(CN) - Government officials failed to properly consider the potential impact an increase in Medicare co-payments would have on economically vulnerable Arizonans, the 9th Circuit ruled Wednesday.
In 2004, the secretary of health and human services granted Arizona a waiver to expand mandatory Medicare co-payments for childless, nondisabled adults who earn up to 100 percent of the federal poverty level and for former recipients of state health care benefits.
Arizona had requested the waiver in 2003 to lower health care costs and close a $1 billion budget gap.
The San Francisco-based federal appeals court vacated the secretary's decision Wednesday, noting that federal law prohibits such waivers specifically sought to save money. The three-judge panel also found that the secretary had failed to take the required close look at the ramifications of the decision.
"There is little, if any, evidence that the secretary considered the factors [federal statute] requires her to consider before granting Arizona's waiver," Judge Richard Paez wrote for the unanimous panel.
"The record is not sufficient for this court to review the agency's consideration of the impact Arizona's demonstration project would have on the economically vulnerable," he added.
A group of "economically vulnerable" Arizonans filed a class action against the secretary and the director of Arizona's Medicaid agency in 2003, alleging that the increased and expanded mandatory co-payments violated the Medicaid Act's cost-sharing restrictions, that the waiver was illegal and that they had received inadequate notice of the changes.
Senior U.S. District Judge Earl Carroll certified the class and temporarily enjoined the co-payments, but he eventually ruled for the secretary and the state official on all points.
The District Court found that the plaintiffs, while vulnerable, were not defined as a "medically needy" population under the Medicaid Act. Because Arizona's state health care plan does not cover them, they are considered an "expansion population" not covered under the law's cost-sharing provisions.
The 9th Circuit panel agreed on this point, but remanded the case back to Arizona for a new look at the waiver and notice issues.
"These regulations are consistent with the secretary's argument that plaintiffs cannot be medically needy within the meaning of the Medicaid program unless the state elects to cover that class and defines it accordingly," Paez wrote. "Thus, the district court properly granted summary judgment to defendants on this claim."