Davis Releases Revised Budget Proposal That Would Cover Deficit with Medi-Cal Reductions, Tobacco Tax Increase
Gov. Gray Davis (D) yesterday released his revised fiscal year 2002-2003 budget proposal, which would cover the state's $23.6 billion budget deficit in part by raising taxes on cigarettes and making "deep cuts" in spending for health care and other programs, the Los Angeles Times reports (Tamaki/Bustillo, Los Angeles Times, 5/15). The plan would cover the shortfall with $11.7 billion in "revenue shifts and transfers," $2.1 billion in increased taxes and fees and $7.6 billion in budget cuts (Benson, Wall Street Journal, 5/15). Under the plan, taxes on cigarettes would increase 50 cents a pack to $1.37 (Tamaki/Bustillo, Los Angeles Times, 5/15). The tax on tobacco products would produce $475 million in revenue (LaMar, Contra Costa Times, 5/15). The proposal also would increase the fee hospitals pay the state for administering the federal Disproportionate Share Hospital program by a total of $86 million. The plan also calls for delaying the proposed Healthy Families expansion to parents of enrolled children (Ornstein, Los Angeles Times, 5/15). In addition, programs for mental health services would be cut (Payne, Santa Rosa Press Democrat, 5/15).
Davis' plan also would cut general fund payments to Medi-Cal by $758.3 million, which would result in a loss of $350 million in federal matching funds (Ornstein, Los Angeles Times, 5/15). The state would save $47 million by reducing the reimbursement rate physicians receive for treating Medi-Cal patients (Maxwell, Fresno Bee, 5/15). Average physician payments would drop from $20 per office visit to $16, the lowest rate in the nation, according to the California Medical Association. Other proposed changes include:
- Requiring Medi-cal beneficiaries to reapply for coverage on a quarterly rather than annual basis;
- Eliminating dental, chiropractic, acupuncture and podiatry benefits for adult Medi-Cal beneficiaries;
- Cutting the number of annual dental exams for children in Medi-Cal from two to one;
- Increasing the program's income eligibility requirements for two-parent families with enrolled children from 100% of the federal poverty level to 67%; and
- Delaying the start of a program initially scheduled to begin July 1 that would automatically enroll children eligible for the free and reduced school lunch program in Medi-Cal (Ornstein, Los Angeles Times, 5/15).
The San Francisco Chronicle reports that the budget proposal is a "dramatic turnaround" for Davis, who had earlier said he would not raise taxes. "To balance this budget entirely without any increases whatsoever would have required substantial reductions in education, which I was not prepared to do," Davis said. Medical groups and health care advocates called the proposed budget "devastating" (Lucas et al., San Francisco Chronicle, 5/15). Republicans criticized Davis and other Democrats for "reckless spending" when the state had budget surpluses in the late 1990s (Booth, Washington Post, 5/15). Republican lawmakers "vowed" not to approve any of the proposed tax increases (San Jose Mercury News, 5/15).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.