Thursday, May 14th, 2004


· CUTS STILL PENDING: Community Clinics, Healthy Families Premiums

· MEDI-CAL REDSIGN ROLLS ON: Specifics Postponed Until August 2nd.

· HOSPITAL FINANCING: A New Element of Medi-Cal Redesign

Governor Schwarzenegger released his May Revision of the state budget today, with no new taxes but significant changes from what he proposed in January. The full May Revise is available at:

The budget proposal included both good news and bad, including the withdrawal of some health proposals, and the continued consideration of others. An updated health care budget cuts scorecard is available on the Health Access web site, at:

MAJOR CUTS WITHDRAWN: Health advocates will be pleased that the Governor has withdrawn two sets of the most controversial cuts in the budget, including:

· ENROLLMENT CAPS: the proposals to establish enrollments caps in a range of public health insurance programs, including Healthy Families, Medi-Cal for immigrants, the AIDS Drug Assistance Program, the Genetically Handicapped Persons Program, California Childrens’ Services, and others; and

· PROVIDER RATE REDUCTIONS: the proposal to further cut Medi-Cal provider rates for doctors and specialists by 10%.

Both these proposals to cut had significant challenges. The enrollment caps were rejected in both legislative houses earlier this year, on bi-partisan votes, and an earlier provider rate reduction was overturned in court. The Governor heard the opposition, and saw the prospects of these proposals.

Nevertheless, the fact that these cuts are “off the table” is a victory for not only health advocates, but the hundreds of thousands of Californians that would have been denied care under the enrollment caps, and the millions that would have had their access to care restricted under the provider rate reductions.

A full description of the Health and Human Services budget is available at the agency’s website, at:

SOME CUTS REMAIN: The budget continues to have some health cuts, including a significant cut to community clinics, totaling over $72 million. It is estimated that this is equivalent to over 675,000 health visits annually.

There is also a proposal to increase premiums for some children in the Healthy Families program, for those in families that are between 200%-250% of the federal poverty level. This replaces the Administration’s proposal for a “two-tiered” benefit structure; now all families will get vision and dental services, but will need to pay the increased cost-sharing.


The Schwarzenegger administration will defer the proposal for Medi-Cal redesign until August to give more time to work out details and specifics. When the legislature gets back from summer recess on August 2nd, the Administration is expected to release a more details proposal, including legislative language, in anticipation of seeking a federal waiver. The rest of the Administration’s timeline, including getting federal approval by the end of the year, remains the same.

The Administration is counting on savings from the redesign in the 05-06 budget year. The intent is “to contain costs, improve access and improve quality”. Medi-Cal redesign continues to include cost sharing, managed care, benefits, and eligibility with the main goal of saving money, not improving quality or access. The Administration is also adding hospital financing as another key element. A new 3-page update of the Medi-cal Redesign is available at:

THE ANTI-DEAL: In other areas of the budget where the Governor has cut deals, such as with higher education and local government, the out-years promise improved funding. For health care, the out-years promise cuts, reduction in access, and higher costs for low-income working families, seniors and persons with disabilities. Through Medi-Cal redesign, health care will face the biggest cuts next year and for years to come, ones that will be severe and long-lasting

SPECIFIC CONCERNS ABOUT REDESIGN: Health advocates should continue to be concerned and active about the redesign process, which threaten to make children, seniors, and people with disabilities pay more for less, and safety-net providers go under.

* MANAGED CARE: The Administration continues to consider moving the “aged, blind and disabled” into managed care as a primary element of redesign. Whether managed care will be mandatory or merely coerced

through differential cost-sharing has yet to be decided. This shift may have devastating effects—for seniors and persons with disabilities and for safety-net clinics and hospitals who rely on the Medi-Cal funding. Among the concerns include the disruption of provider relationships for seniors and persons with disabilities.

Geographic expansions of managed care that are premised on including seniors and persons with disabilities are also troublesome: many of the counties targeted for managed care expansions are precisely those in which both Medicare and CalPERS have been unable to sustain managed care networks. Medi-Cal, with its less adequate provider reimbursement, is even less likely to sustain such managed care networks.

* COST SHARING: Despite the efforts of health advocates, cost-sharing remains a central element of the proposal. It remains unknown whether the Administration will request permission from the federal government to allow providers to dump working families, seniors and persons with disabilities if those low-income individuals cannot pay co-pays or other cost-sharing.

Cost-sharing is especially troublesome since providers will be able to deny care while Medi-Cal HMOs get capitation payments for care that is never delivered because the enrollee cannot afford the cost-sharing. In this scenario, insurers profit while low-income working families go without care.

* BENEFITS: Since benefits and cost sharing remain on the table, it remains possible that a differential benefit package with differential cost sharing is still under consideration: or in plain English, paying more to get basic benefits, something that hurts the most those with the greatest health needs—seniors, persons with disabilities, and those with serious chronic conditions.

* ELIGIBILITY: Health advocates support eligibility simplification—but only if it makes more people eligible without increasing cost-sharing. Since eligibility remains on the table, the concern remains that so-called simplification is really about denying some people eligibility or requiring increased share of cost.


Medi-Cal redesign will now include the topic hospital financing, in large measure because moving seniors and persons with disabilities into managed care substantially disrupts existing hospital financing arrangements under Medi-Cal.

It is also the declared goal of the Administration to eliminate intergovernmental transfers (IGTs), a key funding source for safety-net hospitals. It is their view that the federal government has grown increasingly skeptical of intergovernmental transfers.

Why should advocates care about hospital financing? Because Medi-Cal is a vital funding source for safety-net hospitals, such changes could imperil access for the uninsured and those on Medi-Cal. Particularly at risk are the trauma networks and other essential services that county hospitals provide.

The risk presented is similar to that of Medi-Cal managed care, which had a devastating impact on public hospitals in the early 1990s, which led to several hospitals closing or being sold to private hospital systems. The remaining county hospitals, serving critical areas like Los Angeles and Alameda counties, are less viable because of these hospital financing changes in the early 1990s, and could be more at risk now.

In talking about this new element of Medi-Cal redesign, DHS Director Shewry stated a desire to stabilize and, if possible, to improve funding for safety net hospitals. But past experience, as well as current discussions, indicate that county hospitals and other safety net providers are still at risk. While the arcana of DSH, 1255 funding, CMAC and other hospital-specific financing may not be a direct focus for health advocates, the overall impact on the uninsured needs to be followed.

THE COMBINED IMPACT: The combination of differential cost-sharing, provider denial of access for failure to pay co-payments, increased managed care, and restructured hospital financing could easily result in substantially diminished access to care for millions in communities throughout the state.

Health Access California promotes quality, affordable health care for all Californians.
VIEW THE FILE Uncategorized

Leave a Comment

%d bloggers like this: