The federal help on health, and what’s missing…

Thursday, February 12th, 2009

* Major Economic Package Includes Significant State Aid; COBRA Subsidies, Health IT
* State Medi-Cal and Public Hospital Cuts Dependent on Amount of Federal Aid

* State Budget Alert: State Spending Cap Could Force Cuts in Forever Into the Future

New on the Health Access WeBlog: Fast Breaking Budget News; Economic Stimulus Updates; Health Reform & HHS: It’s Not the Name, It’s the Numbers; This COBRA Won’t Bite; SCHIP Passed and Signed!; Who Should–and Shouldn’t–Be HHS Secretary; President Obama: Health Care Reform in Year One

Governor Arnold Schwarzenegger and legislative leaders continue to negotiate around a budget package, reported to include significant cuts, taxes and revenues, and borrowing, along with rollbacks of worker and environmental protections and a spending cap.

At the same time, in Congress, a federal economic recovery package is pending for final approval, which includes needed financial assistance to the states, especially around health care issues.

In fact, the state proposal is reported to use much of the $11 billion to deal with the existing deficit hole, which is $42 billion and growing. According to the framework of the budget compromise, significant cuts–including to Medi-Cal benefits and to public hospitals–are pending, to be triggered on or off depending on the amount of general fund money received in total from the federal package.


Earlier this week, leaders in the U.S. House and Senate agreed to a final compromise between their two different economic recovery packages. Among other provisions, the compromised economic recovery package includes the following health-related items that would:

* Increase federal Medicaid matching funds by $87 billion, based on a formula that inlude 65% spread evenly, and 35% targeted to states, like California, with high increases in unemployment rates. California is roughly estimated to get $11.23 billion over the 27 months of the stimulus period, although that number is subject to change.

* Subsidize COBRA health coverage, for those eligible who lose employer-based coverage, with over $24.7 billion to cover 60% of the cost of premiums for as long as nine months. This would not include those who are over certain income requirement, who left employment before September 2008, and who don’t qualify for COBRA (for example, if the employer folded.) The final package also does *not* include a House provision allowing for some workers to stay on COBRA for a longer period through to Medicare eligibility.

* Provide $19 billion for health care information technology to implement electronic health records. There would be bonuses between $44,000 and $64,000 for physicians, and as much as $11 million for hospitals. Physicians and hospitals must implement EHRs by 2014 or face the loss of Medicare reimbursements.

* Increase funds to the National Institute of Health by $10 billion for biomedical research;

* Provide $1.1 billion for research to compare the effectiveness of medications and medical devices, an important first step in health reform and cost containment efforts.

* Establish a new Prevention and Wellness Fund with $1 billion.

MEDICAID EXPANSION NOT INCLUDED: Most disappointing for health advocates, the economic recovery package does not include a provision in the House version that would have allowed states to expand Medicaid coverage to recently unemployed workers, as well as low-income adults without children at home–who currently are not eligible in California for Medi-Cal.

Since many unemployed Californians may not be eligible for COBRA, or may find it unaffordable even with the subsidies in this package, the loss of the Medicaid expansion is a disappointment. While the economic recovery package will help many Californians, it won’t prevent a spike in uninsurance that will accompany the spike in unemployment.


Back in California, there are reports of the details of a budget deal between the Governor and both Democratic and Republican legislative leaders

Reports indicate that the deal includes a “spending cap,” which is of great concern to health advocates. By definition, the point of a spending cap is to prevent more spending–but even to areas like health care where we have underinvested.

The concern for health advocates is that a spending cap would lock us in to:
* the lowest per-patient Medicaid spending in the nation,
* over 6 million uninsured Californians,
* and the current broken health system for all of us, preventing increased Medi-Cal provider reimbursement rates, coverage expansions, or other reforms and improvements, and investments of our shared health system.

More concerning, a spending cap wouldn’t just prevent progress, but it would inevitably force cuts into the future. Even indexed for inflation and population growth, an artificial limit on spending won’t take into account:
* medical inflation, which typically goes up at a rate greater than regular inflation. Even public programs, which do a better job in keeping costs down than private health coverage, would be forced to cut; and
* the aging of our population, a significant trend which will put a greater strain on health and human services in California and nationwide.

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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