“A serious, difficult cut…”

Monday, January 10, 2011



* Health care cuts would impact health & finances of over eight million Californians, and slash tens of thousands of jobs and frustrate economic recovery in California

* Medi-Cal patients would face limits on care; increased costs; reduced access to providers
* Healthy Families vision coverage to be axed for one million children; increased costs, too

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In what he described as both a “painful” and “honest” budget, Governor Jerry Brown’s new budget announced today resolves a 18-month $25 billion deficit through a range of remedies. The budget recommends extending taxes (that must be approved by the voters), but even with those new revenues, the budget includes $12.5 billion in severe cuts, many of them to Health and Human Services.

The Governor asserted in his press conference today that it is time to put an end to 10 years of gimmicks and tricks, and time to take action to restore California’s fiscal solvency and put the state on the road to economic recovery and job growth. He proposed a 5-year extension of existing taxes, revenues that will have to be approved by the voters. He expressed his faith in voters’ willingness to approve the taxes, saying “I think people will want to protect and defend California.”

He called the cuts he proposed “serious” and that without revenues, they would need to be “draconian.” Proposed reductions to key health and human services to will result in Californians being denied medically necessary care and facing greater financial strain. The cuts will also force the state to turn away hundreds of millions of dollars in federal matching funds that are might otherwise assist in California’s economic recovery.

Cuts to Medi-Cal

Governor Brown proposes to make $1.7 billion of cuts to Medi-Cal, the health care coverage that 7.7 million Californians depend upon, by limiting care, increasing cost sharing, reducing payments to doctors and providers, and other reductions.

PROVIDER RATE CUTS: Payments to Medi-Cal providers, including physicians, pharmacy, clinics, and some hospitals and nursing facilities would be reduced by 10% in order to get $9.5 million dollars in savings in 2010-11 and $709.4 million in 2011–12. California already has one of the lowest Medicaid provider rate reimbursements of all 50 states, and over half of doctors do not take Medi-Cal patients as a result.

HARD CAPS ON CARE: The budget proposal would limit care and coverage for Medi-Cal patients:
o Limit doctor/clinic visits to 10/year, reducing the number of doctor visit Medi-Cal pays for from 3.2 million to 2 million, for a savings of 196.5 million in 2011-12.
o Limit prescription drugs to 6 per month (with no exceptions unless for life-saving drugs), for a savings of $11.1 million in 2011-12.
o Establish maximum benefit dollar caps on medical supplies (e.g., wound care, incontinence supplies) and durable medical equipment (e.g., wheelchairs and hearing aids), for a savings for $9.8 million in 2011-12.

If these caps on coverage are implemented, cutting Medi-Cal by a total $217.4 million in 2011-12, the sickest 10% of Medi-Cal patients will see their coverage run out–no longer covered to see a doctor, or get a prescription, or get an appropriate wheelchair, etc. There will be real impacts to the patient’s health and life, as well as to their financial wherewithal.

NEW COSTS FOR CARE: Beneficiaries, many of whom earn less than $1000 per month, will now have to pay new copayments for doctor, clinic, and dental visits as well as prescription drugs, hospitalization, and emergency room visits. The savings, totalling $557.1 million in 2011-12, come from both the dollars collected for these low-income families, and the reduction in how these patients use services, even for necessary, prescribed care. The proposal would impact co-payments of:
o $100/day for a hospital stay, up to a maximum of $200 (for a savings of $151.2 million in 2011-12);
o $50 copayment for emergency room visits (for a savings of $111.5 million in 2011-12);
o $5 copayment for doctor visits and prescriptions (to save $294.4 million in 2011-12).

ELIMINATE ADULT DAY HEALTH CARE: 27,000 seniors who receive services at 330 adult day health care centers would lose access to variety of coordinated and co-located health, therapeutic, and social services that allow them to live in their own homes. This is supposed to save $1.5 million in 2010-2011 and $176.6 million in 2011-2012.

Another benefit that will be eliminated is coverage for over-the-counter cough and cold medications and nutritional supplements, for a savings of $16.6 million in 2011-12.

Cuts to Healthy Families

Healthy Families, the State Children’s Health Insurance (SCHIP) in California that covers nearly one million children of low income families, will see a $38.5 million reduction.

ELIMINATE VISION COVERAGE: About $11.3 million of the cuts will be achieved by eliminating vision services to the almost 1 million Healthy Families enrolled children. These lower-income children would either not get or have to pay for eye check-ups and eyeglasses, which have been linked to academic success for students.

INCREASED PREMIUMS AND CO-PAYS: Additionally, the budget proposal shifts costs to low income families, for a total of $27.5 million. It would:
* Increase monthly premiums for families between 200 and 250 percent FPL by $18 per child, an increase of 75%, (with a family maximum of $126); and for families between 150-200% FPL by $14/child by nearly 100%. These changes, on families of 150% of poverty level, or $27,500 for a family of three, would yield a savings of $22 million.
* Raise emergency room co-payments from $15 to $50 and raising hospital inpatient services co-payments of $100 per day with a $200 maximum (for a savings of $5.5 million).

Other Budget Proposals

The Governor’s budget also proposes a shift of $1 billion from Proposition 10 funding (which is designated for the First 5 Commission) to pay for Medi-Cal for children under 5 years old.

The budget also proposed extending existing provider fees to draw down federal funds to our health system–both an existing hospital fee that helps fund Medi-Cal reimbursements, and a managed care plan fee that helps fund Healthy Families.

There are numerous cuts in other areas as well. For example, there’s an increase in cost-sharing for many of the 39,500 AIDS patients in the AIDS Drug Assistance Program (ADAP), for a savings of $16.8 million.

The impacts go beyond the budget and health care. These reductions will also have economic impacts, first and foremost because of lost federal matching funds–for every state dollar cut, the state’s health system and economy loses at least one other federal dollar.

Next Steps

The Legislature will now consider this budget, under a condensed timeline of 60 days. The push will be to complete work on the budget by March, so that a revenue package and related budget proposals can go to the voters by June 2011. Some temporary taxes expire July 2011, and if they do–either through legislative inaction or because the voters vote to end them, then the Legislature will need to make additional, much steeper, cuts.

For more information, contact the author of this report, Linda Leu, at lleu@health-access.org. As always, more information on the budget and health reform is available on our website at www.health-access.org.

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

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