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Ninth Circuit Approves Lower Medi-Cal Provider Payments

By Robyn Hagan Cain on December 13, 2012 | Last updated on March 21, 2019

Four cases. Eleven consolidated appeals. A bunch of big-name healthcare administrators. What more could you want?

Thursday, the Ninth Circuit Court of Appeals reversed a district court ruling barring state budget cuts to Medi-Cal, the state's Medicaid program, because the Secretary of Health and Human Services has exclusive authority to determine whether a state can cut Medicaid rates while continue to comply with the Medicaid rules, the Sacramento Bee reports.

In February, Judge Christina Snyder ruled that the federal Medicaid Act requires that government-insured and privately insured patients have equal access to medical care. If the state and federal government continue to cut these programs, physicians will be forced to stop taking new patients, meaning that access to care would be impacted, the California Medical Association reports.

The plaintiffs -- various Medi-Cal providers and beneficiaries -- cross-appealed the court's modification of its orders to allow the rate reductions as to Medi-Cal services provided before the injunctions took effect. They claimed that the reimbursement rate reductions did not comply with 42 U.S.C. § 1396a(a)(30)(A). They relied on Orthopaedic Hosp. v. Belshe, which interpreted §30(A) as requiring a state seeking to reduce Medicaid reimbursement rates first to consider the costs of providing medical services subject to the rate reductions.

The Ninth Circuit, however, concluded, "The Medicaid program is a colossal undertaking, jointly funded by the federal government and the States. Congress explicitly granted the Secretary authority to determine whether a State's Medicaid plan complies with federal law."

The appellate court held that (1) Orthopaedic Hospital does not control the outcome in these cases because it did not consider the key issue here - the Secretary's interpretation of §30(A), (2) the Secretary's approval of California's requested reimbursement rates - including her permissible view that prior to reducing rates states need not follow any specific procedural steps, such as considering providers' costs - is entitled to deference under Chevron, and (3) the Secretary's approval complies with the APA.

The Ninth Circuit further held that the plaintiffs were unlikely to succeed on the merits of their Supremacy Clause claims against the Director because -- even assuming that the Supremacy Clause provides a private right of action -- the Secretary had reasonably determined that the State's reimbursement rates comply with §30(A).

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