A deeper wound for our health care system…

Wednesday, May 14th, 2008


* Budget shortfall projected at $17.2 billion; Governor continues “cuts & borrow” approach
* Health cuts keep in place January proposals, goes further in directly denying coverage
* Hundreds of thousands of the poorest working families would lose coverage

Click Here for What’s New on the Health Access WeBlog: Much more on the budget cuts; Welcome, Speaker Bass; Bass and health reform; Balance billing; Canadian health care; Underinsurance; Who gets hurt by a cuts-only budget?; High deductible health plans for who?; MRMIP’s waiting list; McCain’s risky high-risk pool proposal; The new opportunity for health reform; Big Tobacco’s track record on reform; More on the McCain health plan.

SACRAMENTO–Gov. Arnold Schwarzenegger released the revised version of his budget proposal today, which makes deeper cuts in health and human services programs in order to address the state’s shortfall, which has grown by nearly $3 billion since he first released the budget in January. Altogether, the $100 billion general fund budget is $17.2 billion short.

“The crisis is very real and it is very serious,’’ the governor said. His proposal would attempt to bring in $11.7 billion in new money ($3.5 billion from deficit bonds of years past), and another $5 billion by selling the lottery’s income to Wall Street. Schwarzenegger would cut an additional $12.5 billion from state programs, on top of the $1 billion that was cut earlier this year to help minimize the deficit.

“We had to make very difficult cuts. No one wanted to do this. But because health and human services was the second largest part of the budget, this is where we had to cut,’’ Schwarzenegger said. Twenty percent of the cuts imposed come from Health and Human services, reported Director of Finance Mike Genest. Deficit aside, Schwarzenegger restored funding to some of his original cut proposals in January and will now keep parks open and will not release inmates nearing their release date early.

View the full May Revision at the website of the Department of Finance here: www.ebudget.ca.gov.

The Health and Human Services Agency has their summary of the health and human services cuts here, at:


CUTS ALREADY MADE (PROVIDER RATES): Health programs were already dealt a blow earlier this year. Medical providers that treat Medi-Cal recipients will see their reimbursement rates cut by 10% as a result of a budget cut package already approved earlier in the year. Already California ranks near the bottom for reimbursement rates for doctors caring for Medi-Cal patients. That cut — saving the state $544 million (and losing an equivalent amount in federal matching dollars) — will begin July 1st.

CUTS ALREADY PROPOSED AND STILL PENDING (MEDI-CAL BENEFITS, QSRs): Still pending from the Governor’s January proposal are a range of cuts, such as eliminating benefits for adults on Medi-Cal, including dental coverage, optometry, podiatry, and other services. The pending proposals also included imposing additional paperwork burdens on children and families so hundreds of thousnads enrollees fall off the program (known as quarterly status reports).

NEW MAY REVISE CUTS: The Governor’s May revision retain all cuts to health care proposed in January, that would make it harder for the 6.6 million children, parents, seniors and people with disabilities on Medi-Cal to get the care they need–by reducing access to providers, by eliminating benefits, by increasing paperwork so that it is easier to fall off coverage. The May Revision also does the one major type of cut that the January budget did not do–directly deny people coverage by changing eligibility rules. The May revision cuts of interest to health advocates are as follows:

* DENIAL OF COVERAGE TO LOW-INCOME WORKING PARENTS: Parents earning very low wages (roughly between $11,000 and $18,000/year for a family of three) would no longer be eligible for Medi-Cal coverage.

Under the new proposal, a family of three would need to earn even less: $891 a month, and work fewer than 100 hours a month. The cut is expected to reduce spending by $31.2 million this year, but increase to $342.5 annually in three years. In the first year of implementation, 39,000 parents would be denied coverage. After a couple of years of full implementation, over 429,000 Californians would be denied Medi-Cal coverage.

This proposal was also proposed for the 2003-04 budget by then-Gov. Gray Davis, but rejected. Earlier reform expanded coverage to these parents as part of welfare reform, so that families working their way off of welfare would not lose health coverage as they found jobs (that likely did not provide health benefits). If this cut stands, then the potential incentive is to work less, in order to keep coverage.

* CONTINUED BUREAUCRATIC ENROLLMENT PROCEDURES: The Administration, which had championed efforts to make it easier for families to enroll in public programs, is now further seeking to delay the implementation of SB437 (Escutia) of 2006, which would have streamlined and fast-tracked enrollment for children into Healthy Families or Medi-Cal. This delay saves the state $13 million.

* ADDITIONAL BENEFIT CUTS: Qualifying low-income legal immigrants who permanently live in the US will lose various benefits, including prescription drugs and dental coverage, and only get four services: emergency care, pregnancy-related coverage, certain long-term care services, and some cancer treatments. This would be a $86.7 million cut.

* MORE PAPERWORK FOR EMERGENCY SERVICES: The limited emergency services coverage that Medi-Cal provides to undocumented immigrants would be more limited, through the implementation of a monthly eligibility process. The savings would reduce state payments to California health providers by $42 million.

* CUT TO NON-CONTRACTING HOSPITALS: Hospitals that don’t contract with Medi-Cal would face a rate cut of either 5% of regional contracted rates, or 90% of cost, whichever is lowest. This would provide $11.2 million in savings.

* COST AND QUALITY DATA: The budget proposes to take money from the state’s Health Data and Planning Fund, which would be used to give consumer a glimpse of providers’ prices, error rates and other key information that would help health care purchasers make informed choices. This cut saves $12 million.

Again, these cuts come on top of more than $1 billion cuts proposed in January. The governor had previously proposed higher premiums and co-pays for Healthy Families enrollees, requiring families to report changes to their income every three months in order to remain on Medi-Cal, and the elimination of essential benefits, such as adult dental care and incontinence creams and washes for aged, blind and disabled Californians.

View the fact sheet and previous reports here and here.


With the latest budget figures, the Legislature can now begin making decisions and negotiating on the budget in earnest. Many decisions had been postponed — in part because it was unclear how much money the state had to work with, and in part, because the cuts were so untenable. Next week, budget subcommittees will continue to hammer out details. Health Access will monitor the status of the health budget proposals and keep advocates informed.

For more information, contact the author of this report, Hanh Kim Quach, policy coordinator, Health Access California, at hquach@health-access.org.

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