Elder Law of Louisville's Blog

Tuesday, January 25, 2011

Supreme Court to Hear Challenge to State's Plan to Cut Medicaid Payments

The U.S. Supreme Court has agreed to hear an appeal of three California cases that could decide whether Medicaid recipients and their health care providers have a federal constitutional right to challenge a state's proposed reduction of benefit payments.

Faced with a massive budget deficit, in 2008 the California legislature ordered a 10 percent cut in reimbursements to Medi-Cal (the state's Medicaid program) providers, including doctors, dentists, pharmacies and adult day care centers. Critics asserted that the cuts would drive doctors from the Medi-Cal program and make it harder for the millions of poor and unemployed Californians who rely on Medi-Cal to get acceptable health care. The cuts were originally proposed under former Gov. Arnold Schwarzenegger, although incoming Gov. Jerry Brown's proposed budget seeks to make many of the same reductions to address California's $25 billion budget deficit.

In three separate cases -- Maxwell-Jolly v. Independent Living Center (09-958), Maxwell-Jolly v. California Pharmacists (09-1158), and Maxwell-Jolly v. Santa Rosa Memorial Hospital (10-283) -- the providers challenged the cuts in federal court, asserting that California could not make them and still comply with a federal requirement that Medicaid reimbursements be "consistent with efficiency, economy and quality of care and are sufficient to enlist enough providers so that care and services are available to the general population." The state countered that the reductions were necessary in light of the budget deficit and that the providers lacked legal standing to challenge them. The Ninth Circuit Court of Appeals stopped California from implementing the proposed cuts and the state appealed to the United States Supreme Court.

Despite advice from the U.S. Solicitor General to decline the case, the Court agreed to hear the three consolidated cases and to address the narrow question of whether Medicaid beneficiaries and their providers have standing under the U.S. Constitution's Supremacy Clause to challenge the state's reductions for violating federal Medicaid law. The court granted one hour of oral argument, the date of which has not been set, although the Court's failure to expedite briefing suggests the case will be heard in the Term starting October 3, 2011.

While federal law is not clear as to how much states may reduce reimbursements, 22 cash-strapped states have joined California in the appeal, making the outcome one of potentially national significance.


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