Dominguez v. SchwarzeneggerDominguez v. Schwarzenegger
In 1973, the State of California established the In-Home Supportive Services (IHSS) program to provide in-home assistance and care to low-income elderly and disabled persons who otherwise would be unable to remain safely in their homes.
See
FACTUAL AND PROCEDURAL BACKGROUND
Under Title XIX of the Social Security Act (the Medicaid Act),
IHSS is one of the programs for which California receives federal funding under its version of Medicaid, known as MediCal. Medi-Cal operates via a prospective reimbursement system, whereby the State “sets reimbursement rates for specific services, regardless of where those services are performed.”
Orthopaedic,
The IHSS program is paid for and administered through a combination of federal, state, and county funds. The State has authorized counties to provide for the delivery of IHSS services by one of two methods: first, a county may hire IHSS providers directly; or second, a county may contract with a nonprofit consortium (NPC) or establish a public authority (PA) — an entity separate from the county that performs public and essential governmental functions necessary to deliver IHSS services.
See
In counties that have established a NPC or PA, wages and benefits are established through collective bargaining between the NPC or PA and the providers’ union.
For the IHSS program, the California legislature has directed the Department to establish a provider reimbursement rate methodology that: (1) is consistent with the functions and duties of NPCs and PAs; (2) “[mjakes any additional expenditure of state general funds subject to appropriation in the annual Budget Act”; and (3) “[pjermits county-only funds to draw down federal financial participation consistent with federal law.”
Following the passage of the American Recovery and Reinvestment Act of 2009 (ARRA), the federal government contributes approximately sixty-two percent of the overall cost of the IHSS program.
2
Of the remaining “non-federal share,” the State contributes sixty-five percent while the county contributes thirty-five percent.
However, on February 20, 2009, the Governor signed § 12306.1(d)(6) into law. Scheduled to take effect July 1, 2009, § 12306.1(d)(6) reduces the statutory maximum for which the State would contribute its proportionate share for IHSS wages and benefits from $12.10 per hour to $10.10 per hour. In other words, the State’s maximum contribution to wages and benefits would be reduced from sixty-five percent of the non-federal share of an hourly rate up to $12.10 to sixty-five percent of the non-federal share of an hourly rate up to $10.10.
The new law does not require counties to reduce wages and benefits paid to IHSS service providers. Counties are permitted to make up the difference between the State’s current contribution and any reduction that may result from the State’s decreased contribution. Currently, thirty-four of the fifty-six NPCs and PAs pay IHSS providers $10.10 per hour or less in wages and benefits, so there would be no reduction in the State’s cоntribution in any of those counties, including Los Angeles County in which forty-two percent of all IHSS services are provided. Twenty-two counties are, however, directly affected by the rate change. According to Plaintiffs, in response to § 12306.1(d)(6), fourteen of those counties that were paying wages and benefits of more than $10.10 per hour have thus far submitted Rate Change Requests to the Department of Social Services (DSS), seeking to reduce wages effective July 1, 2009.
3
All of these Rate Change
On May 26, 2009, Plaintiffs brought this action challenging § 12306.1(d)(6) under the Supremacy Clause, claiming that in enacting and implementing § 12306.1(d)(6), the State failed to comply with the procedural and substantive requirements of
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction over this appeal pursuant to
In granting a request for a preliminary injunction, a district court abuses its discretion if it “base[s] its decision on an erroneous legal standard or clearly erroneous findings of fact.”
Earth Island Inst. v. U.S. Forest Servs,
DISCUSSION
In seeking a preliminary injunction in a case in which the public interest is involved, Plaintiffs must show that: (1) they are likely to succeed on the merits; (2) they are likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in their favor; and (4) an injunction is in the public interest.
Cal. Pharms. Ass’n v. Maxwell-Jolly,
I. Likelihood of Success on the Merits
Section 30(A) provides that a State plan must “provide such methods and procedures relating to ... the payment for ... care and services ... as may be necessary ... to assure that payments are consistent with efficiency, economy, and quality of
the Director [to] set hospital outpatient reimbursement rates that bear a reasonable relationship to efficient and economical hospitals’ costs of providing quality services, unless the Department shows some justification for rates that substantially deviate from such costs. To do this, the Department must rely on responsible cost studies, its own or others’, that provide reliable data as a basis for its rate setting.
As we will explain, both the legislature and the Department recognize that reimbursement rates — that is, providers’ wages and benefits' — are directly correlated to ensuring that services are consistent with efficiency, economy, and quality of care, and sufficient to ensure access to services under the IHSS program. Following passage of § 12306.1(d)(6), counties, unsurprisingly, reduced the hourly wage paid to IHSS providers. As we explained in
Orthopaedic, “payments
for [Medi-Cal] services must be consistent with efficiency, economy, and quality of care, and ... those
payments
must be sufficient to enlist enough providers to provide aсcess to Medicaid recipients.”
A. The Application of § 30(A) to
The State argues that
Orthopaedic
does not apply to
We are not persuaded by the State’s attempt to distinguish its rate of
reimbursement
to providers from its
contribution
to the amount counties pay providers in the IHSS context. The State claims that it has removed itself from the rate-setting process and left it up to the counties and providers to negotiate rates through collective bargaining. However, by limiting its contribution to its portion of the non-federal share, the State injects itself
into
the collective bargaining process. Indeed, the statutory cap that the State sets on its contribution provides a powerful bargaining chip to both providers and NPCs or PAs during negotiations over wages and benefits. Prior to
The record proves the point in this case. Approximately fourteen counties submitted Rate Change Requests after receiving notice оf
The Department itself has acknowledged the relationship between reimbursement rates аnd access to in-home supportive services. In the State plan, the Department has articulated its policy that “reimbursement rates for Personal Care Services shall not be less than levels necessary to achieve adequate access to these services, but shall not exceed the lesser of specified limits, consistent with the requirements of [§ 30(A)].” The State plan also provides that “[t]o the extent that the Department finds that sufficient access to services is available, any rate
increases
granted under this program shall be no greater than the funds appropriatеd by the Legislature for such purpose.” (emphasis added). The Department has thus recognized that rate increases are subject to the availability of State funds and has expressly conditioned its approval over such increases on a finding that sufficient access to services is otherwise available. The corollary must also be true. That is, the same oversight exists for any decrease in rates brought about by the availability of State funds. The Department is thus well aware that prior to approving reimbursement rates established through collective bargaining, it must determine whether suffiсient access to services is available.
Of. Ortho
Likewise, the Department has recognized the direct link between the State’s change in
contribution
rate and the resulting change in
reimbursement
rates. In April 2009, the Department sent the United States Department of Health and Human Services (HHS) an analysis of
In any event, the State’s obligation to consider whether providers’ “payments are consistent with efficiency, economy, and quality of care,” § (30)(A), is independent of whatever wages and benefits are set pursuant to collective bargaining. Notably, in concluding that
The State argues that there are in excess of 14,000 IHSS providers listed in county registries, implying that there can be no problem with “access” to services following the legislature’s decision to cut its contribution to wages and benefits under
The State’s argument also misses the point. “We do not require plaintiffs to show the State has committed a substantive violation of § 30(A)’s access provision when they can show that the State did not comply with § 30(A)’s procedural components.”
California Pharmacists II,
slip op. at 3357. Therefore, whether there were to remain an excess of available IHSS providers in county registries after
B. Consideration of Costs
The State next argues that
Orthopaedic
is inapposite to this case because
Orthopaedic
instructs the State to consider the costs to service providers when its sets reimbursement rates,
We rejected a similar argument in
Independent Living II.
There, the Director argued that there was “no established mechanism for obtaining cost data from physicians on the costs they incur for providing each of these [covered] services.”
Furthermore, there does not seem to be anything inherently difficult about studying IHSS providers’ “costs” since there is undoubtedly a way to measure what it costs providers to care for IHSS recipients. The State argues that it cannot study costs because IHSS providers are providing “only their time and labor” and are not paid “rates for specifiс services, but rather receive hourly wages and benefits for the work they perform.” We disagree. The hourly wage paid to an IHSS provider
is
the rate to which they are entitled for providing specific services.
See
In addition, while the State “need not follow a rigid formula,”
Orthopaedic,
At the very least, the State may look to what it costs providers of analogous services, such as in-home nursing care, as a means of considering providers’ costs. Indeed, in determining the “cap for increases in payment rates for individual practitioner services,” the Department is similarly authorized to lоok to the market rate for “like work in each county.” Cal. Welf. InstCode
Accordingly, we hold that the district court did not err in holding that § 30(A) applies to the State’s enactment of
C. State Compliance with § 30(A)
Next, the State argues that while it was under no obligation to do so, it complied with everything that
Orthopaedic
requires by preparing the 2008 Report. The district court did not consider this report because it believed that the State conceded that the legislature did not consider § 30(A) prior to enacting
We agree that, at oral argument before the district court, the State conceded that the legislature did not consider any anаlysis of the § 30(A) factors prior to enacting
In any event, the 2008 Report is inadequate for purposes of § 30(A). Nowhere does the 2008 Report contain any references to
II. Irreparable Harm
The State next argues that the district court erred in concluding that Plaintiffs established irreparable harm absent injunctive relief. In holding that Plaintiffs made a sufficient showing of irreparable harm, the district court made two factual findings, which we review for clear error.
Earth Island Inst.,
On appeal, the State’s primary argument is that Plaintiffs failed to submit any credible evidence that a reduction in the State’s contribution, resulting in a decrease in wages to IHSS providers, would cause IHSS recipients to go without сare.
III. Balance of Equities and the Public Interest
As to the final two elements necessary to obtain a preliminary injunction in a case in which the public interest is involved, we have repeatedly recognized that individuals’ interests in sufficient access to health care trump the State’s interest in balancing its budget.
See Independent Living II,
The State argues that if this injunction is upheld, “it will be unclear whether the State may ever undertake any action to reduce its payments” to Medi-Cal service providers. This statement wholly misreads our Medicaid jurisprudence. If the State makes a policy decision to decrease providers’ reimbursement rates, and fully complies with the requirements of this and our other decisions, it will not be barred by current federal Medicaid law from doing so. Accordingly, we hold that the district court did not abuse its discretion in concluding that the balance of hardships and the public interest weighed in favor of enjoining implementation of California Welfare & Institutions Code
CONCLUSION
The district court properly determined that § 30(A) of the Medicaid Act applies to the State’s enactment of California Welfare & Institutions Code
AFFIRMED.
Notes
. For a more detailed discussion of the Medicaid Act, we refer the reader to our prior decisions.
See, e.g., Cal. Pharm. Ass’n v. Maxwell-Jolly,
. Prior to enactment of the ARRA, the federal government contributed fifty percent of the program’s costs.
. On May 1, 2009, DSS issued All-County Information Notice No. 1-34-09 notifying counties оf
. Plaintiffs also alleged unlawful discrimination under the Americans with Disabilities Act and Rehabilitation Act. The district court did not address Plaintiffs’ ADA or Rehabilitation Act claims and they are not before us on appeal.
. Indeed, in establishing the IHSS program, the State left the bulk of
administrative
duties to the counties. However, before entrusting the counties to administer the program, the State authorized counties to provide for the delivery of IHSS services by either contracting directly with IHSS providers or by establishing NPCs or PAs that would engage with providers in collective bargaining.
See