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New Development in Medi-Cal Payment Lawsuit

The future of California’s proposed Medi-Cal reimbursement cuts is still unclear, with conflicting viewpoints from the Justice and Health and Human Services Departments as the latest development. Acting Solicitor General Neal Katyal filed a “friend of the court” brief supporting the state in Douglas v. Independent Living Center of Southern California, the lawsuit challenging California’s proposed cuts to Medi-Cal providers. The Supreme Court case only concerns whether providers and beneficiaries have the right to sue a state if they believe its administration of the Medi-Cal program will restrict access (not the merits of the cuts themselves). However, the outcome of the case could impact care for millions of low-income Californians.

Douglas vs. ILC is one of many recent lawsuits that have challenged California’s Medi-Cal reimbursement rates as too low to ensure “equal access” to care for beneficiaries, as compared to the general population. Even without the cuts, California’s Medi-Cal reimbursement rates rank 46th in the nation and “physicians are much less likely to serve Medi-Cal patients (68 percent) than patients with private insurance (92 percent) or Medicare coverage (78 percent)”. With 2.13 million Californians newly eligible for Medi-Cal in 2014 (including many transitioning in earlier through LIHP), access will become an even more pressing issue.

CMS recently issued guidelines to clarify how states should set and evaluate their Medicaid reimbursement rates in order to comply with the equal access requirement. But the Supreme Court’s ruling on Douglas vs. ILC (expected in late 2011 or early 2012) could reshape enforcement of state compliance with federal Medicaid standards – and potentially the ACA. In the meantime, California continues to struggle with the imperative to reform its healthcare system by expanding coverage, improving quality, and increasing access while simultaneously controlling costs and closing holes in the budget.