A federal appeals court has ruled that California cannot limit dental, podiatry, optometry and other health services for Medicaid beneficiaries treated at certain federally-funded providers -- based on definitions by Medicare.
A three-judge panel of the 9th Circuit Court of Appeals unanimously reversed a district court's interpretation of the Medicaid Act and ruled that California's reduction of Medi-Cal benefits "impermissibly eliminated mandatory services" -- although only for Medicaid beneficiaries treated at rural and federally-qualified clinics.
Amid a budget crisis in 2009, the California legislature changed the state welfare code and trimmed back adult coverage for services like dental and chiropractic treatment, worth about $130 million, and eventually with approval from the Centers for Medicare & Medicaid Services.
The California Association of Rural Health Clinics and the Avenal Community Health Center sued to reinstate the services, arguing that they were preempted by federal requirements, for one thing, and, for another, that the state couldn't implement the reductions until CMS had approved a state plan amendment.
The legislature enacted the services reductions on the notion that services like podiatry care are optional and can be limited under Medicaid law. The California Department of Health Services then argued in court that the Medicaid Act permits state programs to reimburse rural health clinics (RHCs) and federally-qualified health centers (FQHCs) only for "physician services" performed by medical and osteopathic doctors, and that states have discretion in covering dental and chiropractic services.
The eastern California District Court ruled that the limitations were within California's scope under Medicaid law, which in the areas of rural and federal health clinics actually turns to Medicare law to define certain services.
The California Association of Rural Health Clinics and the state health department agreed that the "physicians' services" referenced by Medicare are core services that RHCs and FQHCs can be reimbursed for -- but they disagreed over whether Medicare or Medicaid defined the actual services RHCs and FQHCs must provide.
Medicare defines a physician as doctors of medicine, osteopathy, dentistry, podiatry, optometry and or chiropractic, so the California rural health association argued that the state denying reimbursement for those services, even for Medicaid patients, conflicted with federal law.
The 9th Circuit Court of Appeals mostly bought that argument, after turning to the original statutes in question.
In Medicaid's definition of rural and federally-qualified providers, the "commandments are unambiguous," wrote Judge Dorothy Wright Nelson.
The RHC and FQHC services that Medicaid requires states to cover are "coequal to those services" as defined by Medicare. "In other words, whatever meaning the Medicare statute gives to those terms,they bear the same meaning in the Medicaid statute," wrote Nelson (who like more and more federal judges has been eligible for Medicare herself for more than a decade, now at the age of 85).
"We hold that Medicaid imposes on participating states an obligation to cover 'rural health clinic services' and 'Federally-qualified health center services,' and Medicaid imports the Medicare definition of those terms."
Nelson added: "Any alternate reading of the statute would do violence to Medicaid's command that the terms 'rural health clinic services,' 'rural health clinic' and 'Federally-qualified health center services' shall have the meanings given those terms in Medicare."
The ruling may have implications beyond California, at least for Medicaid-covered patients at rural and federally-qualified clinics. The California Department of Health Services is reviewing the ruling, while the legislature actually pulled back some of the cuts not long ago and reinstated some adult dental coverage.