U.S. to Deny State Claim for Medi-Cal Costs : Finances: Reimbursement for $315 million in administrative expenses, mostly in L.A. County, had been sought. Rejection could mean more cutbacks.

WASHINGTON —  The federal government will reject a claim by California officials for $315 million in reimbursements for the cost of running the Medi-Cal program in Los Angeles County, officials said Tuesday.

The state filed a claim last year for additional payments to cover the administrative costs of operating the Medi-Cal program, which helps pay the medical bills of poor people. But the federal government will reject the claim formally today.

California and the federal government split the costs of the Medi-Cal program on a 50-50 basis. The state, through a sophisticated new computer system called “Medi-Cal Administrative Claiming,” argued that it could separate administrative costs from medical operating costs and that the federal government owed the extra money.

Administrative costs might include the expense and time of a nurse scheduling an appointment for a patient or explaining how medicine should be used. But the federal government, when it pays for a clinic visit, “pays for all of it, including the paperwork,” said an official with the federal Health Care Financing Administration, which runs the national Medicaid program.

“This was a very sophisticated process created to identify administrative costs for the state of California, and maybe it is too sophisticated,” the official said.

The vast majority of the disputed claims were in Los Angeles County. A federal team visited the county in August and went to clinics, which generated 90% of the claims.

The agency has been working closely with the state in discussing the administrative claiming system, but has decided to reject its findings.

The system “made a massive assumption on the part of the state that it could separate out and charge for services--but these services were always considered part of the basic rates” paid to clinics and doctors, the administration official said.

Federal administrator Bruce Vladeck will announce the decision at the state Capitol today.

Fiscally troubled Los Angeles County had hoped to get $640 million, half from the state and half from Washington, for the costs of running its Medi-Cal program over the last three years. But the rejection of the claim means that none of the money will be available, which could lead to new county budget cuts.

County officials said they are ready to pursue an appeal and possible legal action to resolve the issue.

“We believe our claims absolutely were filed in accordance with their requirements and that they approved the methodology we used, so we should not be (penalized),” Chief Administrative Officer Sally Reed said.

Officials had lobbied the White House heavily, hoping to persuade the Administration that the county’s financial health is a key to the state’s overall economic well-being.

Medi-Cal reimbursement “is a major issue driving the county’s deficit, not only for past claims, but it’s a big question mark in the future as well,” Supervisor Zev Yaroslavsky said.

Reed agreed but held out some hope. “I still believe we will recover some significant portion of the money, not all but some,” she said.

Times staff writer Carla Rivera contributed to this story from Los Angeles.