Court Tosses Lawsuit Over Medicaid Cuts to Therapy Services

A Texas appeals court delivered a big loss on Thursday to a group of home health agencies and parents of children with disabilities who sued the state over payment cuts to in-home therapy providers.

The Texas 3rd Court of Appeals ruled the group’s lawsuit, which sought to block a roughly $350 million budget cut ordered by state lawmakers to a publicly financed therapy program, was invalid “for lack of jurisdiction.” The justices also overrode a lower court’s decision that temporarily blocked state officials from implementing the cuts, which were scheduled to take effect in October 2015.

The reduced payments to therapists were ordered by the Legislature last year but were temporarily halted by a state district judge on the grounds that they might irreparably harm children. Speech, physical and occupational therapists argued they would be forced to stop treating children under the state’s current two-year budget, which includes a roughly 25 percent cut to the amount of money some pediatric therapists are paid by Medicaid, the joint federal-state insurer for the poor and disabled.

Dan Richards, the lead attorney challenging the state, said he was “extremely disappointed” with the ruling and would ask federal health officials to intervene.

“The case is dismissed at the state level," he wrote in an email, "so we will follow the court’s order and immediately seek intervention by federal regulators of the Texas Medicaid program” so children can continue receiving “life-altering therapy services.”

About 60 percent of the payments to therapy providers are financed by the federal government, while roughly 40 percent of the funding comes from the state.

The appeals court affirmed the state’s argument — that the challenge from therapy providers was a “baseless” attempt to force the state into paying them more.

Home health agencies do not have “a vested right in a particular level of Medicaid rates,” the state argued, according to the appeals court’s summary of the case.

A spokesman for the Texas Health and Human Services Commission, which oversees Medicaid, declined to comment on the ruling on Thursday. It was not immediately clear when the state would move forward with the reduced payments, which have been tied up in court for eight months.

Dena Dupuie, who joined the home health agencies’ lawsuit on behalf of her daughter, said the ruling would devastate families of children with disabilities. The lawyers suing the state have argued as many as 60,000 children would lose access to services because therapy providers would be put out of business by the reduced rates. 

“What is going to happen to those 60,000 children, including my own?” she asked. 

The appeals court ruled only on the question of whether home health agencies were entitled to sue. The justices did not rule on the merit of the claim that children would be denied services.

But the state has argued that children will still be able to find therapy providers even if Medicaid pays those providers less money.

Superior HealthPlan, an insurer that operates in Texas Medicaid, testified last week in lower court that the payment cuts will not harm children’s access to care.

Superior “studied this rate cut independently of the state” and is “absolutely convinced that there’s going to be adequate access to the network,” said Jim McClendon, a lawyer for the company.