Setting the Stage for a Budget Summer

Thursday, July 3rd, 2008

* Democratic-supported budget would largely restore Medi-Cal rate reductions
* California Discount Prescription Drug Program continues
* Semi-Annual Reports and Healthy Families premium increases still in negotiations
* Conference Committee could close down as early as this Sunday, July 6th

Click Here for What’s New on the Health Access WeBlog: More on the Health Care Budget Cuts; the Onion on Kids Coverage; Update on MA; Provider Rates; A Clear, Stark Choice; Missed Budget Deadlines; Reporting “Never Events”; How Many More Uninsured Under the Legislature’s Budget?; Where Our Premium Dollars Go; Patients, Not Paperwork; Blog Watch

The Budget Conference Committee, led by Senator Denise Ducheny and Assemblyman John Laird, met this Thursday afternoon and reached agreement on a number of items of note to health advocates.

These decisions largely reflect current agreement between the Democratic majorities in the legislature; no budget decisions are final until the Legislature approves a budget by a two-thirds votes, which requires Republican votes, and the Governor signs the budget. However, these decisions shape the parameters of the budget negotiations this summer. The issues addressed today include:

PRESCRIPTION DRUG DISCOUNTS: The California Prescription Drug Discount Program, AB 2911 (Nunez), supported by Health Access California and a broad “Rx Coalition” of consumer, labor and senior groups, was passed and signed into law in 2006. The program would allow up to five million Californians with no or inadequate prescription drug coverage to buy prescription drug at prices 40 to 60 percent below the sticker price. The discounts would be achieved through contracts with pharmacists and negotiations with drug manufacturers.

The program, though, has not yet been implemented due to budget constraints. The program was in danger of being deferred yet another year until a compromise on the measure was reached Thursday. Under the compromise, the program would be started and implemented in the budget year, but the state would defray the costs to administer the program with a small portion of the manufacturer rebates.

MEDI-CAL RATE REDUCTIONS: The Committee also voted to restore most of the 10 percent rate reductions which took effect two days ago. The higher rates will take effect September 1, 2008. Any services provided between July 1 and August 31 will be reimbursed at the lower rate. The partial rate restorations are all contingent upon a budget agreement that includes revenues.

Following is an accounting of how each individual cut was restored and how the committee votes:

* Providers: Restored most of 10% payment reduction ($158.3 million); Vote: 2-1, 2-1, Republican members voting no
* Pharmacies: restored half (5%) of the payment reduction ($76.3 million); Vote: 2-1, 2-1, Republican members voting no
* Pediatric Sub Acute Care: restored all of payment reduction ($1.8 million); Vote: 2-1, 2-1, Republican members voting no
* Long-term Care: restored half (5%) of the rate restoration ($24.6 million); Vote: 2-1, 2-1, Republican members voting no
* Managed Care rates: restored half (5%) of the payment reduction ($99.2 million); Vote: 2-1, 2-1, Republican members voting no
* Breast and Cervical Cancer treatment: restored full amount of payment reduction ($1.2 million); Vote: 2-1, 2-1, Republican members voting no.
* Non-Contract Hospitals: Compromise would treat small, rural and children’s hospitals as contract hospitals. Vote: 3-0, 3-0

CHILDREN SERVICES: Rates paid under the California Children’s Services (CCS) and Genetically Handicapped Persons Program (GHPP) would be mostly restored by September 1, contingent upon revenues. The governor had originally proposed a 10 percent rate reduction for these programs’ services. In both cases, the vote was 2-1, 2-1, with Republican voting against the partial restorations.

ITEMS REMAINING OPEN: Still in negotiations remain the Semi-Annual Status Reports and additional county administrative funding should those reports be approved. Healthy Families premium increases also remain open. Both would not only place paperwork and additional costs onto families with children on Medi-Cal and Healthy Families coverage, respectively, but would also cause a reduction in enrollment and an increase in California children without coverage.

The children’s groups that make up the 100% Campaign are urging health advocates to call members of the Conference Committee to urge them to reject these additional barriers to kids’ coverage. Their most recent alert is listed here:

CALENDAR: The Budget Conference Committee is expected to return July 6th, Sunday evening to close out the remaining items. Legislative leaders hope to have a vote on the budget by mid-July.

The Senate plans to hold Appropriations hearing the upcoming week and Monday July 14th and then take summer break until August 4th. The Assembly plans to hold its last Appropriations before break on July 16th before leaving and returning on August 4th.

Health Access will keep advocates abreast of these activities. For information, please contact the author of this report Hanh Kim Quach, policy coordinator, at

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

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