For the past few years, the California legislature has been trying to deal with its fiscal crisis by cutting Medi-Cal spending dramatically. Medi-Cal is California's version of Medicaid - it is a joint federal-state program that benefits significantly from federal funding, and is also subject to federal law. Health care providers and beneficiaries have used federal law to challenge recent state cuts in federal courts, pretty successfully so far.
The latest round in this battle between providers and the state occurred a few weeks ago, in California Association of Rural Health Clinics v. Maxwell-Jolly (CARHC). CARHC challenged a law enacted last year that eliminated coverage for certain services, including adult dental, podiatry, and chiropractic serivces, provided by Rural Health Centers (RHCs) and Federally Qualified Health Centers (FQHCs) to Medi-Cal beneficiaries. RHCs and FQHCs are located in medically underserved areas, and they are required to treat people without regard to their ability to pay.
The ruling yielded mixed results for the plaintiffs. They lost on one very important issue - whether federal law requires states to pay for the categories of services that were eliminated. The court found that the statute was clear in treating these services as optional, not mandatory, and thus states could decide not to cover them. On the other hand, the court issued an injunction delaying implementation of the cuts until approved by the federal government. In its reasoning, the court reaffirmed two very important principles that give providers and beneficiaries legal leverage to continue fighting state cuts.
CARHC
First, the court affirmed that health care providers have a right to challenge state laws that conflict with or violate certain federal Medicaid requirements. The extent to which providers and beneficiaries can challenge violations in federal court is not settled law, and not all jurisdications follow California's approach. In fact, this issue is one that will likely be addressed soon by the Supreme Court in Maxwell-Jolly v. Independent Living Center, another case in which hospitals and physicians successfully challenged cuts in Medi-Cal reimbursement.
Second, the court in CARHC enjoined implementation of the cuts because they had not yet been approved by the federal government. Federal law expressly requires approval of state Medicaid plans by the Centers for Medicare and Medicaid Servcies (CMS), and courts have interpreted this to apply to plan amendments that redefine the scope of coverage. This federal oversight is a critical protection for beneficiaries and providers that cannot be ignored.
Other Medi-Cal Cases
The CARHC ruling is consistent with the recent line of federal court cases enjoining other Medi-Cal cuts. All of these cases reinforce the importance of federal law as a check on state Medicaid administration.
In 2008, the California legislature enacted an across-the-board 10% cut in Medi-Cal payments for hospitals, physicians, dentists, pharmacies, and adult health care centers. Plaintiffs were able to successfully challenge these cuts because state officials admitted that they failed to consider how the cuts would impact access and quality, factors required by the Medicaid Act. This case has been appealed to the U.S. Supreme Court.
In 2009, California reduced its contribution toward the In Home Supportive Services (IHSS) program that provides assistance to low-income elderly and persons with disabilities, tried to make it more difficult for people to qualify for these services, and reduced the maximum benefits allowed for Adult Day Health Care to three days per week for all Medi-Cal beneficiaries. In each of these cases, plaintiffs were able to enjoin the cuts because of violations of the federal Medicaid law or laws that prohibit discrimination against people on the basis of disability.
These federal laws are designed to ensure that the Medicaid program is administered fairly and in a manner that promotes access and quality care. As long as state officials continue to disregard federal law or use a flawed process that neglects these important procedural and substantive protections, providers and beneficiaries will have a powerful legal tool for fighting, or at least delaying, state Medicaid cuts.
