States are free to reduce payments to providers to keep down their Medicaid costs, the Obama administration has told a court considering a challenge to a 10 percent cut in provider payments by California’s Medicaid program.
The administration weighed in on this subject in a legal brief submitted in a court case that will decide whether California can reduce its Medicaid payments to providers.
If California’s defense of its Medicaid payment cuts proves successful, it could provide a blueprint for other states to reduce payments at a time when most states are preparing for a significant expansion of their Medicaid rolls.  Many states are already concerned about the potential for rising Medicaid costs while others have opted out of Medicaid expansion or are still undecided, typically citing the potential for growing costs as the primary reason for their reluctance to expand their Medicaid programs as envisioned under the Affordable Care Act.
Any movement toward reducing Medicaid payments to providers would be extremely harmful to Pennsylvania’s safety-net hospitals, which already suffer from inadequate payments that fail to cover the cost of the care they provide to the state’s 2.1 million Medicaid recipients.
To learn more about the California case and its potential implications elsewhere, see this New York Times article.