They are hearing lots of opposition to the cuts…

HEALTH ACCESS UPDATE
Tuesday, April 8th, 2008

SENATE BUDGET SUBCOMMITTEE REVIEWS MEDI-CAL CUTS

* Quarterly Status Reports: hundreds of thousands to ultimately lose coverage
* Proposal to eliminate adult dental care could increase ER use, hurt clinics
* Children on Healthy Families would also face cuts

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At a public hearing Monday, the Senate Budget Subcommittee, which oversees state public programs, postponed decisions on a number of Gov. Arnold Schwarzenegger’s proposed cuts to the Medi-Cal and Healthy Families Program. The two programs, along with all state departments, are under pressure to cut 10 percent across-the-board in an effort to close the state’s $14 billion shortfall. The two programs provide coverage to nearly 7 million Californians – nearly 20% of the state.

Monday’s hearing was part of the normal budgeting process for the 2008-09 fiscal year, which begins July 1. Lawmakers prefer to delay decisions on major items until after the governor releases his May revision of the budget, which reflects the latest number on income taxes to the state. The Legislature and Governor have already approved a $1 billion mid-year emergency cuts package in February, which included a 10% rate reduction ($544 million reduction) to Medi-Cal providers.

As lawmakers heard testimony for proposals that raised premiums for the poorest residents in the state and capped their coverages, Sen. Alex Padilla commented on the bad timing and irony: “In tougher economic times, the demand for services and workload goes up and here we are debating cuts to services.’’

BIG CUTS, “BIG MISTAKE”

By far, the biggest ticket items considered by lawmakers was the reinstatement of quarterly status reports for both children and adults on Medi-Cal and the elimination of adult dental benefits from Medi-Cal.

Quarterly Status Reports: The savings behind the increased administrative burden of quarterly status reports (which require recipients to verify income every three months, rather than one year or six months) is that recipients would not return paperwork in time and fall off the rolls, in spite of being eligible. State officials said tactic would save $83.5 million. The cuts would also cause the state to lose an equal amount in federal matching funds.

The state has estimated that approximately 150,000 children and about 14,000 adults would lose coverage through this tactic, though children’s advocates say that twice as many children–nearly 300,000–would lose coverage over a two-year period, when taking into account the cumulative impact.

Advocates also questioned whether that savings could actually be realized given that the it would end up costing more person-hours to reprocess and re-enroll Medi-Cal recipients who fell off and re-applied for coverage.

Dr. Gerry Fairbrother, who has studied the costs of Medi-Cal churning, reported a cost of about $122 per child in paper-pushing costs, on top of higher medical costs that the state would incur because of medical delays that were made more serious. Her estimates are from 2005.

“Quarterly status reports cause eligible children to disenroll. The costs are higher when they come back on and it increases the administrative burden,’’ she said. Others estimated the administrative costs at higher than $200 per person, and did not include an additional $40 to re-enroll people in a managed care plan.

The County Welfare Director’s Association also reviewed statistics on adult disenrollment and found that 70% (and growing) of those disenrolled were re-enrolled in the first year. And 90% of that population that was re-enrolled did so within the first 90 days.

The remaining 30% that did not re-enroll were likely those who had moved or had become not eligible for Medi-Cal, said director Stan Rosenstein, describing the rationale for reinistituting the report. Advocates suggested that even among this group, the issue was more about administrative barriers than not being eligible. Chairwoman Elaine Alquist directed staff to flesh out the numbers.

Elimination of Adult Dental Benefits: The other high-dollar cut proposed was the elimination of adult dental benefits from Medi-Cal, which would save the state $114.9 billion, but also cause the state to lose an equal amount in federal matching dollars. The only services that would not be eliminated included those services that “could be performed by a physician’’ such as extraction.

The department, however, did note that lack of dental treatment did result in higher medical and hospital costs because “people could go to the ER’’ to have dental procedures performed.

HEALTHY FAMILIES CUTS

Following is a rundown of cuts discussed to the Healthy Families program, and some comments offered by committee members to the Managed Risk Medical Insurance Board – which administers the program.

* Increased premium payments: Families between 151% of the poverty level to 250% of the poverty level would see their premiums increased between $4 and $7/month. For those in the lower income brackets, it works out to a 77% increase over what they are paying now. This would reduce state spending by $43.2 million, but would cause the state to lose $78.5 million in matching federal funds. Lawmaker comments: “Given that we are in a recession and given that people are losing jobs and gas is costing a whole lot more, how does the department determine that a 77% increase is appropriate?’’ asked Sen. Elaine Alquist, who also asked about the impact the increase would have on enrollment. MRMIB executive director Leslie Cummings said she would need to report back on that figure.

* Increased co-payments on “non-preventive services.” Families earning more than 150% of poverty ($26,400 for a family of three) would see an increase in copayments from $5 to $7.50. These higher copayments would be applied to emergency room visits, non-preventive doctors visits, prescriptions, eye exams and glasses, various therapies and dental procedures. This would reduce state spending by $3.4 million, but also cause the state to lose $6.2 million in federal matching funds. Lawmaker comments: “I wonder how many of us in this room would consider those non-preventive services. I think your definition is not exactly accurate,’’ Alquist said.

* Limit dental coverage to $1,000 per child. MRMIB contents that only 5 percent of children need more than $1,000 in dental work done from year to year. This would save the state$5.3 million, but cause the loss of $11.4 million in federal matching funds)

* Reduction in in rates to health plans by 5%. This would save the state $22.4 million, but cost $40.7 million in federal funds

OTHER MEDI-CAL CUTS CONSIDERED: The cuts to the Medi-Cal program senators heard included: The cuts to the Medi-Cal program senators heard included:

* County Processing dollars: Reduction in funds sent to counties to process Medi-Cal applications. This reduction would occur at the same time that processing activities increased if Quarterly Status Reports were approved. The reduction was scored as a $71.1 million savings, with an equivalent loss of federal funding.

* Medicare premiums for very low-income seniors: The state currently pays Medicare Part B premiums for some seniors who are dually eligible for Medi-Cal and Medicare. Those with incomes higher than 129% of the poverty level ($1,118 a month) would now be asked to pay approximately $100 a month for their Medicare premium. The state would save $66.5 million.

* Public Hospitals: The state proposes taking $78.8 million in federal dollars from public hospitals, which will see an increasing number of patients who can’t afford to pay for medical services, and use it to pay for programs for largely that same population that would be visiting the public hospitals

* Private hospitals: This proposal would reduce by 10 percent what the state pays to private hospitals. This would save $24 million in state dollars, but cause the loss of an equivalent amount in federal dollars.

While no actions were taken to reduce services to recipients, the subcommittee did approve $5 million in cuts in administrative costs to the Medi-Cal program.

Health Access will continue to report on Budget activities. For more information, contact the author of this report, Hanh Kim Quach, policy coordinator, at 916-497-0923, or hquach@health-access.org.

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

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