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California federal court rules Medicaid expenses owed to out-of-state hospitals

[JURIST] District Judge Edward Chen [official profile] for the Northern District of California [official website] last Monday ruled [opinion, PDF] that California's policy for reimbursing out-of-state hospitals that care for California Medicaid (Medi-Cal) patients is unconstitutional. Hospitals in Oregon, Nevada, and Arizona sued the California Department of Health Care Services [official website] in 2014, claiming the state underpaid them for Medicaid services provided to Medi-Cal holders. In September 2015, the state obtained approval for a new Medicaid amendment, which in part set criteria for reimbursement to "border hospitals" that provide care to California residents in neighboring states. The plaintiffs argued that the changes to Medi-Cal's reimbursement policies cost them financially and the methodologies violated the commerce clause and federal law. California responded that they were allowed to discriminate based upon geography under Congress' authority. The federal court disagreed stating that there is no evidence of such geographic targeting and that Congress' purpose was to ensure that cross-border medical services be available to all Medicare recipients.

Comprehensive health care reform [JURIST backgrounder] was passed by Congress in March 2010 and recent legal challenges have reinvigorated debate. The National Conference of State Legislatures (NCSL) [official website] reports that between 2010 and 2015, at least 21 states enacted laws attempting to challenge or completely opt out of mandatory provisions of the ACA. In June the Supreme Court ruled [JURIST report] in King v. Burwell [SCOTUSblog materials] that tax credits available to those who buy health insurance through state exchanges are also available to those who buy it through the federal exchange. Last year the court ruled [JURIST report] in Burwell v. Hobby Lobby [SCOTUSblog backgrounder] that closely held corporations can deny contraceptive coverage to their employees for religious reasons.

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