A BIG Bite Out of Our Health System…

HEALTH ACCESS UPDATE
Wednesday, February 13th, 2008

SENATE BUDGET COMMITTEE APPROVES MAJOR PROVIDER RATE CUTS
* Cuts to doctors, hospitals, other providers, managed care plans to begin July 1
* Committee postpones QSRs and cuts to dental and other benefits, for now
* Other cuts may need to be revisited for 2008-09

Click Here for What’s New on the Health Access WeBlog: Blue Cross’ Letter to Get Doctors to Help Cancel Their Patients’ Policies; More on the Issues in the Individual Insurance Market; Timely Access to Care Regulations; Comparing Canada; An Autopsy on AB x1 1; Valentine’s Day Budget Actions; More on Upcoming Budget Battles

The Senate Budget Committee on Wednesday evening passed a series of bills that would eliminate the $3 billion shortfall in this year’s budget and leave it with a cushion of $1 billion. Additionally, it shrinks the 2008-09 deficit from $11 billion to $7 billion.

Lawmakers and the governor are acting hastily on the budget this year because the state is expected to beginning running out of cash this spring and could begin defaulting on its loans and payments by the beginning of the fiscal year.

To ease the impact of cuts for 2008-09 and to begin making progress toward reducing the deficit, it was seen as important for lawmakers and the Governor to agree to cut some programs mid-year. Gov. Arnold Schwarzenegger, when he unveiled his budget last month, had proposed 10% across the board cuts to all departments. For a quick one-page fact sheet on the health cuts proposed by Governor Schwarzenegger, visit the Health Access website at:
http://www.health-access.org/preserving/Docs/Budget%20Fact%20Sheet%20013008.pdf

Senators approved SB 1x, the budget line items with budget reductions, and SB 3x, the health services “tralier bill” portion of the budget cuts, on a party line vote, with Democrats voting in favor, and Republicans abstaining. Other bills contained cuts on education, human services, transportation, and other areas of the budget.

THE HEALTH CUTS: The biggest blow would be borne by providers who serve Medi-Cal recipients, and Medi-Cal managed care plans. Rates would be reduced by 10 percent for a total savings of $544 million. The rate reductions would not take place until July 1, the start of the fiscal year.

This will directly impact the over six million low-income children, parents, seniors, and people with disabilities with Medi-Cal coverage, who will find a harder time getting access to a doctor or specialist. It also has impact on the health system all Californians rely on–since every dollar cut means the state loses a dollar of federal Medi-Cal matching fund, this $544 million cut is actually a loss of over a billion dollars from the state’s health system.

“The 10% cut on Medi-Cal is the hardest thing on many of us,’’ said Sen. Denise Ducheny, chair of the Senate Budget Committee. “I don’t think any of us particularly thinks this is the best for our health infrastructure. But, it is $500 million, and there are few places where you can find that level of proposed savings.’’

Ducheny also noted that while no cut was being made in the current year, the reason they were moving forward now with the provider rate cut in order for the State to make the necessary changes so it can go into effect immediately on July 1, and the state could get the largest possible savings in the budget year.

The rate cut includes a 10% rate reduction for most Medi-Cal providers as proposed by the Governor for both fee for service and managed care plans (this by itself is a $544 million for the 2008-09 budget year.) There are also reduced Medi-Cal reimbursement by 10% for certain long term care providers, and reduced payments for “non-contract” hospitals.

Programs for children with chronic illnesses and handicapped Californians would also suffer a 10% cut. This cut is to California Children’s Services providers ($10 million for the 2008-09 budget year) and to Genetically Handicapped Persons Program (GHPP) providers ($3.8 million for 2008-09 budget year). Other health cuts included a plan to delay payments to institutional providers, Medi-Cal managed care plans and Delta Dental Plans, and to permanently defer Medi-Cal Checkwrite.

“Given all the debates we’ve had on health care, this is counter to what we’d want to be doing,’’ said Sen. Darrell Steinberg. He was referring to the now-stalled AB x1 1, which would raised new dollars to raise Medi-Cal rates by over 20%–as opposed to the pending proposal, which is to cut by 10%.

In earlier hearings, the Department of Health Services testified that California ranks 41st in the nation in paying providers who care for the poorest Californians. The low rate at which providers are paid acts as a disincentive for providers to accept Medi-Cal patients, which in turn, makes it more difficult for the state’s 6 million Californians on Medi-Cal to seek treatment. These cuts will only exacerbate that situation.

SOME CUTS NOT MADE, STILL PENDING: Health cuts proposed by the Governor that were not made, however, were:
* Elimination of optional benefits, which provide California residents with glasses, incontinence creams and washes, dental care, hearing aids, access to podiatrists and other medical lifelines.
* Reinstatement of quarterly status reports, which would have forced Medi-Cal recipients to verify their income every three months, as opposed to annually, or semi-annually.
* Reductions in payments to hospitals that care for large numbers of uninsured patients – mainly public hospitals.
* Premium payments to Medicare Part B for seniors who qualify for Medi-Cal share-of-cost.

While many of the health services cuts escaped the knife this round, Ducheny did say that they may need to be reopened when discussions about the larger budget are discussed.

The full Senate is expected to vote on the midyear budget cuts package on Friday. In the meantime, the Assembly Budget Committee is expected to meet Thursday to vote on its midyear budget cuts package.

Health Access California promotes quality, affordable health care for all Californians.

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