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California Association of Rural Health Clinics v. Douglas

United States Court of Appeals, Ninth Circuit

July 5, 2013

California Association of Rural Health Clinics; Avenal Community Health Center, Plaintiffs-Appellants,
v.
Toby Douglas, Director of the California Department of Health Care Services, Mari Cantwell, Chief Deputy Director for Health Care Programs of the California Department of Health Care Services; California Department of Health Care Services, Defendants-Appellees. California Association of Rural Health Clinics; Avenal Community Health Center, Plaintiffs-Appellees,
v.
Toby Douglas,

Argued and Submitted December 6, 2012—San Francisco, California

Appeal from the United States District Court for the Eastern District of California Frank C. Damrell, Senior District Judge, Presiding, D.C. No. 2:10-CV-00759-FCD-EFB

COUNSEL

Kathryn Ellen Doi (argued), Murphy Austin Adams Schoenfeld LLP, Sacramento, California, for Plaintiffs-Appellants–Cross-Appellees.

Susan M. Carson (argued) and Kara Read-Spangler, Deputy Attorneys General, Office of the California Attorney General, Sacramento, California, for Defendants-Appellees–Cross-Appellants.

Matthew Sidney Freedus, Feldesman Tucker Leifer Fidell LLP, Washington, D.C., for Amicus Curiae National Association of Community Health Centers.

Elizabeth Charisse Saviano, Law Offices of Elizabeth C. Saviano, Oakland, California, for Amici Curiae California Primary Care Association, San Francisco Community Clinic Consortium, California Consortium for Urban Indian Health, Center for Oral Health and Alameda Health Consortium.

Before: Dorothy W. Nelson, A. Wallace Tashima, and Mary H. Murguia, Circuit Judges.

SUMMARY [***]

Medicaid Act

Reversing the district court's summary judgment, the panel held that California legislation that eliminated coverage for certain healthcare services, including adult dental, podiatry, optometry, and chiropractic services, conflicted with the Medicaid Act and was therefore invalid.

The panel reversed the district court's holding that the California Association of Rural Health Clinics and a federally qualified health center had a private right of action to challenge the California Department of Health Services' implementation of state Medicaid plan amendments prior to obtaining approval from the Centers for Medicare and Medicaid Services. The panel affirmed the district court's holding that these health care providers had a private right of action to bring a claim pursuant to 42 U.S.C. § 1983 challenging the validity of California Welfare and Institutions Code § 14131.10. Following other circuits, the panel held that a private right of action exists to enforce rights created by 42 U.S.C. § 1396a(bb).

The panel reversed the district court's interpretation of the Medicaid Act and held that § 14131.10 impermissibly eliminated mandatory services from coverage. The panel held that it did not owe Chevron deference to the approval granted by the Centers for Medicare and Medicaid Services after the district court entered judgment. The panel concluded that the California Department of Health Services' cross-appeal from the grant of injunctive and declaratory relief was moot.

OPINION

D.W. NELSON, Senior Circuit Judge:

This case concerns a clash of competing interests: the mission of publicly-funded health clinics to provide a panoply of medical services to under-served communities on the one hand, and California's persistent budget woes on the other. We must decide whether California legislation that eliminates coverage for certain healthcare services, including adult dental, podiatry, optometry and chiropractic services, conflicts with the Medicaid Act, 42 U.S.C. §§ 1396, et seq., and is therefore invalid. We hold that Medicaid prohibits the limitations adopted by the California legislature and, accordingly, we reverse and remand.

I. Background

Title XIX of the Social Security Act, referred to as the Medicaid Act, is a cooperative federal-state program through which the federal government provides financial assistance to states so that they can furnish medical care to low-income individuals. Wilder v. Va. Hosp. Ass'n, 496 U.S. 498, 502 (1990) (citing 42 U.S.C. § 1396), superseded on other grounds by statute; 42 C.F.R. § 430.0. Medicaid is jointly financed by federal and state governments and administered by the states through state plans approved by the Secretary for Health and Human Services. 42 U.S.C. § 1396a; 42 C.F.R. § 430.0.

States are not required to participate in Medicaid, but those states that opt in to the system must comply with both the statutory requirements imposed by Medicaid and with regulations promulgated by the Secretary of Health and Human Services. Alaska Dep't of Health & Soc. Servs. v. Ctrs. for Medicare & Medicaid Servs., 424 F.3d 931, 935 (9th Cir. 2005); see also 42 U.S.C. § 1396c; 42 C.F.R. § 430.35. As part of this requirement, states must cover certain services in their plans. 42 U.S.C. §§ 1396c, 1396a(a)(10) (cross-referencing § 1396d(a)(1)–(5), (17), (21) & (28)); 42 C.F.R. §§ 430.0, 430.35. These services include those provided by rural health clinics—health centers that provide services in rural areas with insufficient numbers of healthcare practitioners, and Federally qualified health centers—health centers that serve a medically under-served population. 42 U.S.C. §§ 254b(a)(1), 1396d(l)(1)–(2), 1395x(aa)(2), (4). In addition, each state may opt to cover additional services or may extend services to populations that may not otherwise be covered. See id. § 1396d(a). Each state has discretion to create reasonable standards for determining eligibility for medical services and the extent of those services, provided those standards comply with federal law. Schweiker v. Gray Panthers, 453 U.S. 34, 36–37 (1981).

California participates in Medicaid through the California Medical Assistance Program ("Medi-Cal"), which the California Department of Health Services ("Department") administers. Cal. Welf. & Inst. Code §§ 10740, 14000, et seq. The Department is responsible for establishing and complying with the state plan and must submit any state plan amendments ("SPA") to the Centers for Medicare and Medicaid Services ("CMS") for review and approval. 42 U.S.C. § 1396a(a)(5); 42 C.F.R. §§ 430.10, 430.12, 430.14, 431.10. The Department also ensures that Medi-Cal provides covered services to eligible beneficiaries and reimburses providers for their services. 42 C.F.R. § 431.10.

In February 2009, California found itself in the throes of a budget crisis. As a cost-cutting measure, the state legislature passed California Welfare and Institutions Code § 14131.10 ("§ 14131.10"), which eliminated certain MediCal benefits that the state deemed optional, including adult dental, podiatry, optometry and chiropractic services. The Department amended California's state plan accordingly, and submitted the SPA for ...


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