SACRAMENTO, Calif. — A federal appeals court here affirmed California’s right to cut reimbursement payments to Medi-Cal providers by 10%.

While the rollback in payments to physicians, pharmacists and others serving those covered by California’s Medicaid program was hailed by government officials as a way to trim more than $330 million a year from California’s budget, health care advocates argued that it would hurt patients.

“The decision is devastating news for Medi-Cal patients who rely on providers for access to lifesaving medications,” California Pharmacists Association (CPhA) chief executive officer Jon Roth says. “If enacted, Medi-Cal patients will find themselves without a provider, because these cuts will drive practitioners out of the system.”

Roth said the decision to allow the state to reduce what it pays health care providers who treat Medicaid patients could not have come at a worse time.

California is transitioning 900,000 children from Healthy Families into Medi-Cal and enrolling 5 million to 7 million adults in Medi-Cal as part of the Affordable Care Act.

“These cuts are completely contrary to good public health policy,” he said. “For a state that continually talks about wanting to be the healthiest in the nation, decisions to enact cuts like these are nothing less than shocking.”

In ruling that California can reduce what it pays Medi-Cal providers, the Ninth U.S. Circuit Court of Appeals said trial courts cannot block a state from making cuts that were approved by the federal Department of Health and Human Services (HHS). HHS Secretary Kathleen Sebelius approved California’s cuts in October 2011, but U.S. District Court Judge Christina Snyder blocked them in December of last year. At the time, the cuts were expected to save $623 million annually.

“The Medicaid program is a colossal undertaking, jointly funded by the federal government and the states,” the three-judge appeals court panel said in its ruling. “Congress explicitly granted the Secretary authority to determine whether a state’s Medicaid plan complies with federal law.”

The appeals court’s decision to let California proceed with the Medi-Cal cuts is the latest reversal in a case that has dragged on for nearly two years.

After the state originally announced that it would reduce the rates it pays those who provide services under the program, a coalition of health care groups, including the state pharmacists association, the National Association of Chain Drug Stores and the California Medical Association sued to stop the cuts, leading to Snyder’s ruling.

California then appealed the decision, and the 9th Circuit ruled in the state’s favor. It remains to be seen whether the state will now follow through with the 10% reduction.

Meanwhile, the groups that originally sued to try to block the cuts have urged the state to reconsider reducing the payments and say they are evaluating their legal options for an appeal.