Budget Called a ‘Godsend’ for Health Care Community

California Health and Human Services Secretary Diana Dooley summed up the health care impact of yesterday’s budget proposal this way:

“The good news is, there are no cuts,” Dooley said. “While we are not restoring anything, we are not cutting, either.”

That was a tremendous relief to Senate member Ed Hernandez (D-West Covina), chair of the Senate Committee on Health. After enduring year after year of multi-billion-dollar cuts to health programs, he said no budget news is good budget news.

“When it comes to state cuts, it’s health and human services that always gets hit,” Hernandez said. “When I look at previous budgets, this is a godsend that we don’t have the deficits we’ve had in the past.”

Even with the lack of cuts, there were still a number of items in the proposed budget that could have a significant impact on the health care system:

  • The state wants to reinstate the managed care organization tax and make it permanent. The tax would generate about $86 million for the rest of 2012-13, and $217 million in 2013-14.
  • The hospital quality assurance fee will be extended under the governor’s proposal, meaning hospitals would need to pay $310 million for another year. The fee was due to expire at the end of 2013.
  • Despite being held up in court, the state included a budget measure passed by the Legislature last year: a 10% cut in Medi-Cal provider reimbursement rates. The state won’t realize any savings from that measure as long as it’s being litigated and a federal court injunction remains in place. Toby Douglas, director of the Department of Health Care Services, said he sees an end in sight to that legal action — in part because a three-judge panel in federal Circuit Court last month ruled in the state’s favor on the case. “We expect that to be resolved within the budget year,” Douglas said. The state expects to realize savings of about $488 million a year from that provider rate cut.

Brown’s proposal offers two ways to implement the optional Medi-Cal expansion under the Affordable Care Act to include childless adults up to 138% of federal poverty level in Medi-Cal eligibility.

The two choices are a state-based system, using the existing Low Income Health Plan program, and a county-based system.

Dooley said the two types of Medi-Cal expansion have an impact on health care systems in the counties, but counties won’t bear additional costs or risk, she said.

“I wouldn’t characterize this as a shift in cost to them,” Dooley said. “There is a recognition that they will have costs reduced [with the Medi-Cal optional expansion], it will be a significant relief for the system. Counties have the obligation to provide care to this [indigent] population, so we have to decide: What is an appropriate sharing of that new relationship based on new federal funding?”

The still-unscheduled special health care session in the Legislature may not address Medi-Cal expansion, Dooley said, because that discussion may need to take more time, with more federal guidance.

At the end of January, Dooley said, Governor Brown will be in a position to announce a date for the special session, which will deal with a number of ACA provisions including changes in the individual market, Dooley said.

“We will have a conversation with leadership [in the Legislature] about which issues should be in the special session — the individual market, the Basic Health Program, we may have a proposal for an alternative to that,” Dooley said.

“Those are some finite and discrete issues, and we can move quickly on them,” Dooley said. “Whether the Medicaid expansion can move on the speed of that time frame is an open question.”

When it comes to committing money to anything, Brown has med it clear the state is going to move deliberately.

“We have a very complex challenge facing us with the ACA,” Brown said. “We are going along with the program, we are going to implement — but we’re going to move cautiously. … We are committed to expanding Medi-Cal, but we recognize there are big costs out there, big unknowns. We’re going to move carefully, and with full commitment.”

Brown said after passage of Proposition 30 in November and the pain of years of massive budget cuts, now is not the time to spend.

“I went up and down the state, promising that we would be good stewards of the state’s money,” Brown said. “The deficit is gone, but budget risks remain. … Everybody gets exuberant because of the money [that might now be available], and it’s very hard to say no. But that’s my job.”

Brown offered a parting image during yesterday’s press conference: “Do you know what a governor on a machine is?” he asked reporters.

“It’s something on a machine that depresses the speed of the machine if it gets going too fast. That is a governor,” Brown said. “And that is the metaphor for 2013.”

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