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Supreme Court Refuses Invitation to Slam Door Shut on Challenges to Medicaid Cutbacks

AARP Foundation Litigation and the National Health Law Program (“NHeLP”) filed a friend of the court brief with the U.S. Supreme Court on behalf of AARP and 20 other organizations supporting a challenge to California’s cutbacks on payments for health services for the poor.


California’s Medicaid program, known as Medi-Cal, is the main source of health care insurance for approximately 7 million Californians. In 2008 California cut Medicaid provider rates by 10 percent. Medicaid beneficiaries, doctors, hospitals, pharmacists and other medical providers in California sued the state in three lawsuits, claiming the proposed cuts violated federal law and that the health care provider rates in California were already so low that many physicians lost money every time they treated a patient. Pursuant to federal law, California was required to, but did not assess, whether there were sufficient number of medical providers who would accept the reduced fees and treat Medicaid patients.

California argued that Medicaid recipients and Medicaid providers have no standing to challenge the cuts. When the case reached the U.S. Supreme Court numerous other states joined California in arguing that beneficiaries should not be allowed to sue states on preemption grounds when state laws conflict with federal law. While the case was pending in the Supreme Court, California agreed to waive the bulk of the retroactive cuts and submitted new information to CMS. CMS reversed its prior decision rejecting the cuts and approved the provider cuts. In light of these new circumstances, the Supreme Court decided to remand the case to the Ninth Circuit.

AARP’s brief argued that numerous Supreme Court cases and cases in every federal circuit court have recognized the rights of Medicaid beneficiaries to sue. As to the specific law in question, the brief pointed out that even before California enacted the cutbacks currently at issue, its Medicaid provider payments were the 47th lowest in the nation, and some beneficiaries languished months before getting an appointment for medical treatment. Medicaid reimbursement rates in California have not increased since 2001. Because Medicaid beneficiaries are on the whole in poorer health than the general population, delays in receiving services because of inability to find a Medicaid provider can have dire consequences for individual and public health. AARP’s brief pointed out that lack of access to preventative care or treatment is the third-leading cause of death for adults age 55-64, behind heart disease and cancer and the sixth-leading cause of death among adults ages 25-64.

What’s at Stake

At a time when numerous states are trying to balance their budgets by cutting back Medicaid, private enforcement is particularly critical, particularly for people ages 50-64 that do not yet qualify for Medicare. Future cases will determine the extent to which Medicaid participating providers and beneficiaries can bring lawsuits against state Medicaid officials who reduce Medicaid payments beyond the limits permitted by federal law.

Case Status

Douglas v. Independent Living Center of Southern California
; Cal. Pharmacists Ass’n v. Maxwell-Jolly; Santa Rosa Memorial Hospital v. Maxwell-Jolly was remanded to the U.S. Court of Appeals for the Ninth Circuit by the U.S. Supreme Court.

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