Caught Up in Budget Debate, Medi-Cal Remains a Linchpin in Health Reform

The failure of California lawmakers to reach a consensus on a budget agreement this summer has already delayed more than $400 million in Medi-Cal payments and left some Medi-Cal providers struggling with their finances. Now, the issue may also be threatening Sacramento's ability to take on the job of reforming the state's health care system.

Gov. Schwarzenegger and lawmakers were expected to begin negotiating a health care reform bill after the Legislature reconvenes Aug. 20, but Senate President Pro Tempore Don Perata (D-Oakland) warned that the state budget will take priority.

"No one would like to have a health care bill more than I would," Perata said. "But if we don't have a budget, nothing else matters."

Impasses over the state budget are hardly a new phenomenon in Sacramento. However, lawmakers in 1998 tried to insulate the Medi-Cal payment system from such stalemates by creating a $2 billion safety-net fund to continue compensating Medi-Cal providers without interruption. But because the fund was never adjusted for new Medi-Cal accounting rules or inflation, it ran out of money after just one month.

Earlier this year, Assembly member Audra Strickland (R-Moorpark) introduced legislation to expand the reserve fund to $4 billion, but state officials and legislative analysts opposed the bill, predicting that such an increase would not be necessary.

Even before the latest budget wrangle, Medi-Cal provider payments were already looming as a big issue in Sacramento. In his health care reform proposal, Gov. Schwarzenegger called for raising Medi-Cal reimbursements, but coupled it with a proposed new fee on hospitals and physicians to help qualify for additional federal funds for the program. Not surprisingly, hospitals and doctors liked the possibility of higher reimbursements but opposed the fee.

Lawmakers will determine the fate of that proposal when they begin negotiations with the governor on health care reform -- a debate that, once it begins in earnest, may make the budget fight look like small potatoes.

Other legislation dealing with Medi-Cal that has come before the Legislature this year includes:

AB 752 by Assembly member Mervyn Dymally (D-Compton) would extend the Medi-Cal Hospital/Uninsured Care Demonstration Project Act through fiscal year 2009-2010 and create new distribution requirements for federal funds to public hospitals. The act is intended to maximize federal Medi-Cal funding (Bill Text, 4/10). The bill is before the Senate Appropriations Committee (Bill Status, 7/11).

Legislation (AB 1750) by the Assembly Health Committee would impose a civil penalty for false claims submitted to Medi-Cal (Bill Text, 7/5). The measure is before the Senate Appropriations Committee (Bill Status, 7/25).

Sen. Patricia Wiggins' (D-Santa Rosa) bill (SB 623) would require the Department of Health Care Services to make copayments for prescription drugs for Medicaid beneficiaries who are dually eligible for Medicare (Bill Text, 4/30). The legislation remains before the Senate Appropriations Committee (Bill Status, 5/31).

AB 915 by Assembly member Edward Hernandez (D-West Covina) would direct DHCS to approve Medi-Cal managed care providers' requests to offer incentives to members to encourage healthful behaviors (Bill text, 5/1). The measure is before the Senate Appropriations Committee (Bill Status, 7/25).