U.S. Supreme Court to decide if California can cut payments to Medi-Cal providers

Justices will decide whether to allow the cash-strapped state to reduce what it pays to doctors, hospitals and other providers of healthcare for the poor.

By David G. Savage and Shane Goldmacher, Los Angeles Times

January 19, 2011

Reporting from Washington and Sacramento —

The U.S. Supreme Court announced Tuesday that it will decide whether to give California and other cash-strapped states more freedom to cut the amounts they pay doctors, hospitals and other providers of medical care for the poor.

The case could have a major impact on Gov. Jerry Brown's plans to close the state's massive budget deficit.

Federal courts previously blocked about $1 billion in Medi-Cal cutbacks adopted by the Legislature in 2008. Brown has proposed trying those cuts again. His budget plan would reduce the amounts the state pays healthcare providers by 10%, which would reduce the program by $719 million.

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Many other states have indicated an interest in making similar cutbacks. Twenty-two states joined California in its appeal to the Supreme Court.

Attempts in California to trim spending on Medi-Cal and other health programs have repeatedly been tied up in the courts. Former Gov. Arnold Schwarzenegger once criticized federal judges for "going absolutely crazy" in their continued blockage of attempted spending reductions.

Brown spokeswoman Elizabeth Ashford said the federal courts had been a "roadblock" in allowing California to balance its budget. The issue before the high court, she said, was a matter of "state sovereignty."

"It's incredibly important," she said of the high court's decision to consider the case. "The fact that they are taking this up indicates that they understand how important this issue is to the state."

But medical groups said the state's plans would essentially deny healthcare coverage to hundreds of thousands of people by driving doctors from the program.

Currently, 57% of California doctors accept new Medi-Cal patients, according to a study published last year by the California HealthCare Foundation. That number would drop further if the state reimburses doctors less, said Anthony Wright, executive director of Health Access, a consumer advocacy group.

About seven million Californians get their health coverage through Medi-Cal.

"The practical effect" of the state's cutbacks "is that it makes it harder for the millions of Californians on Med-Cal to get in to see a doctor," Wright said.

The California Medical Assn., which represents 35,000 doctors, called the state's existing Medi-Cal payment rates "ridiculously low — among the lowest in the nation."

Cutting them further "would only serve to force more doctors out of the program and decrease access to care for millions of poor and unemployed Californians," the association's president, James Hinsdale, said in a statement. "Regardless of the legal issues involved, slashing Medi-Cal rates is bad public policy that would undermine the state's healthcare system."

The program of healthcare for the poor, known as Medicaid nationally and Medi-Cal in California, is funded jointly by the federal government and the states. The law is unclear on how far states can go to reduce the amount they pay to providers.

After California's cutbacks in 2008, doctors, hospitals, pharmacies and other providers sued in federal court. They argued successfully that the cutbacks were so steep that poor patients would no longer have access to acceptable healthcare and that the cuts were preempted by the federal Medicaid Act.

But lawyers for then-Atty. Gen. Brown appealed to the Supreme Court. They argued that private parties, such as doctors, had no right to sue the state and no right to a particular reimbursement payment.

This appeal touched a chord in the high court. Chief Justice John G. Roberts Jr., among others, has been skeptical of the notion that when the federal government provides public money for benefits such as health or education, federal law authorizes suits by those unhappy with the level of spending.

The Obama administration so far has sided against the state. In December, the Justice Department told the high court it should turn down California's appeal.

Instead, the justices agreed to hear three separate appeals from the state, all of which raise the same issue. The lead case is Maxwell-Jolly vs. Independent Living Center of Southern California.