Monday, February 20, 2006


  • Governor Signs SB912 (Ducheny), to Rescind 5% Medi-Cal Cut
  • Hearing Last Week on Hospital Financing Waiver
  • Action on Lack of Payment of Federal Funding to Public Hospitals
  • Stakeholder Meetings on “Coverage Initiative” on February 27th


Last Friday, Governor Arnold Schwarzenegger signed SB912 (Ducheny), to rescind the 5% rate reduction for Medi-Cal providers that took effect on January 1, 2006. The bill passed the Legislature on a bipartisan, unanimous vote, reversing an action made a few years ago during the height of the budget crisis. The enactment of the rate reduction was delayed until this year by litigation challenging the cut’s impact on access to health care.

Even with the signing of SB912, California is ranked 50th of all 50 states in the amount that Medicaid (Medi-Cal in California) reimburses doctors and other providers. This effort against the rate cut, led by the California Medical Association, was supported by health and consumer advocates that are concerned that fewer providers and specialists are offering care to those with Medi-Cal coverage. Already, an estimate half of California providers do not take Medi-Cal patients, creating barriers to get the care they need.

The Goverrnor did mention that the rate reduction was possible given a recent federal recalculation of the Medicare Part D “clawback” provision, which was expected to be a cost to the state. The signing statement is available under the “Press Room” and “Press Releases” section of Governor Schwarzenegger’s website, as the “Legislative Update 2/17/06” at:

Health advocates will continue to advocate for other priorities in the budget discussions this year, most notably for the expansion of children’s coverage, and to ensure comprehensive prescription drug coveragefor the seniors and people with disabilities on Medi-Cal, to make up for the costs and gaps in the new Medicare Part D coverage.


Last year, the Schwarzenegger Administration negotiated a new “hospital financing” Medi-Cal waiver with the federal government, changing the formulas and ways that public and safety-net hospitals have gotten crucial federal funding for many years.

According to a legislative hearing on the waiver last Tuesday, the transition to this waiver has not been smooth. Public hospitals have yet to see any money flow, even though it is reported that they are now owed over $600 million, creating a cash flow crunch at county hospital systems around the state. On Friday, a deal was reach between county, state, and federal agencies to address this issue in the near term.


Last year, Health Access and other advocates joined together to stop part of the hospital waiver that the Administration proposed to use to force seniors and people with disabilities on Medi-Cal into managed care plans, ready or not. This year, we face a different proposal—and a different attitude from the Administration.

By this September, California will need to tell the federal government how it plans to use its three-year, $180 million per year allotment to expand coverage. This money originates from the LA County 1115 waiver which funded the LA County hospital system.

This money, which starts flowing to the state in 2007-08, is part of the state’s Medi-Cal Hospital Financing Waiver. It is three one-time allocations of federal money, of $180 million each, that must be spent in the year for which the allocation is provided.

The new coverage initiative would cost a total of $440 million – of which $260 million could come from any state or local source. According to Stan Rosenstein, the state’s Medi-Cal director, the Administration proposes that it would come from counties and the University of California, rather than the State General Fund.

In broad strokes: the program would attempt to catch indigent adults who have no Medi-Cal coverage.
DHS also proposes several other key elements:

  • Indigent adults
  • Unified medical/health record, whether paper or electronic
  • “Medical home” for the covered persons
  • Defined benefit package: this means limits on benefits in some fashion.
  • Supplement, not supplant Medi-Cal/Healthy Families.
  • Operational on Sept. 1, 2007.

A push-pull is already happening. Private hospitals and health care plans are jockeying for their share. Public hospitals, which face flat funding in the last three years of the five year waiver and which are already suffering cash-flow problems from financing waiver hold-ups want to ensure that money stays with them.

The key is to have the program up and running by September 1, 2007. If the state does not use its full $180 million allotment for the year, it loses the money. The best way to use the money quickly, state administrators admit, is to expand existing programs.
The department has not yet decided how best to achieve that. That’s where you come in.
Stakeholders will be invited to meetings in both Los Angeles and Sacramento within the next few weeks to discuss the coverage initiative.

Stakeholder Meeting February 27th in Sacramento
DHS is convening a stakeholder meeting on Monday, February 27, 2006 at 1pm to 5pm, at the DHS Auditorium, 744 P St., First Floor, in Sacramento.
Another DHS meeting will be held in Los Angeles although the date, time and location have not yet been set.

The Sacramento stakeholder meeting is part of the ongoing process of stakeholder involvement that included the legislative hearing on February 14 as well as legislative budget hearings over the next six to eight weeks.

DHS’s concept paper on how to use the $180 million in years 3, 4 and 5 can be found here:
(If that link doesn’t work, go to )

Health Access Key Principles: The Coverage Expansion Element of the Hospital Waiver

Health Access California has developed key principles for evaluating proposals for the coverage expansion element of the hospital waiver.

  • First, do no harm. Don’t reduce access for some of the uninsured while expanding coverage for others.
  • Second, it’s a hospital waiver, not a coverage waiver. This money originates from the waiver that saved the LA County hospital system. Health Access supports both safety net institutions and coverage expansions.
  • Third, look at building on existing systems to maximize effective use of funding. If the each of the three $180 million allocations has to be spent in the year in which it’s allocated, building on existing systems is the only way to go from zero to $180 million.
  • Fourth, be mindful that this expires in 2011.

For more background, see the linked statement of principles.

(If that link doesn’t work, go to
Click on “Projects and Initiatives’’ on the left column.
Click on “Medi-Cal Redesign’’ in the middle column.
Click on “Hospital Financing’’ on the right under “Topics of Interest.’’
“Healthcare Coverage Initiative Concept Document, January 31, 2006’’ is the link you want.)

Other issues concerning the Hospital Financing Waiver:

  • Public hospitals which normally receive the majority of their federal funding in December/January have not been paid yet and may not be paid for months to come. For Alameda, Ventura, Monterey, Kern and other counties, this had become already a serious problem.
  • $400 million for Safety Net hospitals will become available after CMS okays the definition of Certified Public Expenditures. The CMS okay occurred on Friday, February 19, 2006.
  • $1 billion due to Disproportionate Share Hospitals probably won’t be released until the fiscal year is over. That’s because once “Certified Public Expenditure’’ issues are resolved with CMS, the state and public hospitals still must agree on a plan amendment.
Health Access California promotes quality, affordable health care for all Californians.
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