Schwarzenegger Administration Delays Release of Medi-Cal Overhaul Plan Until January

Gov. Arnold Schwarzenegger (R) on Monday announced that he would delay until January the release of a proposal to overhaul Medi-Cal because it was "incomplete and needed more study," the Los Angeles Times reports. According to the Los Angeles Times, the proposal "had been expected to dominate legislative debate leading up to the November elections" (Halper, Los Angeles Times, 8/3).

In May, Schwarzenegger said that on Aug. 2 he would release his plan to reorganize Medi-Cal, which he said would reduce state spending on the program by $400 million beginning in 2005. Schwarzenegger administration officials have discussed plans that would add monthly premiums and copayments for some Medi-Cal beneficiaries, and move some elderly, blind and disabled beneficiaries into managed care programs, which could save $100 million annually. The state must receive permission from the federal government before changes can be enacted (California Healthline, 8/2).

Administration officials said the cost of the program, which serves 6.7 million residents, has grown by 41% over the past five years. California spends about $3 billion on Medi-Cal annually (Los Angeles Times, 8/3). Although the program has one of the lowest per-beneficiary costs of similar state programs at about $2,000 a year, Medi-Cal remains the third-largest expense from the general tax fund, according to the AP/San Jose Mercury News (Thompson, AP/San Jose Mercury News, 8/3).

The reform plan, which had been scheduled for release in May before being delayed until August, will now be released in January as part of the governor's fiscal year 2005-2006 state budget proposal or as a series of legislative proposals. Implementation of the plan, which had originally been set for as soon as early next year, now could be delayed until 2006 (Hinch, Orange County Register, 8/3).

The FY 2004-2005 state budget Schwarzenegger signed Saturday "actually increases Medi-Cal spending by $2 billion, illustrating the complexity of any sweeping revision," the AP/Mercury News reports. The Department of Health Services said it had expected to release the proposed reforms this week, but "a few key issues still need to be resolved."

Rob Stutzman, Schwarzenegger's communications director, said the delay will allow for "a longer deliberative process" (AP/San Jose Mercury News, 8/3).

Health and Human Services Agency Secretary Kimberly Belshe said in a statement, "Restructuring a program as complex as Medi-Cal is no simple task, and we want to do it right" (Los Angeles Times, 8/3). Belshe added that the administration was considering incorporating in the reform plan proposals by the California Performance Review addressing Medi-Cal. CPR was expected to formally release on Tuesday its report to restructure state government (Rojas, Sacramento Bee, 8/3).

State officials said proposed reforms to Medi-Cal reimbursement methods for public hospitals was a "primary reason for the delay," the Contra Costa Times reports. Public hospital officials "loudly objected" to a plan that could reduce by half federal funding for such facilities, a move that could cause some to close, according to the Contra Costa Times. Proposeed revisions to hospital payments are related to the federal waiver the Schwarzenegger administration must request before enacting the Medi-Cal reforms.

The federal government may try to negotiate a Medi-Cal funding cap, which could limit the amount of federal funds the state receives and leave it vulnerable to unexpected increases in health care costs, according to Edwin Park, a senior health policy analyst at the Center on Budget and Policy Priorities.

DHS Director Sandra Shewry said such a waiver would not impose a federal funding limit on the state, citing the state's experience with previous, smaller waivers (Contra Costa Times, 8/3).

Although Schwarzenegger administration officials previously said they might seek the waiver prior to receiving legislative approval of the reforms, state officials now say they will complete the Medi-Cal redesign plan before requesting the federal waiver (Colliver, San Francisco Chronicle, 8/3).

Rachael Kagan, a spokesperson for the California Association of Public Hospitals and Health Systems, said the group saw the delay as a sign of the administration's "commitment to keep the [hospital] safety net whole" (Contra Costa Times, 8/3).

Alina Salganicoff, a vice president at the Kaiser Family Foundation in Menlo Park, said, "There's widespread agreement this program needs to be strengthened and improved," she said, adding, "There's a lot of disagreement about the best way to do this" (San Francisco Chronicle, 8/3).

Jean Ross, executive director of the California Budget Project, said, "I think the administration anticipated there would be a lot of opposition. They were moving in the direction of making a number of very controversial proposals" (Los Angeles Times, 8/3).

Senate President Pro Tempore John Burton (D-San Francisco) said any Medi-Cal "reform by and large means you take needed health care away from poor people. We right now have a lot of people that stay alive by virtue of the Medi-Cal program, we have young children that can grow into fairly health[y] adults by virtue of the Medi-Cal program, and the nature of the program means you have to be poor to be in it. If you're poor, requiring fairly high copayments defeats the purpose." Burton likely will not be involved in debates over the delayed Medi-Cal proposals because term limits will force him out of office at the end of this year when his term ends (AP/San Jose Mercury News, 8/3).