Medi-Cal Reimbursement Rate Cut Included in Budget Proposal May Be Illegal, Legislative Analyst Says
In her nonpartisan analysis of the state budget proposal put forth by Gov. Arnold Schwarzenegger (R), Legislative Analyst Elizabeth Hill on Tuesday said that the proposal is a "solid starting point" but noted that a provision to reduce Medi-Cal provider reimbursements might be illegal, the Sacramento Bee reports (Hill, Sacramento Bee, 1/14). The $99.1 billion budget proposal does not include a tax increase but 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% (California Healthline, 1/13). In her report, Hill noted that the budget depends on savings from the 10% rate reduction in addition to a previous 5% reimbursement cut that currently is being challenged in court (Mendel, San Diego Union-Tribune, 1/14). The California Medical Association and 11 other plaintiffs representing Medi-Cal providers in November filed a lawsuit to halt the implementation of the 5% reimbursement rate cut, which was approved by the Legislature as part of the fiscal year 2003-2004 budget. Chief U.S. District Judge David Levi last month issued a preliminary injunction preventing the implementation of the cuts scheduled to take effect Jan. 1 (California Healthline, 1/12).
Hill stated that proposed reductions in spending for state programs "would have far-reaching consequences for the scope of state services" and urged lawmakers to consider tax increases or removing tax exemptions to increase state revenue (Halper, Los Angeles Times, 1/14). The budget proposal also would limit enrollment in Healthy Families and other health programs, increase fees for enrollees of some programs and eliminate some domestic services for people with disabilities and elderly residents (California Healthline, 1/13). Hill noted that about 55% of the proposed budget reductions come from program cuts and that 45% come from borrowing, reappropriating local government funds and other sources. She said that about 67% of the savings would be sustainable in future years (Gledhill, San Francisco Chronicle, 1/14). Hill concluded, "Even if every solution proposed by the governor were adopted and the savings scored by the administration were realized, we estimate there would be at least a $6 billion structural budget problem remaining" by 2005 (Los Angeles Times, 1/14).
Finance Director Donna Arduin disputed the $6 billion figure, saying that the amount "will come down" to about $3 billion when the administration releases details about cuts to health care and prison programs (Marimow, San Jose Mercury News, 1/14). The Contra Costa Times reports that both Republicans and Democrats "applauded the report, with both claiming it bolstered their positions" (LaMar, Contra Costa Times, 1/14). Assembly Budget Committee Chair Jenny Oropeza (D-Long Beach) said that the remaining budget shortfall predicted by Hill shows that "[w]e have to do more than cut programs for the poor" to balance the budget (Los Angeles Times, 1/14). However, Senate Budget Committee Vice Chair Dick Ackerman (R-Irvine) said that the budget is designed to reduce the deficit over several years, adding, "It's going to be a two- to three-year fix to get out of the hole" (San Francisco Chronicle, 1/14).
Schwarzenegger's budget proposal, including a summary and highlights of the budget for health and human services, is available online. Note: You will need Adobe Acrobat Reader to access the proposal. The Legislative Analyst's report also is available online.