Federal Judge Orders State To Refund Adult Day Health Centers, Doctors, Dentists, Optometrists, Pharmacies and Clinics 10% Cut In Medi-Cal Payments It Made Between July 1, 2008 Through August 17, 2008

SACRAMENTO - US Federal District Court Judge Christina A. Synder, who in the lawsuit “Independent Living Center of Southern California et al v. Sandra Shewry” originally stopped the State from further implementing the 10% rate reductions for most Medi-Cal providers as of August 18, 2008, issued a revised ruling dated January 22, that made her order retroactive to July 1, 2008 and now is ordering the State to refund that 10% cut in payments covering the period from July 1 through August 17, 2008, to those Medi-Cal “fee-for-service” providers - physicians, pharmacies, dentists, optometrists, adult day health care centers, and clinics covered in the lawsuit. [a copy of the order is on the CDCAN website at www.cdcan.us ]

The order was expected after the US 9th Circuit of Appeals in two decisions in July and December last year ruled against the Schwarzenegger Administration on the lawsuit.

Judge Synder said in her order that “…the Court hereby orders respondent Director, her agents, servants, employees, attorneys, successors, and all those working in concert with her to refrain from enforcing [California Welfare and Institutions Code Section 14105.19(b)(1)], including refraining from reducing by ten percent payments under the Medi-Cal fee-for-service program for physicians, dentists, pharmacies, adult day health care centers, clinics, health systems, and other providers for services provided on or after July 1, 2008” [the Judge noted in a footnote that her order did not apply to non-emergency medical transportation and home health agencies who filed a separate lawsuit that stopped their 10% Medi-Cal rate reductions as of November 17, 2008.]

News Comes As Senate Budget Panel Considers Governor’s Medi-Cal Cuts

The news came on the same day the Senate Budget and Fiscal Review Committee held a informational budget hearing to consider Governor Arnold Schwarzenegger’s proposed special session budget reductions to health programs, including over $1 billion in proposed new reductions to the Medi-Cal program that could mean changes in provider rates, and a proposal to eliminate all funding for adult day health care centers.

Neither house in the Legislature has taken any vote yet on the Governor’s proposed special session reductions that he wants approved by March 1, 2010 for implementation by June 1, 2010.

Medicaid Defense Fund Says State Owes Over $68 Million To Providers

The Medicaid Defense Fund, a Novato-based legal advocacy group led by 82 year old attorney Lynn Carman [photo left], said that the amount of money the State would be required to refund to those providers could be over $68 million. It is not certain how much of that amount would be matched by federal funds. The Medicaid Defense Fund estimated that $35 million is owed to Medi-Cal pharmacies, about $16 million to doctors, $8 million to dentists, $5 million to adult day health centers, $4 million to clinics and $3 million to optometrists, covering the period from July 1 through August 17, 2008.

He said that the ruling was yet “another victory” for people with disabilities, the blind and seniors who need Medi-Cal to live in their own communities and for the doctors, pharmacies, adult day health centers, clinics and others who provide “needed and critical Medi-Cal services”.

“We will be serving the Director [of the Department of Health Care Services – the agency that oversees the State’s Medicaid program, called “Medi-Cal”] with a copy of the order, and will pursue contempt of court procedures if the department does not promptly refund the 10% amounts which were withheld, in violation of the Medicaid Act, by the Department for the period of July 1 through Aug.17, 2008,” said Carman.

There was no official reaction to the Judge’s order by the Schwarzenegger Administration.

Background of Case

· The Legislature passed and the Governor approved the permanent 10% rate reductions to most Medi-Cal providers as part of mid-year State budget cuts that revised the 2007-2008 State Budget in February 2008. Those Medi-Cal provider rate reductions went into effect July 1, 2008. [Note: the Legislature passed and the Governor approved in September 2008, the 2008-2009 State Budget that rescinded the 10% reductions as of March 1, 2009 (even if it was stopped earlier by the federal court) and replaced it with a 1% for some providers and a 5% rate cut to other providers including pharmacies and adult day health centers. Another lawsuit in 2009 subsequently blocked the 5% cuts]

· Late spring of 2008 the Medicaid Defense Fund filed a lawsuit that eventually resulted, on August 18, 2008 with an order by Federal District Court Judge Synder that blocked the State from continuing the 10% rate reductions to those Medi-Cal providers as of August 18, 2008 – the date when the judge issued her order.

· The plaintiffs – the individuals and organizations filing that lawsuit – instead wanted the judge’s order to be retroactive to July 1, 2008, the date when the rate reductions first went into effect . The Schwarzenegger Administration last July lost an appeal to the US 9th Circuit Court of Appeals on the case, and returned the case back to the federal district court.

· The federal district court on January 4, 2010 held a hearing and then issued its ruling dated January 22, that revised its previous order and moved the effective date blocking the Medi-Cal provider rate reductions for most providers retroactive to July 1, 2008.

· Plaintiffs who filed the suit are: the Independent Living Center of Southern California headed by Norma Vescovo; Gray Panthers of Sacramento; Gray Panthers of San Francisco; Margaret "Maggie Dee" Dowling of Pittsburg, a person with disabilities and Medi-Cal recipient; Mark Beckwith of Berkeley, a person with disabilities and Medi-Cal recipient; Gerald Shapiro, Pharm.D., owner of Uptown Pharmacy in Los Angeles; Thu-Hang Tran, Pharm.D., president of Vietnamese American Pharmacy Association, in Orange County; and Sharon Steen, of Central Pharmacy in Santa Monica.

· The lawsuit originally named Sandra Shewry, the then director of the Department of Health Care Services, along with other state officials. Shewry, who left state service, was replaced by David Maxwell Jolly.