Uncertain Assumptions in Health Care Budget Estimate, LAO Says

Two reports released yesterday by the Legislative Analyst’s Office analyzing Gov. Jerry Brown’s proposed health care budget for 2013-14 found a number of points of concern, according to Mark Newton, deputy legislative analyst at the LAO.

“What we wanted to do is lay out that there are some budget risks here,” Newton said. Many of those risks, he said, should still be in the budget, but they remain important fiscal unknowns, rather than dependable income sources.

“[Some of this] is not meant so much to be a critique, but more a recognition of budget uncertainty,” Newton said.

Among the reports’ highlights:

  • Two health care fees included in the budget are not fully funded. The managed care organization tax has expired and authorization for a hospital quality assurance fee expires at the end of the year. The Legislature has not reinstated either of them;
  • Several budget items — including the 10% reduction in Medi-Cal provider reimbursement — can’t produce savings because they’re still held up in court. Even if the state wins those lawsuits as the budget assumes it will, it would have to do it within the fi reflected in this budget;
  • There is no funding in the budget for optional Medi-Cal expansion.

Shawn Martin, managing principal analyst at the LAO, said the concern about the optional Medi-Cal expansion is over its fiscal uncertainties, though the LAO released a report earlier this month in favor of the expansion. The previous report said, overall, the expansion would be a boon to California financially, and Martin reiterated that conclusion.

“I think it is financially beneficial overall to the state over 10 years,” Martin said. Even with some fiscal risk, he said, the policy benefits of the Medi-Cal expansion would outweigh the risks.

The report said the Legislature should make sure it eliminates or trims  programs such as the Major Risk Medical Insurance Program for high-risk beneficiaries when the Affordable Care Act provisions and Medi-Cal expansion make those programs duplicative.

“There are places where we could scale back or eliminate programs that would be covered by the optional expansion,” Martin said.

The LAO made two policy-change recommendations:

  • “In the case of the 20% reduction in In-Home Supportive Services,” Newton said, referring to one of the legislative trigger cuts in 2012, “we do offer an alternative. We recommend repealing the initiative, and that the Legislature should consider a more modest 3.6% reduction.”
  • The report also recommends to the Legislature that there be more effective oversight of the state’s developmental centers.

In the second report released yesterday, LAO officials analyzed the state’s Coordinated Care Initiative aimed at improving care for Californians eligible for Medi-Cal and Medicare. The LAO was supportive of the effort, but did warn that the state still does not have federal approval.

“Because legal federal authority is pending,” Newton said, “the Legislature will need to take action to say the initiative should continue.”

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