Governor Schwarzenegger’s Budget Proposal Includes Deep Medi-Cal Cuts
The Schwarzenegger administration released its proposed budget on January 10, 2008. Total state spending is estimated to be $101 billion. Spending from all sources (including federal funds) will reach nearly $200 billion. The budget is crafted around filling a projected $3.3 billion shortfall in the current fiscal year (2007-08), and an $11.2 billion shortfall projected for the next fiscal year (2008-09). The Governor’s budget proposes to fill this $14.5 billion fiscal gap largely by implementing severe cuts to publicly funded programs, selling revenue bonds, suspending debt payment, suspending the Proposition 98 education funding guarantee, and implementing early release of nonviolent prisoners. There were no major new general fund revenue sources proposed in the budget. The Governor has also declared a state fiscal emergency in order to address the current year shortfall immediately. The Governor may declare a fiscal emergency pursuant to provisions of Proposition 58, an initiative approved by the voters in March 2004. Under these provisions, the Legislature has 45 days to send the Governor a bill or bills to address the fiscal shortfall. If the Legislature fails to do so, they may neither act on any other bill nor adjourn.
2008-09 Budget Proposal Details
Medi-Cal
Medi-Cal serves about 1 in 6 Californians (about 6.6 million) and is the largest state fund expenditure outside of education. Total Medi-Cal expenditures are projected to be $33 billion ($13.5 billion in state funds) in 2008-09. The Governor’s budget proposal includes slashing funding for the Medi-Cal program by about $100 million ($48 million in state funds) in 2007-08 and $2.2 billion ($1.1 billion in state funds) in 2008-09. There were no changes to Medi-Cal eligibility. Reimbursement rate cuts, optional benefit cuts and other proposals to close the budget shortfall are proposed to be implemented in this fiscal year. Reimbursement Rate Cut. The proposed reductions in Medi-Cal are largely the result of a 10 percent provider reimbursement rate cut. In 2007-08 the rate cut to providers and managed care plans that serve Medi-Cal patients would be $67 million ($33 million state funds). In 2008-09, the proposed reduction in payments would be $1.2 billion ($600 million in state funds). Payment Delay. The budget includes a delay in an estimated $330 million ($165 million GF) in payments to Medi-Cal fee-for-service providers by one week from June (the current fiscal year) to July (the next fiscal year) in order to achieve short-term savings.
Cuts to Optional Benefits. There is an estimated savings of about $20 million ($10 million in state funds) in 2007-08 and $230 million ($115 million in state funds) in 2008-09 by reducing certain optional benefits in Medi-Cal. These benefits include; chiropractic care, certain medical supplies, acupuncture, audiology, optometry, optical labs, podiatry, psychology, and speech therapy. The budget also proposes eliminating adult dental benefits. However, any dental services that can be provided by a physician will continued to be covered, including dentistry that requires sedation.
Healthy Families
The Healthy Families Program provides health care services through managed care plans to nearly one million lower income children. Despite 5 percent payment cuts, projected caseload growth of 7 percent in 2008-09 will result in an overall spending increase in the Healthy Families Program. Caseload is expected to reach 950,000 in 2008-09 and total program expenditures are expected to be $1.4 billion ($536 million in state funds). Health Plan Rate Reduction. The budget includes a proposal to reduce the rates paid to Healthy Families Program plans by 5 percent for an estimated savings of $22.4 million (state funds) in 2008-09. Premium and Co-Payment Increase. The Governor’s budget proposes to increase premiums by an average of $3 a month for every enrolled child for a state savings of $11 million in 2008-09. The increase would only apply to children in families with income above 150 percent of the Federal Poverty Level (FPL). The proposal would also increase from $5 to $7.50 per visit, the co-payments for non-preventive services for families with incomes over 150 percent of the FPL. This would result in estimated savings of $3.4 million state funds in 2008-09. Dental Benefit Limit. The proposal would establish an annual dental benefit limit in the Healthy Families program of $6.3 million in state funds in 2008-09.
Other Changes in the Budget
Reduction in Funding for Song-Brown Program. The Governor’s budget includes a $500,000 reduction for the Song-Brown program in 2008-09. This program provides provides support funding to family practice, family nurse practitioner and physician assistant training programs. The cuts will result in 24 fewer nursing slots, 2.5 fewer physician residency program slots and 44 fewer nurse practitioner and physician assistant slots. No New Funding for the Steven M. Thompson Loan Repayment Program. Unfortunately the budget did not include funding for the Steven M. Thompson Loan Repayment Program. The program provides loan repayment for physicians who agree to serve in underserved areas.
CMA Response
CMA issued the following statement in response to the proposed budget: “Slashing payments that go towards providing health care to the poor will only exacerbate the health care crisis in California. These cuts will force doctors out of this important program, will Prepared January 10, 2006
force hospitals and clinics to close their doors, and will force tens of thousands of patients to get their care in emergency rooms. It is inconsistent to talk about expanding health care coverage for low-income families at the same time we are cutting the budget of the state’s health care program for low-income families. Cutting the budget for Medi-Cal will only exacerbate the problems the Governor’s health reform plan was designed to solve. Fewer Medi-Cal dollars will mean less access to doctors for lowincome families, more patients in emergency rooms, and higher health care costs for everyone. We appreciate the Governor’s budget predicament, but California cannot afford to leave $1 billion in federal dollars on the table when we are facing a budget shortfall. For every dollar of Medi-Cal spending, California receives a dollar in federal matching funds. The health care plan proposed by Governor Schwarzenegger and Speaker Nuñez recognizes that California can’t afford to ignore this important source of revenue.” Staff Contact: Ned Wigglesworth, 916/444-5532
Prepared January 10, 2006