Help for health care from the feds?

Friday, January 16th, 2008

* First Draft of Economic Recovery Package Includes Significant Health Funding
* SCHIP Reauthorization Advances Through U.S. House & Senate Finance Committee
* Even With Fed Help, Tough Decisions on Cuts And/Or Revenues Still Needed at State Level

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Governor Arnold Schwarzenegger ditched much of the traditional State of the State on Thursday in order to focus solely on the impending budget crisis. He declared that the “state was incapacitated” and in a “state of emergency,” because of the current gridlock on deciding on a budget on cuts and revenues.

Meanwhile, in Congress, financial assistance is being actively considered at the federal level, especially around health care issues. While such funding won’t be close to matching the full $42 billion deficit, decisions made in the next few days and weeks will make a difference of billions of dollars to California.


The U.S. House Committee on Appropriations chaired by Dave Obey (D-WI) just released its version of the “American Recovery and Reinvestment” package. Representing the House Democrats in consultation with President-elect Obama’s team, it includes, regard health care:

Increased Medicaid Matching Funds: It includes $87 billion nationally through the end of federal fiscal year 2010, “with additional relief tied to rates of unemployment.”

Health benefits for the unemployed: The proposal would spend $30 billion to pay 65% of the cost of COBRA for the newly unemployed, for the first 12 months of unemployment.

The proposal would also provide full funding for Medicaid coverage for unemployed workers up to 200%FPL (about $21,000 a year for an individual). And Medicaid eligibility is based on income at the time of application–what would matter is how much unemployment insurance someone is getting, not what they made last year.

Finally, for those over 55 who lose their job or who have worked for an employer for 10 years or more, they could keep their COBRA until they are Medicare eligible—although, after the first year those workers would be expected to pay the full cost of their coverage.

Cost containment: The House Democrats propose major investments in lowering costs and improving quality:
* Health information technology: $20 billion. Health IT is the infrastructure for better cost and quality data, for coordinating and managing care, for reducing medical errors and improving patient safety.
* Prevention: $3 billion to fight hospital infections, grants to public health departments, immunizations, etc.
* Health effectiveness research: $1 billion to compare the effectiveness of drugs, devices and other treatments, based on scientific evidence, not just drug company marketing.* Community health centers: $1.5 billion
* Training primary care providers: $600 million* Indian health services: $550 million

This proposal is the beginning of a (possibly short) debate about the size, scope, and content of an economic recovery package. California health advocates need to inform the state’s Congressional delegation about the need and urgency for this assistance.


The Obey proposal includes an increase in Medi-Cal matching funds, as did previous versions of “economic stimulus” proposals. Right now, California spends 50 cents on Medicaid and gets another 50 cents match from the federal government–a lower number than many other states, but still a major influx of federal dollars to our health system and economy. The proposal is to temporarily increase that match.

A new study by the Institute of Health Policy Studies (IHPS), explores the different ways to determine that match, and how the decision about that formular could mean hundreds of millions of dollars for California:

In a letter, here’s how IHPS broke down the potential difference:

Using the Congressional Budget Office’s estimate for last fall’s Senate bill of $29.2 billion inadditional federal Medicaid funding as the low end of the range of federal fiscal relief and the Governor’s request for $50 billion a year as the high end of the range, we estimate that:
* Using the equal FMAP percentage points per state approach, California’s share of the Medicaid relief package would approximate $3.3 to 5.6 billion in FY 2009.
* Using the equal proportionate reduction in state cost approach analogous to the S-CHIP adjustment, California’s share of the Medicaid relief package would approximate $3.8 to 6.5 billion in FY 2009.
* Using the targeted approach with more relief for states with weaker economies, California’s share of the Medicaid relief package would approximate $4.0 to 6.8 billion in FY 2009.

An approach that uses the baseline of our lowest-in-the-nation Medicaid matching rate would disadvantage California; a targeted approach based on our economic condition would help California, given our weak unemployment rate.

California health advocates need to make the case with our delegation for
* the highest overall level of assistance for health programs, as well as
* a fair formula that ensures our dire economic situation is recognized.


As a separate piece of legislation, the reauthorization for the State Child Health Insurance Program (SCHIP) passed the U.S. House of Representatives Wednesday, 289-139. While it was a strong bipartisan vote, the split in the California delegation was stark, with support all Democrats and only Republican Mary Bono Mack. All other California Republicans voted against it. (Democratic Representative Hilda Solis, Labor secretary-designate, did not vote.)

This is a major boon for the 900,000 children on California’s version of the program, Healthy Families, as well as many more children who are still eligible but not enrolled. By raising $32.3 billion with an increase in the federal tobacco tax, the bill extends SCHIP for 4.5 years, provides health coverage for 4.1 million additional children nationally.

The U.S. Senate Finance Committee passed a similar bill Thursday, on mostly a party-line vote, with Republican Senator Olympia Snowe from Maine voting with the Democrats in support. The hope is that a final package is available for President Obama’s signature by his first week after his inauguration. Unlike President Bush, who twice vetoed similar child coverage proprosals despite overwhelming bipartisan support, President Obama is likely to make this his first legislative victory.

CALIFORNIA NEEDS KEY PROVISION: California has a strong interest in a key policy provision: Both versions would eliminate an arbitrary provision prohibiting federal matching funds for the first five years legal immigrant children are in the U.S. California, which covers these children, loses millions of dollars each year because of this current exclusion, and would benefit from the change. This important provision needs to stay in the bill: children cannot wait five years for coverage, and California needs the assistance.


If both the economic recovery package and SCHIP legislation passes shortly, with the formulas and provisions favorable to California, the state would still have a significant deficit to be remedied through cuts and/or taxes. On the other hand, the size of the problem is so great that it is hard to see how any solution is possible without significant federal assistance.

The Governor’s current budget proposal offers $14.3 billion in tax increases and other new revenue, and $17.4 billion in spending cuts over the next 18 months, which includes both the first half of 2009, and the 2009-2010 budget year.

The budget includes many cuts that were previously rejected by the Legislature as too severe. It proposes to deny coverage to over a half-million Californians, and to deny specific benefits like dental, optometry, podiatry and psychology to millions more. The proposals would significantly impact not just state’s health system, but also have an economic impact as well: California would lose hundreds of millions of dollars in federal matching funds, more than doubling the negative impact of these cuts not just in the health system, but the economy as a whole.

Advocates are actively working for both the state revenues and the federal assistance that can prevent these cuts and sustain these programs. Regarding just the health care cuts, the Governor’s budget proposal would:

* Deny over a half-million low-income working parents Medi-Cal coverage, by lowering the eligibility from 100% to 72% of poverty level, cutting off eligbility for parents in families of three making more than $13,000. The cut would be $5.2 million in 2008-09; $176.4 million in 2009-10, and $342 million in 2011-12, ultimately impacting over 429,000 California parents. Over 100,000 additional Californians, largely legal immigrants, would lose most of their coverage under other proposed cuts.

* Eliminate dental, optometry, podiatry, psychology, and several other benefits for 2.5 million parents, seniors, and people with disabilities on Medi-Cal coverage. This cut would be $39.4 million in 2008-09 and $258.8 million in 2009-10.

* Impose significant additional costs on low-income aged, blind and disabled Californians–over 73,000 who make just over $890/month as individuals would have to pay potentially hundreds of dollars a month or forgo care and coverage. This cut would be $28.6 million in 2008-09, and $371.6 million in 2009-2010.

* Siphon funds away from counties, providers, and public hospitals on which we all rely. For public hospitals, the proposal would reduce rates by $54.2 million, at exactly the time the demand for their services is increasing. For counties, the proposal would also suspend cost-of-living increases, a cut of $24.7 million, that counties need to administer the Medi-Cal program. For providers, the proposal would also cut $85.5 million by delaying payment to Medi-Cal fee-for-service providers–effectively forcing these health providers to lose a month of reimbursements.

* Eliminate the First Five Commission, and thus significant funding for a variety of health coverage and other services for young children, such as “Healthy Kids” programs in various counties. This cut would be $275 million, but would require voter approval. A version of this proposal had been offered by Republican legislators, but this is the first time it has been adopted as part of the Governor’s proposal.

There are also significant cuts to mental health, developmental services, in-home supportive services, CalWORKS, SSI/SSP, food assistance, and other human services. There are over a billion dollars in cuts to health and human services in the budget year, and that number significantly increases as the cuts are fully implemented in future years.

All experts warn that if at least some budget solutions (cuts and/or revenues) are not passed in the next few weeks, California will run out of money as early as February.

The budget will be the top priority of the new year 2009. More analysis about the budget will be available on the Health Access daily blog, at:

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