Health Care Fastest-Growing Component of California Budget

Health care is the "fastest-growing segment of public spending" in California, as the state spent more than $40 billion on health programs in 2003 with "no end in sight," the AP/Sacramento Bee reports (Chorneau, AP/Sacramento Bee, 5/2). Gov. Arnold Schwarzenegger's (R) $99.1 billion fiscal year 2004-2005 budget proposal would reduce state funding for health care programs by more than $900 million, with about $880 million in spending cuts to Medi-Cal, including a provider reimbursement rate cut of 10%. In addition, the proposal would cap enrollment in Healthy Families at its current level of about 732,000 and would increase monthly premiums from $9 to $15 per child for some Healthy Families beneficiaries (California Healthline, 2/17). According to the AP/Bee, the proposed changes might slow the increase in spending on health programs, but they also "run the risk of shuffling patients to seek help in emergency rooms, where the most expensive care in the system is delivered." Lawmakers who view state-sponsored health programs like Medi-Cal as "potential targets for cutting" face the "dilemma" of "finding ways to save money without shifting the problem to other places where the solutions could be even more expensive," the AP/Bee reports. Stephen Levy, director for the Center of Continuing Study of the California Economy, said, "We are on the edge of a very significant jump off the cliff," adding, "I wouldn't think the tipping point is next year but we are heading into it. And the numbers are going to overwhelm us." Alina Salganicoff, a vice president at the Kaiser Family Foundation, said, "We will be increasingly forced to make very difficult choices," adding, "How we organize care, how we finance it, these are issues we are going to have to decide" (AP/Sacramento Bee, 4/2).

Schwarzenegger will deliver his "May revise" of his state budget proposal in less than two weeks, the Sacramento Bee reports. According to the Bee, the governor's May revise will include more than $1.5 billion in unanticipated revenue "largely as the result of a one-time amnesty program for taxpayers using tax shelters." However, Schwarzenegger's budget team will have to compensate for some changes in Schwarzenegger's January budget proposal, including some budget cuts he had proposed in services for people with disabilities but later withdrew. Schwarzenegger also must decide whether he will include provisions in the May revise that "some analysts have called risky, including a plan to cut reimbursement rates for Medi-Cal providers that is in the midst of a legal challenge," the Bee reports.

According to the Bee, some Democratic lawmakers are pleased with the increase in revenues for April but say they will continue to oppose proposed funding cuts to some programs, including those related to health care, social services and higher education. Assembly Budget Committee Chair Darrell Steinberg (D-Sacramento) said, "We'll take any good news. I don't think, though, that it changes fundamentally the nature of the problem or the outline of the debate." Republican legislators say that they would like to see more budget cuts in some areas. After the governor delivers his revised budget plan, the Legislature has until June 15 to send a budget back to Schwarzenegger. However, that deadline "is rarely met" -- with "more importance [being] placed on approving a budget before the first day of the fiscal year, July 1," the Bee reports (Bluth, Sacramento Bee, 5/3).