Managed Pharmacy Care, et al v. Sebelius, et al, No. 12-55067 (9th Cir. 2012)
Annotate this CaseIn the four cases giving rise to these eleven consolidated appeals, the Secretary of the Department of Health and Human Services (HHS) and the Director of the California Department of Health Care Services (DHCS), appealed the district court's grant of preliminary injunctions to plaintiffs, various providers and beneficiaries of California's Medicaid program (Medi-Cal). At issue was the implementation of Medi-Cal reimbursement rate reductions. The court held that Orthopaedic Hospital v. Belshe did not control the outcome in these cases because it did not consider the key issue here - the Secretary's interpretation of 42 U.S.C. 1396a(a)(30)(A); the Secretary's approval of California's requested reimbursement rates were entitled to Chevron deference; and the Secretary's approval complied with the Administrative Procedures Act, 5 U.S.C. 500 et seq. The court further held that plaintiffs were unlikely to succeed on the merits on their Supremacy Clause claims against the Director because the Secretary had reasonably determined that the State's reimbursement rates complied with section 30(A). The court finally held that none of the plaintiffs had a viable takings claim because Medicaid, as a voluntary program, did not create property rights.
Court Description: Medicaid / Preliminary Injunctions. The panel reversed the district court’s decisions in four cases and vacated preliminary injunctions prohibiting the California Department of Health Care Services and its director from implementing Medi-Cal reimbursement rate reductions authorized by the California legislature and approved by the Secretary of the Department of Health and Human Services. Asserting claims against the Secretary under the Administrative Procedures Act and against the Director under the Supremacy Clause, various Medi-Cal providers and beneficiaries claimed that the reimbursement rate reductions did not comply with 42 U.S.C. § 1396a(a)(30)(A). They relied on Orthopaedic Hosp. v. Belshe, 103 F.3d 1491 (9th Cir. 1997), which interpreted § 30(A) as requiring a state seeking to reduce Medicaid reimbursement rates first to consider the costs of providing medical services subject to the rate reductions. The panel held that Orthopaedic Hosp. did not control because it did not consider the Secretary’s interpretation of § 30(A). Agreeing with the D.C. Circuit, the panel held that the Secretary’s approval of California’s requested reimbursement rates, including her permissible view that prior to reducing rates states need not follow any specific procedural steps, was entitled to Chevron deference, and that the Secretary’s approval complied with the Administrative Procedures Act. The panel further held that the plaintiffs were unlikely to succeed on the merits of their Supremacy Clause claims against the Director because, even assuming that the Supremacy Clause provides a private right of action, the Secretary had reasonably determined that the State’s reimbursement rates complied with § 30(A). Finally, the panel held that none of the plaintiffs had a viable takings claim because Medicaid, as a voluntary program, does not create property rights. The panel dismissed cross-appeals as moot.
The court issued a subsequent related opinion or order on May 24, 2013.
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