5th Circuit Denies Petition to Review Disapproval of Medicaid Reimbursement Amendment

In a per curiam opinion, the Fifth Circuit on Monday denied a petition by the Louisiana Department of Health to review a denial by the United States Department of Health and Human Services (HHS) of a proposed amendment concerning reimbursement of pharmacists’ Medicaid expenses.

The state’s petition stemmed from a 2014 determination by the Centers for Medicare & Medicaid Services (CMS), an HHS agency, that only partially approved Louisiana State Plan Amendment (SPA) 12-66; CMS took issue with the state’s methodology for calculating its proposed reimbursement rates for costs of ingredients for pharmacists that CMS saw as “more generous,” the court explained. The portion of the amendment that CMS struck down was termed SPA 12-66B.

“The (CMS) Administrator thus found that SPA 12-66B did not comply with § 1902(a)(30)(A), which requires that states have methods and procedures to assure that payment rates are consistent with efficiency, economy, and quality of care,” the court recounted. “The Administrator accordingly disallowed Federal Financial Participation for payments to pharmacists based on SPA 12-66B. Those payments amounted to $26 million over the two-year period. Had CMS approved SPA 12-66B, the federal government would have paid 61% percent of the total, or about $16 million.”

After timely asking the CMS administrator to review the decision, to no avail, the state petitioned the court. Reflecting CMS’s determination, the Fifth Circuit concluded that the state did not meet its evidentiary burden to explain why SPA 12-66B complies with federal requirements.

“(E)ach state must ‘make assurances satisfactory to CMS’ that the economy, efficiency, and quality of care requirements are met, and these assurances must be supported, on CMS’ request, by ‘data, mathematical and statistical computations, comparisons, and any other pertinent records,’ ” the court said, citing 42 C.F.R. § 447.518(c).

Instead, the state’s attempts at providing satisfactory assurances undermined its argument, the court opined.

“The additional data also undercuts the State’s argument: while that data showed that SPA 12-66B’s methodology would underpay almost forty percent of pharmacists, the Administrator noted conversely that SPA 12-66B overpaid ‘more than 60 percent of pharmacies in excess of their actual costs for’ for both generic and brand-name drugs,” the court said. “While an average-based metric will necessarily result in a methodology that underpays some pharmacists, the Administrator reasonably could conclude that SPA 12-66B overpaid most pharmacists.”

The state also had invoked CMS determinations from 1991 that denied state amendment proposals for lack of evidence in an attempt to demonstrate that, in comparison, its evidence was abundant; the court acknowledged that Louisiana, in this case, indeed brought more evidence than the states in the 1991 petitions. However, the asserted contrast did not convince the circuit judges.

“While Louisiana’s evidence certainly surpasses Oklahoma’s and Arkansas’s from those cases, Louisiana points to no rule that those cases set a minimum evidentiary benchmark above which CMS is obligated to approve a state’s plan,” the court found.`

The Louisiana Department of Health is represented by Brown & Peisch PLLC. The respondents are represented by government counsel.