California's Medi-Cal “Hold Back”

Arguments are soon to be heard regarding a preliminary injunction in a case that may have profound effects on how nursing home care is delivered to the poor in Humboldt County and across the state.

To help deal with California’s budget crisis, this year’s California budget included a 10% reduction in Medi-Cal reimbursement rates for freestanding skilled nursing facilities and other healthcare providers (AB 97).  This 10% cut is scheduled to go into effect retroactively to June 1, 2011.  That cut was recently approved by the Obama administration.  The State has agreed that, on December 31, 2012, it will reimburse medical providers for the 10% that is held back, provided it has the money.

A number of cases have been filed by medical providers regarding the legality of that hold back.  The lead case is California Hospital Association v. Douglas, CV11-09078, before Judge Christina A. Snyder in the Central District.  There is presently a motion for a preliminary injunction scheduled to be heard in that action on December 19, 2011.  The State sought a stay of that hearing which was denied by Judge Snyder.

The medical providers’ argument is, essentially, that Medi-Cal reimbursement rates are so low that they lose money every time they see a Medi-Cal patient.  Any healthcare provider that receives Medicare is required to also receive Medi-Cal patients.  The response of the State is to simply say, “If you don’t want to be in the business of providing medical care, you don’t have to.”    While it may be legally correct, its position is morally corrupt.  Many providers have indicated that, if the cuts take effect, they will be financially incapable of seeing Medi-Cal patients.

This cut will not only affect skilled nursing facilities.  All medical providers will be affected.  Medi-Cal rates are already below the cost of service in numerous areas.  Cutting rates further will severely impact the care.  In nursing homes labor comprises close to 70% of a nursing home’s operating costs.  So, if rates are cut, that is where the nursing home will make up the loss.

What’s equally absurd about this cut is that Medi-Cal receives matching funds from the federal government.  So, for every dollar that Medi-Cal cuts from its program, $2.00 are lost