County of Sacramento v. Lackner

• Decision Date: 12 September 1979
• Citation: 97 Cal.App.3d 576,159 Cal.Rptr. 1
• Court: California Court of Appeals Court of Appeals
• Parties: COUNTY OF SACRAMENTO and County of Alameda, political subdivisions of the State of California, Plaintiffs and Respondents, v. Jerome LACKNER, M.D., Director of Health, State of California, and Marion Woods, Director of Benefit Payments, State of California, Defendants and Appellants, County of San Mateo, a political subdivision of the State of California, Intervener and Respondent. Civ. 17051.

Page 1

159 Cal.Rptr. 1

97 Cal.App.3d 576

COUNTY OF SACRAMENTO and County of Alameda, political subdivisions of the State of California, Plaintiffs and Respondents, v. Jerome LACKNER, M.D., Director of Health, State of California, and Marion Woods, Director of Benefit Payments, State of California, Defendants and Appellants County of San Mateo, a political subdivision of the State of California, Intervener and Respondent.

Civ. 17051.

Court of Appeal, Third District, California.

Sept. 12, 1979.

Evelle J. Younger and George Deukmejian, Attys. Gen., John J. Klee, Jr., Asst. Atty. Gen., Thomas E. Warriner, Elisabeth C. Brandt, Asher Rubin, and John E. Fourt, Deputy Attys. Gen., for defendants and appellants.

L. B. Elam, County Counsel, Warren E. Thornton, Acting County Counsel, J. Steven Burris, Deputy County Counsel, Sacramento, for plaintiff and respondent, County of Sacramento.

Richard J. Moore, County Counsel and Kelvin H. Booty, Jr., Senior Deputy County Counsel, Oakland, for plaintiff and respondent, County of Alameda.

Keith C. Sorenson, Dist. Atty., and James A. Aiello, Asst. Dist. Atty., for intervener and respondent, County of San Mateo.

EVANS, Associate Justice.

This appeal presents a controversy over Medi-Cal payments which plaintiff counties allege are due them from the defendants. Defendants appeal from a judgment granting the County of Sacramento, County of Alameda, and intervener County of San Mateo (unless otherwise specified, referred to as plaintiffs) declaratory relief and a peremptory writ of mandate. The judgment found that certain Medi-Cal payments made were insufficient in amount and directed reimbursement to the counties and declaratory relief.

In 1965, California adopted the Medi-Cal program (Welf. & Inst.Code, § 14000 et seq.) ¹ for the purpose of extending individualized medical treatment to those traditionally unable to afford such services. To achieve that result the program, in conjunction with a federal program (42 U.S.C. § 1396 et seq.), provided for reimbursement to both public and private health care providers for medical services rendered.

When enacted, the Medi-Cal program established two plans for reimbursing counties providing health care services to indigents. Under the "standard" county plan ( § 14150), a county was required to pay the state a specific sum, in return for which the state would pay for the medical care of all individuals falling within certain welfare eligibility categories (hereinafter referred to as linked individuals). Financial responsibility for non-linked individuals, i.e., those who did not fall within the welfare eligibility classification, remained with the counties.

The second alternative, known as the "option plan" ( § 14150.1) provided that annually a county would be required to pay the state a sum equal to 100 percent of the county's health care costs (which included both linked and non-linked individuals) provided in the 1964-1965 fiscal year, with an adjustment for population increase; in return the state would pay the county's entire cost of medical care. The election to enter the "option" program was made irrevocable until June 30, 1970. ( § 14150.1.) The plaintiffs chose the option plan.

After its enactment the cost of implementing the Medi-Cal program escalated rapidly; in 1967, in order to limit these increases, the Legislature enacted section 14150.2 ² which imposed strict limits on future cost increases for counties under the option plan and established a $44,000,000 ceiling on funds available for the care of non-linked individuals in option counties.

Despite that legislation, state Medi-Cal costs again escalated to unacceptable levels. In December 1970, the Director of the then Department of Health Care Services declared a fiscal emergency and imposed a 10 percent cutback in payments to health care providers and adopted regulations causing a postponement of certain elective services under Medi-Cal. (See California Medical Assn. v. Brian (1973) 30 Cal.App.3d 637, 106 Cal.Rptr. 555.)

Against this historical background, in 1971 plaintiffs (who are option counties) filed the instant mandate action. While the exact nature of the pleadings is in question, the main thrust of the suit sought to enjoin defendants from implementing the so-called emergency regulations. Plaintiffs' action was consolidated for trial with a similar action, California Medical Assn. v. Brian, supra. The trial court, in the consolidated proceeding, found the emergency regulations invalid, issued findings and conclusions, and awarded judgment to plaintiffs.

The defendants in California Medical Assn. v. Brian separately appealed the action. We affirmed the judgment. (California Medical Assn., supra, 30 Cal.App.3d 637, 106 Cal.Rptr. 555.) A purported appeal by defendants in this case was ordered dismissed under the one final judgment rule (Code Civ.Proc., § 904.1), as the issue of damages remained unresolved.

The matter then went to trial in this proceeding on the question of the extent of "damages." The court awarded the County of Sacramento $1,556,305.20, County of Alameda $3,120,695.63, and the County of San Mateo $1,184,445, with interest, in each case, from June 1971.

On appeal, defendants do not contest the trial court's conclusion that the 10 percent cutback and the December 15 regulations were invalid, but rather limit their attack to the issue of whether the damages awarded plaintiffs were, in whole or part, proper. To this end defendants present five major contentions.

I

Defendants first contend the amounts awarded each plaintiff for costs of health care exceeded the amount each county was entitled to receive pursuant to sections 14150.1 and 14155. Defendants assert that if plaintiffs were entitled to recovery at all, they could recover only the increased cost of medical services occasioned by the 10 percent cutback and the emergency regulations. The contention is without merit.

We have reviewed the pleadings and all amendments presented by the three plaintiffs and agree with defendants that the issue of total reimbursement under sections 14150.1 and 14155 was not specifically raised. However, the petitions in each case request any relief the court deems appropriate, and contrary to defendants' argument plaintiffs did during trial declare their intention to seek damages for the state's failure to reimburse as required by sections 14150.1 and 14155, irrespective of the December 15 regulations and 10 percent cutback. The following colloquy during the proceedings make this point clear:

"MR. HEINRICH (Counsel for plaintiff, Sacramento County): Q. Now, as far as the option is concerned, the funded option, Mr. Cumming, how much did the State fund the option for throughout the state?

"A. The State provided in this year's budget $35,000,000 in State funds to go with approximately $111,000,000 in county funds to pay for care of this third group of patients which we are calling option patients.

"Q. And how much was allocated to the County of Sacramento?

"A. $35,353,000 was allocated to Sacramento County.

"THE COURT: Of the thirty-five million?

"THE WITNESS: Yes.

"MR. HEINRICH: Q. And have you made any projection as to how much you may or may not spend in excess of this amount, the county?

"A. Our estimate is that we will exceed that by at least $800,000 because there wasn't a big enough appropriation made. The thirty-five million simply won't cover our needs and the needs of the other option counties.

"Q. This will have to be paid up by the County of Sacramento itself?

"A. That's correct.

"Q. I see.

"THE COURT: But you are not suing for that, huh?

"THE WITNESS: Ask him.

"MR. HEINRICH: No, no. We are. We are.

"THE COURT: All right." (Emphasis added.)

Moreover, we do not agree with defendants' argument that the damages awarded were outside the scope of the court's findings of fact and conclusions of law. Findings of fact numbers 41 through 45 provide as follows:

"41. That the Counties of Sacramento, Alameda and San Mateo are, and at all times herein mentioned have been, 'option' counties, having elected to become so under Section 14150.1 of the Welfare and Institutions Code and have incurred and are incurring costs greater than the maximum net cost which has been guaranteed to the counties by Sections 14150.1 and 14155 of the Welfare and Institutions Code.

"42. That Sections 14150.1 and 14155 manifest a legislative intent to guarantee to option counties that their net costs for providing health care services to categorical aid recipients and all other persons in the county hospital shall not exceed the actual county costs for such services rendered in the 1964-65 period plus proportionate increases for population growth.

"43. That the effect of the regulations adopted December 11, 1970, pursuant to Section 14120(c) upon plaintiff counties is to increase their costs of providing health care services to an amount greater than the maximum net cost guaranteed by Sections 14150.1 and 14155.

"44. That in addition to the regulations adopted December 11, 1970, the Director ordered a 10% Reduction in payments pursuant to Section 14120(c), the effect of which was to increase the costs to plaintiff counties of providing health care services to an amount greater than the maximum net cost guaranteed by Sections 14150.1 and 14155.

"45. That a controversy has arisen and now exists between plaintiff counties and defendants with respect to whether Sections 14150.1 and 14155 of the Welfare and Institutions Code constitutes a guarantee to option counties that their costs for providing health care services to categorical aid recipients and all other persons in the county hospital is not to exceed the total county costs for such services rendered in the 1964-65 period plus proportionate increases for population growth.

"46. That plaintiff counties desire a judicial declaration as to whether Sections 14150.1 and 14155 constitute a guarantee to...