State to Sue U.S. Over Medicare

California and at least four other states will file a lawsuit against the federal government to force Washington to pay unexpected costs associated with its troubled new Medicare program.

State Atty. Gen. Bill Lockyer said Wednesday that the states suing -- California, Texas, Kentucky, New Jersey and Missouri -- would appeal directly to the U.S. Supreme Court to block the federal government from billing them for hundreds of millions of dollars in drug costs.

At issue is a provision in the new program requiring states to reimburse the federal government for drugs provided to low-income seniors and disabled people. The states had been paying those costs until the new federal drug program took effect Jan. 1. But state officials say flaws in the financial formulas behind the new drug program are leading Washington to overbill them.

Congress had assured states that the new program would lower their costs of providing drug coverage by 10%. Yet state officials estimate that, by the middle of next year, California will have paid $161 million more than it would have under the old system.

Lockyer announced his plan to sue later this month in a letter to lawmakers. Gov. Arnold Schwarzenegger endorsed the move. “Our state is poised to take action to ensure California does not pay more than its fair share,” the governor said.

State Controller Steve Westly, meanwhile, said his office would refuse to send the Medicare payment to the federal government when the bill comes this month.

“The controller is not going to cut this check,” Westly spokesman Yusef K. Robb said. “California is going to lead where Washington fails. We think changes need to be made.”

The lawsuit threat comes as the Medicare program is already beset with problems. California officials have been forced to allocate an additional $150 million in state money to provide drug coverage for seniors who have been denied medications since Jan. 1 because of computer problems that remain unresolved.

The federal government has pledged to see that the states are repaid that money.

And on Wednesday, the Medicare program announced that it would cover an additional 60-day supply of pharmaceuticals for those who need emergency medication. Such patients were previously guaranteed only a 30-day supply.

But the issue that California and other states plan to bring to the Supreme Court involves only the hundreds of millions of dollars in costs that the states would face even if the drug coverage was working as planned.

The governors of more than 15 states say the program, which was supposed to save the states money, would actually cost them more than the old system through at least fiscal 2006-07.

More states could join the lawsuit, Lockyer said, and Arizona plans to file a friend-of-the-court brief. New York may do the same.

Medicare officials say that in coming years state payments are to be reduced -- resulting in a significant net gain for states.

“Over the long haul, we believe the states will save money,” said Gary Karr, a spokesman for Medicare.

He said state calculations of losses do not include new help they are receiving from the federal government to cover drug costs for state employees.

California is not the first state to take on the federal government over Medicare.

Last summer, Texas Gov. Rick Perry vetoed that state’s reimbursement to Medicare.

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Times staff writer Ricardo Alonso-Zaldivar contributed to this report from Washington.