Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-09-16359/USCOURTS-ca9-09-16359-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LYDIA DOMINGUEZ, by and through 

her mother and next friend Lisa

Brown; ALEX BROWN, by and

through his mother and next friend

Lisa Brown; DONNA BROWN, by and

through her conservator and next

friend Julie WeissmanSteinbaugh; CHLOE LIPTON, by and

through her conservator and next

friend Julie Weissman-Steinbaugh;

HERBERT M. MEYER, on behalf of

themselves and a class of those

similarly situated; LESLIE GORDON,

 on behalf of themselves and a

class of those similarly situated;

CHARLENE AYERS, on behalf of

themselves and a class of those

similarly situated; WILLIE BEATRICE

SHEPPARD, on behalf of themselves

and a class of those similarly

situated; ANDY MARTINEZ, on

behalf of themselves and a class

of those similarly situated; SERVICE

EMPLOYEES INTERNATIONAL UNION

UNITED HEALTH CARE WORKERS

WEST; 

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SERVICE EMPLOYEES INTERNATIONAL 

UNION UNITED LONG-TERM CARE

WORKERS; SERVICE EMPLOYEES

INTERNATIONAL UNION LOCAL 521;

SERVICE EMPLOYEES INTERNATIONAL

UNION CALIFORNIA STATE COUNCIL,

Plaintiffs-Appellees,

v.

ARNOLD SCHWARZENEGGER,

Governor of the State of No. 09-16359

California; JOHN A. WAGNER, D.C. No. Director of the California  4:09-cv-02306-CW Department of Social Services;

DAVID MAXWELL-JOLLY, Director of OPINION

the California Department of

Health Care Services; JOHN CHIANG

California State Controller,

Defendants-Appellants,

and

FRESNO COUNTY; FRESNO COUNTY

IN-HOME SUPPORTIVE SERVICES

PUBLIC AUTHORITY,

Defendants. 

Appeal from the United States District Court

for the Northern District of California

Claudia Wilken, District Judge, Presiding

Argued and Submitted

January 19, 2010—Pasadena, California

Filed March 3, 2010

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Before: Stephen Reinhardt, William A. Fletcher and

Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.

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COUNSEL

Stephen P. Berzon, Scotta A. Kronland, Stacey M. Leyton,

Peder J. Thoreen, and Anne N. Arkush of Altshuler Berzon

LLP, San Francisco, California, for the plaintiffs-appellees.

Edmund G. Brown, Jr., Attorney General of California, Douglas N. Press, Senior Assistant Attorney General, Susan M.

Carson, Supervising Deputy Attorney General, and Gregory

D. Brown and Michael A. Zwibelman, Deputy Attorneys

General, San Francisco, California, for the State defendantsappellants.

OPINION

MILAN D. SMITH, JR., Circuit Judge:

In 1973, the State of California established the In-Home

Supportive Services (IHSS) program to provide in-home

assistance and care to low-income elderly and disabled persons who otherwise would be unable to remain safely in their

homes. See Cal. Welf. & Inst. Code § 12300. PlaintiffsAppellees, a putative class comprised of recipients of the

State’s IHSS program and the unions who represent IHSS

providers, seek to enjoin state legislation that reduces the state

contribution to wages paid to IHSS providers because it is

preempted by Section 30(A) of the Medicaid Act. The district

court issued a preliminary injunction. We affirm.

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FACTUAL AND PROCEDURAL BACKGROUND

Under Title XIX of the Social Security Act (the Medicaid

Act), 42 U.S.C. § 1396 et seq., the federal government grants

states funds to use towards state-administered programs that

provide medical assistance to low income individuals.1 To

receive federal funds, states must administer their programs in

compliance with individual “State plans for medical assistance,” which require approval by the federal Secretary of

Health and Human Services. 42 U.S.C. § 1396-1. The California Department of Health Care Services (Department) is designated the “single State agency established or designated to

administer or supervise the administration of the [State] plan.”

42 C.F.R. § 431.10(b).

IHSS is one of the programs for which California receives

federal funding under its version of Medicaid, known as

Medi-Cal. Medi-Cal operates via a prospective reimbursement system, whereby the State “sets reimbursement rates for

specific services, regardless of where those services are performed.” Orthopaedic, 103 F.3d at 1493. IHSS recipients

receive a host of “supportive services . . . [,] which make it

possible for the recipient to establish and maintain an independent living arrangement.” Cal. Welf. & Inst. Code

§ 12300(b). These services, which are provided in the beneficiary’s home, include assistance with ambulation, bathing,

oral hygiene, grooming, dressing, bowel and bladder care,

feeding, and self-administration of medications. Id.

§ 12300(b)-(d). There are over 360,000 IHSS providers serving 440,000 individuals in California; sixty-two percent of

IHSS recipients receive care from an IHSS provider who is

1For a more detailed discussion of the Medicaid Act, we refer the reader

to our prior decisions. See, e.g., Cal. Pharm. Ass’n v. Maxwell-Jolly, slip

op. at 3331-61 (9th Cir. March 3, 2010) (California Pharmacists II);

Indep. Living Ctr. of S. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644 (9th Cir.

2009) (Independent Living II); Indep. Living Ctr. of S. Cal., Inc. v. Shewry,

543 F.3d 1050 (9th Cir. 2008) (Independent Living I); Orthopaedic Hosp.

v. Belshe, 103 F.3d 1491 (9th Cir. 1997). 

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also a relative. In many cases, supportive services are provided by a parent, who is eligible to receive payment for caring for his or her child only upon leaving full-time

employment or if the parent is unable to obtain full-time

employment because no other suitable provider is available

and the child would be left with inadequate care. See Cal.

Welf. & Inst. Code § 12300(e). 

The IHSS program is paid for and administered through a

combination of federal, state, and county funds. The State has

authorized counties to provide for the delivery of IHSS services by one of two methods: first, a county may hire IHSS

providers directly; or second, a county may contract with a

nonprofit consortium (NPC) or establish a public authority

(PA)—an entity separate from the county that performs public

and essential governmental functions necessary to deliver

IHSS services. See Cal. Welf. & Inst. Code §§ 12302,

12301.6(a)-(b). Fifty-six of the State’s fifty-eight counties

have established a NPC or PA. NPCs and PAs are considered

employers of IHSS providers for purposes of collective bargaining over wages, hours, and other terms and conditions of

employment, although IHSS recipients retain the right to hire,

fire, and supervise the work of their individual IHSS provider.

Id. § 12301.6(c).

In counties that have established a NPC or PA, wages and

benefits are established through collective bargaining between

the NPC or PA and the providers’ union. Cal. Welf. & Inst.

Code § 12301.6(c). Before any increase in wages or benefits

may take effect, it must be approved by the Department,

which determines whether the increase is consistent with federal law and ensures that federal financial participation is

available. Id. § 12306.1(a).

For the IHSS program, the California legislature has

directed the Department to establish a provider reimbursement rate methodology that: (1) is consistent with the functions and duties of NPCs and PAs; (2) “[m]akes any

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additional expenditure of state general funds subject to appropriation in the annual Budget Act”; and (3) “[p]ermits countyonly funds to draw down federal financial participation consistent with federal law.” Id. § 14132.95(j)(2)(A)(i)-(iii). In

establishing its rate-setting methodology, the Department is

also authorized to “[d]eem the market rate for like work in

each county . . . to be the cap for increases in payment rates

for individual practitioner services,” and “[p]rovide for consideration of county input concerning the rate necessary to

ensure access to services in that county.” Id.

§ 14132.95(j)(2)(C).

Following the passage of the American Recovery and Reinvestment Act of 2009 (ARRA), the federal government contributes approximately sixty-two percent of the overall cost of

the IHSS program.2 Of the remaining “non-federal share,” the

State contributes sixty-five percent while the county contributes thirty-five percent. Cal. Welf. & Inst. Code § 12306(b).

However, the State’s contribution is subject to a statutory cap.

Prior to implementation of the statute at issue in this case,

California Welfare & Institutions Code § 12306.1(d)(6)

(effective July 1, 2009), the State contributed sixty-five percent of the non-federal share up to $12.10 per hour. Id.

§ 12306.1(c)-(d). That statutory cap has increased over time,

beginning at $8.10 per hour in 2000 and reaching $12.10 by

way of four statutory increases. See id. § 12306.1(d)(1)-(5).

However, on February 20, 2009, the Governor signed

§ 12306.1(d)(6) into law. Scheduled to take effect July 1,

2009, § 12306.1(d)(6) reduces the statutory maximum for

which the State would contribute its proportionate share for

IHSS wages and benefits from $12.10 per hour to $10.10 per

hour. In other words, the State’s maximum contribution to

wages and benefits would be reduced from sixty-five percent

of the non-federal share of an hourly rate up to $12.10 to

2Prior to enactment of the ARRA, the federal government contributed

fifty percent of the program’s costs. 

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sixty-five percent of the non-federal share of an hourly rate up

to $10.10.

The new law does not require counties to reduce wages and

benefits paid to IHSS service providers. Counties are permitted to make up the difference between the State’s current contribution and any reduction that may result from the State’s

decreased contribution. Currently, thirty-four of the fifty-six

NPCs and PAs pay IHSS providers $10.10 per hour or less in

wages and benefits, so there would be no reduction in the

State’s contribution in any of those counties, including Los

Angeles County in which forty-two percent of all IHSS services are provided. Twenty-two counties are, however,

directly affected by the rate change. According to Plaintiffs,

in response to § 12306.1(d)(6), fourteen of those counties that

were paying wages and benefits of more than $10.10 per hour

have thus far submitted Rate Change Requests to the Department of Social Services (DSS), seeking to reduce wages

effective July 1, 2009.3 All of these Rate Change Requests

were approved by DSS and the Department.

On May 26, 2009, Plaintiffs brought this action challenging

§ 12306.1(d)(6) under the Supremacy Clause, claiming that in

enacting and implementing § 12306.1(d)(6), the State failed to

comply with the procedural and substantive requirements of

42 U.S.C. § 1396a(a)(30)(A) (hereafter § 30(A)).4 After noting that the State conceded that the legislature did not con3On May 1, 2009, DSS issued All-County Information Notice No. I-34-

09 notifying counties of § 12306.1(d)(6). The notice instructed: “Counties

currently providing wages and individual health benefits above $10.10

must submit a PA Rate Change Request to reflect the change in the maximum amount in which the state will participate. A letter of intent to complete a Rate Change Request must be submitted to [DSS] by June 1, 2009

from each of the counties affected by the statutory change.” 

4Plaintiffs also alleged unlawful discrimination under the Americans

with Disabilities Act and Rehabilitation Act. The district court did not

address Plaintiffs’ ADA or Rehabilitation Act claims and they are not

before us on appeal. 

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sider the § 30(A) factors prior to adopting § 12306.1(d)(6),

the district court granted the preliminary injunction. Defendants appealed.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction over this appeal pursuant to 28 U.S.C.

§ 1292(a)(1). A district court’s decision to grant or deny a

preliminary injunction is reviewed for abuse of discretion.

Indep. Living II, 572 F.3d at 651. Reviewing for abuse of discretion, first, we “determine de novo whether the trial court

identified the correct legal rule to apply to the relief requested.” United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.

2009) (en banc). If the trial court did not identify the correct

legal rule, it abused its discretion. Id. Second, we must determine if the district court’s “application of the correct legal

standard was (1) ‘illogical,’ (2) ‘implausible,’ or (3) without

‘support in inferences that may be drawn from the facts in the

record.’ ” Id. (quoting Anderson v. City of Bessemer City, 470

U.S. 564, 577 (1985)).

In granting a request for a preliminary injunction, a district

court abuses its discretion if it “base[s] its decision on an erroneous legal standard or clearly erroneous findings of fact.”

Earth Island Inst. v. U.S. Forest Serv., 442 F.3d 1147, 1156

(9th Cir. 2006), abrogated on other grounds by Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365 (2008). We

review conclusions of law de novo and findings of fact for

clear error. Id. Under this standard, “[a]s long as the district

court got the law right, it will not be reversed simply because

the appellate court would have arrived at a different result if

it had applied the law to the facts of the case.” Id. (internal

quotation marks omitted).

DISCUSSION

[1] In seeking a preliminary injunction in a case in which

the public interest is involved, Plaintiffs must show that: (1)

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they are likely to succeed on the merits; (2) they are likely to

suffer irreparable harm in the absence of preliminary relief;

(3) the balance of equities tips in their favor; and (4) an

injunction is in the public interest. Cal. Pharms. Ass’n v.

Maxwell-Jolly, 563 F.3d 847, 849 (9th Cir. 2009) (California

Pharmacists I) (citing Winter, 129 S. Ct. at 376); see also Am.

Trucking Ass’ns, Inc. v. City of Los Angeles., 559 F.3d 1046,

1052 (9th Cir. 2009).

I. Likelihood of Success on the Merits

[2] Section 30(A) provides that a State plan must “provide

such methods and procedures relating to . . . the payment for

. . . care and services . . . as may be necessary . . . to assure

that payments are consistent with efficiency, economy, and

quality of care.” 42 U.S.C. § 1396a(a)(30)(A) (hereafter

§ 30(A)). In Orthopaedic, we held that § 30(A) requires

the Director [to] set hospital outpatient reimbursement rates that bear a reasonable relationship to efficient and economical hospitals’ costs of providing

quality services, unless the Department shows some

justification for rates that substantially deviate from

such costs. To do this, the Department must rely on

responsible cost studies, its own or others’, that provide reliable data as a basis for its rate setting.

103 F.3d at 1496. The principal issue in this appeal is whether

the district court erred in holding that Orthopaedic applies to

the State’s enactment of California Welfare & Institutions

Code § 12306.1(d)(6). 

[3] As we will explain, both the legislature and the Department recognize that reimbursement rates—that is, providers’

wages and benefits—are directly correlated to ensuring that

services are consistent with efficiency, economy, and quality

of care, and sufficient to ensure access to services under the

IHSS program. Following passage of § 12306.1(d)(6), coun3374 DOMINGUEZ v. SCHWARZENEGGER

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ties, unsurprisingly, reduced the hourly wage paid to IHSS

providers. As we explained in Orthopaedic, “payments for

[Medi-Cal] services must be consistent with efficiency, economy, and quality of care, and . . . those payments must be sufficient to enlist enough providers to provide access to

Medicaid recipients.” 103 F.3d at 1496. Because section

12306.1(d)(6) directly affects what Medi-Cal providers are

paid for providing services, it falls within § 30(A). Thus, we

hold that before enacting legislation that has the effect of lowering payments to providers—here, § 12306.1(d)(6)—the

State must study the impact of that decision on the statutory

factors set forth in § 30(A). See California Pharmacists II,

slip op. at 3346.

A. The Application of § 30(A) to Cal. Welf. & Inst.

Code § 12306.1(d)(6)

The State argues that Orthopaedic does not apply to

§ 12306.1(d)(6) because that section does not set medical

reimbursement rates. According to the State, Orthopaedic is

concerned with ensuring that the State follows adequate procedures to assure that reimbursement rates are consistent with

the statutory factors set forth in § 30(A)—efficiency, economy, access, and quality of care. However, § 12306.1(d)(6)

neither sets rates, nor changes the procedure in place, i.e., the

collective bargaining process, to ensure that wages and benefits paid to IHSS providers are consistent with those statutory

factors. Rather, § 12306.1(d)(6) merely lowers the State’s

contribution toward wages and benefits set by the counties

pursuant to collective bargaining. 

[4] We are not persuaded by the State’s attempt to distinguish its rate of reimbursement to providers from its contribution to the amount counties pay providers in the IHSS context.

The State claims that it has removed itself from the ratesetting process and left it up to the counties and providers to

negotiate rates through collective bargaining. However, by

limiting its contribution to its portion of the non-federal share,

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the State injects itself into the collective bargaining process.

Indeed, the statutory cap that the State sets on its contribution

provides a powerful bargaining chip to both providers and

NPCs or PAs during negotiations over wages and benefits.

Prior to § 12306.1(d)(6), providers could seek hourly wages

and benefits up to $12.10 knowing that counties would have

to contribute just 35 percent of their non-federal share. After

the passage of the current § 12306.1(d)(6), providers confront

the reality that any hourly wage above $10.10 would be borne

entirely by the county.

Similarly, the State argues that the collective bargaining

process is an adequate procedure under Orthopaedic to assure

that rates are consistent with efficiency, economy, and quality

of care, and sufficient to ensure access. That may be true,

though we note that nothing in the record demonstrates that

the Department has conducted any analysis or study regarding

the effect of the collectively bargained rates on the statutory

factors. But, in any event, Plaintiffs are not challenging those

collectively bargained rates, nor are they challenging the collective bargaining process as a method of establishing rates.

Rather, they are challenging the procedural adequacy of the

legislature’s decision to decrease its funding of those rates. As

we have explained, decreasing the amount the State contributes to those rates is as integral to the collective bargaining

process as the negotiations themselves, because it directly

impacts the amount at which rates will ultimately be set. 

The record proves the point in this case. Approximately

fourteen counties submitted Rate Change Requests after

receiving notice of § 12306.1(d)(6). At least two of those Rate

Change Requests expressly state that the decision to reduce

the hourly wage for IHSS providers “is due to the change in

the State Participation Rate, effective July 1, 2009.” These

changes demonstrate that the amount the State determines it

will contribute to IHSS providers’ wages and benefits alters

the amount counties are willing to pay IHSS providers for

their services—something that the State itself recognized as

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impacting IHSS recipients’ access to services. See Cal. Welf.

& Inst. Code § 14132.95(j)(2)(C).5

The Department itself has acknowledged the relationship

between reimbursement rates and access to in-home supportive services. In the State plan, the Department has articulated

its policy that “reimbursement rates for Personal Care Services shall not be less than levels necessary to achieve adequate access to these services, but shall not exceed the lesser

of specified limits, consistent with the requirements of

[§ 30(A)].” The State plan also provides that “[t]o the extent

that the Department finds that sufficient access to services is

available, any rate increases granted under this program shall

be no greater than the funds appropriated by the Legislature

for such purpose.” (emphasis added). The Department has

thus recognized that rate increases are subject to the availability of State funds and has expressly conditioned its approval

over such increases on a finding that sufficient access to services is otherwise available. The corollary must also be true.

That is, the same oversight exists for any decrease in rates

brought about by the availability of State funds. The Department is thus well aware that prior to approving reimbursement

rates established through collective bargaining, it must determine whether sufficient access to services is available. Cf.

Orthopaedic, 103 F.3d at 1497 (rejecting the State’s argument

5

Indeed, in establishing the IHSS program, the State left the bulk of

administrative duties to the counties. However, before entrusting the counties to administer the program, the State authorized counties to provide for

the delivery of IHSS services by either contracting directly with IHSS providers or by establishing NPCs or PAs that would engage with providers

in collective bargaining. See Cal. Welf. & Inst. Code § 12301.6(c). The

State further directed the Department to establish a provider reimbursement rate methodology that would be consistent with the manner in which

NPCs and PAs were constituted. See id. § 14132.95(j)(2)(A)(i). In directing the Department to consider a host of relevant factors in establishing

its rate-setting methodology, the State recognized that the hourly wage at

which providers would be paid would have a direct impact upon “access

to services in that county.” Id. § 14132.95(j)(2)(C). 

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that it does not have to pay the costs associated with quality

of care because hospitals are required to provide such care as

a result of contractual obligations and licensing requirements).

Likewise, the Department has recognized the direct link

between the State’s change in contribution rate and the resulting change in reimbursement rates. In April 2009, the Department sent the United States Department of Health and Human

Services (HHS) an analysis of § 12306.1(d)(6), providing its

arguments as to why § 12306.1(d)(6) did not violate newly

enacted requirements of ARRA. That analysis explained the

reduction in the State’s contribution under § 12306.1(d)(6),

including that “funding has been reduced so that the maximum wage participation level will be $10.10 per hour starting

July 1, 2009. As a result, the State’s conditional approvals of

the PA rates are no longer effective and each of the counties

in question will need to request the State’s approval of

another PA rate. . . . If in connection with that a county then

chooses to negotiate different wages in excess of the $10.10

maximum wage participation level, it will be doing so voluntarily and not because of any State requirements.” Thus, the

State explicitly invalidated its prior approval of PA rates, previously negotiated via collective bargaining, as a result of

§ 12306.1(d)(6).

[5] In any event, the State’s obligation to consider whether

providers’ “payments are consistent with efficiency, economy, and quality of care,” § (30)(A), is independent of whatever wages and benefits are set pursuant to collective

bargaining. Notably, in concluding that § 12306.1(d)(6) did

not render the State ineligible for increased funding under

ARRA, HHS advised the State that if the Department were to

approve provider wage rates at a level less than that recommended by the county, “the State would need to assure that

the lack of funding from local sources will not result in lowering the amount, duration, scope or quality of care and services

available under the plan.” 

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The State argues that there are in excess of 14,000 IHSS

providers listed in county registries, implying that there can

be no problem with “access” to services following the legislature’s decision to cut its contribution to wages and benefits

under § 12306.1(d)(6). But the fact that there were 14,000

available IHSS providers in county registries before

§ 12306.1(d)(6)’s rate cut took effect does little to ensure sufficiency of access to quality services after a reduction in

wages and benefits. Regardless, as we explained in Orthopaedic, “[d]e facto access, produced by factors totally unrelated

to reimbursement levels, does not satisfy the requirement of

[§ 30(A)].” 103 F.3d at 1498. Sixty-two percent of IHSS

recipients receive care from an IHSS provider who is also a

relative. Allowing the State to rely on the fact that so many

IHSS recipients depend on care from a relative, who may

often have no other choice than to provide such services,

would allow the State “to ignore the relationship of reimbursement levels to provider costs when determining whether

payments are sufficient to ensure access to quality services.”

Id. Moreover, by focusing on quantity of providers, the State

fails to consider potential effects on quality of care. 

The State’s argument also misses the point. “We do not

require plaintiffs to show the State has committed a substantive violation of § 30(A)’s access provision when they can

show that the State did not comply with § 30(A)’s procedural

components.” California Pharmacists II, slip op. at 3357.

Therefore, whether there were to remain an excess of available IHSS providers in county registries after the decrease in

wages and benefits has little bearing on the State’s procedural

compliance with § 30(A). See Independent Living II, 572 F.3d

at 657 (discussing this court’s “process-oriented view” of

§ 30(A)). 

B. Consideration of Costs

[6] The State next argues that Orthopaedic is inapposite to

this case because Orthopaedic instructs the State to consider

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the costs to service providers when its sets reimbursement

rates, 103 F.3d at 1496, but providers of IHSS services do not

have “costs” that can be reimbursed. Rather, sixty percent of

providers are spouses, parents, or other relatives of the beneficiaries, and approximately fifty percent live with the recipients they serve. The State contends that it would thus be

“virtually impossible” for it to obtain “cost studies” with

respect to IHSS services, and so Orthopaedic, which holds

that states should consider costs, should not apply.

We rejected a similar argument in Independent Living II.

There, the Director argued that there was “no established

mechanism for obtaining cost data from physicians on the

costs they incur for providing each of these [covered] services.” 572 F.3d at 652 (brackets in original) (internal quotation marks omitted). Having determined that § 30(A) clearly

applied to the State’s decision to cut providers’ reimbursement rates, we rejected the Director’s argument, and held that

“[i]n the absence of such cost data, the Director could not

have complied with § 30(A).” Id. The same holds true here.

Since we have determined that the State should have studied

the impact of its decreased contribution to providers’ wages

and benefits prior to passing § 12306.1(d)(6), the State is not

ipso facto immunized from challenges to its actions because

it had no system in place to make such an assessment.

Furthermore, there does not seem to be anything inherently

difficult about studying IHSS providers’ “costs” since there is

undoubtedly a way to measure what it costs providers to care

for IHSS recipients. The State argues that it cannot study

costs because IHSS providers are providing “only their time

and labor” and are not paid “rates for specific services, but

rather receive hourly wages and benefits for the work they

perform.” We disagree. The hourly wage paid to an IHSS provider is the rate to which they are entitled for providing specific services. See Cal. Welf. & Inst. Code § 14132.95(j)(1)

(“[R]eimbursement rates for personal care services shall be

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vices in the [IHSS] program.” (emphases added)). Indeed,

those services are expressly enumerated in the governing statute. See id. § 12300(b).

[7] In addition, while the State “need not follow a rigid

formula,” Orthopaedic, 103 F.3d at 1498, for determining

what it costs providers to care for IHSS recipients, they must

rely on something. The State offers nothing to support its

assertion that it would be “nonsensical and virtually impossible” to comply with Orthopaedic’s requirements in the IHSS

context. To the contrary, the State concedes that the July 2008

Report to the Legislature, Public Authorities and Nonprofit

Consortia in the Delivery of In-Home Supportive Services,

SFY 2006/2007 (the July 2008 Report) contains extensive

data regarding quality and access in the IHSS system, including: the number of providers available to work on provider

registries for each county; data on service shortages and the

availability of emergency back-up providers; data on PA/NPC

rates and IHSS provider wages and benefits by county; data

from provider and consumer satisfaction surveys and PA/NPC

surveys; as well as what it costs PAs and NPCs to deliver services. In fact, the State argues that the July 2008 Report satisfies § 30(A)’s requirements—a contention to which we turn

below. Yet, the State cannot have it both ways: either it is able

to comply with § 30(A), or it is not.

At the very least, the State may look to what it costs providers of analogous services, such as in-home nursing care, as

a means of considering providers’ costs. Indeed, in determining the “cap for increases in payment rates for individual

practitioner services,” the Department is similarly authorized

to look to the market rate for “like work in each county.” Cal.

Welf. Inst. Code § 14132.95(j)(2)(C)(i).

[8] Accordingly, we hold that the district court did not err

in holding that § 30(A) applies to the State’s enactment of

§ 12306.1(d)(6). 

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C. State Compliance with § 30(A)

Next, the State argues that while it was under no obligation

to do so, it complied with everything that Orthopaedic

requires by preparing the 2008 Report. The district court did

not consider this report because it believed that the State conceded that the legislature did not consider § 30(A) prior to

enacting § 12306.1(d)(6).

[9] We agree that, at oral argument before the district

court, the State conceded that the legislature did not consider

any analysis of the § 30(A) factors prior to enacting

§ 12306.1(d)(6). Not only did the State fail to raise this claim

before the district court, thus waiving the issue, see United

States v. Flores-Montano, 424 F.3d 1044, 1047 (9th Cir.

2005) (issues not raised to the district court are normally

deemed waived subject to three “narrow exceptions”), it took

the position that any consideration of § 30(A) would be

impossible.

[10] In any event, the 2008 Report is inadequate for purposes of § 30(A). Nowhere does the 2008 Report contain any

references to § 12306.1(d)(6), let alone “study the impact of

the contemplated rate change(s) on the statutory factors prior

to setting rates, or in a manner that allows those studies to

have a meaningful impact on rates before they are finalized.”

California Pharmacists II, slip op. at 3360-61. Rather, the

2008 Report is the annual report that DSS is statutorily

required to provide the legislature, regarding the efficacy of

counties’ elections to establish a PA or contract with an NPC

to deliver services. See Cal. Welf. & Inst. Code § 12301.6(o).

While the annual report includes assessments of the quality of

care being provided in the IHSS program, it contains no discussion of a contemplated rate change that would either

increase or decrease payment rates. Finally, in the report on

which the State relies, forty-three percent of PA/NPCs

reported a “critical shortage of available providers that

affected a specific subpopulation of IHSS consumers.” That

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conclusion belies the State’s assertion that current wages and

benefits—those in effect prior to passage of § 12306.1(d)(6)

—are consistent with § 30(A)’s statutory factors.

II. Irreparable Harm

The State next argues that the district court erred in concluding that Plaintiffs established irreparable harm absent

injunctive relief. In holding that Plaintiffs made a sufficient

showing of irreparable harm, the district court made two factual findings, which we review for clear error. Earth Island

Inst., 442 F.3d at 1156. First, the district court held that wage

reductions would cause IHSS providers to leave employment,

leaving IHSS recipients without IHSS assistance. Second, the

district court concluded that IHSS providers would also suffer

immediate and irreparable harm, due to the fact that a reduction in providers’ wages and benefits would result in financial

injury that providers would be unable to recover due to the

State’s Eleventh Amendment immunity.

[11] On appeal, the State’s primary argument is that Plaintiffs failed to submit any credible evidence that a reduction in

the State’s contribution, resulting in a decrease in wages to

IHSS providers, would cause IHSS recipients to go without

care. However, the State takes no position on whether Plaintiffs may establish irreparable injury to IHSS providers as

opposed to IHSS recipients. As we stated in California Pharmacists II, to show a likelihood of irreparable injury, “plaintiffs need only show harm to Medi-Cal service providers or

their members.” Slip op. at 3358; see also California Pharmacists I, 563 F.3d at 850. Here, Plaintiffs have submitted ample

evidence of harm to IHSS providers, including that fourteen

counties have sought to reduce wages and benefits in the

wake of § 12306.1(d)(6), which would impact many providers’ ability to afford such basic necessities as food, clothing,

utilities, and rent. Accordingly, we hold that the district court

did not abuse its discretion in concluding that Plaintiffs estabDOMINGUEZ v. SCHWARZENEGGER 3383

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lished irreparable harm absent injunctive relief, as its finding

regarding provider harm was not clearly erroneous.

III. Balance of Equities and the Public Interest

[12] As to the final two elements necessary to obtain a preliminary injunction in a case in which the public interest is

involved, we have repeatedly recognized that individuals’

interests in sufficient access to health care trump the State’s

interest in balancing its budget. See Independent Living II,

572 F.3d at 659; California Pharmacists II, slip op. at 3360.

(recognizing the important public interest in social welfare

cases of safeguarding access to health care for Medicaideligible individuals). We continue to do so here, especially in

light of evidence in the record that suggests that reductions in

providers’ wages and benefits may have an adverse, rather

than beneficial, effect on the State’s budget, such that it would

actually save the State money if it maintained its current level

of funding of the IHSS program. See California Pharmacists

I, 563 F.3d at 852 (balance of equities and public interest

weighed in favor of Medi-Cal providers where the impact of

the injunction on the State’s budget crisis would be minimal).

[13] The State argues that if this injunction is upheld, “it

will be unclear whether the State may ever undertake any

action to reduce its payments” to Medi-Cal service providers.

This statement wholly misreads our Medicaid jurisprudence.

If the State makes a policy decision to decrease providers’

reimbursement rates, and fully complies with the requirements of this and our other decisions, it will not be barred by

current federal Medicaid law from doing so. Accordingly, we

hold that the district court did not abuse its discretion in concluding that the balance of hardships and the public interest

weighed in favor of enjoining implementation of California

Welfare & Institutions Code § 12306.1(d)(6).

CONCLUSION

The district court properly determined that § 30(A) of the

Medicaid Act applies to the State’s enactment of California

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Welfare & Institutions Code § 12306.1(d)(6). The district

court correctly held that Plaintiffs demonstrated a likelihood

of success on the merits of their Supremacy Clause claim, and

did not abuse its discretion in holding that the balance of

hardships tips sharply in Plaintiffs’ favor. Accordingly, we

affirm the district court’s order granting the motion for a preliminary injunction.

AFFIRMED. 

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