Civil rights suit alleges discrimination in Medi-Cal

By Catherine Ho, San Francisco Chronicle

Updated 3:29 pm, Wednesday, July 12, 2017

Two civil rights groups and one of the state’s largest labor unions representing hospital workers have sued the state of California, alleging the state-administered Medi-Cal health insurance program for the poor discriminates against Latinos.

The lawsuit, filed Wednesday in Alameda County Superior Court, argues that the program’s low payment rates to doctors and clinicians disproportionately harm Latinos, who make up a large percentage of the program’s beneficiaries.

The action was brought by the Mexican American Legal Defense and Education Fund, the Civil Rights Education and Enforcement Center and the labor union SEIU-UHW. The organizations filed suit on behalf of four Medi-Cal beneficiaries who say they had to wait months or years to receive health care after many doctors’ offices told them they did not accept Medi-Cal patients because the program reimburses providers at a much lower rate than Medicare, which covers the elderly, or private insurers.

“In effect, California has created a separate and unequal system of health care, one for the insurance program with the largest proportion of Latinos, and one for the other principal insurance plans, whose recipients are disproportionately white,” the complaint says.

The lawsuit was brought under a state statute that, similar to the federal Civil Rights Act of 1964, prohibits discrimination based on race, ethnicity or other protected categories in programs operated by or funded by the state. It names two California health agencies and their directors: Diana Dooley, California secretary of Health and Human Services Agency, and Jennifer Kent, director of the California Department of Health Care Services. Health Care Services administers Medi-Cal and is overseen by Health and Human Services.

The Health and Human Services Agency deferred comment to Health Care Services, which said it is reviewing the lawsuit.

California operates the nation’s largest Medicaid program, with 13.5 million enrollees — about a third of the state’s population. Patient advocates and providers have long complained that Medi-Cal reimbursement rates — payments that go to doctors to treat Medi-Cal patients — are too low. Planned Parenthood, for example, recently cited low reimbursement rates as one of the reasons it closed three centers in Northern California.

Plaintiff Esther Castañeda, a 56-year old Medi-Cal enrollee who lives in Sacramento, said she suffered for 10 months with intense abdominal pain, nausea and vomiting from gallstones. But her surgery was canceled twice because the surgeon’s office did not accept Medi-Cal, she said. She eventually got the surgery in Mexico with funds that she and her family members paid for out of pocket.

The suit, which seeks to represent a class of all 13.5 million Californians enrolled in Medi-Cal, is not seeking monetary damages. The objective is to get the state to raise Medi-Cal reimbursement rates and ease administrative hurdles in the program that discourage some doctors from taking on Medi-Cal patients, said attorneys for the plaintiffs.

Bill Lann Lee, senior counsel at the Civil Rights Education and Enforcement Center, said it is the first time that attorneys have brought a state civil rights case in health care under the theory known as “disinvestment” — that as the population of Medi-Cal beneficiaries evolved from predominantly white to predominantly people of color, the payment rates to providers, which is set by the state, fell.

Between 2000 and 2016, as the number of Latinos on Medi-Cal rose from 2.3 million to 7.2 million, Medi-Cal payment rates dropped 20 percent, the lawsuit says.

Hispanics make up 48 percent of Medi-Cal enrollees, according to the most recent data from the Department of Health Care Services. Whites make up 20 percent, followed by Asians at 13 percent and African Americans at 8 percent.

The same theory was applied in a 1975 federal case in Alabama, Whitfield vs. Oliver, in which two black plaintiffs sued the state, alleging racial disparities in state welfare programs that disproportionately harmed black beneficiaries. The court found that racially based discriminatory intent existed, and ordered the state to eliminate the disparities.

Each state sets its own Medicaid reimbursement rates, and California’s is among the nation’s lowest. Medi-Cal reimbursement rates for physician fees are 81 percent of the national average, according to data compiled by the Kaiser Family Foundation. Only three states have lower rates.

“The rate is so low that it’s a disincentive for doctors to treat Medi-Cal patients, or to treat only very few,” said Lee, who previously served as assistant attorney general in the Justice Department’s civil rights division under President Bill Clinton.

Catherine Ho is a San Francisco Chronicle staff writer. Email: cho@sfchronicle.com Twitter: @Cat__Ho