Schwarzenegger Releases California Performance Review, Including Recommendations for Health Programs

Gov. Arnold Schwarzenegger (R) on Tuesday released the California Performance Review, a 2,500 page report that aims to save $32 billion over five years by eliminating or consolidating more than 100 boards and commissions and modifying state business practices, the Orange County Register reports (Hinch, Orange County Register, 8/4). The report aims to save almost $5 billion over five years by making changes to Health and Human Services Agency (Colliver, San Francisco Chronicle, 8/4).

The review recommends that the state:

• Establish a new Public Health Department;
  
  
• Reduce the amount of oversight of HMOs (Hinch, Orange County Register, 8/4);
  
  
• End counties' role in determining Medi-Cal beneficiaries' eligibility, which would eliminate 17,000 county jobs. Under the plan, private contractors would administer many of the applications online;
  
  
• Move the Department of Managed Health Care and all licensing boards, including the Medical Board of California, under DMHC's authority;
  
  
• Shift responsibility for the Medically Indigent Adults program from the counties to the state;
  
  
• Change the HIV reporting system to use names rather than alphanumeric codes (Colliver, San Francisco Chronicle, 8/4);
  
  
• Implement in Medi-Cal a "smart card" system to reduce fraud, possibly by asking beneficiaries to record their fingerprints electronically on cards at doctors' offices;
  
  
• Revise regulations on care providers in community health centers to exclude potentially dangerous criminals;
  
  
• Develop an online state child immunization registry;
  
  
• Open bidding for durable medical equipment provided under Medi-Cal (Hubbell [1], San Francisco Chronicle, 8/4);
  
  
• Consolidate the Mental Health Department and alcohol and drug programs;
  
  
• Transfer responsibility for Medi-Cal provider fraud cases to the Attorney General's Office;
  
  
• Manage state workers' compensation claims (Kim Quach, Orange County Register, 8/4).

Some of the proposed changes could be achieved by executive order, but many require legislative approval, the Sacramento Bee reports (Talev, Sacramento Bee, 8/4). According to the Chronicle, the likelihood of implementing the proposals "will rest on the public's -- or the Legislature's -- impressions of the current system, and whether the review's projected cost savings also successfully promote care." Several structural reforms require outsourcing labor, "which could be palatable for business groups but not to labor interests," the Chronicle reports (Hubbell [1], San Francisco Chronicle, 8/4).

Some Democratic leaders have predicted the proposed changes will not pass, and they will "look instead to work with Schwarzenegger on some of the proposals," which could move actual savings difficult to assess, the Chronicle reports (Hubbell [2], San Francisco Chronicle, 8/4). A similar, but broader state reorganization plan was proposed in 1996 by the California Constitution Revision Commission. The recommendations made by the commission after two years of hearings were "ignored by the Legislature," the San Diego Union-Tribune reports (Mendel, San Diego Union-Tribune, 8/4).

Schwarzenegger might attempt to adopt parts of the plan through legislation; package sections of the review as initiatives that would appear on the state ballot; and enact some parts by executive order (Nicholas, Los Angeles Times, 8/4).

Some critics have said the Performance Review Commission in drafting the plan was "too secretive and relied heavily on business and corporate input while excluding public interest groups," the AP/Fresno Bee reports (Wasserman, AP/Fresno Bee, 8/4). Corporations such as Electronic Data Systems, Microsoft and Hewlett-Packard met privately with the review commission as the report was being drafted, the Los Angeles Times reports.

For example, former Michigan Gov. John Engler (R), who now works for EDS, was given "easy access" and spent about one hour with the review team, saying he was looking for information about the process, the Times reports. The commission ultimately adopted an EDS proposal for a "public-private partnership" in which EDS would try to enroll more Medi-Cal beneficiaries in Medicare to help reduce costs for the state. Under the proposal, EDS would receive 10% of any cost savings to the state.

In addition, representatives from WellPoint Health Networks, Health Net, Molina Healthcare and the California Association of Health Plans advised the commission on a recommendation to transfer responsibility for some health plan audits from the state to health insurance industry accreditation groups (Nicholas, Los Angeles Times, 7/31).

Schwarzenegger said, "There are many of the corporate world that are very smart at reorganizing, and we of course talked to them also because we want to get their input, but we are sharing with everyone now at the same time that information" (Sacramento Bee, 8/4).

Treasurer Phil Angelides (D) said, "It would behoove [Schwarzenegger] to release a full record of the meetings and communications between the governor and members of his administration, and private interests ... so that everyone can see what meetings were held, who attended, who had access, what was discussed and what was proposed by whom" (Nicholas, Los Angeles Times, 8/4).

Bart Bohn, administrative officer for Fresno County, said, "I see lots of ideas that start off with verbs like 'create' or 'establish.' That makes me a little bit nervous. That doesn't sound like you're eliminating and consolidating" (Fitzenberger, Fresno Bee, 8/4).

Health Access Executive Director Anthony Wright said, "This is not a complete plan. They are disjointed concept papers" (Kim Quach, Orange County Register, 8/4). He added, "Our biggest concerns are that, in the shuffle, key functions will get lost, including the ability to provide oversight to HMOs and protect people's rights" (Colliver, San Francisco Chronicle, 8/4).

Schwarzenegger said he will not comment on specific proposals in the report until after the public hearings (Sacramento Bee, 8/4). He said, "Of course there will be the special interests that will be screaming, that will be complaining, that will be squawking about the recommendations, calling them unfair and impractical and maybe even worse. But this is because their agenda is not the people's agenda" (Gledhill, San Francisco Chronicle, 8/4). He added, "Sometimes a surgeon has to cut in order to save the patient" (Kim Quach, Orange County Register, 8/4).

Schwarzenegger administration officials said most of the savings outlined in the report are "at least two years off," the AP/Bee reports (Wasserman, AP/Fresno Bee, 8/4).

Summaries of editorials addressing the California Performance Review are provided below.

• Los Angeles Times: Reading the California Performance Review recommendations "is like negotiating the world's least organized buffet line," but the report is "studded with good ideas" for government reform, a Los Angeles Times editorial states. The commission needs to put the "1,000 or more scattershot proposals into logical order" and "craft a practical plan that pays obvious dividends and can gain political support," the editorial states (Los Angeles Times, 8/4).
  
  
• San Diego Union-Tribune: "Revamping state government is a worthy effort," but "genuine change has been stymied by staunch defenders of the status quo," according to a Union-Tribune editorial. The editorial concludes that the report is correct in saying that "making government more cost efficient and responsive cannot be achieved 'through stopgap measures and half-hearted attempts at coordination'" (San Diego Union-Tribune, 8/3).
  
  
• San Jose Mercury News: Although a government "overhaul is overdue," state residents "should resist the temptation to buy it or snub it without even giving it a test drive," a Mercury News editorial states. The report includes some "promising ideas," such as centralizing eligibility processing for health care programs, and some "not-so promising" proposals, including expanding the lottery, the editorial states (San Jose Mercury News, 8/3).