Perea v. Ghaly CA1/1 ( 2024 )

Filed 5/29/24 Perea v. Ghaly CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
ANALILIA JIMENEZ PEREA et al.,
Plaintiffs and Appellants,
A165963
v.
MARK GHALY, as Secretary, etc., et (Alameda County
al., Super. Ct. No. RG17867262)
Defendants and Respondents.
Plaintiffs assert the state’s funding, and the defendants’ management,
of the California Medical Assistance Program (Medi-Cal) has been woefully
inadequate and as a consequence Latinos, who comprise a disproportionate
percentage of Medi-Cal beneficiaries, are being discriminated against on the
basis of their ethnicity. Plaintiffs ground their discrimination claims on
Government Code section 11135, which broadly prohibits discrimination in
state-funded programs and activities. In this appeal, plaintiffs challenge
rulings rejecting their disparate impact claims on the ground they have been
unable to identify proper “comparator” groups impacted by the legislative and
administrative actions they challenge. Plaintiffs’ concern that, over the
years, chronic budgetary problems and allegedly inadequate administrative
oversight have negatively impacted the state’s ability to fund Medi-Cal, is
understandable. Nevertheless, the trial court judges who ruled on plaintiffs’
1
discrimination claims properly concluded they cannot attack those problems
through the disparate impact discrimination claims they have attempted to
advance here.
BACKGROUND
Medicaid and Administration of the Medi-Cal Program
Medicaid is “a federal-state cooperative program for the provision of
medical care to certain low-income populations.” (Family Health Centers of
San Diego v. State Dept. of Health Care Services (2023) 15 Cal.5th 1, 5
(Family Health Centers); Santa Rosa Memorial Hospital, Inc. v. Kent (2018)
25 Cal.App.5th 811, 815 (Santa Rosa).) “ ‘The program is jointly funded by
the federal and state governments and is administered by the states. The
states determine eligibility, the types of services covered, payment levels for
services, and other aspects of administration, within the confines of federal
law.’ ” (Keffeler v. Partnership Healthplan of California (2014)
224 Cal.App.4th 322, 327 (Keffeler).) To qualify for federal funds, each state
must submit a detailed Medicaid plan describing the nature and scope of its
program to the Centers for Medicare and Medicaid Services (a division of the
Department of Health and Human Services) for review and approval. (Santa
Rosa, at p. 815; Keffeler, at p. 327.)
“California participates in Medicaid through the California Medical
Assistance Program, known as ‘Medi-Cal,’ which is administered by the
Department of Health Care Services . . . [(DHCS)].” (Family Health Centers,
supra, 15 Cal.5th at p. 7.) As part of its coverage, Medi-Cal pays for health
2
care services in various service categories, including, physician and clinician
services (collectively, “physician services”)1 and long-term care.2
The Medi-Cal program delivers and pays for health care services
through two methods or systems: fee-for-service and managed care. (Keffeler,
supra, 224 Cal.App.4th at pp. 330–331.)
Under the fee-for-service system, the DHCS reimburses healthcare
providers directly for covered services provided to Medi-Cal beneficiaries. It
pays the provider according to a fixed fee schedule. Medi-Cal is required to
periodically review and revise these rates as necessary to comply with
applicable federal requirements. (Welf. & Inst. Code, § 14079.) Plaintiffs
allege the DHCS has not enacted a “systemwide increase in rates” in over 20
years.
Under managed care, beneficiaries enroll with local managed care
organizations (MCOs) and the state pays the MCOs a fixed, per-beneficiary
“capitation” payment. Medi-Cal uses the fee-for-service schedule as a
benchmark for setting the managed care capitation rate. The vast majority of
Medi-Cal beneficiaries using physician services are currently enrolled in
managed care. Plaintiffs allege the DHCS’s process for setting capitation
rates results in arbitrarily low rates for a variety of reasons, including
because it relies on the low fee-for-service reimbursement rates as a
component of the process. Plaintiffs further allege that while the DHCS
1 In their third amended complaint, plaintiffs “refer to physician and
clinician services in shorthand as ‘physician services.’ ” We do so, as well.
2 Medicaid provides funding for 31 categories of services. (42 U.S.C.
§ 1396d(a)(1)–(31).) Participating states are not required to provide all such
services. (Id., § 1396a(a)(10)(A) [specifying required services].) California,
through Medi-Cal, provides funding for many of them, including physician
services and long-term care services. (Cal. Code Regs., tit. 22, § 51301 et seq.
[schedule of benefits covered by Medi-Cal].)
3
annually updates capitation rates using the prior years’ experience as a
baseline, it fails to adequately monitor or enforce access to care for MCO
participants.
Plaintiffs’ Claims
Plaintiffs are Medi-Cal beneficiaries who utilize the physician services
category of benefits. Although they allege defendants, and the DHCS in
particular, have failed to comply with a number of specific statutory and
regulatory duties and obligations,3 they have not sued for mandamus relief
compelling defendants to comply with these asserted duties and obligations.
Rather, plaintiffs maintain defendants’ alleged failure to comply with
statutory and regulatory mandates constitutes actionable discrimination
against Latino Medi-Cal beneficiaries under both intentional and disparate
impact theories and they seek mandamus and injunctive relief prohibiting
such discrimination. The instant appeal concerns only plaintiffs’ disparate
impact claims.4
3 For example, plaintiffs allege defendants have violated statutory and
regulatory duties to review and revise reimbursement rates to ensure
reasonable access to physician and dental services, include a minimum
number of primary care providers per participant in their networks, ensure
appointment availability within a maximum number of days, and provide for
physicians within a maximum distance or travel time from where
participants live (citing Welf. & Inst. Code, §§ 14079, 14197; Health & Saf.
Code, §§ 1340–1399.864; Cal. Code Regs., tit. 28, §§ 1000–1300.826).
Whether defendants have violated any of these asserted duties is not an issue
that is before us in this appeal.
4 Following the trial court’s ruling sustaining defendants’ demurrer to
their third amended complaint, plaintiffs voluntarily dismissed their
intentional discrimination claims without prejudice. Accordingly, we neither
review nor take any position on the potential merit of those claims. We note,
however, that plaintiffs have made serious allegations in their complaint and
observe that an intentional discrimination claim entails an analysis different
than that applicable to a disparate impact claim. (Compare Village of
4
Plaintiffs predicate their discrimination claims on statistics showing
the proportion of Medi-Cal beneficiaries who identify as Latino has increased
significantly, and disproportionately, since the late 1970s. As of 1980,
approximately 25 percent of Medi-Cal beneficiaries were Latino (whereas 19
percent of the state population was Latino). By 2018, 58 percent of Medi-Cal
beneficiaries were Latino (whereas 39 percent of the state population was
Latino).
Plaintiffs therefore maintain the state’s funding and the defendants’
administration of the Medi-Cal program has had an increasingly
disproportionate, and negative, impact on Latinos. Specifically, plaintiffs
allege: (1) defendants’ “disinvestment” in the Medi-Cal program through
various actions and inactions has resulted in a decline in reimbursement
rates in comparison with market rates for physician services since 1979, (2)
defendants have failed to monitor and enforce requirements regarding the
adequacy of Medi-Cal’s provider network which has been negatively impacted
by the low reimbursement rates, and (3) defendants have imposed
Arlington Heights v. Metropolitan Housing Development Corp. (1977)
429 U.S. 252, 266–268 (Arlington Heights) [setting forth “sensitive” multi-
factor analytical framework for intentional discrimination claim based on
direct and circumstantial evidence] with Texas Dept. of Housing and
Community Affairs v. Inclusive Communities Project, Inc. (2015) 576 U.S.
519, 524–525 (Inclusive Communities) [“In contrast to a disparate-treatment
case, where a ‘plaintiff must establish that the defendant had a
discriminatory intent or motive,’ a plaintiff bringing a disparate-impact claim
challenges practices that have a ‘disproportionately adverse effect on
minorities’ and are otherwise unjustified by a legitimate rationale.”]; id. at
pp. 542–543 [courts must employ “adequate safeguards at the prima facie
stage” and “examine with care whether a plaintiff has made out a prima facie
case of disparate impact” to avoid serious constitutional questions that would
arise from pervasive use of race and racial quotas].)
5
administrative barriers, including inadequate reimbursement rates, that
limit access to care.
Plaintiffs contend these alleged funding and administrative
shortcomings have disproportionately harmed Latino beneficiaries by
limiting their access—or providing them “inferior” access—to physician
services when compared to three posited groups with disproportionately
White populations. These comparator groups are: (1) California residents
who have health insurance through other plans, including Medicare and
private insurance, (2) current Medi-Cal beneficiaries receiving long-term care
services, and (3) past Medi-Cal beneficiaries who utilized physician services.
Plaintiffs maintain the asserted disparity in access constitutes actionable
discrimination under Government Code section 111355 and its implementing
regulations.
DISCUSSION6
Threshold Issues
For the first time on appeal, defendants advance two threshold
arguments: (1) only a claim of intentional, rather than disparate impact,
5All further statutory references are to the Government Code unless
otherwise indicated.
6 Our standard of review of a judgment of dismissal following the
sustaining of a demurrer without leave to amend and the granting of a
motion for judgment on the pleadings is well established. When reviewing an
order sustaining a demurrer, we independently determine whether the facts
alleged in the complaint are sufficient to state a cause of action. (McCall v.
PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Thomas v. Regents of
University of California (2023) 97 Cal.App.5th 587, 605.) “ ‘We treat the
demurrer as admitting all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law. [Citation.] We also
consider matters which may be judicially noticed.’ [Citation.] Further, we
give the complaint a reasonable interpretation, reading it as a whole and its
parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “ ‘A
6
discrimination can be advanced under section 11135 because the statute is
modeled on title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d et seq.;
hereafter title VI), and (2) a disparate impact claim under section 11135
cannot, in any case, be asserted against a state agency. Generally, we will
“ ‘ “ignore arguments, authority, and facts not presented and litigated in the
trial court” ’ ” (Gonzalez v. County of Los Angeles (2004) 122 Cal.App.4th
1124, 1131), and we deem defendants to have forfeited both issues here. (See
Cabatit v. Sunnova Energy Corp. (2020) 60 Cal.App.5th 317, 322.)
We also observe that section 11135 broadly provides that no person
shall, on the basis of protected categories, “be unlawfully denied full and
equal access to” state-funded programs or “be unlawfully subjected to
discrimination under” a state-funded program (§ 11135, subd (a)), and that
more than a decade ago in Darensburg v. Metropolitan Transportation Com.
(9th Cir. 2011) 636 F.3d 511, 519 (Darensburg), the Ninth Circuit Court of
Appeals considered the merits of the plaintiffs’ section 11135 disparate
impact claims with no suggestion such theory cannot be employed to
establish actionable discrimination under that statute. Nor has any
subsequent section 11135 case, state or federal, questioned utilization of such
theory. (See, e.g., Villafana v. County of San Diego (2020) 57 Cal.App.5th
1012, 1017 (Villafana); C.B. v. Moreno Valley Unified School Dist. (C.D.Cal.
2021) 544 F.Supp.3d 973, 993.) The Legislature, likewise, has taken no
action to amend the statute to preclude such claims. (See Stats. 2005, ch.
706, §§ 20, 40, pp. 5657, 5681 [Legislature amended § 11135 to expressly
state it applies to California State University, rejecting interpretation in
motion for judgment on the pleadings is equivalent to a demurrer and is
governed by the same de novo standard of review.’ ” (People ex rel. Harris v.
Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777.)
7
Garcia v. Board of Trustees of California State University (Aug. 15, 2005,
B178329), review den. and opn. ordered nonpub. Nov. 16, 2005.].)
As for defendants’ second assertion, that a section 11135 disparate
impact claim cannot, in any case, be asserted against the state or a state
agency, it is predicated on a claim that a definitional provision in the
implementing regulations (Cal. Code Regs., tit. 2, § 11150 [defining
“ ‘Recipient’ ” as “not includ[ing] State agencies”]7) controls over the plain
language of the statute which states, “No person” shall, on the basis of
enumerated characteristics, “be unlawfully subjected to discrimination
under[] any program or activity that is conducted, operated, or administered
by the state or by any state agency, is funded directly by the state, or receives
any financial assistance from the state.” (§ 11135, subd. (a), italics added.) It
is well established that the language of the enabling legislation controls, not
the other way around. (See § 11342.2 [regulations adopted by state agency
must be consistent and not in conflict with statute]; Alameda County Deputy
Sheriff’s Assn. v. Alameda County Employees’ Retirement Assn. (2020)
9 Cal.5th 1032, 1067 [regulations that are inconsistent with a statute or
impair its scope are void].)8
7Except where otherwise indicated, all further references to
“Regulation” or “Regulations” are to title 2 of the California Code of
Regulations.
8 While this appeal was pending, the California Civil Rights Council
issued a notice of approval of regulatory action, amending and adopting
additional implementing regulations for section 11135, including regulations
recognizing the propriety of disparate impact claims, including against the
state and state agencies. (Regs., § 14000 et seq., filed Mar. 19, 2024, eff. July
1, 2024.) These regulations go into effect on July 1, 2024, and will be codified
at subchapter 9 of chapter 5 of division 4.1 of title 2 of the California Code of
Regulations. Plaintiffs requested that we take judicial notice of several of
these proposed and now final, but not yet effective, regulations, and the
prefatory initial and final statements of reasons for the regulations, urging
8
Disparate Impact Discrimination Fundamentals
Disparate treatment and disparate impact are two different theories by
which a plaintiff can prove a claim of unlawful discrimination. (Frank v.
County of Los Angeles (2007) 149 Cal.App.4th 805, 817 (Frank).) To prevail
on a disparate treatment theory, the plaintiff must prove the defendant
deliberately intended to discriminate. (Id. at p. 822 [under disparate
treatment theory the “ ‘plaintiff must prove the ultimate fact that the
defendant engaged in intentional discrimination’ ”]; Carter v. CB Richard
Ellis, Inc. (2004) 122 Cal.App.4th 1313, 1321 (Carter) [“ ‘ “Disparate
treatment” is intentional discrimination against one or more persons on
prohibited grounds.’ ”].)
A disparate impact claim, in contrast, seeks to remedy discrimination
caused by facially neutral practices that disproportionally and negatively
impact a protected class and are otherwise unjustified by a legitimate
rationale. (Inclusive Communities, supra, 576 U.S. at p. 524.) “[D]isparate
impact is not proved merely because all members of a disadvantaged
subgroup are also members of a protected group.” (Carter, supra,122 Cal.App.4th at p. 1326.) Rather, “Proof may be offered, ‘usually through
statistical disparities, that facially neutral . . . practices adopted without a
deliberately discriminatory motive nevertheless have such significant
adverse effects on protected groups that they are “in operation . . .
functionally equivalent to intentional discrimination.” ’ ” (Frank, supra,
that because they clarify and do not purport to change established law they
may properly be considered in the instant case. They further urge that these
new regulations refute defendants’ threshold arguments. Given our rejection
of defendants’ arguments as having been forfeited and contrary to well
established case law, these new regulations are largely immaterial to our
analysis and we deny the request to take judicial notice of them.
9
149 Cal.App.4th at p. 817, quoting Harris v. Civil Service Com. (1998)
65 Cal.App.4th 1356, 1365.)
Our courts have adopted a three-part burden-shifting framework for
analyzing disparate impact claims. “Under disparate impact law, ‘(1) a
plaintiff establishes a prima facie case if the defendant’s facially neutral
practice causes a disproportionate adverse impact on a protected class; (2) to
rebut, the defendant must justify the challenged practice; and (3) if the
defendant meets its rebuttal burden, the plaintiff may still prevail by
establishing a less discriminatory alternative.’ ” (Villafana, supra,
57 Cal.App.5th at p. 1017 [applying framework in § 11135 case], quoting
Darensburg, supra, 636 F.3d at p. 519 [same].)
Thus, “ ‘ “The basis for a successful disparate impact claim involves a
comparison between two groups—those affected and those unaffected by the
facially neutral policy.” ’ [Citation.] ‘[W]e must analyze the impact of [a
challenged policy] on minorities in the population base “affected . . . by the
facially neutral policy.” ’ [Citation.] ‘ “[T]he appropriate inquiry is into the
impact on the total group to which a policy or decision applies.” ’ ” (County
Inmate Telephone Service Cases (2020) 48 Cal.App.5th 354, 368 (County
Inmate), criticized on other grounds in Zolly v. City of Oakland (2022)
13 Cal.5th 780, 789–790; Darensburg, supra, 636 F.3d at pp. 519–520.)
In other words, “To make out a prima facie case of disparate impact, a
plaintiff must employ an appropriate comparative measure. [Citation.] ‘An
appropriate statistical measure must . . . take into account the correct
population base and its [protected group] makeup.’ [Citation.] There is no
prima facie case when the wrong base population is used in the statistical
sample. [Citation.] ‘[T]he appropriate inquiry is into the impact on the total
10
group to which a policy or decision applies.’ ” (Villafana, supra,
57 Cal.App.5th at p. 1018.)
In support of their disparate impact claims, plaintiffs have posited
three comparator groups. Defendants maintain none of them is a viable
comparator group.
Comparator Group 1: Californians Insured Through Medicare and
Private Insurance Plans
Plaintiffs’ first posited comparator group consists of Californians with
other health insurance—that is, Californians who are not Medi-Cal
beneficiaries. Plaintiffs assert Medi-Cal’s “poor reimbursement [rates] for
physicians participating in Medi-Cal, coupled with [defendants’] failures of
oversight and erection of administrative barriers, [has] result[ed] in a
segregated, two-tiered system with different levels of access to doctors in
California.” “The lower tier is predominantly Latino with poor access to care
and limited to the relatively small share of doctors willing to accept Medi-
Cal,” while the “upper tier is predominantly White, with superior access to
care and a much broader supply of participating physicians.”
Putting aside for the moment the viability of this posited comparator
group, we first consider whether plaintiffs’ allegations in support of this
comparison state a claim under section 11135, the statute on which plaintiffs
ground their discrimination claims.
Section 11135 states, in relevant part: “No person in the State of
California shall, on the basis of sex, race, color, religion, ancestry, national
origin, ethnic group identification, age, mental disability, physical disability,
medical condition, genetic information, marital status, or sexual orientation,
be unlawfully denied full and equal access to the benefits of, or be unlawfully
subjected to discrimination under, any program or activity that is conducted,
11
operated, or administered by the state or by any state agency, is funded
directly by the state, or receives any financial assistance from the state.
Notwithstanding Section 11000, this section applies to the California State
University.” (§ 11135, subd. (a).)
The implementing regulation on which plaintiffs rely, Regulation
11154, similarly provides, “It is a discriminatory practice for a recipient, in
carrying out any program or activity directly, or through contractual,
licensing or other arrangements, on the basis of ethnic group identification,
religion, age, sex, color, or a physical or mental disability” to, inter alia, “deny
a person the opportunity to participate in, or benefit from an aid, benefit or
service;” “afford a person the opportunity to participate in or benefit from an
aid, benefit or service that is not equal to that afforded others;” “otherwise
limit a person in the enjoyment of any right, privilege, advantage or
opportunity enjoyed by others receiving any aid, benefit or service resulting
from the program or activity;” “utilize criteria or methods of administration
that: (1) have the purpose or effect of subjecting a person to discrimination on
the basis of ethnic group identification, religion, age, sex, color, or a physical
or mental disability; [¶] (2) have the purpose or effect of defeating or
substantially impairing the accomplishment of the objectives of the
recipient’s program with respect to a person of a particular ethnic group
identification, religion, age, sex, color, or with a physical or mental
disability;” or “make or permit selections of site or locations of facilities:
[¶] (1) that have the purpose or effect of excluding persons from, denying
them the benefits of, or otherwise subjecting them to discrimination under
any program or activity; [¶] (2) that have the purpose or effect of defeating or
substantially impairing the accomplishment of the objectives of the program
or activity with respect to a person of a particular ethnic group identification,
12
religion, age, sex, color, or with a physical or mental disability.” (Regs.,
§ 11154, subds. (a), (b), (g), (i)(1)–(2), (j)(1)–(2).)
Thus, on its face, section 11135, subdivision (a) mandates “full and
equal access to the benefits of” the Medi-Cal program and prohibits
“discrimination under” the Medi-Cal program. (Italics added.) The
implementing regulation on which plaintiffs rely is likewise focused on
ensuring the Medi-Cal program is not operated in a way that discriminates
among beneficiaries (and those eligible to become and applying to be
beneficiaries) on the basis of, inter alia, their ethnicity. In sum, this general
statutory and regulatory prohibition against discrimination in any state-
funded program prohibits discrimination in allowing access to and in the
receipt of benefits afforded by the program. It does not, on its face, purport to
require that state-funded programs provide services commensurate to those
that may be provided by a private program either philanthropic or for-profit.
If plaintiffs had alleged, for example, that the DHCS operates Medi-Cal
so as to exclude Latinos from the program, or to prevent them from receiving
benefits provided to other beneficiaries under the program, they would state
a claim under section 11135. (See e.g., Hector F. v. El Centro Elementary
School Dist. (2014) 227 Cal.App.4th 331, 333, 335, 342 [father of student
afflicted with numerous emotional disabilities who was bullied at school and
thus deprived of all the benefits of a public education, had standing to sue
district on behalf of student under antidiscrimination and harassment laws,
including § 11135]; Fry v. Saenz (2002) 98 Cal.App.4th 256, 260–261
[applying department’s “completion rule” unlawfully denied children “the
benefits of the CalWORKs program on account of their disabilities”].)
However, section 11135 and Regulation 11154 are not, on their face,
amenable to a claim that, while the Medi-Cal program is accessible to, and all
13
services provided by the program are available to, any individual who
qualifies, including Latinos, the program does not provide Medi-Cal
beneficiaries with the extent of coverage or the range of provider choices that
may be available to other California residents who participate in other health
insurance plans.9
As plaintiffs point out, section 11135 is to be interpreted broadly given
its salutary purpose—to prohibit discrimination in state-funded programs.
One of its companion statutes, for example, section 11139, states, “This
article shall not be interpreted in a manner that would frustrate its purpose.”
However, that a statute is to be broadly construed to effectuate its beneficial
purposes does not mean its plain language may be disregarded (see Lee v.
Cardiff (2023) 94 Cal.App.5th 398, 407) or that the courts may read into the
statute a mandate it does not include (see Vasquez v. State of California
(2008) 45 Cal.4th 243, 253).
Recounting the legislative history of section 11135, plaintiffs’ amici
curiae, Impact Fund et al., emphasize the statute has been steadily amended
since its enactment in 1977 to enlarge the categories of protected persons, so
that the statute broadly prohibits discrimination in state-funded programs on
the basis of “sex, race, color, religion, ancestry, national origin, ethnic group
identification, age, mental disability, physical disability, medical condition,
genetic information, marital status, or sexual orientation.” (§ 11135, subd.
(a).) Amici curiae also highlight amendments clarifying the availability of a
9Defendants point out, and plaintiffs do not dispute, that all of the
funding and administrative difficulties plaintiffs allege negatively impact all
Medi-Cal beneficiaries utilizing physician services. Indeed, plaintiffs allege
as much in their third amended complaint.
14
private right of action (for equitable relief only)10 and expressly making the
statute applicable to the state, itself, and to the California State University
system. (§§ 11135, subd. (a), 11139; Regs., § 11142.) While these
amendments have expanded the classes of individuals who are entitled to
equal access to, and equal participation in, state funded programs for which
they qualify, they did not inject into section 11135 a mandate that state
funded programs must deliver the same services and benefits nonstate-
funded programs may deliver.
The legislative history of section 11135 as enacted in 1977 also reflects
that the statute is intended to be a tool to root out and prohibit unlawful
discrimination in allowing access to, and in sharing in the benefits of, state-
funded programs. (See, e.g., Assem. Com. on Governmental Organization,
Analysis of Assem. Bill No. 803 (1977–1978 Reg. Sess.) as introduced Mar. 7,
1977, p. 1 [bill would “require that state agencies take action to curtail all
state funding to any contractor, grantee, or local agency that (1) denies
persons the benefits of; or (2) subjects persons to discrimination under, any
program or activity that receives any financial assistance from the state”];
Senate Com. on Governmental Organization, Analysis of Assem. Bill No. 803
(1977–1978 Reg. Sess.) as amended June 21, 1977, p. 1 [bill “would prohibit
any state-funded program or activity from unlawfully denying benefits or
unlawfully discriminating on the basis of ethnic group identification, religion,
age, sex, color, or physical or mental disability,” and would “Require[] state
agencies to curtail funding to any contractor, grantee, or local agency that
has engaged in unlawful denial of benefits or unlawful discrimination”]; id. at
p. 2 [“The major intent of this measure is to shift the burden of proving
10 The provisions of the statute are otherwise enforced by appropriate
state agencies. (§§ 11136, 11137; Regs., §§ 11157, 11158.)
15
unlawful discrimination in a state-funded program from the person being
discriminated against to the state agency administering the program.”]; Dept.
of Transportation, Enrolled Bill Rep. on Assem. Bill No. 803 (1977–1978 Reg.
Sess.) Sept. 14, 1977, p. 1 [“bill adds a new section of law prohibiting
discrimination in the participation of the benefits of state funded programs”
and further provides “state funds going to a recipient violating these
provisions, shall be terminated for those programs or activities in which
violations are found”].)
In sum, given the plain language of section 11135, which is reinforced
by its legislative history, plaintiffs have not alleged, nor can they allege, a
viable discrimination claim based on their first comparator group theory.11
In addition to the lack of congruence between plaintiffs’ allegations and
the statutory and regulatory language, plaintiffs’ first posited comparator
group does not, and cannot, support a disparate impact claim.
To establish a prima facie case of disparate impact discrimination, a
plaintiff must use an appropriate comparative measure. (Villafana, supra,
57 Cal.App.5th at p. 1018; Darensburg, supra, 636 F.3d at p. 519.) “ ‘An
appropriate statistical measure must . . . take into account the correct
population base and its [protected group] makeup.’ [Citation.] There is no
prima facie case when the wrong base population is used in the statistical
sample. [Citation.] ‘[T]he appropriate inquiry is into the impact on the total
group to which a policy or decision applies.’ ” (Villafana, at p. 1018, italics
added; Darensburg, at pp. 519–520.)
11 In response to the court’s notice that it intended to take judicial
notice of this legislative history, defendants asked that we take judicial notice
of additional history. We conclude the additional history is of no significant
relevance and deny defendants’ request.
16
In Villafana, for example, recipients of benefits under the state-funded
CalWORKS program sued under section 11135, alleging that unannounced
home visits conducted by peace officers disproportionately impacted
minorities and women as compared to the county’s general population.
(Villafana, supra, 57 Cal.App.5th at pp. 1015–1016.) The Court of Appeal
rejected the plaintiffs’ contention that they could base a disparate impact
claim on a comparison of CalWORKS participants to the general population
of the county, explaining the relevant comparison group under disparate
impact law is the group to which the facially neutral practice applies, in that
case, CalWORKS participants. (Id. at p. 1018.) Because the plaintiffs did not
allege that minorities and women suffered any harsher impact than other
CalWORKS participants subject to the visitation practice, they failed to state
a viable disparate impact claim. (Id. at p. 1020.)
Similarly, in County Inmate, supra, 48 Cal.App.5th at page 358, county
jail inmates brought civil rights claims challenging allegedly exorbitant
commissions charged by telecommunications companies that were passed on
to inmates and their families making calls to and from the jail. The court
rejected the plaintiffs’ assertion that they could base a disparate impact claim
on a comparison of inmates and their families, who were disproportionately
African-American and Latino, to the overall populations of the respective
counties. (Id. at pp. 367–368.) “The ‘total group’ to whom defendants
provide[d] telephone service by means of their contracts with providers [was]
the inmate population; defendants [did] not provide telephone service to any
other group. Consequently, the only appropriate inquiry [was] an analysis of
the impact on minorities ‘in the population base “affected” ’ [citation], and
that [was] the inmate population. There [was] no other relevant group. And
17
African-American and Latino inmates [were] treated exactly the same as any
other inmates.”12 (County Inmate, at p. 368.)
Plaintiffs’ first posited comparator group suffers from the same problem
as did the comparator groups in Villafana and County Inmate. It attempts to
compare the alleged impact of the state’s facially neutral Medi-Cal funding
and administrative practices on a predominantly Latino Medi-Cal beneficiary
population with the extent of coverage and provider choice that may be
available to a predominantly White population that is not subject to those
facially neutral practices. This is not a comparative theory that can support
a claim of disparate impact discrimination in the operation of the Medi-Cal
program. (See Villafana, supra, 57 Cal.App.5th at p. 1020; cf. Darensburg,
12 The analysis in Villafana and County Inmate is consistent with
guidance provided in the federal government’s title VI legal manual, on
which plaintiffs rely heavily in their briefing. In discussing the identification
of an appropriate comparator population, it advises: “If an agency uses
statistical evidence, it must determine the particular proportion of protected
persons and non-protected persons adversely affected. To do this, the agency
must ‘take into account the correct population base and its racial makeup.’
[Citation.] This step in a statistical analysis of disparate impact, therefore, is
to identify the base population from which to draw comparative evidence,
because the challenged policy must be shown to have a discriminatory effect
within the population or area it affects. [Citation.] In other words, the legally
relevant ‘population base’ for a statistical measure of adverse disparate
impact is all persons the policy or practice affects or who could possibly be
affected by some change in (or the elimination of) the policy or practice.
Normally, this means ‘persons subject to the challenged . . . practice.’
[Citation.] . . . [¶] . . . [B]ecause the ultimate question is whether the policy
has a discriminatory effect within the population it affects, statistical
evidence ideally should be based on comparison groups that include, but do
not extend beyond, ‘the total group to which the policy was applied.’ ” (U.S.
Dept. of Justice, Civil Rights Division, Title VI Legal Manual (2017) Relevant
Comparator Population, pp. 19–20, § VII.C.1.c.iii.
<https://www.justice.gov/crt/fcs/T6manual> [as of May 29, 2024].)]
18
supra, 636 F.3d at pp. 519–520 [among other shortcomings in the district
court’s disparate impact analysis, the court erroneously focused on regional
transportation expansion plan’s impact on minority bus riders, rather than
on the “entire integrated transit system’s users,” including those using other
transportation modalities, since all users were impacted by the plan].)
Plaintiffs maintain Villafana and County Inmate are inapposite
because unlike in those cases, Medi-Cal has what plaintiffs call “express
equal and integrated access provisions” that “explicitly compare the access [to
healthcare] available to Medi-Cal participants to the access [to healthcare]
available to the insured public generally.”
In support of this argument, plaintiffs point first to Regulation 11154
and specifically to subdivision (i)(2) which, as we have recited, prohibits a
recipient of state funds13 from engaging in discriminatory acts, including
“utiliz[ing] criteria or methods of administration that: [¶] . . . [¶] (2) have the
purpose or effect of defeating or substantially impairing the accomplishment
of the objectives of the recipient’s program with respect to a person of a
particular ethnic group identification, religion, age, sex, color, or a physical or
mental disability.” (Regs., § 11154, subd. (i)(2), italics added.) Plaintiffs
maintain this general regulatory language pertaining to all state-funded
programs provides an analytical bridge to Medicaid/Medi-Cal’s specific
statutory and regulatory scheme. And pursuant to this specific statutory and
regulatory scheme, say plaintiffs, we can determine whether the state’s
13 “ ‘Recipient’ ” refers to the party operating the state-funded program,
not to the recipient of the benefits afforded by such a program. (Regs.,
§ 11150.) Rather, a person receiving the benefits of such a program is an
“ ‘Ultimate beneficiary,’ ” defined as “a person identified in Government Code
Section 11135 who receives, applies for, or is unlawfully deterred from
receiving or applying for, the benefits of, or employment under a program of
activity which receives State support.” (Ibid.)
19
funding and administration of the Medi-Cal program substantially “impairs
[the] accomplishment of the ‘objectives’ ” of that program. Plaintiffs then
point to “objectives” of the Medicaid Act and, in turn, the Medi-Cal program,
as assertedly expressed in section 1902(a)(30)(A) of the Social Security Act
(42 U.S.C. § 1396a(a)(30)(A) (hereinafter “Section 30(A)”), and Welfare and
Institutions Code section 14000, subdivision (a).
Section 30(A) requires Medicaid participating states to “provide such
methods and procedures relating to . . . the payment for[] care and services
available under the plan . . . as may be necessary . . . to assure that payments
. . . are sufficient to enlist enough providers so that care and services are
available under the plan at least to the extent that such care and services are
available to the general [insured] population.”14
In Armstrong v. Exceptional Child Center, Inc. (2015) 575 U.S. 320, 328
(Armstrong), the United States Supreme Court held “the Medicaid Act
14 The genesis of the current version of Section 30(A) was summarized
in Santa Rosa as follows: “ ‘When originally enacted in 1965, the Medicaid
Act required states to reimburse health care providers for the “reasonable
cost” of hospital services rendered; the term “reasonable cost” was defined
under federal standards to correspond to the cost of services actually incurred
by a hospital provider and otherwise allowable under Medicare.’ [Citation.]
‘[I]n practice[,] hospitals were reimbursed for whatever cost they had
incurred. There was little incentive to contain cost or produce needed
services efficiently.’ [Citation.] [¶] Federal law no longer mandates
reimbursement of costs. [Citation.] Federal law now requires ‘a substantive
result,’ not a particular methodology or form of reimbursement. . . . [¶]
‘Congress did not purport to instruct the Secretary [of the federal
Department of Health and Human Services] how to accomplish these
substantive goals. That decision is left to the agency.’ [Citation.] ‘Each State
participating in Medicaid has unique, local interests that come to bear. The
Secretary must be free to consider, for each State, the most appropriate way
for that State to demonstrate compliance’ with section 30(A).” (Santa Rosa,
supra, 25 Cal.App.5th at p. 816.)
20
implicitly precludes private enforcement of [Section 30(A)],” which contains
text so broad and nonspecific as to be “ ‘judicially unadministrable.’ ”15
(Armstrong, at p. 328; accord, Santa Rosa, supra, 25 Cal.App.5th at p. 821
[Armstrong “applies equally to proceedings in state as well as federal
courts”16]; Sanchez v. Johnson (9th Cir. 2005) 416 F.3d 1051, 1060 [“The text
and structure of § 30(A) simply do not focus on an individual recipient’s or
provider’s right to benefits, nor is the ‘broad and diffuse’ language of the
statute amenable to judicial remedy.”].)17 Plaintiffs maintain they are not,
15 The high court made this holding in a suit brought by providers of
Medicaid-funded residential habilitation services advancing a claim akin to
that made by plaintiffs—that the Idaho state agency responsible for
administering the state’s Medicaid-funded health care program had set
reimbursement rates for residential habilitation services lower than Section
30(A) allowed. (Armstrong, supra, 575 U.S. at pp. 323–324.) The district
court granted summary judgment to the providers and ordered the agency’s
administrators to increase the rates. (Id. at p. 324.) The Supreme Court
reversed. (Id. at p. 332.)
16 Indeed, as the court in Santa Rosa explained, Section 30(A) was
revised in the face of reimbursement cost concerns to maximize the
Secretary’s flexibility and discretion in assessing whether a state plan
complies with the Medicaid Act. (Santa Rosa, supra, 25 Cal.App.5th at
p. 816.)
17 Thus, in Santa Rosa the Court of Appeal held hospitals challenging
a reduction in reimbursement rates approved by the federal government,
could not sue the state or state officials for an alleged violation of Section
30(A). “[H]ealth care providers alleging a violation of 42 United States Code
section 1396a(a)(30)(A) (section 30(A)) may not obtain a writ of mandate
against state officials to contest Medicaid rates approved by the federal
agency that administers the program. Their recourse is an administrative
action against the federal agency that approved the rates.” (Santa Rosa,
supra, 25 Cal.App.5th at p. 814.) While plaintiffs acknowledge that under
Armstrong and Santa Rosa, claims challenging reimbursement rates under
Section 30(A) must be brought through the administrative review and
mandamus process, they claimed at oral argument that is not a viable option
because defendants have allegedly failed to comply with their statutory and
21
contrary to Armstrong, seeking to enforce Section 30(A) but cite the statute
only “as an objective of Medi-Cal” for purposes of Regulation 11154 and,
specifically, its language barring methods of administration of state-funded
programs that have the effect of “defeating or substantially impairing the
accomplishment of the objectives of the recipient’s program with respect to a
person of a particular ethnic group identification. . . .”18 (Regs., § 11154,
subd. (i)(2).) They cite no authority, however, for the proposition that they
can transform the broad and nonspecific, and “judicially unadministrable”
language of Section 30(A) into a state plan objective enforceable by state plan
beneficiaries through a private right of action under state anti-discrimination
laws.19 (See Armstrong, at p. 328 [“the Medicaid Act implicitly precludes
private enforcement of § 30(A), and [Medicaid providers] cannot, by invoking
our equitable powers, circumvent Congress’s exclusion of private
enforcement”].)
regulatory rate review obligations and therefore have not requested Medicaid
rate approvals that could be challenged. However, if defendants are failing to
comply with such predicate statutory and regulatory duties and obligations
(e.g. their alleged duty to periodically review rates under Welf. & Inst. Code,
§ 14079), they can be compelled to do so through ordinary mandamus. (Code
Civ. Proc., § 1085; Common Cause v. Board of Supervisors (1989) 49 Cal.3d
432, 442 [“Mandamus will lie to compel a public official to perform an official
act required by law . . . [and] may issue . . . to compel an official both to
exercise his discretion (if he is required by law to do so) and to exercise it
under a proper interpretation of the applicable law.”].)
18 Other than making this assertion, plaintiffs did not in their briefing
address Armstrong beyond noting in their reply brief that litigation under
Section 30(A) “was permissible for years prior to Armstrong. . . .”
19 We note the amicus brief filed by the National Health Law Program,
emphasizes the import of Section 30(A), but argues only that Section 30(A)
supports comparison of Medi-Cal physician services beneficiaries with Medi-
Cal long-term care beneficiaries (plaintiffs’ second posited comparator
theory), not with all California residents insured through other plans.
22
Turning to Welfare and Institutions Code section 14000, it provides in
relevant part: “The intent of the Legislature [in enacting the Medi-Cal
program] is to provide, to the extent practicable, through the provisions of
this chapter, for health care for California residents who lack sufficient
income to meet the costs of health care and whose other assets are so limited
that their application toward the costs of that care would jeopardize the
person or family’s future minimum self-maintenance and security. It is
intended that, whenever possible and feasible, all of the following shall apply:
[¶] (a) The means employed shall allow, to the extent practicable, eligible
persons to secure health care in the same manner employed by the public
generally, and without discrimination or segregation based purely on their
economic disability. The means employed shall include an emphasis on
efforts to arrange and encourage access to health care through enrollment in
organized, managed care plans of the type available to the general public.”
(Welf. & Inst. Code, § 14000, subd. (a), italics added.)
Plaintiffs assert the italicized language is an express “integration
provision” that shows the “Legislature intended to compare Medi-Cal
[beneficiaries’] access to care to the access of those with other forms of health
care insurance.”20 Again, plaintiffs disregard the plain language of the
statute.
20 The term “integration provision” has been used in connection with
title II of the Americans with Disabilities Act (ADA), for example, which
provides that “no qualified individual with a disability shall, by reason of
such disability, be excluded from participation in or be denied the benefits of
the services, programs, or activities of a public entity, or be subjected to
discrimination by any such entity.” (42 U.S.C. § 12132.) “Pursuant to this
provision, a seminal ‘integration mandate’ appears in the regulation that
requires a ‘public entity [to] administer services, programs, and activities in
the most integrated setting appropriate to the needs of qualified individuals
with disabilities.’ 28 C.F.R. § 35.130(d). In a case brought by two people then
23
Welfare and Institutions Code section 14000, subdivision (a), contains
qualified language expressing an intent to allow—“whenever possible and
feasible” and “to the extent practicable”—eligible persons to secure health
care “in the same manner” as the general public. As the Court of Appeal
explained in California Medical Assn. v. Brian (1973) 30 Cal.App.3d 637, 642,
“It is clear that the legislative intent was to provide ‘mainstream’ medical
care to the indigent. In effect, this meant that poorer people could have
access to a private practitioner of their choice, and not be relegated to a
county hospital program.” (See Paramount Convalescent Center, Inc. v.
Department of Health Care Services (1975) 15 Cal.3d 489, 497 [basic premise
of government-supported health programs including Medi-Cal is “to afford
recipients the widest possible choice of qualified care facilities”]; County of
San Diego v. State of California (1997) 15 Cal.4th 68, 96 [legislative goal to
allow Medi-Cal recipients to secure basic health care in same manner as
general public means allowing public assistance recipients “ ‘free choice of
institutionalized for mental illness who sought to be discharged to community
care facilities, the Supreme Court explored the contours of these rules. For
present purposes, it suffices to state that according to [the high court],
‘discrimination’ occurs when an individual is ‘unjustifi[ably]’ institutionalized
and thereby denied the benefit of the most ‘integrated setting’ available in
the community for which the state’s treating professionals deem him suited.”
(U.S. v. Mississippi (5th Cir. 2023) 82 F.4th 387, 391–392, quoting Olmstead
v. L.C. (1999) 527 U.S. 581, 599–600 (Olmstead).) The “ ‘most integrated
setting appropriate’ ” is the “ ‘setting that enables individuals with
disabilities to interact with non-disabled persons to the fullest extent
possible.’ ” (Olmstead, at p. 592.) As the Olmstead court also explained, the
“integration mandate” does not mean the “ADA imposes on the States a
‘standard of care’ for whatever medical services they render, or that the ADA
requires States to ‘provide a certain level of benefits to individuals with
disabilities.’ ” (Id. at p. 603, fn. 14.) Rather, the court held, “States must
adhere to the ADA’s nondiscrimination requirement with regard to the
services they in fact provide.” (Ibid.)
24
arrangements under which they shall receive basic health care’ ” and
ensuring Medi-Cal eligibles could “ ‘secure health care in the same manner
employed by the general public (i.e., in the private sector or at a county
facility)’ ”].)
This understanding—that the intent was, to the extent practicable, to
enable Medi-Cal beneficiaries to procure basic health care at facilities other
than county hospitals—is supported by the legislative history. When the
Legislature enacted the Medi-Cal Act in 1965, it declared, through a
prefatory statement of intent, that its purpose was to “afford basic health
care and related remedial or preventive services to recipients of public
assistance and to medically indigent aged and other persons, including
related social services which are necessary for those receiving health care
under this chapter.” (Stats. 1965, 2d Ex. Sess., ch. 4, § 2, p. 103, italics
added.) The Legislature further declared that “After December 31, 1966,
such care shall, to the extent feasible, be provided through a system of
prepaid health care or contracts with carriers.” (Id. at p. 104.) In addition,
subdivision (b) of section 14000 of the Welfare and Institutions Code as
enacted included language similar to that appearing in subdivision (a) today
and stated, “The means employed shall be such as to allow eligible persons to
secure basic health care in the same manner employed by the public
generally, and without discrimination or segregation based purely on their
economic disability.” (Stats. 1965, 2d Ex. Sess., ch. 4, § 2, p. 104, italics
added.) Subdivision (d) of section 14000 of the Welfare and Institutions
stated, in turn, “In the administration of this part and in establishing the
means to be used, the department shall give due consideration to the
appropriate organization and to the ready accessibility and availability of the
25
facilities and resources for basic health care and extended health services to
persons eligible. . . .” (Stats. 1965, 2d Ex. Sess., ch. 4, § 2, p. 104.)
Thus, read together and in context, the original statutory text
explained that basic health care would be provided to the extent feasible
through a prepaid system or contracts with carriers, with due consideration
given to the facilities and resources available for such care. Nothing in the
language suggests that when the Legislature established the Medi-Cal
program it contemplated, let alone mandated, that Medi-Cal would provide
beneficiaries with the same coverage and provider options other state
residents might have through other health insurance plans.
The Legislature amended Welfare and Institutions Code section 14000
in 1991 to facilitate the transition of the Medi-Cal program to providing
services through managed care.21 (Stats. 1991, ch. 95, § 1, pp. 496–497.) The
legislation was an urgency measure resulting from budget negotiations that
sought to increase the emphasis on managed care arrangements for Medi-Cal
beneficiaries, improve access to medical care, and reduce costs for the state
by providing for more cost-effective health delivery systems than fee-for-
service provider care. (See, e.g., Dept. of Finance, Enrolled Bill Rep. on
Assem. Bill No. 336 (1991–1992 Reg. Sess.) June 15, 1991, p. 1; Governor’s
Off. of Planning and Research Enrolled Bill Rep. on Assem. Bill No. 336
(1991–1992 Reg. Sess.) June 28, 1991, pp. 1, 3.) The amendment added
language regarding the means employed to secure health care which remains
in the statute today: “The means employed shall include an emphasis on
efforts to arrange and encourage access to health care through enrollment in
21 During the 1980s and 1990s, Medicaid programs throughout the
country moved away from the traditional fee-for-service model for delivery of
health care services and toward managed care models. (Keffeler, supra,
224 Cal.App.4th at pp. 328–330.)
26
organized, managed care plans of the type available to the general public.”
(Stats. 1991, ch. 95, § 1, p. 496; Welf. & Inst. Code, § 14000, subd. (a).)
Thus, as the Legislative Counsel’s Digest stated, whereas existing law
required the DHCS “whenever possible and feasible, to give due consideration
to the appropriate organization and the ready accessibility and availability of
the facilities and resources for health care to eligible persons, and to new and
innovative approaches to the delivery of health care services,” the new law
would “instead, require the department to emphasize and take advantage of
the efficient organization and ready accessibility and availability of health
care facilities through enrollment in managed care arrangements and new
and innovative fee-for-service managed care approaches to the delivery of
health care services.” (Leg. Counsel’s Dig., Assem. Bill No. 336 (1991–1992
Reg. Sess.) 4 Stats. 1991, Summary Dig., p. 48; see Dept. of Health Services,
Health & Welfare Agency, Enrolled Bill Rep. on Assem. Bill No. 336 (1991–
1992 Reg. Sess.) June 27, 1991, p. 1 [“Over the years, managed care has
become the manner in which the public generally received medical care;
however, the State’s ability to provide Medi-Cal services through managed
care has lagged. The managed care initiative proposed by Governor Wilson is
intended to remedy this situation.”].)
Thus, the subsequent history reflects the Legislature’s continued
concern with the manner in which health care services are delivered to
beneficiaries. It does not, in any case, indicate an intent to now mandate that
the Medi-Cal program provide the same coverage and same provider options
that may be available to other state residents through other health plans.
Plaintiffs argue the Legislature’s intent as expressed in Welfare and
Institutions Code section 14000, subdivision (a) is analogous to the goals of
the Fair Housing Act (FHA; 42 U.S.C. § 3601 et seq.) as articulated in
27
implementing regulations that proscribe housing practices that have the
“segregative effect” of harming the community by increasing, reinforcing, or
perpetuating segregated housing patterns. These federal regulations provide
in pertinent part, “Liability may be established under the Fair Housing Act
based on a practice’s discriminatory effect, as defined in paragraph (a) of this
section. . . . [¶] . . . A practice has a discriminatory effect where it actually or
predictably results in a disparate impact on a group of persons or creates,
increases, reinforces, or perpetuates segregated housing patterns because of
race, color, religion, sex, handicap, familial status, or national origin.”
(24 C.F.R. § 100.500(a); 78 Fed.Reg. 11460, 11482 (Feb. 15, 2013);
88 Fed.Reg. 19450, 19454 (Mar. 31, 2023).)
It has long been recognized that actionable discrimination under the
FHA can be proved under intentional and disparate impact (or “disparate
effect”) theories and that the latter theory embraces both traditional
disparate impact and perpetuation of segregative-effect claims. (See
generally Schwemm, Segregative-Effect Claims Under the Fair Housing Act
(2017) 20 N.Y.U. J. Legis. & Pub. Pol’y 709, 713 (hereafter Schwemm II);
Schwemm & Bradford, Proving Disparate Impact in Fair Housing Cases After
Inclusive Communities (2016) 19 N.Y.U. J. Legis. & Pub. Pol’y 685, 690–691
(hereafter Schwemm I.) As Professor Schwemm, a widely acknowledged
scholar in this area, has explained, “HUD’s [(Department of Housing &
Urban Development)] regulation endorsing discriminatory-effect claims
under the FHA recognizes that a challenged practice may have an illegal
effect in either of two ways: ‘(1) harm to a particular group of persons by a
disparate impact; and (2) harm to the community generally by creating,
increasing, reinforcing, or perpetuating segregated housing patterns.’ ”
(Schwemm II, at p. 713.) “Most segregative-effect claims have been made
28
against municipalities accused of using their land-use powers to block
integrated housing developments in predominantly white areas. Unlike
disparate-impact claims, segregative-effect claims may challenge a particular
action or decision of the defendant as well as an across-the-board policy.
Moreover, segregative-effect claims focus on the harm done to the local
community, whereas disparate-impact claims focus on the harm done to a
racial minority or other FHA-protected class.” (Ibid., fns. omitted.)
Thus, as Schwemm goes on to discuss, a segregative-effect claim
involves either a single land-use denial or adoption of a constrictive land-use
policy that impacts the supply of housing within a defined community. It is
not a theory that permits unbounded comparison to the general public. “In
impact cases, the focus is how the defendant’s challenged policy affects
protected versus non-protected classes in the market area for the housing at
issue. The geographic focus in segregative-effect cases is often a smaller
area. . . . Indeed, HUD’s articulation of the segregative-effect theory speaks
in terms of a ‘community’ being injured, not a protected class as in impact
claims. This language implies that the proper focus in a segregative-effect
claim is limited by the boundaries of this harmed community.”22 (Schwemm
II, supra, 20 N.Y.U. J. Legislation & Public Policy at p. 738, fns. omitted.)
Plaintiffs assert “Healthcare, like housing, is capable of
desegregation—for example, by setting reimbursement rates at levels
adequate to allow Medi-Cal participants to see the same physicians as
everyone else in the same geographic area. . . .” They cite no authority,
22 The final amended regulations implementing section 11135 include
language nearly identical to the FHA regulation. We have no occasion in the
instant case to expound on the meaning of the amended regulatory language,
but presumably it has the same import Professor Schwemm has discussed in
connection with the pertinent FHA regulation.
29
however, that supports their contention that the Legislature’s intent with
regard to the Medi-Cal program was, and is, to create a health care program
providing beneficiaries the same benefits and access to providers as may be
provided to other California residents under other health care plans in the
same way desegregation of entrenched discriminatory housing patterns
within a community is a goal of the FHA.
In Villafana, supra, 57 Cal.App.5th at page 1019, the court rejected a
similar effort to support a disparate impact claim under section 11135 by
analogizing to the FHA. The court explained that beyond prohibiting
discrimination, “the Fair Housing Act aims to promote integrated housing
patterns and prevent the increase of segregation in the general population.”
(Villafana, at p. 1019.) Because the law was intended to impact not only
those who fall within protected classes but also the broader population,
“demographic statistics within the general population could serve as an
appropriate measure for comparison” in stating a disparate impact claim.
(Ibid.) But “Welfare benefits are not distributed with the express aim of
affecting those who do not qualify for them in the same way that the Fair
Housing Act does.” (Ibid.) So, too, the Medi-Cal program was not intended to
impact both “those who fall within protected classes” and “also . . . the
broader population.” (Ibid.; see Jackson v. Stockdale (1989) 215 Cal.App.3d
1503, 1514 [“express purpose of the Medi-Cal Act is to afford necessary health
care to needy persons and, where feasible, to provide that care without
discrimination or segregation on the basis of economic disability”].)
Plaintiffs also argue precedent in the disability context supports a
comparison between the disproportionately Latino population of Medi-Cal
beneficiaries and the disproportionately White population having other forms
of health care insurance. Relying primarily on Davis v. Shah (2d Cir. 2016)
30
821 F.3d 231, 260–262 and footnote 21 (Davis), plaintiffs maintain Medi-Cal’s
supposed “integration provision”—that is, Welfare and Institutions Code
section 14000, subdivision (a)—is analogous to integration provisions in title
II of the ADA and in section 504 of the Rehabilitation Act of 1973 (29 U.S.C.
§ 794).
Davis involved amendments to New York’s Medicaid plan that
restricted coverage for orthopedic footwear and compression stockings to a
narrow set of medical conditions, effectively denying disabled persons access
to medically necessary care and putting them at risk of institutionalization.
(Davis, supra, 821 F.3d at p. 261.) As the circuit court explained, “Both Title
II of the ADA and § 504 of the Rehabilitation Act protect the rights of
disabled individuals to participate in state-administered or funded services”
and prohibit excluding a disabled individual from participating in or being
denied the benefits of services, programs or activities of a public entity or
being subjected to discrimination by such entity. (Davis, at p. 259; Olmstead,
supra, 527 U.S. at pp. 599–600.) In addition, federal regulations required
public entities to “administer services, programs, and activities in the most
integrated setting appropriate to the needs of qualified individuals with
disabilities.” (28 C.F.R. §35.130(d).) The court therefore concluded the
plaintiffs could assert a disparate treatment claim based on the exclusion of
disabled individuals from services provided by the program on the basis of
their protected status. (Davis, at pp. 259–264 & fn. 18.) Neither the federal
regulation at issue in Davis, nor any language of the opinion, supports
plaintiffs’ assertion that they can base a disparate impact claim on
differences in coverage and provider options available to Medi-Cal
beneficiaries and to participants in other health care plans.
31
Nor are we persuaded that Linton by Arnold v. Carney by Kimble
(M.D.Tenn. 1990) 779 F.Supp. 925 (Linton), advances plaintiffs’ case. In
Linton, indigent patients sued the State of Tennessee to enjoin an unwritten
state policy that allowed nursing homes to limit the number of beds in their
facilities available for Medicaid patients. Thus, the policy allowed nursing
home operators “to give preference to private pay patients by reserving for
their exclusive use beds which [were], due to lack of certification, unavailable
to Medicaid patients.” (Id. at pp. 927, 932.) The federal district court
concluded the policy violated Medicaid statutes and regulatory provisions.
(Id. at pp. 932–934.)
It also concluded the plaintiffs had shown the policy had a disparate
impact on racial minorities and violated title VI. (Linton, supra, 779 F.Supp.
at p. 935.) The court’s disparate impact analysis is less than clear. It found
the state’s Medicaid program had a disparate and adverse impact on
minorities because (1) “the higher incidence of poverty in the black
population, and the concomitant increased dependence on Medicaid” meant
“a policy limiting the amount of nursing home beds available to Medicaid
patients will disproportionately affect blacks,” (2) blacks comprised 39.4
percent of the Medicaid population but accounted for only 15.4 percent of
those Medicaid patients able to gain access to Medicaid-covered nursing
home services, and (3) the statewide system of licensed nursing homes, “70
percent funded by the Medicaid programs, serves whites[,] while blacks are
relegated to substandard boarding homes which receive no Medicaid
subsidies.” (Id. at p. 932.) The court did not use or discuss the now well-
established analytical framework applicable to disparate impact claims, let
alone discuss the requirement that “An appropriate statistical measure must
. . . take into account the correct population base and its racial makeup.”
32
(Darensburg, supra, 636 F.3d at p. 520; Villafana, supra, 57 Cal.App.5th at
p. 1018 [same].) It is also apparent the state’s policy discriminated among
Medicaid nursing home beneficiaries on the basis of race and resulted in
discriminatory access to a Medicaid service. We also note that the district
court’s conclusion that the unwritten policy violated federal law was, in
considerable respect, contrary to then-recent amendments to the Medicaid
Act. (See Heritage House of Salem, Inc. v. Bailey (Ind. Ct.App. 1995)
652 N.E.2d 69, 78–79 & fn. 18 [discussing changes to Medicaid nursing home
regulations].)
Comparator Group 2: Long-term Care Medi-Cal Beneficiaries
Plaintiffs’ second posited comparator group consists of Medi-Cal
beneficiaries utilizing long-term care. Specifically, they claim the state’s
methods of administering Medi-Cal have a disproportionate effect on Latino
“physician services” participants as compared to “long-term care” participants
of whom a greater percentage are White. They assert long-term care
beneficiaries are an appropriate comparator group for physician services
beneficiaries because both services are part of the Medi-Cal program, both
are administered by the DHCS, and both are subject to the same federally
approved state Medicaid plan. These generic commonalties are not sufficient
to make Medi-Cal long-term care participants a viable comparator group.
Plaintiffs’ own allegations in support of this disparate impact theory
are that different policies and practices, and specifically different funding and
reimbursement policies and practices, apply to physician services and long-
term care services. Plaintiffs allege, for example, that, “While Defendants
have repeatedly cut or held flat physician and clinician reimbursement rates
in Medi-Cal, at least one other service paid for by Medi-Cal and overseen by
Defendants has consistently seen rate increases over the same period: long-
33
term care.” They further allege, “Defendants implement automatic rate
increases for long-term care that do not exist for physician services.
Defendants spell this out in the state plan for Medi-Cal, which sets forth the
methodology by which Defendants automatically update long-term care
reimbursement rates. As a result, long-term care rates have steadily
increased while physician payments have stagnated.”
Plaintiffs’ assertion that different policies and practices apply to
physician services and to long-term care services is also accurate. Long-term
care, for example, is governed by the Medi-Cal Long-Term Care
Reimbursement Act (Welf. & Inst. Code, § 14126), which sets forth facility-
specific rate-setting methodology that is subject to federal approval and the
availability of federal funds, and that is based on costs and staffing levels
associated with quality of care for residents of nursing facilities as defined in
Health and Safety Code section 1250.23 (Welf. & Inst. Code, §§ 14126.02,
subds. (a), (b), 14126.021, 14126.025; see generally, Crestwood, supra,
23 In Crestwood Behavioral Health, Inc. v. Baass (2023) 91 Cal.App.5th
1, 11 (Crestwood), the court discussed the impetus for the Medi-Cal Long-
Term Care Reimbursement Act, stating that, “Prior to 2004, providers
received a fixed amount per patient per day that provided ‘no incentive for
quality care while reimbursing [them] about $5[,]000 a year less than it costs
to care for these residents.’ (Assem. Conc. Sen. Amends. to Assem. Bill No.
1629 (2003–2004 Reg. Sess.) as amended Aug. 24, 2004, p. 6.) The
Legislature adopted the Medi-Cal Long-Term Care Reimbursement Act
(Reimbursement Act) in September 2004. (See [Welf. & Inst. Code,]
§§ 14126–14126.035.) The purpose of the Reimbursement Act was to devise a
Medi-Cal reimbursement methodology that ‘more effectively ensures
individual access to appropriate long-term care services, promotes quality
resident care, advances decent wages and benefits for nursing home workers,
supports provider compliance with all applicable state and federal
requirements, and encourages administrative efficiency.’ ([Id.,] § 14126.02,
subd. (a).)”
34
91 Cal.App.5th at pp. 11–12 [discussing the statutory and regulatory
provisions governing reimbursement for long-term care services].) Long-term
care is also separately funded (Welf. & Inst. Code, § 14126.033, subd. (c)(1)),
and subject to a detailed and lengthy regulatory scheme outlining the
reimbursement methodology.24 (Cal. Code Regs., tit. 22, § 52000 et seq.; id.,
§§ 52500–52516.)
In short, plaintiffs have not identified a facially neutral funding policy
or administrative practice that applies to both beneficiaries utilizing
physician services and to beneficiaries utilizing long-term care services,
making the latter a viable comparator group.25
Despite relying on the differences in funding and reimbursement of
physician services and long-term care services to show “disparity” in the
funding and reimbursement of these two categories of service, plaintiffs
maintain these differences are “immaterial” when it comes to identifying a
viable comparator group because both service categories are subject to “the
24 Plaintiff’s amici curiae, National Health Law Program et al., identify
additional differences in the funding and reimbursement of long-term care
services. (E.g., 42 U.S.C. § 1396a(a)(13)(A) [agencies must use public process
when setting reimbursement rates for nursing facility services]; 42 C.F.R.
§§ 447.272, 447.321 [Medicaid regulations place upper payment limit on
supplemental payments to long-term care facilities].)
25 Plaintiffs requested judicial notice of a Medi-Cal update bulletin
outlining the Medi-Cal reimbursement rate calculation and review process for
long-term care, documents from the State Plan published on the DHCS
website (which include Medi-Cal State Plan Attachment 3.1-A, Medi-Cal
State Plan Attachment 4.19-D, and Medi-Cal State Plan Supplement 4 to
Attachment 4.19-D, dictionary definitions of the terms “objective” and
“aspiration,” and section 4.1 of the State Plan certifying compliance with
Section 30(A)). Because these materials largely pertain to differences
between the physician services and long-term care categories, they are
unnecessary to our disposition and we deny these requests for judicial notice.
35
same material policies around rate setting.” In support of this general
assertion, they cite to the State Plan’s identification of physician services and
long-term care services as categories of Medi-Cal services and recycle their
argument that Section 30(A) and Welfare and Institutions Code section
14000, subdivision (a)—which they claim “specifically peg access in Medi-Cal
to that available to the general insured population”—apply to both physician
services and to long-term care services. That physician services and long-
term care services are both categories of Medi-Cal do not alter the fact they
are, as plaintiffs’ allegations acknowledge, funded and managed differently,
particularly with respect to reimbursement rates. Nor, as we have discussed
do Section 30(A) and Welfare and Institutions Code section 14000, either
separately or collectively, provide a basis for a discrimination claim based on
the failure to provide beneficiaries with the same services that may be
provided to other state residents under other health care plans.
Plaintiffs also cite to Whitfield v. Oliver (M.D.Ala. 1975) 399 F. Supp.
348, 350–352, for the proposition that “distinct aspects of the same program”
can be a basis for a disparate impact comparison. Whitfield was an equal
protection case in which the court examined whether the plaintiffs’ evidence
pertaining to the state’s application of different reduction factors to two
categorical assistance programs was sufficient to require strict scrutiny,
rather than rational basis, review. (Id. at pp. 350–352.) The court concluded
disparities in the funding of the predominantly Black Aid to Needy Families
with Dependent Children program as compared to the predominantly White
Old Age Assistance program, along with abundant evidence of racially-based
discriminatory intent, violated equal protection. (Id. at pp. 350–357.) The
court did not address the analytical framework applicable to disparate impact
claims, let alone identify a viable comparator group within that framework.
36
(Id. at pp. 350–352.) Accordingly, Whitfield is of no assistance on the issues
before us.
Southwest Fair Housing Council, Inc. v. Maricopa Domestic Water
Improvement District (9th Cir. 2021) 17 F.4th 950 (Maricopa), is also
distinguishable. In Maricopa, customers in a public housing complex, who
were disproportionately African-American, Native American, and single
mothers, challenged the local water district’s policy of charging a higher
security deposit to the 20 households residing in the housing complex than
was charged to households residing in non-public housing. (Id. at pp. 955–
956.) The district served, in total, approximately 300 households. (Ibid.)
The trial court concluded the appropriate comparator group consisted of
nonprotected-group members residing in the one public housing complex (id.
at pp. 963–964) and ruled the plaintiffs failed to make a sufficient showing to
proceed on a disparate impact claim. (Id. at p. 959.) Nor had they adduced
sufficient evidence to raise a triable issue of disparate treatment. (Ibid.) The
Ninth Circuit concluded that while the plaintiffs had identified a viable
comparator group, i.e., “the [d]istrict’s public housing and non-public housing
residents,” the district demonstrated it had a legitimate reason to adopt the
two-tier rate structure and the plaintiffs raised no triable issue of pretext.
(Id. at pp. 963–964, 972.) With respect to the comparator group, the circuit
court observed, “When a defendant makes a deliberate choice to subject only
a subset of its customers or constituents to a certain policy, it is proper to
compare the demographics of that subset to the larger population of clients to
which the policy does not apply to discern whether the decision to limit a
policy to that subset produced any disproportionate effect.” (Id. at p. 963.)
Plaintiffs emphasize the Maricopa court’s general observation that
“There are multiple valid methods of analysis involving different comparative
37
populations.” (Maricopa, supra, 17 F.4th at p. 963.) However, the circuit
court was also careful to point out that a policy which is “generally applicable
and that does not explicitly apply only to a subset based on a particular
characteristic may require a different analysis or consideration of
idiosyncratic factors to isolate the ‘affected’ population.” (Id. at p. 963, fn. 10;
see generally Schwemm I, supra, N.Y.U. J. Legis. & Pub. Pol’y at pp. 697–709
[discussing the unique challenges in using statistical evidence and identifying
comparator groups in FHA disparate impact cases].) In any case, in
Maricopa, all customers were subject to a security deposit; the only difference
was that the district charged a fractional sub-set of its already small
customer base more. (Maricopa, at p. 958.)
Here, in contrast, there is no such commonality within so confined a
population. As we have discussed, physician services and long-term nursing
services are different categories of service, governed by different and detailed
statutory and regulatory provisions, including with respect to funding and
reimbursement for services.
Comparator Group 3: Past Medi-Cal Beneficiaries
Plaintiffs’ third posited comparator group consists of “past” Medi-Cal
beneficiaries who accessed physician services. Specifically, plaintiffs alleged
defendants’ “disinvestment disparately impacts Medi-Cal participants today,
who are overwhelmingly and disproportionately Latino, as compared to Medi-
Cal participants in the past, who were significantly less Latino. [¶] . . . This
disinvestment has built upon and perpetuated past discrimination, when
rates were set arbitrarily low as the share of Latino participants rapidly
grew.” “When Latinos were not such a large proportion of participants,
38
reimbursement rates were higher and more reflective of the costs of providing
care, and participants had much better access to health care.”
To begin with, these conclusory allegations do not adequately define a
comparator group. The generic terminology “past” Medi-Cal beneficiaries is
insufficient to identify the comparative population. Plaintiffs allege, for
example, that “disinvestment” “built upon and perpetuated past
discrimination.” The obvious question then is how far into the “past” must
one reach to discern the posited comparator group of less-discriminated
against, or non-discriminated against, beneficiaries. Plaintiffs provide no
adequate answer. They point out that in their third amended complaint they
included a graph allegedly showing a “Medicaid fee index,” which compares
Medicaid fee-for-service payments for “All services” and a “Medicare Fee
Index” for “Primary care” between 1979 and 2017, and the rise of the Latino
share of Medi-Cal’s population during the same period. They similarly
alleged “Access to care for Medi-Cal participants has worsened during the
relevant time period” because, “For example, from the early 2000s to 2016,
Medi-Cal participants became much more likely not to have a usual source of
care other than an emergency room, and to have had no visits with
physicians in the preceding 12 months.” (First & second italics added, third
italics in original.) None of this adequately defines a comparator group of
“past” Medi-Cal beneficiaries who received physician services.
In addition, plaintiffs failed to allege that “current” and “past”
physician services beneficiaries have been subject to the same facially neutral
policies and practices so as to make “past” physician services beneficiaries a
viable comparator group. To the contrary—they allege the state’s funding
and Medi-Cal policies have changed drastically over time. Plaintiffs allege,
for example, that “in the past” defendants’ “reimbursement rates were higher
39
and more reflective of the costs of providing care,” that the Legislature has
repeatedly cut reimbursement rates for Medi-Cal over the past 40 years,
impacting fee-for-service and managed care alike, that reimbursement rates
have thus been permitted to stagnate over this period of time, and that
current physician services beneficiaries are now severely impacted by the
Legislature’s and defendants’ “disinvestment” in the Medi-Cal program.
Thus, plaintiffs’ own allegations show, as the defendants argued below and as
the trial court concluded, “the former Medi-Cal basic health plan and the
current Medi-Cal basic health [plan] cannot be compared [because they] are
not part of the same neutral policy or procedure.”
Plaintiffs maintain these differences are immaterial because the fee-
for-service rate-setting provision has remained essentially unchanged since
1992 and “relevant portions” of the managed care rate-setting statute have
been in effect since the 1970s. They acknowledge “more specific
requirements” for managed care rate-setting have been put in place since
that time but assert these provisions “simply flesh out requirements that had
been in effect since 1977.” Again, plaintiffs cannot have it both ways. Their
pivotal allegations are that Medi-Cal’s current beneficiaries utilizing
physician services are negatively impacted by changes in the state’s funding
level and defendants’ administration of the program over the past four
decades, as compared to some unspecified time in “the past.”
Plaintiffs’ reliance on The Committee Concerning Community
Improvement v. City of Modesto (9th Cir. 2009) 583 F.3d 690 (CCCI), is
misplaced. In CCCI, plaintiffs, residents of predominantly Latino
unincorporated neighborhoods outside the city of Modesto sued the city for a
number of alleged discriminatory acts, including, excluding the
neighborhoods from a Master Tax Sharing Agreement (MTSA), which
40
plaintiffs maintained constituted a barrier to annexation erected by the city
and county, leaving the residents without comparable government services.
(Id. at pp. 696, 699, 703.) The district court granted summary judgment for
the city on the plaintiffs’ MTSA claim. The circuit court reversed, concluding
the evidence raised a triable issue of intentional discrimination in connection
with their equal protection and title VI claims. (CCCI, at pp. 700, 702–705.)
This evidence included statistical evidence, including historical census data,
about the ethnicities of the populations in the neighborhoods included and
excluded from the MTSA. (Id. at pp. 703–704.) It additionally included
evidence of actions by the city under the MTSA that arguably supported an
inference of intentional discrimination against Latino majority excluded
neighborhoods. (Id. at p. 705.) Specifically, the circuit court considered this
evidence in applying the intentional discrimination analytical framework of
Arlington Heights, supra, 429 U.S. at pages 267–268, which allows a court to
consider, “In addition to statistical evidence showing discriminatory impact,”
other factors to determine intent, including “the historical background of the
decision, the sequence of events leading up to the decision, and any relevant
legislative or administrative history.”26 (CCCI, at p. 703.)
26 The plaintiffs in CCCI also alleged a disparate impact claim under
section 11135 as to which the district court granted summary judgment on
statute of limitation grounds. The district court declined to alternatively
grant summary judgment on the merits, stating there was some evidence of
disparate impact. (The Committee Concerning Community Improvement v.
City of Modesto (E.D.Cal., May 16, 2007, No. CV-F-04-6121 LJO DLB) 2007
WL 1456142, at pp. *18–20). The circuit court reversed the district court’s
statute of limitations ruling and remanded for the lower court to determine
whether to exercise supplemental jurisdiction over the state law claim. The
circuit court did not address the substance of the claim or engage in any
discussion of the analytical framework applicable to a disparate impact claim.
(CCCI, supra, 583 F.3d at pp. 705, 715.) While it appears the district court
may have retained supplemental jurisdiction, no further merits order was
41
We also observe that CCCI, like Maricopa, involved one practice
adopted at one time which applied to one regional population area. (CCCI,
supra, 583 F.3d at pp. 702–703; Maricopa, supra, 17 F.4th at p. 956.) Again,
there is no such commonality here. Plaintiffs’ third posited comparator group
theory seeks to compare not only undefined “current” and “past” Medi-Cal
physician services beneficiaries, but their discrimination claims turn on
alleged differences in how Medi-Cal was funded and managed “then,” and
how it is funded and managed “now.” This is not a viable disparate impact
comparison.
Plaintiffs also cite to Regulation 11154, subdivision (i)(3), which they
point out states it is a discriminatory practice for a recipient, in carrying out
a state-funded program, “(i) to utilize criteria or methods of administration
that: [¶] . . . [¶] (3) perpetuate discrimination by another recipient on the
basis of ethnic group identification, religion, age, sex, color, or a physical or
mental disability.” Plaintiffs made no mention of this subdivision in their
third amended complaint. It also has no application. The state has always
issued by the court. (See The Committee Concerning Community
Improvement v. City of Modesto (E.D.Cal. Aug. 27, 2010, No. CV-F-04-6121
LJO DLB) 2010 U.S. Dist. LEXIS 95052, at pp. *6, *18 [Post-remand order on
a motion to file a fourth amended complaint stating, “On June 18, 2010, in
remanded proceedings, this Court exercised its discretion for supplemental
jurisdiction and reinstated the state law claims previously dismissed,
including the claim for alleged violation of [the Fair Employment and
Housing Act],” and further observing the plaintiffs’ proposed fourth amended
complaint did not comply with the Ninth Circuit ruling.].) We also note that
the circuit court’s opinion in CCCI predated by six years the United States
Supreme Court’s decision in Inclusive Communities holding that while
disparate impact claims can be brought under the FHA, some care must be
taken in the use of raw statistical disparities to “protect[] defendants from
being held liable for racial disparities they did not create.” (Inclusive
Communities, supra, 576 U.S. at p. 542.)
42
funded and administered the Medi-Cal program. Thus, there has been no
prior “recipient” of these state funds whose alleged discrimination the state is
now allegedly “perpetuating.” We also observe that plaintiffs’ complaint of
“perpetuating” discrimination is seemingly at odds with the premise of their
third comparator group theory—that at some undefined earlier time Medi-
Cal reimbursement rates were adequate and not discriminatory, but in
ensuing years, the state and defendants commenced discriminating. In other
words, instead of being predicated on a claim of perpetuating historic and
entrenched discrimination (or, as used in connection with the FHA, a claim of
perpetuating segregative effect), plaintiffs’ third comparator group theory is
predicated on the commencement of and adherence to allegedly
discriminatory conduct.
Plaintiffs also cursorily cite to, but provide no developed argument with
respect to, Welfare and Institutions Code section 14000.1, which states, “It is
the intent of the Legislature that health care services available under this
chapter shall be at least equivalent to the level provided in 1970–71.” This
statute also does not advance their disparate impact claims.
In Morris v. Williams (1967) 67 Cal.2d 733 (Morris), our Supreme
Court discussed the significance of the predecessor version of this statute
which stated the Legislature intended “ ‘that the scope and duration of health
services under this chapter and Chapter 8 (commencing with Section 14500)
shall be at least equivalent to the level provided in 1964–65 under public
assistance programs.’ ” (Id. at pp. 740–741, quoting Welf. & Inst. Code,
former § 14000.1.) The statute was enacted as part of the original Medi-Cal
Act, at which time the Legislature did not have sufficient data to predict the
costs of the program but did have aspirations as to the extent of services it
would provide. Within two years, the state faced budget problems and could
43
not appropriate funds to the program equivalent to those appropriated in
1964–1965. (Morris, at p. 744.) The Medi-Cal administrator enacted
emergency regulations to address the shortfall and reduce services. (Ibid.)
The trial court found, and the high court agreed, that some of the
administrator’s actions violated specific provisions of the Medi-Cal Act, but
not Welfare and Institutions Code section 14000.1. (Morris, at p. 761.)
The Supreme Court explained that the administrator was “empowered
to spend no more than the appropriated amount. His authority must
therefore be measured by the annual budgetary provisions. [Welfare and
Institutions Code] [s]ection 14000.1, by contrast, contains no mandate
directed to the Administrator that defines his spending power. Rather, that
section is directed to future Legislatures informing them of a principal long-
term goal of Medi-Cal founders. The 1965 Legislature, of course, could not
bind its successors and did not intend to do so. Nothing in [Welfare and
Institutions Code] section 14000.1 prevents the 1967 Legislature from
establishing different goals or modifying old ones to accord with fiscal
realities.” (Morris, supra, 67 Cal.2d at p. 749.) In response to the plaintiffs’
argument that in the urgency budgetary legislation the Legislature had
reaffirmed “the objective of [Welfare and Institutions Code] section 14000.1
by expressing the Legislature’s ‘contemplation’ that Medi-Cal ‘be permitted to
operate at its present [1966–67] level,’ ” the high court explained the
Legislature also “clearly contemplated that program reductions may be
necessary to meet fiscal limitations.” (Ibid.) “To focus on the precatory
language of the urgency clause,” said the court, “is to miss the central impact
of the act: that the limited appropriation may compel program cuts that
would necessarily reduce the 1966–67 level.” (Id. at pp. 749–750.)
44
Thus, while Welfare and Institutions Code section 14000.1 may
articulate a legislative goal, it imposes no funding mandate on any
subsequent Legislature, let alone, any Medi-Cal administrator. Nor does it
remotely suggest that a disparate impact discrimination claim can be
predicated on asserted differences between current budget allocations and
those in 1970–1971. In short, Welfare and Institutions Code section 14000.1
does not substitute for the lack of a facially neutral policy or practice that
applies to both plaintiffs and the posited comparator group of “prior”
physician services beneficiaries which disproportionately impacts plaintiffs
more negatively than it does the comparator group.27
DISPOSITION
The judgment is affirmed. Defendants to recover costs on appeal.
27 In addition to the materials we have already noted and discussed,
the parties requested that we take judicial notice of a variety of other
materials. We have carefully considered these requests and the attached
materials but conclude, in light of our analysis and the controlling case law,
none of them are material to our disposition. We therefore deny all pending
requests for judicial notice.
45
_________________________
Banke, Acting P. J.
We concur:
_________________________
Stewart, J.
_________________________
Langhorne Wilson, J.
A165963, Perea v. California Department of Health Care Services
46