Concern Over Retroactive Medi-Cal Cut

State lawmakers last week got a reply to their long-held question about a 10% Medi-Cal provider reimbursement rate reduction — and they didn’t much like the answer.

At an Assembly budget subcommittee hearing last week, the testimony turned to what would happen if a federal appeals court rules in favor of the state’s effort to cut Medi-Cal reimbursement rates to providers by 10%.

Assembly member Holly Mitchell (D-Los Angeles) asked the director of the Department of Health Care Services, Toby Douglas, a question that has haunted provider groups facing the large rate reduction.

“If the state were to win the appeal,” Mitchell asked, “would those reductions then be retroactive?”

Douglas said they would be.

“They would have to be retroactive,” Douglas said. The law to make those cuts was passed June 1, 2011, so providers would need to pay back 10% of Medi-Cal payments from that time, he said.

“We would have to implement from that day forward,” Douglas said. “You cannot retrospectively unwind a reduction.”

Rather than making providers immediately pay back 10% of two years’ worth of Medi-Cal payments, Douglas said the state would bill them 5% at a time — in addition to the 10% provider rate cut — for a total reduction of 15% until the difference is made up. If the cut were to be implemented by this summer, that would mean a 15% Medi-Cal reimbursement reduction over roughly a four-year period. After that time, the rate reduction would go back to the initial 10% cut.

That revelation drew a high level of concern from lawmakers in the hearing.

“We have to recognize the precarious position we’re putting the state in and the state’s health in,” Mitchell said. “If we’re asking providers to bear a 15% cut … it’s very, very precarious.”

Mitchell acknowledged the decision to make that 10% cut came from the Legislature.

Douglas said the state would have no choice but to make the cut retroactive.

“It’s not an option,” Douglas said. “If we were trying to do a payment increase we can’t go back retrospectively. It starts from there.”

If the state tried to disallow the retroactive cuts CMS officials “could disallow federal funding,” he said.

Assembly member Mariko Yamada (D-Davis) noted that the cuts to providers by the state would come at the same time as California is trying to expand Medi-Cal enrollment and services, an effort that would likely create more of a demand for provider participation while diminishing providers’ funding — something that could create an access problem, she said.

“If you’re looking at a 15% claw-back to June 2011, and this is at a time when we’re trying to expand services in California, well, that seems rather illogical,” Yamada said. “We would be trying to get an expansion of services when we’re going back in time. This seems like a very schizophrenic message to be giving.”

Assembly member Wesley Chesbro (D-Arcata) said two rural hospitals in his region have said they might stop taking Medi-Cal patients with a cut that severe.

“Ironically, in my district,” Chesbro said, “we might actually have two less hospitals when the Affordable Care Act starts.”

Douglas said his department would monitor access issues carefully, and might make other payment options possible for medical institutions that were particularly hard-hit.

Related Topics

Capitol Desk Medi-Cal