California Budget Crisis - Day 56: Federal Judge Orders State to Explain Delay in Implementing Order to Restore Medi-Cal Rates

Temporary Court Order Last Week Blocked Most of the Medi-Cal Cuts

The injunction or temporary order CV 08-3315 CAS (MANx), issued August 18, 2008, orders the Department of Health Care Services:

" . . . respondent Director [Department of Health Care Services], her agents, servants, employees, attorneys, successors, and all those working in concert with her to refrain from enforcing Cal. Welf. & Inst. Code § 14105.19(b0(1), including refraining from reducing by ten percent payments under the Medi-Cal fee-for-service program for physicians, dentists, pharmacists, adult day health care centers, clinics, health systems, and other providers for services provided on or after July 1, 2008."

The judge's order did not include Medi-Cal managed care health plans, and hospitals not contracted with Medi-Cal.

The temporary court order last week means that the State Medi-Cal reduction of close to $600 million in State general funds would have to be - at least for now - restored back to the Medi-Cal program to pay providers covered under the temporary order.

Not Clear How State Will Respond - But Governor's Revised Budget Included Democrat's Medi-Cal Provider Rate Restoration

What is not clear is how the State will now proceed to comply with the federal court order issued last week, and how it will respond with the hearing on August 28th.

Governor Schwarzenegger issued a revised budget proposal last week - referred to as the "August Revision", that he said represented a compromise, basing his new proposals on the budget put forward by legislative Democrats in late June - which remains stalled on both the Senate and Assembly floors.

The budget plan by legislative Democrats actually proposes to restore many of the Medi-Cal provider rates - so the Governor appears to be assuming that Medi-Cal provider rates would be restored because his new proposed spending cuts released last week do not include cuts to Medi-Cal.

The Governor proposed in that compromise issued last week, $2 billion in more cuts on top of what the Legislative Democratic budget proposed, (for a total of $9.9 billion in cuts) including targeting the January 1, 2009 federal cost of living money owed to people who receive SSI/SSP (Supplemental Security Income/State Supplemental Payment).

The Governor also proposed in his compromise last week to freeze spending year-over-year for the second year in a row.

The Governor's compromise budget proposal - which has been criticized by both Republicans and Democrats in the Legislature for different reasons, Neither house has acted on any of the Governor's new proposals.

Medi-Cal Provider Cut Proposed by Governor in January and Approved by Legislature in February

Governor Schwarzenegger proposed in January, and the Legislature approved in February emergency legislation that permanently cut Medi-Cal provider rates by 10% effective July 1, 2008. The action is contained in ABx3 5 (the "x3" stands for the third special or extraordinary legislative session that was called by the Governor to deal with the budget emergency - a copy of this bill is on the CDCAN website, at www.cdcan.us)

The federal court order issued last week temporarily blocked those cuts and ordered the State to restore the funding as of July 1, 2008.

The Legislature however did not act then and later rejected in June the Governor's other Medi-Cal proposals that called for permanent elimination of 11 Medi-Cal benefits - called "optional benefits" that the federal government does not require the states to provide. However, with the budget stand-off continuing with no end in sight, all previous spending cut proposals - even those previously rejected - could be reconsidered and included in a budget deal.

Many Provider Rate Cuts Restored by Budget Committees In June As Part of Budget Stalled In Legislature

Many of those provider rate reductions were reversed by the Senate and Assembly budget committees in June, but that action, along with others, are part of the State budget proposal that has been stalled, so the provider rate reductions went into effect July 1.

Department of Health Care Services Oversees Medi-Cal Program

The hearing specifically orders Sandra Shewry, director of the California Department of Health Care Services, which oversees the State's Medicaid program (called "Medi-Cal") to show reasons (or causes) why she should not be held in contempt of the court for refusing to comply with the Judge's order.

The Department of Health Care Services is under the California Health and Human Services Agency headed by Secretary Kim Belshe, who reports directly to Governor Arnold Schwarzenegger. The Medi-Cal program is overseen within the Department of Health Care Services by Chief Deputy Director Stan Rosenstein.

Over 1.6 million children and adults with disabilities - including developmental disabilities, mental health needs, seniors, persons who are blind, receive Medi-Cal program services and supports.

Attorneys for Lawsuit Say State Is Defying Court Order

The attorneys who filed the lawsuit on behalf of the people who are Medi-Cal recipients (or organizations that represent or work with people who are Medi-Cal recipients including the Independent Living Center of Southern California, Gray Panthers and others) filed the request that the State be held in contempt and sanctions issued, with a request that the Judge order that a permanent injunction blocking the Medi-Cal cuts be issued as punishment for failure to carry out the court's original order issued August 18th.

Lynn S. Carman of Novato, and Stanley L. Friedman, co-counsel for Medicaid Defense Fund which filed the suit, said that despite issuance of the order on August 18, 2008 to pay all Medi-Cal fee-for-service providers, the Department of Health Care Services is still deducting 10% from all payments for these Medi-Cal providers.

Carman said that the State in previous cases where it was forced to restore Medi-Cal rate cuts due to court orders, complied quickly in 1987 and 2003, and that further delay "...is causing daily suffering among thousands of beneficiaries who cannot get their medicine necessary to survive, or stay out of institutions, and is intolerable."

Carman added that "...thousands of community pharmacies are being driven out of business because the rates do not even reimburse them their cost to acquire the medicine which they dispense in the Medi-Cal program."

The California Disability Community Action Network, is a non-partisan link to thousands of Californians with developmental and other disabilities, people with traumatic brain injuries, the Blind, the Deaf, their families, community organizations and providers, direct care, homecare and other workers, and other advocates to provide information on state (and eventually federal), local public policy issues.