Appeals Court Jumps In on Medi-Cal Pharmacy Cuts

Legal challenges to Medi-Cal provider payments cuts are heating up and chances are good that the battle will get still more contentious.

In February, the Legislature and Gov. Arnold Schwarzenegger (R) approved the reductions of Medi-Cal provider payments, but last week, a three-judge panel of the Ninth U.S. Circuit Court of Appeals in San Francisco ruled that the state could not reduce pharmacist payments until at least Aug. 11.

The court said plaintiffs had made a case that the cuts would reduce Medi-Cal payments to less than the pharmacies' cost of obtaining and dispensing nearly half the drugs they provide, a situation that could prompt pharmacists to drop out of Medi-Cal.

And that, plaintiffs say, is the point, arguing that the payment cuts violate a federal law that requires state Medicaid rates to be high enough to provide the same level of medical service available to the general population.

This week, California Department of Health Care Services officials fired back, asking the court to suspend its ruling to delay the cuts. Department officials said the state will need to spend $12 million per month to continue using the higher reimbursement rates, exacerbating California's budget deficit.

In an unusual move, the court revoked its injunction on the rate cuts late Wednesday, letting the state proceed with plans to reimburse pharmacists at the lower rate while the trial proceeds.

Further complicating matters for the state, the battle is set to open another front next week when a separate suit attacking Medi-Cal payment reductions for a broader swath of health care providers heads to court.

In the meantime, here's a look at how health care measures are faring in the Legislature.