Federal court reverses ruling to charge Medicaid recipients for care

Posted: Wednesday, September 21, 2011 5:00 am | Updated: 4:51 pm, Tue Sep 20, 2011.

WASHINGTON — A federal appeals court Wednesday reversed part of a lower court’s ruling that let Arizona require that some Medicaid recipients make co-payments for their medical care.

The ruling by a three-judge panel of the 9th U.S. Circuit Court of Appeals in the class-action suit could affect more than 220,000 Arizonans who have had to pay part of the cost of their medical care, or face denial of treatment, since last October.

The appeals court said the U.S. Department of Health and Human Services’ decision to allow the state to charge co-payments was arbitrary and capricious and needs to be reconsidered.

An attorney for the Medicaid recipients hailed the ruling. Ellen Sue Katz said the co-payment can mean the difference for poor people between getting medical care or having it denied.

“We got statements from people who were poor,” Katz said. “They couldn’t afford the co-payments … so we’re hoping that they are able to get the medical care they need without the co-payment.”

Katz said the plaintiffs were not seeking to recover the payments they have made so far, merely to let those who cannot afford a co-payment to continue to receive Medicaid benefits.

An attorney for the Arizona Health Care Cost Containment System (AHCCCS), the state’s Medicaid agency, declined to comment on Wednesday’s ruling or say how the state planned to proceed.

In 2003, the agency proposed raising co-payments for “childless, nondisabled adults” who earned no more than the poverty level, in an effort to close a state budget gap. It also proposed making the payments mandatory, meaning a provider could deny treatment if the payment was not made.

The state asked for a waiver from federal rules that prohibit such “cost sharing” for most people covered by Medicaid. The U.S. Department of Health and Human Services gave its blessing, saying that the recipients in question were not mandated to receive Medicaid benefits under state or federal law, and thus no waiver was necessary.

Fourteen recipients sued in what later became a class-action suit, claiming that the “medically needy” should not be required to make co-payments for services. The suit, which also challenged the way the Health and Human Services secretary arrived at the waiver decision, delayed implementation of the fee until 2010, when a U.S. District judge in Phoenix ruled in favor of the state and federal governments.

On appeal, the judges deferred to the secretary’s interpretation that people who are not mandated to receive coverage are “not protected by … cost-sharing limits.” But the appeals courts said that in reaching that decision, the secretary had failed to consider all elements required by the law.

“There is little, if any, evidence that the secretary considered the factors (the federal statute) requires her to consider before granting Arizona’s waiver,” Judge Richard Paez wrote for the court in its opinion.

The court specifically said that it was not enough for the state to argue, and the federal government to agree, that the change was needed in order to save the state money and thus provide coverage to other needy people.

The appellate judges sent the case back to the district court with directions to order the Health and Human Services secretary to reconsider her waiver decision.

“I have no inclination as to what (the state is) going to do,” said Katz, who added that she considers the ruling a victory.