Some Medi-Cal Payments on Hold During Budget Gridlock in California

The Senate on Wednesday fell one Republican vote short of approving a new state budget for fiscal year 2007-2008, continuing a stalemate that has forced officials to discontinue payments to hospitals, nursing homes and other Medi-Cal providers, the San Diego Union-Tribune reports.

California since July 1 has been without a budget. The Assembly on July 20 approved a spending plan, but Senate Republicans have abstained from passing a budget until more demands are met, including an additional $700 million in cuts to reduce the operating deficit to zero (Mendel, San Diego Union-Tribune, 8/2).

All but one Republican lawmaker voted against the budget despite an assurance by Gov. Arnold Schwarzenegger (R) that he would invoke his line-item veto authority to cut $700 million in spending from the budget (Halper/Rau, Los Angeles Times, 8/2).

Schwarzenegger said, "I was prepared to eliminate the operating deficit as requested; therefore, the Senate should have approved the budget." He added, "My job now is to make sure this does not shut down state government" (San Diego Union-Tribune, 8/2).

The governor also could seek to cut the Medi-Cal budget if he can demonstrate that caseloads are expected to fall below the numbers used when the budget was drafted, although that technique might "work on paper only," according to the Sacramento Bee.

The Legislature would have to pass a deficiency bill later in the year if the caseloads rise above projected levels, mitigating any decrease in funds that could be projected in the budget now.

Moreover, the state would receive any savings if caseloads actually do fall below projected levels regardless of the budget (Lin, Sacramento Bee, 8/2).

The budget stalemate prompted the State Controller's Office to withhold a $227 million scheduled payment to hospitals, nursing homes and other Medi-Cal providers this week (Steinhauer, New York Times, 8/1).

State Controller John Chiang said he does not have the legal authority to pay these providers because they are institutions. However, he said that nurses, physicians and pharmacists will continue to receive Medi-Cal reimbursements because they directly bill Medi-Cal (Silicon Valley/San Jose Business Journal, 8/1).

A $2 billion safety-net fund created to continue paying Medi-Cal providers during a budget stalemate also has been depleted one month earlier than expected (California Healthline, 8/1). The fund was created in 1998 but never has been adjusted for inflation (San Diego Union-Tribune, 8/2).

Senate President Pro Tempore Don Perata (D-Oakland) sent legislators back to their districts and said "it's very likely" that the Senate will not reconvene until the Assembly returns from summer recess on Aug. 20 (Sacramento Bee, 8/2).

Senate Republican Leader Dick Ackerman (R-Irvine) said emergency legislation is being drafted to continue funding, if necessary. However, legislation requires approval from both chambers, and the Assembly has adjourned (San Diego Union-Tribune, 8/2).

"Unless a budget is signed this week or emergency funding becomes available, the state will be forced to end funding for an estimated 500 hospitals and 11,000 nursing homes, hospices and care centers that serve the elderly poor," a Sacramento Bee editorial states. "Some of these care centers may be forced to close," the Bee states, adding, "Others will be forced to turn people away."

"With nowhere to go, thousands of those elderly and infirm patients could end up in emergency rooms -- adding to the health care crisis that the governor and state legislative leaders have pledged to address this session," the editorial states (Sacramento Bee, 8/2).