On October 27, 2011, the California Department of Health Care Services announced that the Centers for Medicare and Medicaid Services (CMS) has approved a number of provider reimbursement cuts in the state’s Medicaid program. The specific proposals approved by CMS are a 10 percent provider payment reduction on a number of outpatient services, including physicians, clinics, optometrists, therapists, laboratories, dental, durable medical equipment, and pharmacy; a 10 percent payment reduction for freestanding nursing and adult subacute facilities; and a 10 percent provider payment reduction and rate freeze for distinct part/nursing facility-B services.
DHCS stated that CMS found the proposed cuts “were fully supported by a thorough access analysis” and “were accompanied by a unique monitoring plan that will collect data to ensure that access to care is not compromised as the reductions are implemented.” The cuts are projected to save the state $623 million. CMS said it approved the cuts to give California the flexibility needed “to address their difficult budget circumstances.”
The California Medical Association and the California Hospital Association (CHA) expressed disappointment with CMS’ approval. CHA also filed a lawsuit on November 1 in federal court in an attempt to block the cutbacks. A number of lawsuits are pending in the U.S. Supreme Court challenging various Medi-Cal rate cut proposals raising issues under 42 U.S.C. section 1396a(a)(30)(A) of the Social Security Act, which requires that a state Medicaid plan provide payments that “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.” Many states are pursuing approvals for payment cutbacks in their Medicaid programs as they struggle to deal with budget shortfalls.