30. December 2011 · Comments Off · Categories: Health Law

On Wednesday, December 28, a federal judge in California issued a temporary injunction blocking California’s implementation of a 10% rate reduction to “Medi-Cal” pharmacies. Medi-Cal is California’s state Medicaid program, designed to serve the state’s poor and disabled. This 10% reduction is part of a total reduction in state Medi-Cal to most “fee-for-service” providers passed by the California Legislature in March, 2011.

Because the Judge’s Order only addressed the rate reduction that applies to pharmacies, other programs in California may still be affected by the federal government’s approval of the 10% cut for Medi-Cal fee- for- service health care providers. Nevertheless, some interesting points about the carefully and strongly worded injuction bear mentioning:

  • The holding of the Court’s Order: The Court held that the new 10% reduction to Medi-Cal particpating pharmacies violates the federal Medicaid Act, because the cut was enacted for purely budgetary reasons, and without consideration of the impact the reduction would have on Medi-Cal beneficiaries’ access to medicines. The reduction would cause pharmacies, and the STATE”S Medicaid benficiaries, harm becasue the pharmacies would not be able to continue operating in the Medi-Cal program with the 10% reduction.
  • California’s budget crisis does not “. . . in social welfare cases, constitute a critical public interest that would be injured by the grant of preliminary relief. In contrast, there is a robust public interest in safeguarding access to health care for those eligible for Medicaid…Further, the Ninth Circuit has explained that ‘it would not be equitable or in the public’s interest to allow the state to continue to violate the requirements of federal law.’ ”
  • The Court found, as well, that it was likely that the US DHHS’s approval of the California State Plan Amendment (the amendment to California’s state Medicaid Plan, the document which governs how doctors, hospitals, and others providing services to Medicaid partipants are paid) “would be found to be arbitrary and capricious resulting in a continuing violation of federal law.”

Now, it is only a temporary injunction, and applies to pharmacies, but the Order holding that state budgetary concerns resulting in reductions in services called for under federal law is interesting, to say the least, and no doubt has applicability to many states’ Medicad State Plans throughout the country.

Stay tuned…

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