• Late June Ruling By US 9th Circuit Court of Appeals Cleared Way For State To Implement Cuts Retroactively to June 1, 2011
  • Brown Administration Will Exempt Several Provider Categories – But Most Providers Impacted
  • Implementation of 10% Cut Will Be Done on Staggered Schedule By Medi-Cal Provider Category


SACRAMENTO, CA (CDCAN)  [Last updated – 08/14/2013 – 08:06 PM] – With legal hurdles largely cleared through the federal courts that previously stopped the 2011 Medi-Cal provider cuts from being enacted, the Brown Administration released on Wednesday its plan to implement those 10% cuts on a staggered schedule for providers impacted beginning September 5, 2013. 


Some providers are exempted from the reduction, including pharmacy in Medi-Cal managed care plans, a certain fee-for-service Medi-Cal providers – but most providers are impacted. 


The 2011 cuts were authorized in AB 97 that was one of several budget related bills that made up the 2011-2012 State Budget.  AB 97 called for a 10% provider payment reductions to most categories of services in Medi-Cal fee-for-service (FFS) as well as equivalent reductions in Medi-Cal managed care plans. The cuts to Medi-Cal managed care plans will be applied only prospectively (meaning as of the scheduled date of October 1, 2013) and not retroactively.


Attached to this CDCAN report is the 2 page announcement from the Department of Health Care Services, the state agency that oversees California’s federally funded Medicaid Program that is matched with State funds – called “Medi-Cal”. The document, a pdf file saved as a document (that allows persons who are blind or sight impaired to read it using a screen reading device – pdf image files cannot) is titled “20130813 – Department of Health Care Services AB 97 Implementation Announcement of 10% Medi-Cal Provider Reductions (2 Pages – Aug 14 2013).pdf”



  • Medi-Cal recipients and providers who filed lawsuits in federal court in 2011 argued that the reductions would have a devastating impact on access to health care and services across the State, especially to children and adults with disabilities, mental health needs, and seniors.   The Medicaid Defense Fund, headed by 82 year old attorney Lynn Carman said the cuts, if implemented, violate basic rights of people with disabilities and seniors. 
  • The State previously acknowledged the seriousness of the cuts but claimed the reductions were necessary to contain costs in order to bridge an ongoing enormous budget shortfall – and to keep the budget balanced in future years.   
  • It is not clear how the reductions, including the effort to collect the reduction retroactively, will have on the State’s efforts to dramatically expand Medi-Cal under the federal health care reform in January and its other efforts to change delivery of services for many people with disabilities and seniors who are eligible for both Medicare and Medi-Cal in 8 counties in the coming year.  The Brown Administration has previously stated that it has taken and continues to take steps to strengthen the Medi-Cal program and access to services. 
  • The implementation schedule of the Medi-Cal reductions follows the implementation of a temporary 8% across-the-board cut in hours to all In-Home Supportive Services (IHSS) recipients that took effect July 1, 2013 as part of a federal court settlement agreement between the Brown Administration and attorneys representing IHSS recipients and workers last May.  That cut will fall to 7% on July 1, 2014 and could end on June 30, 2015, unless the State is not able to obtain sufficient new federal funding for IHSS to cover restoring that IHSS cut. 
  • All of the recipients of IHSS – who also include thousands of children and adults with developmental disabilities who also receive regional center funded services – are also Medi-Cal recipients who will be impacted by the Medi-Cal provider rate reductions. 



Medi-Cal fee-for-service providers affected by the earlier court injunction that blocked the payment reductions will have a 10% prospective payment reduction applied to all claims they submit for services on the following staggered schedule:

  • Medical Transportation  – Reduction Begins: 09/05/2013
  • Dental – Reduction Begins: 09/05/2013
  • Durable Medical Equipment/Medical Supplies – Reduction Begins: 10/24/2013
  • Pharmacy [fee-for-service] – Reduction Begins: 01/09/2014
  • Physician/Clinic  – Reduction Begins: 01/09/2014
  • Distinct Part Nursing Facility Level B (PT 17 & AC 1,2,3) – Reduction Begins: 01/09/2014
  • Medi-Cal managed care plans equivalent reductions under AB 97 is scheduled to begin October 1, 2013 (see below).



  • The Department of Health Care Services indicated in its announcement that since the 10% Medi-Cal fee-for-service provider payment reduction is effective for services provided on or after June 1, 2011, those Medi-Cal providers were over-paid by that amount because the federal court order blocked the cuts from being implemented.
  • As mentioned, the US 9th Circuit Court of Appeals’ December 2012 ruling that reversed the lower federal district court order blocking the cuts, allowed the State to finally implement its planned 10% Medi-Cal provider cut retroactively to its original June 1, 2011 implementation date. 
  • As a result, the State will also implement a schedule to collect that 10% that was paid to Medi-Cal fee-for-service providers from that June 1, 2011 effective date through the date that the 10% cut is scheduled to be actually applied to providers for new claims and reimbursements on the staggered schedule as listed above.
  • These retroactive payments to the State by Medi-Cal fee-for-service providers will not occur until after the 10% payment reductions are implemented for that provider (the first being September 5, 2013 for medical transportation).
  • The Department of Health Care Services indicated that it will provide at least sixty (60) days advanced notification to providers of the scheduled recovery of the overpayments. 



The Department of Health Care Services included in its announcement several exemptions to the Med-Cal fee-for-service provider rate reductions, “…in order to preserve and protect access to care for Medi-Cal members.”   It appears however that the State might still intend to collect from those exempted providers the 10% cuts retroactively (from June 1, 2011 to the still not determined effective date of the exemption.

The exemptions are subject to approval by the federal government as part of the amendments (changes) the State will submit to California’s Medicaid State Plan. 

Providers proposed for exemption are:

  • Nonprofit dental pediatric surgery centers that provide at least 99% of their services under general anesthesia to children with severe dental disease under age 21 will be, according to the Department of Health Care Services announcement “…exempted prospectively from the 10% payment reduction. After required public notice, the effective date of this prospective exemption will be in the near future”.
  • Distinct part nursing facilities, Level B, classified as rural or frontier, based upon the California Medical Service Study Area’s definitions, will be exempted prospectively from the 10% payment reductions and will not be subject to the rate freeze at the 2008-09 levels on a prospective basis. After required public notice, the effective date of this prospective exemption will also be in the near future.
  • Certain prescription drugs (or categories of drugs) that are generally high-cost drugs used to treat extremely serious conditions, such as hemophilia, multiple sclerosis, hepatitis and others will be exempt from the 10% payment reduction. The Department of Health Care Services indicated that it has submitted an amendment to California’s Medicaid State Plan (SPA or State Plan Amendment 12-014) to exempt these categories of drugs, with an effective date for the exemption of March 31, 2012.



  • Under AB 97, the Department of Health Care Services indicated in its announcement that it will also be required to make “actuarially equivalent reductions to Medi-Cal managed care”.
  • Such reductions will be effective on October 1, 2013, on a prospective basis only – and not retroactively.
  • The Department of Health Care Services previously announced that given the differences between the Medi-Cal managed care and Medi-Cal fee-for-service systems, reductions to pharmacy would not be applied in managed care.
  • The Department of Health Care Services in its announcement said it was now announcing that specialty physician services in Medi-Cal managed care will not be subject to a reduction.
  • Guidance on the Medi-Cal managed care implementation will be issued soon in an All Plan Letter.



  • The 10% reductions was originally proposed by Governor Brown and passed by the Legislature as part of the 2011-2012 State Budget in a budget trailer bill – AB 97  (Chapter 3, Statutes of 2011). 
  • On March 16, 2011 the State Senate passed the bill by a vote of 36 to 2, followed by approval in the Assembly by a vote of 59 to 14.  The Governor signed AB 97 on March 24, 2011, taking effect immediately. 
  • The Brown Administration received approval from the Obama Administration to implement the 10% Medi-Cal reductions effective June 1, 2011, but was blocked from implementing most of those reductions due to a federal lawsuit filed in federal district court in Oakland.
  • Last December a 3 judge panel of the US 9th Circuit Court of Appeals reversed the lower federal district court order. Earlier this year the full US 9th Circuit Court of Appeals rejected an appeal by attorneys representing Medi-Cal recipients and providers, including the Medicaid Defense Fund, to reconsider the 3 judge panel ruling. 
  • On June 14, 2013, the US 9th Circuit of Appeals denied a motion by attorneys representing Medi-Cal recipients and Medi-Cal providers to delay implementation of the Medi-Cal cut until the US Supreme Court decides later this year whether or not to take up the case.   That ruling in June cleared the way for the State to implement the 10% Medi-Cal provider rate reductions, including a plan to collect that amount paid to providers since June 1, 2011 retroactively. 

 Please support CDCAN here:

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

  • LAAAC is managed by St. Barnabas Senior Services; Funded, in part, by Archstone Foundation.
  • St. Barnabas Senior Services

%d bloggers like this: