Medi-Cal Cuts Threaten California's Healthcare Providers

The California Hospital Association says it’s disappointed by the magnitude of the proposed cuts Gov. Arnold Schwarzenegger wants to make to Medi-Cal payments, as legislators try to address the state’s current $3.3 billion budget deficit in a special session. Healthcare providers will likely face even more cuts when lawmakers begin to address the projected $14.5 billion deficit in fiscal year 2008-09.

The association, which represents nearly 450 hospitals and health care systems, said the governor has proposed delaying $165 million in payments already due hospitals. Additionally, he has proposed cutting nearly $1 billion in Medi-Cal payments in the 2008-09 year, of which $254 million will come out of hospitals’ coffers, said Jan Emerson, CHA vice president of external affairs.

“We recognize that the state is facing a serious fiscal crisis, and there are many meritorious programs which are supported by the state budget,” the CHA said in a statement. “Cuts to the Medi-Cal program; however, will affect the ability of millions of low-income and disadvantaged Californians to obtain needed hospital and other health care services.”

The CHA, which supports the state’s health care reform plan and fees its members will face if the plan is approved by the senate and voters, says the governor’s proposed cuts won’t reap so much financial benefits as it will hurt MediCal recipients. The organization said that California will only save about half of the $254 million in proposed cuts to hospitals because it also will lose matching federal funds.

Any cuts could seriously impact hospitals that operate on thin financial margins and do not have the reserves to operate without Medi-Cal payments, according to the association. In 2006, California hospitals’ total uncompensated care was $8.6 billion, with bad debt accounting for about $1.1 billion, while the Medi-Cal payment shortfall, the difference between the cost of care and reimbursement, was $2.1 billion, Emerson said.

The Senate Budget Committee will meet twice a week beginning today to consider current-year budget adjustments.

Schwarzenegger’s plan would fully funds growth in the Healthy Families Program and Access for Infants and Mother’s Program, bringing enrollment in both plans to an all-time high. Still, the Republican governor says 10 percent cuts to nearly all general funds departments are unfortunate, but necessary.

“The system has driven us to that stage that we have to make those cuts because we can’t grab the money anywhere else,” Schwarzenegger said during a discussion with San Diego County officials last week.

Democrat Assembly Speaker Fabian Nunez has vowed to vigorously oppose Schwarzenegger’s proposal. "Clearly, if it’s passed as it is written, it would cause tremendous, permanent pain to the people of California,” Nunez said.

Differences on the proposed budget cuts aside, Schwarzenegger and Nunez say moving forward with the state’s health care reform plan approved by the House Assembly would guarantee health care for most Californians because the cost is shared by everyone receiving it.

“When it comes to putting up the money employers are part of it, the Hospital Association puts up part of it, the state will put up part of it, the federal government will put up part of it,” Schwarzenegger said.