PulsePoints

California may cut the reimbursement rates for medical care providers in Medi-Cal, which is California’s state health program for the poor. The United States Court of Appeals in San Francisco ruled today that the California Department of Health Care Services and the United States Health and Human Services secretary acted properly when they reviewed and approved the cuts to Medi-Cal reimbursements.

The Court of Appeals determined that the secretary’s approval of California’s requested reimbursement rate decrease, including her view that prior to reducing rates states need not follow any specific procedural steps, such as considering providers’ costs, is entitled to deference.

Last year, the U.S. Centers for Medicare and Medicaid Services approved California’s proposal to reduce the Medi-Cal reimbursement rates. The cuts, which were part of California’s 2011-2012 budget, were expected to result in $623 million savings according to the Department of Health Care Services.

In a ruling last year, the trial court stated that “The state’s fiscal crisis does not outweigh the serious irreparable injury the [citizens of California] would suffer absent the issuance of an injunction [preventing the reimbursement rate cuts].” In a separate decision, the trial court judge also blocked California from cutting Medi-Cal reimbursement rates for pharmacies by 10 percent, which would cause many Medi-Cal beneficiaries to lose access to drugs. In addition, the judge found sufficient evidence that the pharmacy reimbursement rate cuts would force pharmacies to reduce services or close.

The results from this ruling could be significant for skilled nursing facilities that provide complex care for elderly patients. Many skilled nursing facilities in California were already reimbursed by Medi-Cal below their costs. As a result, they will not be able to absorb the even lower rates resulting from the upcoming cuts. Some hospitals and other senior care facilities may be forced to close these units outright because they will not be able to continue operating them.

Unfortunately, this ruling could be the beginning of other states viewing cuts to Medicaid programs as a way to substantially cut state budgets. There is, thankfully, a possible bright spot. The Affordable Care Act proposes to expand Medicaid coverage that would, at least initially, be completely covered by the federal government. While the states would be responsible for paying a gradually increasing share in 2017, the share is limited to 10 percent of the cost. The Medicaid expansion is not guaranteed, however, and must be approved by each states’ legislature.