California Hospitals, HMOs Get $1.7B in Givebacks
California hospitals and managed care organizations will receive an estimated $1.7 billion over five years in additional federal health care funding as a result of the Medicare-Medicaid "giveback" legislation passed by Congress last week, the Sacramento Bee reports. The $35 billion package, included as part of the final budget deal, will restore cuts made to Medicare and Medicaid under the 1997 Balanced Budget Act. Sen. Dianne Feinstein (D) said, "By restoring some of these funds, this measure helps stabilize California's health care system." According to the Bee, more than two-thirds of California hospitals are "operating in the red," while the majority of the state's physician groups are also losing money. The giveback package also allocates $11 billion over five years nationally to "boost Medicare managed coverage, particularly in underserved rural areas." Since 1998, 13 California counties saw all their Medicare HMOs leave, as the BBA cuts "sparked a mass exodus of Medicare managed care from counties across California." Bobby Pena of the California Association of Health Plans said, "I'd stop short of saying this will salvage Medicare managed care, but it will mean some plans may make a choice to go back into a market they left or stay in a market they were thinking about leaving." As part of the package, Congress increased both the minimum monthly payments made to Medicare managed care organizations and the minimum annual rate to Medicare managed care organizations for one year (Rapaport, Sacramento Bee, 12/19).
Also included in the spending bill is a provision that will allow California to keep nearly $350 million in unspent federal funds allocated for the state's Healthy Families program. The state missed a deadline this September to spend its allotment and faced the "looming political embarrassment" of forfeiting the unspent money. The state's "most powerful Democrats" -- including Gov. Gray Davis (D) and Feinstein -- appealed to President Clinton to allow California to keep the money. Under the legislation, California and the 38 other states that did not use their full allotment will retain 60% of the unspent funds. States that did spend all of their funds would receive the remaining 40% in unspent funds from the other 39 states. Feinstein called the reprieve a "critical step towards ensuring that 200,000 California children who are eligible for the program --- but who are not yet signed up -- gain adequate health coverage." The Bee reports that the Davis administration is considering extending Healthy Families to uninsured parents, a step made possible by new federal regulations that allow states to request waivers to expand the program. California, which will receive 65% of the funding for such an expanded program from the federal government, would "have to put up $128 million in matching funds to cover 600,000 parents." Anne Marie Flores of the PICO California Project, which has lobbied the state to expand Healthy Families, called the federal funds an "embarrassment of riches," adding, "It is imperative that we do a better job of signing up children and that we take advantage of all these dollars to cover the whole family" (Rojas, Sacramento Bee, 12/19).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.