Supreme Court opens term with key Medicaid case

WASHINGTON - The Supreme Court justices opened their new term Monday by hearing a major health-care case that tests whether judges can stop California and other cash-strapped states from cutting payments to doctors and hospitals that serve low-income patients.

The case is likely to affect how much money is available to pay for care for more than 50 million Americans, about half of them children, who depend on Medicaid.

Since its creation in 1965, Medicaid has been a cooperative effort and jointly funded by the federal government and states. But that cooperation is being tested at a time when states face huge deficits. Over the last three years, the California Legislature voted for a series of cuts, up to 10 percent, in its payments to providers of Medi-Cal, the state's Medicare program.

The providers went to court in San Francisco arguing that California was violating federal law. The reduced payments were so low, they argued, that patients would be denied the care they need. In response, federal district and appeals judges issued orders blocking the cuts from taking effect.

Lawyers for California, backed by other 31 states, appealed to the high court and were joined by the Obama administration. They argued that disputes over Medicaid funding should be resolved by health-care administrators in Washington and Sacramento, not by judges in San Francisco.

This dispute "cries out for administrative review," California's Deputy Attorney General Karin Schwartz told the justices in the consolidated cases of Douglas v. Independent Living Center of Southern California and Douglas v. Santa Rosa Memorial Hospital.

Chief Justice John G. Roberts Jr. said he agreed with the state's view, since Congress had not given private parties a right to sue under the Medicaid Act.

But Justices Ruth Bader Ginsburg and Elena Kagan spoke up for the providers who sued. They said California was seeking to cut its reimbursements even before the state cleared the move with federal Medicaid officials. There is no effective way to enforce the Medicaid Act if patients and providers cannot go to court when spending is slashed, Ginsberg said.

"My people have a life-or-death problem," said Washington attorney Carter Phillips, arguing on behalf of the doctors and hospitals.

The justices sounded closely divided, but several showed interest in a middle-ground position under which judges could issue temporary orders to block proposed state cuts but only until Medicaid officials in Washington could review the cuts.