The New Budget: A Body Blow for California’s Health System

HEALTH ACCESS UPDATE: Monday, May 14, 2012

Health cuts a “body blow” to the health system Californians rely on, including:
* Major cuts to California health care providers: hospitals (public, private, & district); nursing homes; community clinics; etc.
* Shifting seniors/people with disabilities to managed care plans, with concerns about transition, continuity of care, access
* Reducing funding for children’s coverage, by eliminating Healthy Families and transferring 875,000 children into Medi-Cal
* Steep cuts likely for our California health system, even if voters approve revenues in November; Without revenues, it gets worse
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Governor Jerry Brown announced today a revised 2012-13 California budget to solve a newly revised $16 billion deficit. Half of the Governor’s budget solution to the deficit is $8 billion in additional budget cuts, including over $1.2 billion in Medi-Cal alone. Nearly $6 billion in tax revenues, making up 35% of the Governor’s budget solutions, would result from a proposed ballot measure pending approval by the voters in November.

Health advocates called the budget “a body blow to the health system all Californians depend on.” Few California patients will not feel the impacts of these budget cuts and changes in some way, from the cuts to health coverage for children in Healthy Families to seniors and people with disabilities in Medi-Cal; from the cuts to community clinics to nursing homes, from private hospitals to district hospitals to public hospitals.

In a YouTube video announcing the new size of the deficit released this weekend, Governor Brown also stated that state spending “is now at its lowest level in decades.” In fact, cuts proposed in the new budget would be cumulative on top of $15 billion in cuts to health and human services already made in recent years, from the elimination of dental and other benefits for millions, and other cuts to doctors, clinics and hospitals directly.

The Governor’s 2012-2013 proposed budget already had proposed steep cuts that are retained in the new revision: The proposal cuts children’s health care in the Healthy Families program by 25%, ultimately by shifting its 875,000 children into Medi-Cal, raising concerns about disrupting care and access to providers. The proposal also shifts 1.4 million “dual-eligible” seniors and people with disabilities into managed care. While this proposal has been modified in its timing and scope, there remains concerns about access and transition issues, including about whether the health plans are ready to care for such vulnerable patient populations.

This revised budget also includes hundreds of millions of dollars in new cuts, particularly to hospitals and nursing homes that millions of Californians depend on. These include cuts to public hospitals, district hospitals, private hospitals, and nursing homes. A reimbursement change to community clinics continues in the Governor’s proposal, despite being rejected in some legislative committees.

Health and human service advocates argue that these are the wrong cuts at the wrong time, during a economic downturn when Californians need such help the most, and when we need to get ready for health reform to maximize the benefit for our families and our state. They called for a rational budget conversation that includes seeking more revenues, not just more cuts.

The pending health cuts include:

* DIRECT CUTS TO HEALTH PROVIDERS: HOSPITALS, NURSING HOMES, AND CLINICS: The proposal includes significant additional cuts to health care providers beyond the January budget, including
* hospital payment cuts to supplemental payments to private hospitals; elimination of of public hospital grants, etc., for $150 million general fund savings;  
* an additional $100 million designated for public hospitals under the federal Medicaid waiver would be taken for state general fund savings; 
* an additional cut to district hospitals (non-designated public hospitals) of $75 million; and  
* nursing homes reimbursement changes for $47.6 million and another for $23.3 million in general fund savings.  
* The budget still includes a January proposal that the Governor seeks would change payments to Federally Qualified Health Centers (FQHCs), for a reduction of $27.8 million general fund.

* HEALTHY FAMILIES CUTS TO CHILDREN’S COVERAGE: The proposal would reduce Healthy Families managed care plans by 25.7 percent, impacting access to care for the 875,000 children covered by the program. The budget proposal would also shift children from Healthy Families to Medi-Cal. The budget year savings is adjusted to be $48.6 million general fund.

* SHIFT OF “DUAL-ELIGIBLES” TO MANAGED CARE: This proposal, as part of a broad “coordinated care initiative,” would shift 1.4 million low-income seniors and people with disabilities who get both Medicare and Medi-Cal (so called “dual-eligibles”) into managed care. Advocates have raised issues about patient populations that have already been shifted, and how access and transition problems with impacts this particularly vulnerable population. The budget year savings is estimated at $663.3. million general fund.

* The Governor revised his proposal to impose cost-sharing on Medi-Cal patients which was adopted by the Legislature last year but rejected by the federal government. A new, more narrow proposal, would seek $15 co-payments on non-emergency ER visits, and $1-3 co-payments on specific prescription drugs, for a $20 million general fund savings.
* Other budget proposals continuing from January seek to reduce laboratory rates, and to no longer paying for certain Medi-Cal services, for a $75 million general fund savings.
The Governor proposed to enact these cuts regardless of the result of a November initiatives to raise tax revenue.

These budget items will be considered by the state Legislative committees in the next several weeks, in advance of a June 15th deadline to pass a budget.

Health Access will continue to put out timely updates in the next several days on blog, Twitter, Facebook, and E-mail as we learn more about the state budget, as well as about tomorrow’s Exchange meeting, updates on legislation, and other items.
Health Access California promotes quality, affordable health care for all Californians.