An organization representing 110 nursing homes filed a federal lawsuit against Gov. M. Jodi Rell Thursday saying its Medicaid reimbursement system is “broken” an doesn’t comply with federal laws.

The Connecticut Association of Health Care Facilities, Inc. filed this injunction in U.S. District Court against Gov. M. Jodi Rell claiming that the state has underpaid nursing homes a total of $100 million annually and its payment system is based solely on the state’s ability to pay, not on federally dictated guidelines. 

Fed up after years of underpayments Matthew Barrett, executive director of CAHCF said, it is taking this action because it anticipates that the state will again attempt to balance the budget on the backs of the frail and elderly as is seeks to close a $500 million budget deficit.

“The current system is broken and violates federal laws,” Barrett said in a phone interview Thursday.

Rich Harris, Rell’s spokesman disagrees.

“The state’s payments to these for-profit nursing homes are neither arbitrary nor unlawful,“ Harris said in a statement Thursday afternoon. “On the contrary, the state’s payment rates are among the highest in the nation, and the method used to determine payment rates is subject to approval by the federal Centers for Medicare & Medicaid Services.”

Barrett disputes the notion that the Centers for Medicare and Medicaid Services have to approve the rate system formula. “It’s misleading to say they’ve approve it because what they approve is the process for setting the rate,” he said. And the only reason Connecticut’s reimbursement rates are high, is because Connecticut’s labor rates are high, Barrett added.

The lawsuit claims the nursing homes were scheduled for a long overdue increase in its rates until Rell signed a budget bill, which canceled those increases. Rell also proposed no increases in the rate last year when she unveiled her two-year budget proposal.

Barrett said he will seek legislative fixes to the problem, but the lawsuit ensures that his member homes are protected if legislative efforts fail.

The state currently spends $1.2 billion a year on nursing home care for Medicaid patients.

“Moreover, even as the actual number of Medicaid-eligible residents in Connecticut has dropped by 8 percent over the last five years, the amount of money the state has spent on Medicaid-funded care in nursing homes has increased by 9.3 percent,“ Harris said.

Again, Barrett said Harris’ statement is very misleading because his calculation on the rate increases doesn’t back out the provider user tax. He said the homes have not received a rate increase since 2007. 

The lawsuit breaks no legal ground, but is similar to lawsuits filed in California and Washington, where those states, like Connecticut, recently cut Medicaid payment rates based solely on state budgetary concerns. Lawyers for the nursing homes say federal courts at both the trial and appellate levels have issued orders stopping those rate cuts after finding that they conflicted with federal law.

The governor will have 21 days to answer the lawsuit.