Wednesday, June 22th, 2005

Governor Announces Hospital Financing Waiver With Bush Administration;
Opposition from Hospitals, Counties, Patient Advocates: Hospital Closures Feared

* Community and Patient Groups Alarmed About Schwarzenegger Deal with Feds
* Schwarzenegger Deal Fails to Protect the Health Care Safety Net
* Days of Actions Planned, Starting Noon Thursday in SF; Events in LA, SJ Next Week

Governor Arnold Schwarzenegger today announced an agreement with the federal government on a Medicaid waiver that would fundamentally restructure the financing of hospitals in California. Alarmed by projections that health care services and hospitals might close under a new federal funding plan, hospital, county, and patient organizations urged the Governor to renegotiate the plan he crafted with the federal government that fails to adequately fund California’s safety net hospitals.

In a press conference this morning, CA Secretary of Health and Human Services Kim Belshe announced that the Governor had come to a deal with the Bush Administration with regard to the funding of safety-net hospitals, those that disproportionately serve uninsured, indigent, and Medi-Cal patients, which in turn have repercussions for the health system as a whole. This would be “a change in the formula used for 25 years” to fund hospitals.

CONCERNS: Hospitals, counties, consumer advocates, and groups representing patients, seniors, people with disabilities, and communities expressed concerns about the Governor’s proposal for hospital financing that would destabilize our health care system, since it would:

  • freeze the amount of money for public hospitals for the next five years, ensuring cuts in health services;
  • shift the risk and responsibility for bringing in federal funds to public hospitals from the state to the counties;
  • fail to provide specific hospitals any guarantee of adequate funding, to prevent closures;
  • require that seniors and people with disabilities be forced into mandatory managed care, losing access to doctors and specialists, and further destabilizing the funding for hospitals. (This proposal is being inserted as a condition of the waiver, even though the Legislature has rejected it earlier this year.)

While Secretary Belshe claimed that the goals of the waiver were to “stabilize funding,” “provide opportunities for growth,” and “support the transition of Medi-Cal to managed care,” the critics countered that the deal would destabilize funding, not keep pace with medical inflation, and that much of the funding promised is illusory, since the hospitals and counties won’t be able to draw down the money.

ACTIONS: Health Access and many groups representing patients, counties, hospitals, seniors, people with disabilities, nurses, providers, people of faith, and communities will have local press conference and actions over the next week to protest this waiver, and urge teh

The first will be in San Francisco tomorrow, Thursday, June 23rd, at noon, in front of the Tom Waddell Clinic, 50 Lech Walesa (formerly Ivy) Street, at Polk, from one block from City Hall. Speakers include: Chris Daly, San Francisco Supervisor; Father John Hardin, Executive Director, St. Anthony Foundation; Mitchell H. Katz, M.D., San Francisco Director of Health; Roland Pickens, Associate Administrator, San Francisco General Hospital; Barry Zevin, MD, Medical Director, Tom Waddell Medical Center; and Roma Guy, San Francisco Health Commission and Health Access board member.

Other events are scheduled next week in San Jose and Los Angeles. For more information, contact Health Access: for San Jose, contact Jessica Rothhaar at 510-873-8787 x107, and for Los Angeles, contact Idabelle Fosse, at 213-748-5287.

BACKGROUND: The five-year Medicaid waiver currently being negotiated by the State and federal government would replace the current waiver that expires June 30th. This waiver will govern how public and private safety net hospitals are paid by the Medicaid program (known as Medi-Cal in California). Medi-Cal is the primary source of financial support for public hospitals, and a important funding stream for all hospitals. Public hospitals operate more than 60 percent of California’s top-level trauma centers and train half the state’s doctors.

HOSPITAL OPPOSITION: Today, the California Association issues a strong letter of opposition, that stated: “Unfortunately, the past year of negotiations between the State and federal government over a new Medicaid hospital financing waiver have led us to the conclusion that California’s health care crisis will worsen in the next five years, and that public hospitals and the patients and communities they serve will be hardest hit… It is incumbent on us to caution the State about the impact of a financing arrangement that freezes funding for public hospitals and shifts the risk and responsibility for supporting them from the state to the counties. We are increasingly concerned that access to care for the uninsured and insured alike will diminish if the current plan goes forward. Services we all rely on – trauma, emergency, doctor training – will become scarce. Some public hospitals could close. Private hospitals are not prepared to assume their burden.”

In a June 1st letter to Secretary of Health and Human Services Kim Belshé, a broader group of California’s hospital leaders, from both public and private hospitals, declared in one voice their opposition to the proposed waiver, citing the “grave implications” of the plan: “Safety net hospitals already are in crisis, and if they are not adequately funded for the next five years, services that all Californians rely on—such as trauma care and doctor training—will suffer. In fact, under the current proposal, we are certain that some public and private safety net hospitals would close.”

COUNTY OPPOSITION: Numerous county boards of supervisors have already announced their opposition, including the boards–with supervisors of both parties–in Riverside, Santa Clara, Contra Costa, San Joaquin, and Kern. Several other counties expected soon. A June 10th letter from the Urban Counties Caucus stated, “Our counties believe that the current waiver proposal threatens the survival of our county hospitals.”

LEGISLATOR OPPOSITION: A June 14th letter to Governor Schwarzenegger from the Chair of the Assembly Budget Subcommittee on Health, Hector De La Torre, and dozens of Assemblymembers also raised this point: “…it is clear that a significant portion of this [waiver] funding is unreliable… The current proposal creates financial uncertainty for both public and private hospitals… Reliable annual increases over the five-year duration of the plan are necessary to keep hospitals open and functioning.”

The letter closes, “A lack of annual adjustments in funding will only exacerbate the fiscal crisis that California’s hospitals are currently experiencing due to an increase in population, hospital and emergency room closures, and the large number of indigents needing care. We request that the Administration advocate for a waiver that features a committed investment to California’s hospitals, secures a stable source of funding, and contains an adequate growth component…. without these elements, your Administration will be responsible for any subsequent damage to an already weakened hospital infrastructure in California.”

REQUESTED CHANGES: The community groups are urging that Governor Schwarzenegger:

  • Go back to the federal government in pursuit of a better deal for California’s safety net hospitals and the patients and communities they serve.
  • Ensure that the waiver include adequate funding for growth for the next five years for public hospitals, and does not divert money from safety-net hospitals to other areas.
  • Oppose the inclusion of unrelated requirements in the waiver, such as the forcing of seniors and people with disabilities in Medi-Cal into managed care and other “milestones” that have been proposed as a condition of securing $180 million of the federal money under this waiver.
  • Commit to backfilling any shortfalls created if there are insufficient matching funds to draw down the federal funds permitted under the waiver.

NATIONAL CONTEXT: Secretary Belshe attempted to make the case that this deal was as good as California would get, especially in the context of the $10 billion in Medicaid cuts proposed at the federal level. Yet in other states, both Democratic and Republican Governors were active in opposing the Bush Administration’s proposal to cut Medicaid in the federal government budget.

Despite urging from a wide range of doctors, hospitals, patient and provider groups, Governor Schwarzenegger did not make any independent statements about the Medicaid cuts, even though he could have had a powerful voice as the most prominent Republican Governor in the nation. And with this waiver, Governor Schwarzenegger is making agreements with the Bush Administration, over the objections of the California hospitals, counties, and patients he was suppose to represent in these negotiations.

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