The General Assembly should have no say in changes Gov. Mark Sanford wants to make in the state’s $4.8 billion Medicaid program, his attorneys said in court papers.

The state lawsuit aimed at halting Sanford’s proposed changes to the health care program for the poor, disabled, children and seniors recently was transferred to federal court.

The lawsuit is the most direct challenge of Sanford’s plan to move the state’s 1 million Medicaid recipients from state-administered, fee-for-service health care to managed health care, administered by private insurance companies — and eventually to self-directed care with no government safety net.

The plaintiffs — rural health clinics and a nonprofit group — say changes to Medicaid must be cleared by the General Assembly under the state Administrative Procedures Act, with adequate public notice and opportunity for input.

Sanford’s attorneys say the Department of Health and Human Services is the “single state agency” that can set Medicaid policy — and the Legislature has no jurisdiction in that process.

The governor’s lawyers contend federal law also specifically prohibits all review, clearances or other interference by an S.C. office or agency into Medicaid matters, except for Health and Human Services.

Under state law, the General Assembly approves the state funds necessary for South Carolina to qualify for a federal Medicaid dollar match.

Columbia attorney Tony R. Megna, who represents the plaintiffs, said Sanford’s attorneys have misread federal law.

Sanford asked the federal government in June to approve a series of controversial changes to S.C.’s Medicaid program — including cuts to children’s services and the addition of significant co-payments on recipients.

The request, forwarded to Washington without public input and with the knowledge of only a handful of Republican legislators, touched off a volatile reaction from Democrats and advocates for the poor, disabled and elderly.

Sanford has since modified or dropped some proposed changes.

If the federal government approves the waiver, the earliest it could be implemented would be July 1, 2006. Health and Human Services director Kerr has said he wants Sanford’s waiver approved by the end of December.

Attorneys for Sanford, Health and Human Services director Robbie Kerr and his department, which administers Medicaid, requested the case be moved to federal court and asked for a nonjury trial.

Senior U.S. District Court Judge Matthew J. Perry set a schedule for proceedings, including a conference between the two sides next week. The earliest a trial could begin is Sept. 5, 2006.

“We wonder why the governor doesn’t want the case heard in state court,” Megna said. “That would seem to be a slap in the face to the (state) Supreme Court, and to the people.

“We are perfectly happy for Judge Perry to hear this case.”

Megna is one of three attorneys who filed the suit in Richland County Circuit Court in September, on behalf of Pee Dee Health Care, a string of mostly rural health clinics in Florence and Darlington counties, and the S.C. Coalition for Integrity in Medicaid Reform, a coalition of interested citizens.

The lawsuit highlights a conflict over jurisdiction in this area of medical law.

“It’s plausible that a state agency could run afoul of the public notice and comment period,” said Jacquelyn Fox, a USC Law School professor who specializes in medical law. “You can’t just dismiss this out of hand. This merits some sort of look.”

Sanford’s attorneys, Davidson Morrison and Lindemann of Columbia, did not return calls requesting comment.

Sanford spokesman Joel Sawyer said Health and Human Services officials were within their authority in requesting the changes.

South Carolina is among 12 states grappling with changes in Medicaid due to the rising costs of health care.

Under Medicaid, services to the poor, elderly and disabled are paid for by a 3-to-1 combination of federal and state dollars.

This year, the state got about $4 billion from the federal government to provide Medicaid services, but anted up less than $1 billion as its share.

Sanford wants to slow the cost of the state’s share of the Medicaid bill, which last year rose at a 5.8 percent rate — one of the nation’s lowest.

State Medicaid officials said growththis year has hovered around 9 percent. Medicaid’s annual national average growth for 2003 was 9.3 percent.

POSSIBLE PROBLEMS

A major criticism of the Sanford waiver is that once South Carolina accepts a five-year growth rate, there would be no latitude to expand Medicaid services should unemployment spike or a national disaster occur.

South Carolina’s economy, still based largely on textiles and agriculture and bolstered by tourism, has 6.9 percent unemployment, fourth-worst rate in the nation.

Economic expansion under Sanford has been at a standstill the past three years, his Democratic critics say.

Republican lawmakers who support Sanford’s reform say Medicaid growth must be slowed because, in 10 years, it could consume up to 29 percent of the state’s budget, now around $6 billion a year.

States also are being pressured by President Bush to cut Medicaid. The Senate recently passed a $10 billion cut over five years. And House Republicans pushed for additional $11 billion in Medicaid cuts, which would impose co-payments and, critics say, eliminate health coverage for a million children.

Sanford’s defense against the lawsuit appears to be based on the 11th and Fourth amendments to the U.S. Constitution, and the principle of sovereign immunity, according to experts who have reviewed the case.

USC Law School professor Eldon Wedlock said federal law generally trumps state law, though that hasn’t always been the case and there are exceptions.

Reach Burris at (803) 771-8398 or rburris@thestate.com