A service of the California Health Care Foundation

Federal Court Upholds 10% Medi-Cal Provider Cut

The United States Ninth Circuit Court of Appeals on Friday upheld the right of California to impose a 10% rate reduction on providers of Medi-Cal services.

The long-awaited ruling is the last judicial step, short of the U.S. Supreme Court, for the controversial cut to hospitals, physicians, emergency transport and dentists. Provider groups have said they would likely appeal the rate reduction to the Supreme Court.

The federal ruling lifted the injunctions on implementing the reductions. Outside of a Supreme Court appeal, the federal judicial panel clearly stated there would be no further appeals considered.

“This decision will be devastating to an already fragile safety net,” said Lindsey Robinson, president of the California Dental Association. If provider rates dip too low, providers may stop accepting Medi-Cal patients, she said. That comes at a time when the expansion of Medi-Cal will create more demand for providers.

“The state’s efforts to cut reimbursement rates will harm patients’ oral health and their ability to access care at a time when California is trying to recruit more providers into the system,” Robinson said.

That 10% cut represents about $600 million a year to the California budget.

The Legislature, prompted by the governor and a huge budget shortfall, passed the 10% across-the-board reductions in 2011. That move was put on hold until the court case could be resolved. Now, two years later, providers are not only looking at that 10% cut, but also at needing to pay back two years’ worth of retroactive service fees.

State officials have said that “clawback” can be paid over four years instead of two, which would mean a 15% rate reduction for Medi-Cal providers for the next four years, and a 10% reduction after that.

The California Hospital Association, in a written release, expressed sadness at the Ninth Circuit decision and did not yet commit to a Supreme Court appeal.

“We are evaluating next steps in terms of the judicial process,” the statement said.

The other avenue of effort is legislative. Two bills going through the Legislature now would reverse the 10% cuts.SB 640 by Sen. Ricardo Lara (Long Beach) and AB 900 by Assembly member Luis Alejo (D-Watsonville) received bipartisan support and unanimous votes in committee when first introduced.

The governor said he would veto the bills. Some lawmakers are talking about mounting a campaign for a two-thirds majority in the Legislature to override a veto.

If those bills do become law and the 10% reductions are reversed, the reversal of cuts could not be retroactive, so providers would face a minimum of two years’ worth of provider rate reductions, according to state officials.

Categories: Capitol Desk, Medi-Cal