AIDS Foundation Sues Over Medi-Cal Cuts

LOS ANGELES (CN) – The AIDS Healthcare Foundation claims that California has illegally cut Medi-Cal payment rates and is jeopardizing the nonprofit healthcare provider’s role as a “safety-net” provider to poor people with HIV/AIDS.

The Foundation sued Director of California’s Department of Healthcare Services Toby Douglas, claiming the state’s “desperate attempt to balance its budget on the backs of safety-net providers” is unconstitutional, violates California’s Medi-Cal plan, and federal Medicaid laws.

The Foundation seeks a judgment invalidating the law and the state’s compliance with its “mandatory duties” under state and federal law.

“There is no disputing the State of California continues to be mired in a fiscal crisis. The state continues to seek to address those financial woes by reducing the amounts paid under the state’s Medicaid program, Medi-Cal, to certain health care providers for services to Medi-Cal recipients. The state has been repeatedly admonished by both state and federal courts that, if it wants to reduce Medi-Cal payment rates, it must do so in a manner consistent with the mandates of controlling law. Unfortunately, in this case, the state has again failed to satisfy its obligations under the law and therefore has illegally reduced Medi-Cal payment rates to non-profit, safety-net healthcare providers and is now paying less to these providers for their pharmaceutical services than it pays to commercial pharmacies for the very same services,” the 18-page Superior Court complaint states.

AIDS Healthcare Foundation says it “primarily serves a low income/indigent patient population” and participates in the states’ Medicaid program, Medi-Cal, and the federal 340B drug pricing program.

The latter program offers safety-net providers the option of either receiving discounted reimbursement from the state Medicaid program, or through the “normal Medicaid fee-for-service rate for drugs distributed to Medicaid recipients” – the so-called “carve out” option.

But according the Foundation, after the state announced a state fiscal emergency in the summer of 2009, it enacted a budget bill which effectively “wiped out” the carve out option. That has allegedly left safety-net providers with a single option which limits their “ability to participate in, and benefit from the, 340B program.”

“(T)he California law eliminates the ‘carve out’ option and mandates that 340B safety net providers ‘carve-in’ their Medicaid drugs. But the Medi-Cal reimbursement rate for drugs purchased through the 340B program is less than the reimbursement rates for the very same drugs not purchased through the 340B program. As a result of this law, 340B safety net providers like AHF have been and will continue to be harmed because they will be paid less than non-340B pharmacies (which, as a practical matter, are mainly for-profit, retail pharmacies) for the same services and will have less net revenue to use to fulfill their role as safety net providers,” the complaint states, abbreviating AIDS Healthcare Foundation.

The Foundation says the law will lead to safety-net providers reducing “the services they currently provide to Medi-Cal beneficiaries” or cause them to “completely cease providing care to Medi-Cal beneficiaries.”

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