California Healthline Daily Edition

Summaries of health policy coverage from major news organizations

Supreme Court Declines To Rule on Medi-Cal Reimbursement Suit

On Wednesday, the U.S. Supreme Court declined to rule on a California lawsuit that could determine whether Medicaid beneficiaries and providers can sue states over reimbursement cuts, the Los Angeles Times reports (Savage/Megerian, Los Angeles Times, 2/23).

The justices sent the case back to a lower appellate court, noting the complexity of the case and the fact that some circumstances have changed since it originally was filed (Doyle, Sacramento Bee, 2/23).


The case stems from reimbursement cuts the California Legislature approved in 2008 and 2009 to Medi-Cal, the state's Medicaid program.

Health care providers and Medi-Cal beneficiaries challenged the changes in court, arguing that the payment cuts violated federal law that says Medicaid rates must be "sufficient to enlist enough providers" so beneficiaries can access care to the same extent as the general population in a particular area.

The 9th U.S. Circuit Court of Appeals in San Francisco ruled that beneficiaries could sue under the U.S. Constitution's supremacy clause, which lets federal law take precedence over state law. California appealed to the U.S. Supreme Court. The case before the high court is a consolidated set of three separate lawsuits on the issue that had been filed by providers and beneficiaries.

In May 2011, the Obama administration argued in support of California, saying that no federal law allows individuals to sue states to enforce the standard that Medicaid rates must be "sufficient to enlist enough providers" (California Healthline, 10/3/11).

Details of Supreme Court Decision

The high court noted that since the case was filed, CMS approved some of the proposed rate changes, while the state withdrew some others that are being challenged in the case. The justices ruled 5-4 that the 9th U.S. Circuit Court of Appeals should re-examine the case based on these changed circumstances (Millman, Politico, 2/22).

The justices said that it is still up for debate whether the plaintiffs can allege that the cuts run afoul of federal law if a federal agency has approved them (Los Angeles Times, 2/22).

However, the justices suggested that the cuts should be challenged under the Administrative Procedure Act (Pecquet, "Healthwatch," The Hill, 2/22).

Since the ruling did not affirm the lower court's decision to block the reductions, the state has another opportunity to argue for its right to implement the cuts to curb the budget deficit. For now, the state will continue paying the higher reimbursement rate as it assesses the decision, according to state officials.


The court's four conservative judges dissented. Chief Justice John Roberts said that Medicaid was created as a partnership between states and the federal government, and as such, spending decisions should be made by those entities, not through the courts (Los Angeles Times, 2/22).

Reaction to Ruling

Both sides claimed victory because the court did not rule in favor of one side or the other, the Times reports.

James Hay, president of the California Medical Association, said the decision is a "win for physicians and their patients."

Jim Humes, the state's executive secretary for legal affairs, said the court's actions "recognize the authority of states to better manage their health services programs" (Los Angeles Times, 2/23).


The case is particularly significant because the outcome could affect the federal health reform law's expansion of Medicaid.

Lloyd Bookman, founding partner with law firm Hooper, Lundy and Bookman, said, "If this case comes out adversely and states are allowed to cut rates without fear of provider lawsuits, that could have an impact on the mechanisms of the [reform law] because ... [it] depends on many millions of people enrolled in state Medicaid programs" (California Healthline, 10/3/11).

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