Federal Budget Bill Could Cost State $1B in FY 2006

A federal spending reductions bill approved by the House last week for the fiscal year 2006 budget could result in a $500 million to $1 billion funding loss for state programs, including Medi-Cal, according to estimates by the California Budget Project, the Sacramento Bee reports.

Under the bill, California would lose the ability to pool taxes on managed care providers with federal money to increase payments to health care providers. California is one of four states that uses such a system. Gov. Arnold Schwarzenegger (R) in a letter to lawmakers said the change could cost the state as much as $175 million a year.

The state also is concerned that the bill would:

Eliminate the state's ability to negotiate confidential hospital rates for Medi-Cal beneficiaries, which Schwarzenegger said would cost the state billions of dollars;
Change policies for antipsychotic drugs and antidepressants, which would increase the cost to the state by $25 million;
Limit flexibility in treating high-needs patients with AIDS or mental illnesses (Whitney, Sacramento Bee, 11/25); and
Impose restrictions on using federal funds to provide subsidies for doctors who treat low-income patients (Halper, Los Angeles Times, 11/25).

Stan Rosenstein, Medi-Cal director at the Department of Health Services, said other provisions in the House bill not considered in the CBP estimate could cost the state an additional $500 million annually (Sacramento Bee, 11/25).

The House bill was approved 217-215 last week and now heads to conference committee where the House and the Senate will attempt to reach a compromise. The Senate version of the bill contains fewer spending cuts, but "would still cost California billions in the future," the Times reports (Los Angeles Times, 11/25).

Speaking on behalf of the Schwarzenegger administration, Rosenstein said some cuts to Medi-Cal included in the bill "were unintentional consequences of cutting these programs." He added, "We are hopeful we can get all of these [issues] resolved in the House-Senate conference" (Sacramento Bee, 11/25). 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.