Expanding Medicaid eligibility is an important part of the current health reform law, but many question whether this will mean better health care access. Medicaid beneficiaries have had trouble accessing care for years. From the beginning, Medicaid has been plagued with two problems: low payment rates for providers, and a slow, often confusing, reimbursement system. Medicaid pays far less than Medicare for the same service, and rates are usually too low to even cover providers' costs. Recent state budget cuts have exacerbated the problem - states are cutting already low rates as a way to fix their budget deficits.
These problems have discouraged a number of medical providers - including physicians, hospitals, nursing homes, and specialty clinics - from treating Medicaid patients. As rates are cut further, even more are leaving the Medicaid program. This means that Medicaid patients are having a difficult time finding accessible, qualified providers to treat them. For patients with chronic health conditions, it also means that they end up relying more on the emergency room. Hospitals and emergency room physicians cannot refuse to treat Medicaid patients because of state and federal mandates that they screen and stabilize anyone who comes to the ER, regardless of ability to pay. The frequent use of emergency rooms by Medicaid patients and the uninsured creates a serious financial strain on hospitals in underserved communities, and makes it very difficult to find physicians willing to work there.
State Medicaid payment cuts have been criticized as bad health policy, but in some cases, they are also illegal. Generally states have a great deal of discretion to administer Medicaid, including setting payment rates, but they must comply with certain federal requirements. One of the most important of these is commonly known as the Equal Access Provision (or Section 30(A)) of the Medicaid Act. It requires states to “assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.” This creates express procedural and substantive requirements: state officials must consider factors such as access and quality in their rate-setting process, and the rates should ensure equal and timely access to care for Medicaid beneficiaries. The Ninth circuit has interpreted this to mean that rates must bear a reasonable relationship to a provider's costs and therefore that the state must rely on responsible cost studies in setting its rates.
In California, patients and providers used this provision to successfully halt the recent Medicaid cuts passed by the legislature. In Independent Living Center of Southern California (ILC) v. Shewry, the Ninth Circuit upheld a preliminary injunction to prevent the state from cutting Medi-Cal payments by 10% to physicians, dentists, pharmacies, adult health care centers, clinics, and other providers. This seemed like a pretty easy case to win. The state did not consider any of the factors required under the Equal Access Provision. State officials admitted that they reduced the rates solely because of the budget deficit; they did not do any cost studies nor did they try to determine what impact, if any, the cuts would have on access or quality. The plaintiffs also presented significant evidence of the harm that would result: the cuts would lead to a mass exodus of providers from the Medicaid program that would send the health care system into further crisis.
The reality, however, that these kinds of cases are usually difficult to win. In fact, this case is merely the latest in a long line of cases in California and other states challenging inadequate rates, many unsuccesfully. Courts do not like second-guessing resource decisions that are viewed as political (as opposed to legal) in nature. And it is very easy for states to dress up their decisions with a miniminal level of process that allow courts to avoid scrutiny of the merits.
The ILC case was "easier" than most because the plaintiff's sought to enjoin state cuts; it is much easier to get a temporary injunction to stop state action where there are obvious legal procedural defects, than it is to try to force the state to act. This is because courts are very deferential to government agencies. The federal government oversees the Medicaid process through its Centers for Medicare and Medicaid Services (CMS). CMS has authority to review and approve or reject state Medicaid plans, including payment rates. In practice, however, federal oversight is lacking and meaningful reviews are not done. Nonetheless, if the federal government has not rejected a state plan or found it noncompliant, then courts do not want to question it either. The reality is that lawsuits trying to force a state to raise existing Medicaid rates or to revise its rate-setting process will be much more challenging.
California is a bellwether state for health care, and ILC v. Shewry has given patients and providers renewed hope that federal courts will hold states more accountable for the legal promises they make. But ILC has been appealed to the U.S. Supreme Court, and a number of other lawsuits will be heard this year, so it is not yet clear what ILC really means for Medicaid beneficiaries and providers.
For a more detailed description of these lawsuits and legal trends, I highly recommend reading the October 2009 Issue Brief, titled Medicaid Payment Rate Lawsuits: Evolving Court Views Mean Uncertain Future for Medi-Cal, published by the California HealthCare Foundation.
