Story highlights

Private individuals want to sue California over Medicaid cuts

Comments from eight of the nine justices indicate they favor the states

California lawmakers slashed Medicaid reimbursement rates

Washington CNN —  

The Supreme Court opened its new term Monday with a lively oral argument dealing with whether private plaintiffs can sue the states over cuts to the popular Medicaid health program.

The case could have a great impact on the 60 million current Medicaid patients and the providers of the state-federal cooperative effort. And it could signal how the justices may view a separate blockbuster appeal pending at the high court, the sweeping health care reform bill championed by President Obama.

In a withering 10-minute span, eight of the nine justices repeatedly peppered an attorney for the five plaintiffs with questions and concerns about the limits of a “private cause of action.” Their comments suggested they were leaning in favor of the states.

“What do you do with someone who is suffering a lack of access to vital medical care in a way that is irreparable, and is it realistic to think that Congress meant under those circumstances to deprive the individual plaintiff of any kind of rights?” asked Carter Phillips, attorney for the health care providers. “And the answer is no.”

“The answer is yes, they intended to deprive them of the right to sue under the statute,” countered Chief Justice John Roberts sharply. “When Congress was specifically focused on the question of how to enforce this provision, they did not provide a right of action.”

The argument comes amid a shaky economy, and pits cash-strapped states desperate to cut costs against low-income patients demanding guaranteed care – most of which is paid for by the federal government.

At issue is whether health care providers can sue California for cutting Medicaid reimbursement rates. Lawmakers slashed those rates three years ago in an effort to resolve a mounting state budget deficit. Medicaid payments typically take up the bulk of a state’s budget. As the largest state in the union, California, also boasts the single largest Medicaid clientele.

Among the cuts were a 10% across-the-board reduction on payments and reimbursement rates due to doctors, hospitals, pharmacies, nursing homes, and other health care providers.

Medicaid is the 46-year-old joint program offering a variety of health and long-term services to the poor, elderly, and disabled. Each state has discretion to structure benefits, eligibility, service delivery, and payment rates under guidelines established by federal law. State Medicaid spending is roughly “matched” by the federal government, averaging about 57%, based largely on per capita income.

Figures from the federal Department of Health and Human Services show about 30 million lower-income children are covered under the program, about a quarter of the underage population. Costs for services totals about $340 billion, according to latest figures.

After California’s budget cuts, a variety of health care providers in the state sued, requesting an injunction to prevent state Medicaid officials from enforcing the reductions.

During arguments, the state said the dispute was between it and Washington, and that private individuals and groups should stay out.

“The (private) injunctions have disrupted the administrative process as it is intended to work by drawing out the process, by politicizing the process, by prejudicing our ability to get state plan approval,” said Karin Schwartz, a deputy state attorney general.

California “did an end-run around the administrative process, you put your regulations – your new rate schedules – into effect even before you submitted them to HHS, and continued them in effect while the agency was considering them, and continued them in effect to the extent that you were allowed to do so by injunction, even after HHS disapproved them?” said Justice Elena Kagan.

“There is no end run here,” said Schwartz, noting the state may impose new rates while awaiting review from the federal government.

“That’s a very drastic remedy that’s going to hurt the people that Medicaid was meant to benefit,” Justice Ruth Bader Ginsburg said of the cuts.

But the bulk of the tough questioning was aimed at the lawyer for the coalition of private plaintiffs. Justice Stephen Breyer wondered what would happen if any number of private parties could step in.

“A principle that says you can do that any time you want seems to me to create the real fear of far-reaching,” Breyer said, “in the extent that it just stops the agency of doing their business at the behest of anyone who would like to assert a state law. It’s a mess, in other words.”

“But my people (patients and doctors) have a life[and-death problem,” countered Phillips. “So if there were ever a situation where you would say, let’s look to see whether or not there is relief available, this would be the situation.”

The Medicaid program is voluntary, but when states participate, they must follow federally established requirements, including ensuring health care providers are reimbursed with enough money to ensure patients receive access to timely, quality care. And the state must get approval from federal officials before any cuts are made.

A federal appeals court ruled California’s cuts were improper, prompting the high court to now step into the dispute. The Obama administration is supporting the states.

Other states – including Arizona and New Hampshire – are carefully eying this case as they contemplate similar budget cuts. Congress is also considering changes to the federal-funding Medicaid formula.

The landmark Patient Protection and Affordable Care Act passed last year includes increases to Medicaid and Medicare. A congressionally prepared report suggests as many as 16 million people could be added to the Medicaid rolls under the new health care law. Three separate appeals have reached the high court, which is poised to hear arguments and issue a ruling by June in what may be the biggest case before the justices in a decade.

How the court settles the current Medicaid dispute in California could signal how much deference they will show Congress and the federal government’s power to impose sweeping new health requirements and regulations on states and individual Americans.

The consolidated cases are Douglas v. Independent Living Center of Southern California (09-958); Douglas v. California Pharmacists Assn. (09-1158); Douglas v. Santa Rosa Memorial Hospital (10-283). A ruling is expected in the next few months.