Clayworth Healthcare Pharmacy (a Medicaid service provider) and two Medicaid recipients filed a civil suit challenging California's then-pending 5% reduction in the reimbursement rate paid to Medicaid providers. The suit was filed on March 19, 2003 in the United States District Court for the Eastern District of California, against Diana M. Bonta, the Director of the Department of Health Services of the State of California (DHS), in her official capacity, and against the DHS.
On November 07, 2003, another suit raising substantially similar issues was filed by the California Medical Association and thirteen other groups representing Medicaid providers, together with the Disabled Rights Union, a non-profit association of disabled persons. The suit was brought against Ms. Bonta in her official capacity. The Court determined on November 19, 2003, that the two cases were sufficiently related that they should be heard before the same judge and magistrate, but declined to officially consolidate them as a single case with a shared docket. All the substantive orders and opinions subsequently issued by the Court decided issues relating to both cases. Both are included here.
The Plaintiffs alleged that the 5% reduction in the reimbursement rate violated the quality of care and equal access provisions of the Medicaid statute. They also argued that the reduction was a de facto amendment to California's federally approved Medicaid plan, and that all such amendments required Federal approval. They sought a preliminary injunction preventing the DHS from implementing the reduction while the issue was in court, and a permanent injunction to enjoin California from reducing the rates paid to providers for services and to require the State to rely on cost studies to ensure rates were reasonably related to the cost to the providers of providing services to Medicaid recipients. They also sought a declaration from the Court that the 5% reduction was unlawful, and to recover reasonable attorneys' fees and costs.
The Court (Judge David F. Levi) granted the motions of the Plaintiffs in both cases for preliminary injunctions in an Order and Opinion dated December 23, 2003. He held that a cause of action existed under 42 U.S.C § 1983 allowing private plaintiffs to sue states for denying Medicaid beneficiaries their federally guaranteed right to equal access to quality medical services. He held that California had approved the reduction in provider costs without considering the impact the reduction would have on such access, and that therefore the pending rate reduction was arbitrary and unlawful. In the same decision, he dismissed the claims against the DHS itself, but not those against Ms. Bonta, as barred under the Eleventh Amendment. Clayworth v. Bonta, 295 F.Supp.2d 1110 (C.D. Cal. 2003).
On January 8, 2004, the remaining Defendant filed an interlocutory appeal to the Ninth Circuit Court of Appeals. On August 2, 2005, the three-judge panel unanimously reversed the decision of the of the lower court, holding that no cause of action existed under § 1983 that would allow Medicaid providers or recipients to challenge the State's level of compliance with the equal access and quality of care provisions of Medicaid, citing the decision in Sanchez v. Johnson (416 F.3d 1051), which was issued by the same three-judge panel on the same day as this opinion (see related cases). Clayworth v. Bonta, 140 Fed.Appx. 677 (9th Cir. 2005).
In light of the decision from the Appellate Court, the District Court dismissed both cases, Cal. Med. Assoc. on November 1, 2006, and Clayworth on December 1, 2006.Alex Colbert-Taylor - 07/02/2013