Judge: Illinois must pay $586M/month, plus $2B over next 12 months to cover Medicaid bills

By Jonathan Bilyk | Jun 30, 2017

While Illinois state officials have argued the order could amount to little more than “squeezing blood from a stone,” a Chicago federal judge has ordered Illinois’ state government to begin paying more than $586 million a month to cover Medicaid claims, plus an additional $2 billion from July 1, 2017 to June 30, 2018 to begin reducing its stack of unpaid Medicaid bills.

As state lawmakers continued work in the waning hours of Friday, June 30, to pass the state’s first budget in three years before the July 1 deadline, U.S. District Judge Joan Lefkow sided with a group of insurers and Medicaid providers, saying the state must reorder its spending practices to immediately begin paying back the Medicaid insurers and providers the billions of dollars they say they are owed.

The judge acknowledged the decision could have huge ramifications for the state, given its dire financial situation.

However, the judge said the situation is the result of choices made by state officials in deciding who to pay with the resources at hand, including workers’ payroll, debt service and other “core priorities,” giving Medicaid short shrift.

She said this cannot be allowed, given past court orders and decrees, ordering the state to pay its Medicaid bills to ensure access to health care services does not dry up for those whose health care bills are paid by the state through Medicaid.

“Defendants (the state of Illinois) have not submitted a payment proposal that would accomplish what is necessary for substantial compliance with the consent decrees,” Lefkow wrote. “Defendants have favored what they have determined to be core priority over their obligations under this court’s orders and decrees.

“Other than the State’s debt service obligations which must be met in order to avoid default, a consequence that all parties and the court agree should be avoided, defendants have not demonstrated a basis in law or fact for the choices they have made, which had resulted in sacrificing compliance with the laws of the United States as embodied in the consent decrees.”

The order came at the request of so-called managed care organizations (MCOs), which include health insurers, hospitals and others contracted by the state to either provide health care or process payments for millions of Illinois’ Medicaid recipients. These MCOs filed suit in April, asking the court to order the state to not only pay them, but force the state to move their invoices to the top of Illinois’ deep and growing piles of unpaid bills.

Specifically, the MCOs asked the judge to enforce a consent decree entered in 2015 ordering the state to pay its Medicaid bills to ensure access to health care services doesn’t dry up for those whose health care bills are paid by the state through Medicaid.

The state argued its current financial circumstances don’t allow it to pay all its bills at once – even if they are accompanied by a court order. The plaintiffs, however, argued they believed the state had only chosen not to pay them, prioritizing instead “core services,” including state and public worker pensions.

The MCOs said they believed legal precedent gives the federal courts the power to order the state to pay them, even at the expense of pension payments, which are otherwise mandated by the Illinois state constitution.

Lefkow sided with the plaintiffs, saying she believed they had demonstrated sufficiently that the state was violating the 2015 order, and that health care options for those on Medicaid were drying up from the state’s failure to pay them.

She noted, for instance, one MCO had been left unable to reimburse any of its member providers since February, causing many of these doctors and other health care service providers to leave their network, leaving Medicaid-reliant patients with no or very limited viable health care options where they live.

The judge had given the state and MCOs two weeks in mid-June to negotiate a deal, but the two sides remained too far apart, leading the judge to now order the state to pay roughly what the MCOs had demanded.

She said she anticipated the state would “be reimbursed at approximately 50 percent by federal Medicaid match from the federal government, thus reducing the net outlay from State funds by approximately 50 percent per month.”

She further ordered the state to work with the MCOs to grant higher priority for payment to “Safety Net Hospitals” – hospitals serving vulnerable populations in sensitive areas of the state – deemed “crucial to affording the plaintiff class members’ access to federally mandated healthcare services.”

And she ordered the state to file monthly reports showing the payments were being made.


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