(Adds comments from judge and attorney for Medicaid recipients)

By Karen Pierog and Dave McKinney

A U.S. judge on Friday dealt a
major financial blow to Illinois by ordering the cash-strapped
state to pay $586 million a month to Medicaid providers to
ensure continued medical care for poor and disabled residents.

The order by Judge Joan Lefkow also stipulated that Illinois
send $2 billion to Medicaid providers during the fiscal year
that starts on Saturday to pay down the existing $3.1 billion
backlog of unpaid bills.

Illinois Comptroller Susana Mendoza, whose office pays the
state’s bills, said the ruling “takes the state’s finances from
horrific to catastrophic” and called on state lawmakers to
immediately pass a budget.

“Payments to the state’s pension funds; state payroll
including legislator pay; general state aid to schools and
payments to local governments – in some combination – will
likely have to be cut,” she said in a statement. “Payments to
the state’s bond-holders will continue uninterrupted.”
The decision came as Illinois lawmakers failed to reach
consensus on a budget on Friday, leaving a state with the worst
credit rating in the nation poised to enter a third-straight
fiscal year without a full operating budget.

Governor Bruce Rauner’s office had no comment on the ruling.

Lefkow had issued an order on June 7 that concluded Illinois
was not complying with federal consent decrees regarding
Medicaid. That order allowed attorneys representing Illinois’ 3
million Medicaid recipients to seek a subsequent order forcing
the state to increase payments to managed-care organizations,
which in turn pay doctors, hospitals and others.

In her latest order, the judge said the state failed to
offer a payment plan that would result in substantial compliance
with the consent decrees that stemmed from lawsuits filed
against Illinois in 1992.

Attorneys representing Medicaid recipients said Illinois,
which has been allocating only $160 million a month to the
healthcare program, will be able to subsequently seek
reimbursement for about half of the higher payment from the
federal government.

“Without these payments, doctors, hospitals, clinics and
other key healthcare providers would stop seeing Medicaid
patients, or else simply go out of business altogether,” Tom
Yates of the Legal Council for Health Justice said in a

Illinois’ unprecedented budget impasse between its
Republican governor and Democrats who control the legislature
has ballooned the state’s unpaid bill pile to about $15 billion.
(Reporting by Dave McKinney; Editing by Bill Trott)

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U.S. judge orders Illinois to boost payments on Medicaid bills