Lydia Dominguez v. Arnold Schwarzenegger ( 2010 )

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 Weissman-
Steinbaugh; 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;

3363
3364 DOMINGUEZ v. SCHWARZENEGGER
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,
Director of the California  D.C. No.
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
DOMINGUEZ v. SCHWARZENEGGER 3365
Before: Stephen Reinhardt, William A. Fletcher and
Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge Milan D. Smith, Jr.
3368 DOMINGUEZ v. SCHWARZENEGGER
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, Doug-
las 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 defendants-
appellants.
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 per-
sons who otherwise would be unable to remain safely in their
homes. See Cal. Welf. & Inst. Code § 12300. Plaintiffs-
Appellees, 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.
DOMINGUEZ v. SCHWARZENEGGER 3369
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 assis-
tance,” which require approval by the federal Secretary of
Health and Human Services. 42 U.S.C. § 1396-1. The Califor-
nia Department of Health Care Services (Department) is des-
ignated 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 reimburse-
ment system, whereby the State “sets reimbursement rates for
specific services, regardless of where those services are per-
formed.” 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 inde-
pendent living arrangement.” Cal. Welf. & Inst. Code
§ 12300(b). These services, which are provided in the benefi-
ciary’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 serv-
ing 440,000 individuals in California; sixty-two percent of
IHSS recipients receive care from an IHSS provider who is
1
For 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).
3370 DOMINGUEZ v. SCHWARZENEGGER
also a relative. In many cases, supportive services are pro-
vided by a parent, who is eligible to receive payment for car-
ing 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 ser-
vices 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 bar-
gaining 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 fed-
eral 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 reimburse-
ment rate methodology that: (1) is consistent with the func-
tions and duties of NPCs and PAs; (2) “[m]akes any
DOMINGUEZ v. SCHWARZENEGGER 3371
additional expenditure of state general funds subject to appro-
priation in the annual Budget Act”; and (3) “[p]ermits county-
only funds to draw down federal financial participation con-
sistent 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 con-
sideration 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 Rein-
vestment Act of 2009 (ARRA), the federal government con-
tributes 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 contrib-
utes 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 per-
cent 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
2
Prior to enactment of the ARRA, the federal government contributed
fifty percent of the program’s costs.
3372 DOMINGUEZ v. SCHWARZENEGGER
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 permit-
ted to make up the difference between the State’s current con-
tribution 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 ser-
vices 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 Depart-
ment 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 not-
ing that the State conceded that the legislature did not con-
3
On 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 maxi-
mum amount in which the state will participate. A letter of intent to com-
plete a Rate Change Request must be submitted to [DSS] by June 1, 2009
from each of the counties affected by the statutory change.”
4
Plaintiffs 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.
DOMINGUEZ v. SCHWARZENEGGER 3373
sider the § 30(A) factors prior to adopting § 12306.1(d)(6),
the district court granted the preliminary injunction. Defen-
dants 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 dis-
cretion, first, we “determine de novo whether the trial court
identified the correct legal rule to apply to the relief request-
ed.” 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 deter-
mine 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 erro-
neous 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. Nat-
ural 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)
3374 DOMINGUEZ v. SCHWARZENEGGER
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 reimburse-
ment rates that bear a reasonable relationship to effi-
cient 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 pro-
vide 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 Depart-
ment 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), coun-
DOMINGUEZ v. SCHWARZENEGGER 3375
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, econ-
omy, and quality of care, and . . . those payments must be suf-
ficient 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 low-
ering 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 pro-
cedures to assure that reimbursement rates are consistent with
the statutory factors set forth in § 30(A)—efficiency, econ-
omy, 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 bene-
fits 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 distin-
guish its rate of reimbursement to providers from its contribu-
tion to the amount counties pay providers in the IHSS context.
The State claims that it has removed itself from the rate-
setting 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,
3376 DOMINGUEZ v. SCHWARZENEGGER
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 col-
lective 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 contrib-
utes 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
DOMINGUEZ v. SCHWARZENEGGER 3377
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 support-
ive services. In the State plan, the Department has articulated
its policy that “reimbursement rates for Personal Care Ser-
vices shall not be less than levels necessary to achieve ade-
quate 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 availabil-
ity of State funds and has expressly conditioned its approval
over such increases on a finding that sufficient access to ser-
vices 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 Depart-
ment is thus well aware that prior to approving reimbursement
rates established through collective bargaining, it must deter-
mine 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 coun-
ties to administer the program, the State authorized counties to provide for
the delivery of IHSS services by either contracting directly with IHSS pro-
viders 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 reimburse-
ment 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 direct-
ing 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).
3378 DOMINGUEZ v. SCHWARZENEGGER
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 result-
ing change in reimbursement rates. In April 2009, the Depart-
ment 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 maxi-
mum 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 volun-
tarily and not because of any State requirements.” Thus, the
State explicitly invalidated its prior approval of PA rates, pre-
viously 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, econ-
omy, and quality of care,” § (30)(A), is independent of what-
ever 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 recom-
mended by the county, “the State would need to assure that
the lack of funding from local sources will not result in lower-
ing the amount, duration, scope or quality of care and services
available under the plan.”
DOMINGUEZ v. SCHWARZENEGGER 3379
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 legisla-
ture’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 suf-
ficiency of access to quality services after a reduction in
wages and benefits. Regardless, as we explained in Orthopae-
dic, “[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 reim-
bursement 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 substan-
tive 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 avail-
able 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
3380 DOMINGUEZ v. SCHWARZENEGGER
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 benefi-
ciaries, and approximately fifty percent live with the recipi-
ents 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] ser-
vices.” 572 F.3d at 652 (brackets in original) (internal quota-
tion marks omitted). Having determined that § 30(A) clearly
applied to the State’s decision to cut providers’ reimburse-
ment 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 pro-
vider is the rate to which they are entitled for providing spe-
cific services. See Cal. Welf. & Inst. Code § 14132.95(j)(1)
(“[R]eimbursement rates for personal care services shall be
equal to the rates in each county for the same mode of ser-
DOMINGUEZ v. SCHWARZENEGGER 3381
vices in the [IHSS] program.” (emphases added)). Indeed,
those services are expressly enumerated in the governing stat-
ute. 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 impossi-
ble” 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, includ-
ing: 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 ser-
vices. In fact, the State argues that the July 2008 Report satis-
fies § 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 pro-
viders of analogous services, such as in-home nursing care, as
a means of considering providers’ costs. Indeed, in determin-
ing 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).
3382 DOMINGUEZ v. SCHWARZENEGGER
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 con-
ceded 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 pur-
poses 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 dis-
cussion 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
DOMINGUEZ v. SCHWARZENEGGER 3383
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 con-
cluding that Plaintiffs established irreparable harm absent
injunctive relief. In holding that Plaintiffs made a sufficient
showing of irreparable harm, the district court made two fac-
tual 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 reduc-
tion 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 Plain-
tiffs 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 Plain-
tiffs may establish irreparable injury to IHSS providers as
opposed to IHSS recipients. As we stated in California Phar-
macists II, to show a likelihood of irreparable injury, “plain-
tiffs need only show harm to Medi-Cal service providers or
their members.” Slip op. at 3358; see also California Pharma-
cists 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 provid-
ers’ 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 estab-
3384 DOMINGUEZ v. SCHWARZENEGGER
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 pre-
liminary 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 Medicaid-
eligible 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 require-
ments 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 con-
cluding 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
DOMINGUEZ v. SCHWARZENEGGER 3385
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 pre-
liminary injunction.
AFFIRMED.