Court: Medicaid patients who sued over state plan can get lawyers’ fees

A federal appeals court said Medicaid patients who sued after the state raised their copayments could still collect attorneys’ fees as the winning party in their case – even though they ultimately lost. (Photo by Tim Evanson/Creative Commons)

WASHINGTON – A federal appeals court ruled Wednesday that a group of Arizona Medicaid recipients who sued the government after it approved higher copayments for their care should still be able to recover attorneys’ fees in the case.

The ruling by a three-judge panel of the 9th U.S. Circuit Court of Appeals overturned a lower court that said the patients could not collect because they did not ultimately win their case – even though the lower court judge agreed that the higher fees had been improperly approved.

But the appeals court panel said the Medicaid clients were still the “prevailing party” and entitled to fees because they were able to force the U.S. Department of Health and Human Services to re-evaluate the copayment policy, which the department ultimately reaffirmed.

Calls seeking comment from the U.S. Attorney’s Office were not immediately returned Wednesday, but an attorney for the Medicaid recipients welcomed the ruling.

“We’re pleased with the victory,” said Richard Rothschild, a lawyer with the Western Center on Law and Poverty, who argued the case. “I think the decision stands for the principle that the government should treat its citizens fairly.”

Circuit Judge Margaret McKeown, who wrote the opinion, said the case is “the latest in a decade-long conflict over the cost of copayments and medication for low-income Arizonans who qualify for a state Medicaid demonstration project covering child-less adults.”

Arizona voters in 2000 approved an expansion of the Medicaid program to cover such adults with “nominal copayments” and with a guarantee that they could not be denied medical service for an inability to pay.

In 2001, state officials asked for – and received – approval from the secretary of Health and Human Services for a “demonstration” project that would require higher copays of those clients and allow them to be turned away if they couldn’t pay.

A group of recipients sued in 2003, claiming that cost-saving is not sufficient justification to approve a demonstration project and arguing that the secretary failed to consider their evidence before giving the OK. The courts agreed, finding the approval decision “arbitrary and capricious.”

The state sought the same demonstration project in 2011 when the first program expired and was approved by the secretary – attracting a new lawsuit by a group claiming to represent the class of affected Medicaid recipients who wanted the copayment blocked.

A district court judge again agreed that the approval was arbitrary and capricious. But the court decided that rejecting the copayment would have the effect of killing the entire coverage program, which would “deny plaintiffs and the class the very benefits they claim to require.”

Instead, the court ordered the secretary to reconsider the copayment decision. But when she did, the court accepted her explanation and ruled against the plaintiffs.

Because of that, the lower court said the patients could not try to recover their fees. But the appeals court disagreed, saying the plaintiffs in the latest case had “the classic hallmarks of a prevailing party.”

“The … plaintiffs left the courthouse with an order that the secretary violated the APA (Administrative Procedure Act) and had to undertake a ‘do over’ of her administrative review – a victory that can hardly be described as leaving ’emptyhanded,'” McKeown wrote.

“In this case, the district court’s order finding the secretary’s actions arbitrary and capricious under the APA was not ‘reversed, dissolved, or otherwise undone’ by its later summary judgment order,” in favor of the secretary, McKeown wrote.