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AARP Urges the Federal Government to Reject California Medicaid Cuts

AARP asked the federal Department of Health and Human Services (DHS) to continue to disapprove California's efforts to cut provider reimbursement rates for medical providers across the state — cuts that would worsen the acute shortage of Medicaid providers providing critical basic services to the state's most vulnerable residents.


California's Medicaid program, also known as Medi-Cal, is the main source of health care insurance for almost 1 million Californians age 65 and older, as well as more than 6 million Californians under age 65. As with all Medicaid programs, the state agrees to provide (subject to federal approval) a basic array and level of services; in exchange, the federal government pays a significant share of the costs of the health insurance program.

Responding to a state budget crisis, the California legislature in 2008 cut Medicaid reimbursement rates of health care providers in California, including Adult Day Health Care services, hospitals, doctors, dentists and pharmacies, by 10 percent. Inasmuch as California's Medicaid expenditure rate was already the lowest in the nation, the additional cuts meant that in many cases pharmacists would lose money if they dispensed prescription drugs to Medicaid recipients. AARP California fought these cuts and continues to fight proposed health care cuts in the state legislature.

The federal Centers for Medicare and Medicaid Services (CMS) rejected California's plan, and the state appealed to DHS. At the same time, residents and providers sued to stop the proposed changes in court. Last year, a federal appeals court agreed that the actions may violate federal law and that the state cannot rely on budgetary constraints as the basis for defending them. That case, Douglas v. Independent Living Centers of Southern California, Inc., has been appealed to the U.S. Supreme Court. Meanwhile, the administrative appeal continues.

AARP Foundation Litigation attorneys filed AARP's brief in Independent Living Centers and requested to file a brief in the administrative appeal, pointing out that federal regulation requires that Medicaid payments be sufficient to enlist enough providers so that services under the state Medicaid plan are available to recipients at least to the extent that those services are available to the general public. California failed to provide any analysis to support this. In fact, California's reimbursement rate was so low before the cuts that many health care providers refused to participate in Medi-Cal and some recipients waited for months for appointments with participating providers. As AARP California — which opposed this and other efforts to close the budget gap that disproportionately affected older and lower-income people — pointed out when the bill was being debated, the cuts will only make matters worse.

What's at Stake

Recipients of Medicaid constitute the most vulnerable sector of the population, and Medicaid is a critical safety net for low-income people ages 50-64 who are not yet eligible for Medicare. Additionally, studies show that access to preventive and other health care is the third-leading cause of death for adults age 55-64, and delayed access increases odds of mortality. AARP has vigorously fought efforts to restrict or impede access to affordable health care. California is the nation's most populous state and any efforts it makes in this arena will not only affect 7 million California residents, it will send a strong message to other states.

Status of the Case

In re. Reconsideration of Disapproval of California State Plan Amendments is pending before DHS; AARP's amicus brief has been accepted for consideration by the Administrative Law Judge.