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State Medicaid Rate Cuts: Legal Challenges and Possible Solutions

First few Article Sentences

The largest recession in recent history has forced many states to drastically cut payments for health care services provided to Medicaid enrollees. Medicaid, which provides coverage to indigent patients, is a jointly funded state/federal program in which the federal government matches a percentage of the funds expended by a state on Medicaid services. Washington’s 2009-11 operating budget included an overall 4% reduction in inpatient and outpatient hospital rates, as well as numerous other cuts.

Other states have made similar rate reductions. As a result, health care providers in several states have resorted to litigation, seeking to reverse what providers assert are illegal Medicaid rate cuts. Where these challenges have succeeded, however, the question remains: where will the money come from in order to maintain adequate Medicaid payments? In California, as in other states, the answer has been to enact an assessment or tax on providers, funds from which are used to draw down additional federal matching dollars. Such an assessment has the added benefit of allowing the state to take advantage of provisions of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5), which provides for enhanced federal matching rates through December 2010.


Madden, Michael

Scott, Jill B.

Bennett Bigelow & Leedom, P.S.

Provider Reimbursement

December 1, 2009

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