Supreme Court sends California Medicaid case back to 9th Circuit

WASHINGTON _ The Supreme Court on Wednesday kept alive the possibility that California doctors, pharmacists and senior citizens can challenge the state’s Medicaid reimbursement cuts.

But the closely divided court didn't definitively side with the doctors. Instead, citing the complexity of the cases and some changed circumstances, justices ordered more arguments before a lower appellate court.

“It may be that not all of the considerations that may bear upon resolution of the issue have been presented,” Justice Stephen Breyer wrote for the majority.

The 5-4 decision kicks the set of California Medicaid reimbursement cases back to the 9th U.S. Circuit Court of Appeals, which had sided with the doctors, pharmacists and senior citizens. James Hay, a physician who's the president of the California Medical Association, called the action a win for his side.

“The lower court has previously ruled that interested parties indeed have the right to sue the state and federal government if the federal Medicaid Act is being violated," Hay said in a statement. "They will have the opportunity to decide that once again.”

Lynn Carman, an attorney for the Medicaid Defense Fund, added Wednesday that the 9th Circuit probably would need several months to sort out the multiple cases and plan the next steps. The next ruling might not occur for another nine months, he added.

And though it's not definitive, the ruling Wednesday was a blow to the Supreme Court’s conservative dissenters, who'd sought to stop the reimbursement legal challenge in its tracks.

“Nothing in the Medicaid Act allows providers or beneficiaries, or anyone else for that matter, to sue to enforce" the law, Chief Justice John Roberts Jr. wrote for the dissenters, adding that the Constitution likewise provides “no private right of action.”

The ruling does little to clarify California’s budget battle, which is being waged on several fronts.

The state spends more than $41 billion a year on the Medicaid program, which the state operates under the name Medi-Cal. It serves more than 7 million low-income Californians and consumes about 13 percent of the state's budget.

Faced with what the state's attorneys described as a "devastating, ongoing and deepening financial crisis," the California Legislature approved reimbursement cuts in 2008 and 2009 of between 1 percent and 10 percent.

The California Pharmacists Association, Santa Rosa Memorial Hospital and the Independent Living Center of Southern California challenged the state's cuts, joined by unions and organizations that include the Gray Panthers of Sacramento.

The 9th Circuit Court blocked the reductions from taking effect. Other reimbursement cuts subsequently have been legislated and challenged in court, as well.

Customarily, private parties can sue to enforce a federal law only if Congress has explicitly authorized them to. The Medicaid law doesn't include such authority.

"Congress has not created a cause of action for the private parties," Deputy Solicitor General Edwin S. Kneedler noted in oral argument last October, echoing California's argument.

The medical professionals, though, argued that they have the power to sue under the supremacy clause of the Constitution, which declares that congressional acts are the "supreme law of the land.” Under this reasoning, the California laws imposing reimbursement cuts violated the 1965 Medicaid law's requirement that state payments remain "consistent with efficiency, economy and quality of care" and be "sufficient" for medical professionals.

The Obama administration approved some of the state’s proposed cuts in October, including a 10 percent reduction in reimbursements for pharmacists and laboratory work, after the Supreme Court argument.

Breyer, citing these “changed circumstances,” said the question now was whether a supremacy clause challenge could proceed once federal authorities had approved the cuts.

“The providers and beneficiaries continue to believe that the reductions violate the federal provision, the agency’s view to the contrary notwithstanding,” Breyer wrote.

Jim Humes, California Gov. Jerry Brown's executive secretary, called the ruling an important decision that recognizes the authority of states to "manage their social services programs."


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