Shewry

We enter here into the arcane world of Medicaid law to answer a fundamental question: does a federal statute imposing notice and comment requirements apply to actions taken or mandated by a state legislature? In 2004, the California Legislature, as part of adopting a state budget after the constitutional budget deadline had expired, proposed and enacted over only a three-day period a freeze on the rates the state would use to reimburse certain hospitals that provided services to Medicaid beneficiaries during the state’s 2004-2005 fiscal year. A large number of those hospitals sued for writ relief, claiming the state’s action violated federal Medicaid statutes that require a public notice and comment period as part of the process used when revising rates and rate methodologies and that impose substantive findings necessary to support those rates.

The trial court disagreed with the hospitals except to the extent the freeze affected services rendered prior to the freeze’s enactment. Both the hospitals and the state department responsible for administering the Medicaid program appealed. We conclude the federal statute requiring notice and comment procedures applied to the…