State Starts Year Facing Multiple Lawsuits, Hearings

Toby Douglas has his name on a lot of lawsuits. As the director of the Department of Health Care Services, it is Douglas’ name that appears on many of the lawsuits challenging cuts to health care services.

“These are extremely painful reductions that the Legislature felt it needed to make to balance the budget,” Douglas said. “And we’ll be happy to abide by whatever decisions the courts make.”

Many of those decisions are expected in hearings this month and next.

The U.S. Supreme Court is hearing one of the California lawsuits. Others are being heard in federal district and appeals courts.

Suits Challenging 10% Medi-Cal Reimbursement Cut

The list of health care associations suing the state over the 10% cut in provider reimbursement rates for Medi-Cal — California’s Medicaid program — is a long one. Two of those cases already have resulted in judicial decisions to block those reductions.

Those suits include:

  • The California Hospital Association is challenging 10% Medi-Cal reimbursement cuts recently approved by CMS. Those cuts include a 10% reduction to skilled nursing units and also affect California hospitals, according to the suit. A federal judge recently granted a preliminary injunction to temporarily halt the cuts.
  • In a separate case, a federal judge blocked the pharmaceutical portion of the Medi-Cal cuts as part of a suit brought by Managed Pharmacy Care. DHCS has said it will seek a reversal of these two recent orders and will appeal them to the federal Ninth Circuit.
  • The California Medical Association and many other provider organizations have banded together to challenge the legality of the 10% Medi-Cal provider cuts. They argue that the cutbacks would mean fewer providers are able to treat Medi-Cal beneficiaries, which potentially could limit access to care. That case is expected to be heard at the end of January.
  • The California Medical Transportation Association also filed a suit to block the 10% Medi-Cal payment reductions that specifically affect non-emergency medical transportation service providers. That hearing is set for Jan. 9.

Other Lawsuits

Beyond the 10% provider cut, the state is facing a number of other legal challenges, including:

  • The U.S. Supreme Court is reviewing Douglas v. Independent Living Center, a case that addresses whether low-income people can sue states over federal Medicaid requirements in the same way that businesses can sue states over consumer protection laws. The Supreme Court’s ruling in this case could set a precedent for several other lawsuits in California, as well as other states.
  • The California Association of Health Facilities and the Developmental Services Network have sued the state over a reimbursement rate freeze for some providers of services for the disabled. A federal judge issued a preliminary injunction against the freeze. That case is due to be heard in February or March.
  • A lawsuit challenging the state’s transition plan for the elimination of adult day health care services as a Medi-Cal benefit has been settled, but a federal judge will need to approve the settlement in a hearing in late January.
  • Disability Rights California won a preliminary injunction to temporarily stop 20% trigger cuts in December 2011. Those were reductions ordered by the Legislature earlier in 2011 that were designed to kick in only when certain budget goals were not reached (they weren’t.) That lawsuit does not name Douglas and DHCS, but is targeted at the state Department of Social Services. A hearing is scheduled for Jan. 19.

Ripple Effect

Because many of the court cases revolve around the legality of the 10% provider reimbursement reduction, the two rulings on Dec. 28, 2011, to block the cuts might signal a direction for many of those cases.

DHCS does not comment on pending litigation. But it did summarize the details of the rulings in a DHCS statement, which said, in part, “the district court ruled that the plaintiffs had a high likelihood of success on their claim that the federal Health and Human Services Agency’s review and approval of California’s State Plan Amendments, to implement AB 97 (the bill that called for the cuts), were ‘arbitrary and capricious.’ The district court also found that plaintiffs had a high likelihood of success on many of their legal claims.”

According to Jan Emerson-Shea of CHA, the central issue in the hospitals’ legal case is access to care, a thread running through most of the cases.

“The federal Medicaid law is there to ensure that Medicaid patients get the same access to care as the general public,” Emerson-Shea said. “The state can’t make these cuts simply to balance its budget. There has been no type of study done [by the state] indicating impact on access to care.”

One of the legal claims running through many of these lawsuits is the notion that the state has violated the Supremacy Clause, which establishes federal law as the law of the land. If the Supremacy Clause is upheld in the California case, that opens the door for lawsuits that challenge a state’s adherence to federal law, which is a central issue in all of these court cases.

There is another factor looming on the legal landscape for California: CMS has not yet ruled on whether California will be allowed to place a cap on physician visits or impose new copayment requirements. If CMS approves either or both, that is likely to prompt new lawsuits.

Related Topics

Insight Medi-Cal