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Questions on Medi-Cal Funding Remain After Budget Deal

Medi-Cal took perhaps the hardest one-two combination in this year’s budget bout in California.

Before legislators and Gov. Arnold Schwarzenegger (R) agreed on a plan more than a month past their deadline, the state’s Medi-Cal emergency fund ran dry and many health care providers were hard-strapped to provide — let alone pay for — services.

Then, when the budget finally was hammered out and signed, the largest single hit in the effort to trim more than $700 million from the proposal came at Medi-Cal’s expense. The new budget transfers $332 million from the Medi-Cal reserve fund to the state general fund reserve. State officials say the money can be shifted back if Medi-Cal runs low, but some critics say the state will be hard-pressed to make ends meet this year, with or without padded reserves.

That bodes ill for Medi-Cal providers and beneficiaries.

The issue plays out on two levels: the policy, decision-making level in Sacramento and the grassroots “how-do-we-take-care-of-our-patients” level at local clinics and hospitals up and down the state.

Shoring Up Medi-Cal Emergency Reserves

At least two legislators plan to introduce or reintroduce bills that would address Medi-Cal funding if (some say when) another budget crisis arrives.

Earlier this year, Assembly member Audra Strickland (R-Moorpark) introduced legislation in the Assembly to double California’s emergency Medi-Cal fund from $2 billion to $4 billion. AB 237 was passed unanimously by the Assembly Health Committee, but it died a quiet death in the spring trying to clear the appropriations hurdle.

“Basically, nobody thought it could happen — that we’d go through the entire emergency fund — but it did happen,” said Lindsay Phillips, legislative director for Strickland.

Strickland is considering introducing a similar bill with the hopes that legislators might look at the issue from a different perspective after the bleak stretches of a budgetless August.

Delayed Medi-Cal payments are not new in California, where postdeadline budgets are becoming a tradition. In fact, it was following a long drawn-out budget battle in 1998 when the Legislature created what it thought would be a permanent solution for Medi-Cal payment crises — a $2 billion emergency fund. That was supposed to be enough to tide the state over for two months until a budget was passed.

But cost increases and changes in accounting methods for Medi-Cal made the money disappear a lot quicker this year.

“We had to start tapping those funds earlier,” said H.D. Palmer, spokesperson for the state Department of Finance. “The effect was the two-month cushion became a one-month cushion, which led to our inability to issue checks at all,” Palmer said.

Sen. Jeff Denham of Merced, a Republican holdout and one of the most outspoken budget critics last month, also is planning to introduce a bill that would address Medi-Cal funding as well as other budgeting issues.

“Emergency appropriations for Medi-Cal will most definitely be part of the mix,” said Stacey Bohlke, Denham’s press secretary.

In a letter urging Gov. Schwarzenegger to create a budget revision panel to overhaul the state’s budgeting process, Denham included several specific ideas, including:

“Put some real teeth into the constitutional deadlines, such as requiring both the Senate and Assembly to remain in session around the clock beginning on June 15 if a budget has not been sent to the governor.”

Denham also said the state should “formalize a process for automatic emergency appropriations after July 1st … so that the needy don’t suffer during budget stalemates.”

It’s too late to introduce legislation for this year, but both Strickland and Denham said they plan to introduce bills dealing with Medi-Cal reserves in the next legislative session beginning in January.

Health Care Providers Worked To Maintain Operations

At the local level, many clinic and hospital officials — especially those at facilities serving large Medi-Cal populations — scrambled last month to make ends meet. Some resorted to unconventional methods, and others are considering making contingency plans for what some predict will be another drawn-out stalemate next year.

This account from Lin Hunter, CEO of Mendocino County Community Health Clinic, deals with a relatively small population of Medi-Cal providers and beneficiaries in rural Northern California, but the predicament she describes in a letter to the editor of a local newspaper was shared by many throughout the state:

“California’s budget crisis has had serious impacts on the many local nonprofit organizations that provide direct services to support the health of the people of Lake and Mendocino counties. For over six weeks, our state has gone without a budget,” Hunter wrote.

“During this crisis, Mendocino Community Health Clinic, a local, nonprofit health care organization, has continued to provide health services to almost 13,000 Medi-Cal patients in Lake and Mendocino counties. We have done so while facing the challenge of meeting payroll, purchasing medical supplies and paying utilities without the Medi-Cal reimbursement we rely on to sustain operations.

“If we were forced to face this crisis alone, MCHC would have to make cuts in patient care services, lay off key staff and, perhaps, temporarily close our doors. Such actions would force our patients to seek more costly care elsewhere, such as our already-burdened hospital emergency rooms. However, the community-mindedness of Savings Bank of Mendocino County helped us swiftly meet our most urgent cash requirements by extending us a $1 million line of credit,” Hunter wrote.

Elsewhere in California, clinics in the Central Valley towns of Tipton and Pixley closed for a brief time during the money shortage but reopened with loans from an anonymous donor and insurer Health Net.

Rural clinics, which rely on state health insurance programs for as much as 70% of their revenue, were hardest hit, according to Carmela Castellano-Garcia, president and CEO of the California Primary Care Association, which represents about 600 not-for-profit and community health clinics in California. Her organization’s reserve fund of about $3 million for low-interest loans was quickly depleted last month.

At one point in August, Department of Health Care Services officials estimated the state owed health care providers and managed care plans more than $1 billion in Medi-Cal payments.

Depending on how the Legislature and governor prepare for next summer’s budget battle, Medi-Cal providers may have to come up with more unconventional solutions next year.

Related Topics

Health Industry Insight Medi-Cal The Health Law