The government blocked an effort on Monday by California to reduce its health-care spending by requiring those enrolled in its Medi-Cal program for the needy to make copayments for medical services.
The Centers for Medicare & Medicaid Services informed California by letter that it was unable to identify the legal and policy support that would allow the state to require copayments to Medi-Cal under the Social Security Act.
The decision means California will not be able to count on $575 million in savings to its Medicaid program from the copayments in its fiscal year beginning on July 1 unless the Obama administration reverses the ruling.
California intends to seek a reversal, said H.D. Palmer, a spokesman for the state's department of finance.
Governor Jerry Brown last month unveiled a budget plan projecting a $9.2 billion deficit. He urged a combination of spending cuts and revenue from a measure for the November ballot seeking tax increases that would balance California's budget and provide a $1.1 billion reserve.