California lawsuit challenges Medicaid reimbursement cuts

The reductions are a serious threat to patient access, physician groups say.

By Joel B. Finkelstein, amednews staff. Dec. 1, 2003.

Washington -- California physicians don't want to be the victims of their state's budget crisis. They have filed a lawsuit alleging that impending Medicaid cuts violate federal law.

The California Medicaid program, called Medi-Cal, is set to implement a 5% cut in reimbursement effective Jan. 1, 2004.

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The lawsuit was brought by the California Medical Assn. and other physician groups in the state that say the cut will make an already bad situation worse. It cites the Social Security Act, which requires states to assure that Medicaid payments are adequate to enlist enough physicians and others to serve their beneficiaries.

"By reducing reimbursement for physicians, dentists and others, and greatly reducing funds for such equipment as wheelchairs, prosthetics and other medical necessities, the state is greatly injuring the most vulnerable Californians," said Jack Lewin, MD, the CMA's chief executive officer.

Physician Medicaid participation rates are already very low in California. According to research by the University of California, San Francisco, just over half of primary care physicians in urban counties serve Medi-Cal. But only half of those physicians provide the bulk of the services to these patients.

The 2001 study showed that there were 46 primary care physicians available per 100,000 Medi-Cal patients. Federal workforce standards require 60 to 80 physicians per 100,000 patients.

A lawsuit objecting to proposed Medi-Cal cuts in the 1980s was successful.

The state's push for Medicaid cuts is a sharp departure from just a few years ago. In August 2000, a 15% increase in Medi-Cal reimbursement to physicians and others was approved.

The CMA estimated that the pay boost increased physician Medicaid participation by 2,000 doctors.

Research funded by the California HealthCare Foundation, an independent philanthropic organization, concluded that the reimbursement increase did not lead to much of a change in patient access.

Physician reimbursement rates were still well below market levels, said Christopher V. Perrone, a senior program officer with the foundation. Many physicians were justifiably skeptical about the permanence of such increases, and physicians were still hesitant to take on new Medi-Cal patients or to begin accepting Medicaid patients if they were not already, he added.

CMA spokesman Peter Warren agreed that low reimbursement rates had caused many doctors to stop accepting new Medi-Cal patients. Although a 5% reduction might not seem like a lot of money when physicians are already receiving so little for their Medi-Cal patients, it sends the message that the state is not really committed to the program, he said.

State lawmakers might have thought they were doing Medi-Cal's beneficiaries a favor by not rolling back eligibility, Perrone said, but they did not realize that they were sacrificing access instead.

Budget bottom line

The lawsuit also contends that the Medi-Cal cut is intended solely to ease the state's budget problems, an approach that is illegal under federal law and does not take into account the new Medicaid funds approved by Congress earlier this year.

The CMA estimates that the 5% reduction will result in the state losing $122 million in federal matching funds, for a total hit to the Medi-Cal program of $237 million.

Warren said the lawsuit is based on a similar successful suit filed in the 1980s.

It is too early to tell whether such lawsuits will turn into a national trend as other states consider or implement reimbursement cuts, said Donna Folkemer, a health analyst for the National Conference of State Legislatures.