Medicaid Contractions Inspire New State, National Opposition

Two weeks ago, a coalition of public hospitals, including some in California, filed a federal lawsuit to derail changes in Medicaid regulations the hospitals say will cut their incomes by $5 billion over five years.

Last week, the mayor of San Francisco threatened to sue California if the state follows though with its plan to cut reimbursements to doctors who treat Medi-Cal patients.

Financed with state and federal funds, Medi-Cal is in many respects the engine that drives California’s health care system. Next year, the state will spend about $38 billion on Medi-Cal, roughly $15 billion of that coming from the state’s general fund. It is California’s second largest expenditure each year after education.

Medi-Cal provides health care for about 6.7 million low-income, elderly and disabled people — about one in six Californians.

Opposition to Medi-Cal Cuts Growing

Although no organizations, or other counties or cities have jumped on the state lawsuit bandwagon, several groups — including the California Medical Association, California Primary Care Association and the Alliance for Patient Care — are considering joining the fray.

“We’re exploring all options, including legal options” said Ned Wigglesworth, spokesman for CMA. “We’re definitely against the cuts as they stand now, but we’re not sure yet the best way to move in opposition.”

San Francisco Mayor Gavin Newsom, a Democrat considering a run for governor in 2010, has placed himself squarely in the health care eye in California. First by championing the first universal health care access plan in any city or county in the United States and now by leading the charge against a 10% cutback in Medi-Cal reimbursements.

Gov. Arnold Schwarzenegger (R) proposed the cut as a way to help the state address a $16.5 billion budget shortfall. State officials hope the cuts will save more than $500 million annually. The Legislature approved the plan last month, and cuts are scheduled to begin in July.

“I am prepared to bring California’s counties together and to help lead this effort to enjoin cuts that are both in violation of the law and in violation of our fundamental California values,” Newsom said in a speech to the Sacramento Press Club this week.

“We’d like to work cooperatively with the governor and the Legislature to stave off these cuts,” Newsom said. “We’d rather be working partners, instead of sparring partners.”

Last year, Newsom helped establish Healthy San Francisco, a program that makes health care services available to uninsured residents of the city and county. The plan is ahead of schedule with 15,200 enrolled as of last week, according to city officials.

Cuts in Medi-Cal reimbursements will undermine Healthy San Francisco, Newsom said. Newsom’s administration -— and presumably a lawsuit if it is indeed filed —- argues Medi-Cal cuts would create an unfair burden for city clinics and hospitals, which could be forced to care for more of the 115,000 Medi-Cal patients who live in San Francisco but may no longer be treated by doctors who back away from an underfunded Medi-Cal system.

San Francisco Department of Public Health officials predict the city could lose about $9 million in revenue next year because of the 10% cutback, but the larger and more lasting impact will come from patients already having a hard time finding doctors who are accepting Medi-Cal patients.

“And we’re not the only ones facing that problem,” said Jim Soos, assistant director of policy and planning for the San Francisco Public Health Department. “Doctors all over the state are backing away from Medi-Cal, and what typically happens is the care for those people falls to county hospitals and clinics.”

Newsom’s Not Alone

Newsom is not alone in opposing the 10% reduction in reimbursements. In addition to many providers and consumer groups, the state’s legislative analyst, Elizabeth Hill, last month went on the record as opposing the across-the-board cutbacks to state programs, including Medi-Cal. Hill pointed out that reducing Medi-Cal reimbursements for California doctors, who haven’t seen a raise in Medi-Cal payments since 2001, could turn what is already a steady stream of doctors choosing not to take on new Medi-Cal patients into a full-blown flood.

“The legislative analyst’s report predicted cutting Medi-Cal would come back to haunt the state, and we agree,” said Chris Patterson, spokesman for California Primary Care Association, which represents more than 600 not-for-profit community clinics and health centers.

“Our docs are already among the lowest in the country in reimbursement so this just doesn’t seem the right thing to do. I don’t know what the governor’s thinking. He’s barking up the wrong tree on this one,” Patterson said.

Compared to other states, California is close to the bottom in reimbursing physicians for treating Medi-Cal patients, according to research by the Kaiser Family Foundation and the American Medical Association. California is last in the amount spent per patient.

For most of this decade, the number of physicians willing to take on new Medi-Cal patients has been declining. And the number was not so high to begin with. In 2000, roughly half of California’s doctors refused new Medi-Cal patients, according to state estimates. The rate was considerably higher among some medical specialties.

Some health care experts fear an across-the-board cut of 10% will hasten the physician exodus from the program and raise further obstacles for Medi-Cal beneficiaries to receive care.

National Battle Also Brewing

A similar battle is brewing on the national front, with hospitals leading the opposition to proposed federal cuts in Medicaid spending. Last week, public hospitals from California and groups representing other hospitals nationwide filed a federal lawsuit in Washington D.C., to prevent the Bush administration from implementing new Medicaid regulations that would reduce the amount of federal money paid to hospitals for treating Medicaid patients.

In California, officials at the California Association of Public Hospitals estimate new regulations would reduce Medi-Cal funding at California public hospitals by $600 million.

Related Topics

Health Care Costs Health Industry Insight Insurance Medi-Cal