Medi-Cal Benefits Reinstated, says 9th Circuit Panel

The 9th Circuit Court of Appeals on Friday ruled that federal Medicaid program prohibits California's 2009 healthcare budget cuts.  The state law halted Medi-Cal coverage (California's Medicaid program) of adult dental, podiatry, optometry, and chiropractic care, among other services.

To understand why federal preemption carried the day, it is important to understand the balance of federal and state governance of Medicaid. Medcaid benefits are jointly funded by the federal government and individual states. While states have the autonomy to decide how to run their respective Medicaid programs, the federal government has the final word on many aspects of the program, including required benefits.  

In this case, when an association of rural healthcare clinics sued to block the budget cuts, a U.S. District Court judge agreed with California that the slashed services were optional under the federal Medicaid Act, and he granted summary judgement in favor of the state. Even the U.S. Centers for Medicare and Medicaid (CMS), the federal agency that works with states to administer Medicaid, approved the cuts as "optional services." 

A 9th Circuit panel, however, said it would not defer to the agency's approval, pointing to the federal law that "unambiguously defines" those benefits cut by California among the the healthcare that Medicaid must provide. (The case in the 9th Circuit is California Association of Rural Health Clinics vs. Douglas, 10-17574)