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Legal-Ease Supreme Court to Rule on Cuts to California Medicaid Program: What the Decision Can Mean for Other Physicians

Tom, Valeo

doi: 10.1097/01.NT.0000395578.39391.98
THE CALIFORNIA MEDICAL ASSOCIATION has staged protests in response to planned Medi-Cal cuts.

THE CALIFORNIA MEDICAL ASSOCIATION has staged protests in response to planned Medi-Cal cuts.

The California Medicaid program, known as Medi-Cal, whose reimbursement rates already rank 47th in the nation, may find its rates lowered even more if the US Supreme Court reverses a lower court ruling and prohibits individuals and organizations from suing to force the state to abide by federal Medicaid laws.

“If California is allowed to preferentially decrease Medi-Cal payments, it will be devastating for a lot of patients,” said Steven J. Holtz, MD, associate clinical professor of neurology at the University of California School of Medicine in San Francisco, and president of the Association of California Neurologists. “You can't even cover your overhead with Medi-Cal payments unless you have a high-volume population and a very efficient way of treating them. Most Medi-Cal patients go to the county hospital.”

Medi-Cal, for example, pays $57.30 for a new-patient office visit, level 3, while Medicare pays $117.56. According to an analysis prepared for the Medi-Cal Policy Institute, the majority of Medi-Cal reimbursement rates to physicians fall between 35 and 60 percent of commercial PPO rates.

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As a result, many physicians choose not to accept new Medi-Cal payments. In 2008, while 90 percent of California physicians were accepting new patients, and 73 percent were accepting new Medicare patients, only 57 percent were accepting new Medi-Cal patients, according to a study conducted by the University of California-San Francisco (UCSF). A California HealthCare Foundation survey in 2008 found that the willingness to accept new Medi-Cal patients ranged from 30 percent for psychiatrists to 81 percent for physicians affiliated with a medical facility. Only 56 percent of physicians in medical specialties, such as neurology, were accepting new Medi-Cal patients.

The 586 AAN members who responded to a recent survey reported that 6.1 percent of their patients are on managed care Medicaid (the most common form), and 7.9 percent are on traditional, or fee-for-service Medicaid. The 69 California neurologists in that group, despite working in a state where nearly 20 percent of the population is on Medi-Cal, reported that only 7.6 percent of their patients are on managed care Medicaid, while only 4.8 percent are on traditional Medicaid. (The AAN has 1,417 members in California.)

Also, a mere 25 percent of California physicians treat 80 percent of Medi-Cal patients, according to the California HealthCare Foundation.

“A lot of physicians take Medi-Cal patients because they consider it an obligation to provide charity care,” said Marc R. Nuwer, MD, PhD, professor of clinical neurology and chief of clinical neurophysiology at Ronald Reagan University of California-Los Angeles Medical Center, and past president of the Association of California Neurologists.

Medi-Cal also has a much higher “hassle factor,” said Dr. Nuwer, the lead author of a two-part series on the US health care system that was published in Neurology in 2008.

“You may need to fill out a treatment authorization request, send it, wait weeks, then they say you need to justify something further,” he said. “The hassle is greater, the payment is poorer, and a lot of physicians don't want to accept Medi-Cal into their practice for that reason. Medi-Cal reimbursements are below the level needed to pay the direct expenses of keeping the office open. Sometimes it doesn't even cover costs of billing for the service.”

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Medi-Cal covers 7.7 million Californians — half of them children — at a cost of more than $50 billion per year. In addition, despite a recent drop of 250,000, California still has about 2.6 million undocumented immigrants — about 25 percent of the nation's total — with few having any health insurance.

And Medi-Cal enrollment is expected to grow by an additional two million as a result of the federal health reform legislation, according to the California HealthCare Foundation.

As a result, Medi-Cal contributes significantly to the state's $25 billion budget deficit, even though California spends less per Medicaid enrollee — $3,168 — than any other state, according to the Kaiser Family Foundation. (Rhode Island spends the most – $8,796.)

In an effort to reduce the budget deficit, the California legislature has tried several times to cut Medi-Cal spending, spurring lawsuits including those currently headed for the Supreme Court.

In 2008 the legislature passed, and Gov. Arnold Schwarzenegger signed, a 10 percent reduction in Medi-Cal reimbursements for dentists, health clinics, pharmacies, physicians and other medical providers, including in-home care workers. The cutbacks, scheduled to go into effect on July 1, 2008, would have saved the state close to $1 billion.

Between April 2008 and April 2009, however, five lawsuits filed by health care provider groups argued that the reductions violated the “equal access” clause of the federal Medicaid Act, which requires states to set reimbursement rates at a level “sufficient to enlist enough providers so that care and services are available … at least to the extent that such care and services are available to the general public.”

The 9th US Circuit Court of Appeals blocked the budget cuts. Also, because Medicaid is a joint state-federal program, the Centers for Medicare & Medicaid Services (CMS) must approve such changes, and the CMS rejected California's proposed reimbursement cuts.

Newly elected Gov. Jerry Brown who, as Gov. Schwarzenegger's attorney general, supported the cutbacks, wants to cut Medi-Cal reimbursement rates by 10 percent for the fiscal year, starting July 1 by cutting the number of doctor visits and prescriptions. He hopes to trim $1.7 billion from the state's budget.

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Lawyers for the state have appealed the Circuit Court's recent decisions regarding Medi-Cal cutbacks by disputing two strategies frequently used in such cases. One strategy maintains that the cuts violate the “equal access” clause of the Medicaid Act. The other maintains that any state that tries to cut Medicaid rates unilaterally violates the “supremacy clause” of the constitution, which forbids a state to overrule a federal law. Nearly two-dozen other states, all eager to trim budget deficits, have joined California in this appeal.

The Supreme Court, rather than tackling these larger questions, has agreed to review only the question of whether individuals have the authority to sue the state in federal court to enforce federal Medicaid rules.

“They're not hearing the question of whether California can cut rates, only whether a private party like the California Medical Association (CMA) has legal standing to sue the state in federal court to enforce federal Medicaid law,” said Rosanna Westmorland, vice president of communications and marketing for the CMA. “That's what the Supreme Court will try to decide. If we could bring suit we could bring to light whether Medi-Cal patients have access to quality care.”

This question has been considered by the Supreme Court before, but the rulings haven't been definitive, so the justices “have decided to take a case that may squarely answer the question once and for all,” said Sara Rosenbaum, JD, Hirsh Professor and Chair of the Department of Health Policy at George Washington University Medical Center. “The fact they took this case means a number of justices have questions about this.”

If the court rules that individuals cannot sue the state over Medi-Cal payments, then that would presumably leave the way open for the state legislature to cut payments without fear of challenge. The Supreme Court will not decide the matter until the fall of 2011, at the earliest, and the ruling probably will not be handed down until 2012.

The specter of large cuts in a program that provides health care to the poor may seem drastic, but California has few others choices, according to Lisa E. Gray, spokesperson for the California Department of Health Care Services. “This is an important decision for the state of California,” she said. “Legal rulings have for years hindered the state's efforts to construct a balanced budget. The current fiscal situation calls for tough, difficult choices, and California must be allowed the flexibility to appropriately address the problem. Medi-Cal, as the state's second largest general fund expenditure, must be a part of the solution.”

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But cutting Medi-Cal will only make a bad health care situation worse, according to John D. Hixson, MD, assistant professor of clinical neurology at the UCSF Medical Center, and director of the North division of the Association of California Neurologists.

“Because some private practice doctors limit or refuse to see Medi-Cal patients because of the current reimbursement rates, patients have to wait longer,” he said. “Medi-Cal sets out to achieve a lot, but because of the sheer volume of people who have inadequate insurance coverage, Medi-Cal has outgrown its ability to provide the services it was intended to provide.”

Which way will the Supreme Court rule? Recent decisions by the Supreme Court suggest the justices will lean toward preserving states' rights at the expense of federal authority, according to Dr. Holtz.

“That is the more conservative approach,” he said. “But I think this is a national issue, not a state-by-state issue. I don't think it's appropriate for neurological patients in one state to be denied services provided to neurological patients in other states.” •

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Nuwer MR, Esper GJ, Swift TR, et al. The US health care system: Part 1: Our current system. Neurology 2008;71:1907-1913.
    Nuwer MR, Barkley GL, Swift TR, et al. The US health care system: Part 2: Proposals for improvement and comparison to other systems. Neurology 2008;71:1914-1920.
      Rosenbaum S. Medicaid payment rate lawsuits: Evolving court views mean uncertain future for Medi-Cal. published by the California HealthCare Foundation.
        ©2011 American Academy of Neurology