High Court Asks Solicitor General’s Opinion in Medi-Cal Case

The U.S. Supreme Court last week invited the Solicitor General to weigh in on a case that could determine whether California can legally reduce payments to Medi-Cal providers. Medi-Cal is California’s Medicaid program.

Requesting the Solicitor General’s opinion is often a precursor to the Supreme Court’s decision to hear or reject a case.

In February, California asked the Supreme Court to review two federal court rulings that found the state violated federal Medicaid law when it cut Medi-Cal reimbursements by 10% in 2008.

If the Supreme Court decides to hear the case, the court’s ruling could have a profound impact on how states use money from the federal Medicaid program. The case takes on extra importance in light of the new health care reform law, which calls for a major expansion of Medicaid.

The federal government and states share responsibility for administering Medicaid, and the crux of the case is whether federal law trumps state jurisdiction over Medicaid. California’s Medi-Cal, the largest Medicaid program in the country, provides health insurance to about 7.1 million people, including low-income parents, children and people with disabilities.

There is neither a requirement nor a deadline for the Solicitor General to express the views of the federal government. If the Solicitor General follows standard procedure and issues an opinion in David Maxell-Jolly, director of the California State Department of Health Care Services vs. Independent Living Center of Southern California Inc. et al before the court’s current term ends a month from now — and if the Supreme Court agrees to hear the case — it could be added to the fall docket.

Invitation a Significant Development

Representatives from both sides of the case stopped short of predicting whether the court will hear the case, but both considered the invitation a significant development.

“This request is obviously an indication of interest but as to whether the court will go beyond that … that would be reading tea leaves, and I don’t think I’m going to try that,” said Rochelle Bobroff, a National Senior Citizens Law Center attorney representing Medi-Cal providers in the case.

Anthony Cava, spokesperson for California’s Department of Health Care Services, said in an e-mail: “The request reflects that the Supreme Court is seriously interested in reviewing the issues DHCS represented and understands their importance, not only for California, but for all states.”

How Case Arrived at Supreme Court

About a year ago, Medi-Cal providers won their second court victory in challenging California’s across-the-board cuts in reimbursements to physicians, dentists, pharmacies, clinics and other providers.

The 9th U.S. Circuit Court of Appeals said the California Department of Health Care Services violated federal law by failing to consider the impact of the cuts on quality and access to health care. The three-judge panel’s ruling upheld a preliminary injunction issued in 2008 by a U.S. District Judge in Los Angeles. The reductions, which would have amounted to several hundred million dollars, would make it impossible for California to uphold its responsibilities in the Medicaid partnership with the federal government, judges ruled.

“We do not doubt the severity of the fiscal challenges facing the state of California, but budget crisis does not excuse ongoing violations of federal law,” Ninth Circuit Judge Milan Smith wrote in his ruling. Smith went on to say, “There is a robust public interest in safeguarding access to health care for those eligible for Medicaid, whom Congress has recognized as the most needy in the country.”

Following that ruling, the state Legislature last year approved a 5% reduction in Medi-Cal payments to hospitals and pharmacies, but those cuts were also blocked by court order. The state is challenging that ruling in a separate appeal.

For many years, most Medicaid claims by beneficiaries and providers came under a different part of the Medicaid Act, but a Supreme Court ruling in 2002 limited those options. Using the argument that federal law trumps state law is a relatively new legal tack in Medicaid cases.

Other States Agree With California

Twenty-two other states filed a brief in support of California’s position, urging the Supreme Court to deal with two related, but distinct questions:

• Whether federal law gives Medicaid recipients and providers the right to challenge reimbursement reductions by asserting that federal law pre-empts state law; and
• Whether state laws reducing reimbursements can be trumped by portions of the Medicaid Act.

Bobroff contends Medicaid beneficiaries and providers have the same rights as businesses to claim that federal law pre-empts state law. She said using federal pre-emption arguments is a common legal tactic in many industries, including banking.

“Businesses go into court all the time and say, ‘You can’t make us abide by state law because federal law pre-empts state law,'” Bobroff said.

The argument made two years ago in the challenge to California cuts is essentially the same — that federal Medicaid guidelines should take precedence over state wishes.

So far, federal judges have agreed.  But if the Supreme Court takes up the matter, things could change.

“I think that if the court were to shut the door on Medicaid recipients when the door is wide open to businesses, that would be very significant,” Bobroff said.

California, along with 22 other states, hopes the Supreme Court will give states more clout.

“DHCS is very hopeful that the referral to the Solicitor General will advance the case with the Supreme Court, as it is difficult for states to manage scarce funds and implement program changes when the courts, rather than the federal oversight agency, are creating standards,” said DHCS spokesperson Cava.

Ball’s in Solicitor General’s Court

The ball is now in the Solicitor General’s court. Acting Solicitor General Neal Katyal, who took over for Elena Kagan last month when Kagan was nominated to the Supreme Court, declined comment.

A representative for the Solicitor General said that office does not comment on briefs until they are filed, not even to comment on whether they will be filed.

Scott Markley, a spokesperson for the Supreme Court, said, “There is no deadline on the filing of the invited brief from the Solicitor General; however, such briefs from the SG in pending cases are usually filed by the end of the term in June.”

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