U.S. Appeals Court Says Medi-Cal Cut to Hospitals Was Illegal

A U.S. appeals court decided Monday that the federal government wrongly approved California’s request to temporarily cut Medi-Cal reimbursement by 10% during the recession for hospital outpatient care.

The ruling by a three-judge panel of the U.S. 9th Circuit Court of Appeals said the federal government can approve such cuts only if evidence shows that the recipients of aid will have access to the same services as the general population.

California, struggling with a budget crisis, imposed the cutback for eight months, from July 2008 through February 2009.

If the ruling stands, the state and the federal government will have to pay back California hospitals hundreds of millions of dollars, said Robert Leventhal, who represented more than 50 California hospitals in the challenge.

Before cuts can be made, federal law requires a showing of evidence that beneficiaries will have access to care “at least to the extent that such care and services are available to the general population in the geographic area,’’ the 9th Circuit said, citing a provision in federal law.

Leventhal said previous challenges to the Medi-Cal cuts relied on different legal theories.

Monday’s ruling “will have a major impact on Medi-Cal rates and hopefully bring them up,” he said.

“They are the lowest or next to the lowest in all 50 states for hospital outpatient services,” Leventhal said.

He also said the ruling could be used in future challenges involving Medi-Cal.

It is “impossible” for the government to show that rate cuts would leave recipients with the same access to care as the general public, Leventhal argued.

“It’s clear that the rates aren’t structured to provide the same access to care,” he said.

Jeffrey Eric Sandberg, who argued the case for the U.S. Dept. of Justice, referred questions to the department’s public information office.

A department spokesperson did not immediately respond to a request for comment.

The government could ask the panel to reconsider the decision, request a larger 9th Circuit panel to weigh in or appeal to the U.S. Supreme Court.

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