State’s Medicaid Rate Freeze Reinstated

9th Circuit CourthouseCalifornia’s unilateral decision to freeze Medicaid reimbursement to doctors and hospitals violates federal law but that doesn’t give the health providers an individual right to sue.  The 9th U.S. Circuit Court of Appeals said a group of health care providers had no right to sue over the state’s action.  The appeals court lifted an injunction that had been imposed on the rate freeze by Los Angeles federal Judge Christina Snyder.

In the state’s rush to balance its budget, officials side-stepped federal Medicaid rules that require seeking federal permission for plan changes in its Medicaid terms.

Although the state may have broken the law, that did not give individuals a right to sue.

“While it is regrettable that the state refuses to abide by the law, that does not mean that a right which will support a cause of action… has been unambiguously conferred upon the providers,” wrote Judge Ferdinand Fernandez.

The lawsuit was brought by trade associations representing intermediate care facilities for the mentally retarded and for the developmentally disabled and pediatric subacute facilities, Fernandez said.

California amended the state Medicaid plan so that services provided during the 2009 and 2010 rate year and each year after would not exceed the rates for those classes of providers in the 2008-2009 year.

The state was expected to seek federal approval before implementing the rate change but it did not. 

The state argued that it was allowed to implement changes to the reimbursement plan while it was awaiting federal approval.

Fernandez pointed out that the first time this issue arose was 25 years ago and the appeals court made clear then that the state had to get permission for amendments to Medicaid plans.  The court has repeatedly rejected efforts to make unilateral plan changes over the years.

But in this case, the providers were told they had no right to sue to block the changes.

The suit was brought by the Developmental Services Network and United Cerebral Palsy/Spastic Children’s Foundation of Los Angeles and Ventura Counties.

 Case: Developmental Services Network v. Douglas, No. 11-55851


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