Medi-Cal Redesign Plan Could Face State, Federal Obstacles

Gov. Arnold Schwarzenegger's (R) recent proposal to overhaul Medi-Cal is a "more measured approach" than his initial plan, which would have saved $400 million through "dramatic reforms," the Sacramento Bee reports. Although the "drastically scaled back" proposal might avoid "a bruising political fight with Democrats," getting the redesign approved could serve as the governor's "toughest test yet," according to the Bee (Benson, Sacramento Bee, 1/18).

Schwarzenegger's Medi-Cal redesign plan, announced last week as part of his $112 billion state budget proposal for fiscal year 2005-2006, would reduce state costs by about $260 million annually, with about $191 million of the savings coming from having the federal government assume the costs for certain prenatal care services now covered by the state.

Starting in FY 2006-2007, the plan would establish a monthly premium for 550,000 beneficiaries, including those whose annual incomes exceed the federal poverty level. The premium also would apply to elderly individuals with monthly incomes of more than $812 and elderly couples with monthly incomes that exceed $1,437. The monthly premiums would be set at $10 for adults and $4 for children, with maximum monthly premiums of $27 per family.

The governor's proposal also calls for increasing the number of beneficiaries receiving care through managed care plans to include 13 additional counties and all of the state's elderly, blind and disabled beneficiaries. About half of Medi-Cal beneficiaries are enrolled in managed care plans. Schwarzenegger estimated that increasing enrollment in Medi-Cal managed care plans, which would be implemented in 2007, would save the state $136.6 million.

The redesign also would cap adult dental benefits at $1,000 annually and allocate $5.9 million from the state general fund and $8.6 million in federal matching funds to help state residents apply for Medi-Cal and Healthy Families (California Healthline, 1/11).

The Bee reports that consumer advocates have said that although they are "skeptical" of certain aspects of the redesign, "they are most concerned" about the results of state negotiations with the Bush administration, which must approve the plan.

According to the Bee, President Bush is "widely expected to seek cuts in Medicaid," and the governor's plan calls for the federal government to continue making steady payments to public hospitals that care for Medi-Cal beneficiaries, despite an expected decrease in the number of patients seeking care at such "safety-net" hospitals because of increased enrollment in Medi-Cal managed care plans.

The federal government likely will not approve the plan without receiving assurances that "spending on these hospital payments won't increase beyond a certain point," the Bee reports. Under Schwarzenegger's plan, counties would be responsible for unforeseen health care costs, such as natural disasters or terrorist attacks.

According to the Bee, the Medi-Cal redesign's success "rests on the most arcane piece of the plan."

Rachael Kagan, a spokesperson for the California Association of Public Hospitals, said, "The only mechanism for growth is for counties to spend more money."

Anthony Wright, director of Health Access, added, "All of these specific (proposals) are secondary to the result of the negotiation with a federal government that is actively looking to cap funding for health care, and that is where the biggest trepidation is" (Sacramento Bee, 1/18).

Kim Belshe, secretary of the Health and Human Services Agency, said the state has not received a response to its proposal (Vesely, Inside Bay Area, 1/14).

Wright said that the "secondary impacts" of the Medi-Cal proposal could be "severe," potentially including 110,000 beneficiaries' losing coverage and 124,000 beneficiaries' needing dental care that exceeds the proposed $1,000 cap. He added, "The concern with managed care is not only that (the elderly and disabled) will lose access to their doctors and specialists that they've come to rely on, but that changes the financing system of the hospitals we all rely on."

Cheryl Bergan, a policy analyst at the California Foundation for Independent Living Centers, said that although she supports the plan's gradual expansion of managed care enrollment, some advocates will oppose the proposed cuts to state contributions to the wages of home-care workers. "It sounds like they understand the access needs of people with disabilities," Bergan said, adding, "There are still a few questions out there, but by and large, they dropped some of the things that were more complicated and probably would have resulted in an administrative nightmare" (Sacramento Bee, 1/18).

Assembly member Patty Berg (D-Santa Rosa) said the proposed premiums would act "as a tax of the poor," adding, "I think we're taxing the poor in this budget, and I think we're taxing children in this budget" (Watson Arthurs, Eureka Times-Standard, 1/15).

State officials -- who held 25 meetings last year with community health officials, hospitals and consumer groups -- in a meeting with stakeholders last week defended the plan and indicated further changes to the program "would be highly unlikely," Inside Bay Area reports. State officials said that they expect about 20% of Medi-Cal beneficiaries to end enrollment in the program if premiums are adopted, which would cost the state $8 million annually to collect.

Belshe said the premiums would lead Medi-Cal to more closely resemble employer-based coverage, a change she said would provide beneficiaries with a sense of personal responsibility. She added, "You can't assume nonpayment of premiums means that people couldn't pay. As you move up the income ladder, you're not talking about a welfare program but a working families program."

In response to concerns from the California Dental Association, state health officials said they would consider waiving fees for the treatment and follow-up care for elderly Medi-Cal beneficiaries who begin to use dentures. Officials said they also could waive emergency and hospital dental services from applying to the proposed cap on dental services (Inside Bay Area, 1/14).

With the governor in his State of the State address devoting "a whopping two sentences to the entire topic of health care" -- which accounts for a third of the state budget -- "the silence was menacing" to health care professionals interested in hearing more about the governor's Medi-Cal redesign, a San Jose Mercury News editorial states. The governor's decision to "shift the responsibility" for funding public hospitals "onto cash-strapped counties" would "threate[n] the future of the state's safety-net hospitals" and leave "only the counties to toss more money into the pot to get matching federal dollars," the editorial states.

The editorial concludes that with the counties "broke," Schwarzenegger should "seek other means to reduce spiraling health care costs" and "end his silence on Medi-Cal reform and start leading the debate on how to solve the state's health care crisis" (San Jose Mercury News, 1/16).