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Think Tank

Stakeholders Line Up Against Health Cuts in Governor’s Budget Plan

New battle lines in California’s budget wars are drawn. After a year of fiscal bad news, acrimonious wrangling and several lawsuits challenging the state’s spending plan, prospects for 2010 don’t look much better.

Gov. Arnold Schwarzenegger’s (R) proposals for dealing with a new deficit of about $20 billion over the next year and a half include more cuts for health and social welfare programs. He’s asking the federal government for a one-time “bailout” of $6.9 billion, but the state’s Legislative Analyst’s Office predicts California will probably get less than half that.

Deeper spending cuts than those already made last year might trigger more litigation, but perhaps even more importantly, they could jeopardize federal funding. Several federally subsidized programs, including Medi-Cal and other health programs, require states to maintain certain funding levels to remain eligible for matching funds. Some federal stimulus money also has similar strings attached.

We asked politicians on both sides of the aisle, policymakers, budget experts and health care advocates how they assessed the prospects for California health care programs in the fiscal year 2010-2011 budget. We asked if they thought the state could deal with the budget deficit while maintaining an adequate health care safety net.

We received responses from:

Invitations to participate also were extended to:

  • Gov. Schwarzenegger’s office;
  • Assembly member Jim Nielsen (R-Redding), vice chair of the Assembly Budget Committee; and
  • Sen. Robert Dutton (R-Riverside), vice chair of the Senate Budget Committee.

Advocates Should Join Forces

Stephen Levy
Director, Center for Continuing Study of the California Economy

Gov. Schwarzenegger’s 2010-2011 budget proposes additional cuts in safety net programs that have already absorbed cuts from previous budget agreements.

The deep recession has exposed the contradiction in state safety net funding. Caseloads go up during recessions while state revenue goes down. The federal government can honor its safety net commitments through deficit funding, but states cannot do so.

So there is cause for concern. But there is also cause for concern in education funding, in local government funding and in infrastructure investment funding.

I have three suggestions:

  1. Find a way to work on health care funding in collaboration with people concerned about education, local government and infrastructure. Put aside narrow advocacy for collaboration. The state is in danger of being torn apart. Health care advocates shouldn’t join in the pulling apart.
  2. Join with other states in urging another substantial round of federal assistance for state and local governments. These governments face a $250 billion to $350 billion shortfall over the next two years. California’s case is the nation’s case. We should work together with other states.
  3. The governor is right to call attention to long-term Medicaid funding issues such as the federal formulas for matching state monies. But, here, too, the case is a national case and will go better made arm in arm with other governors. We have a contradiction in our Medicaid safety net state-federal partnership.

Both in recession and for the health care reform being considered in Congress, most states are unable to meet current matching fund requirements without devastating other programs. The federal-state match cannot withstand the long-term health care cost increases that are occurring.

The federal government recognizes the safety net funding contradiction for extended unemployment benefits. The federal government picks up 100% of the added costs.

We need a new state-federal social contract for Medicaid funding in the 21st century.

Avoiding a Body Count Budget

Assembly member Noreen Evans (D-Santa Rosa)
Chair, Assembly Budget Committee

California faces a $19.9 billion budget deficit over the next 18 months.  But the challenge ahead is not simply a matter of balancing the state’s books.  It’s finding a way to do it in a way that avoids a body count.

As budget solutions are debated over the coming weeks and months, one thing is clear: we are not talking about simple cuts.  Whether the Legislature adopts the governor’s proposals will mean the difference between life and death for women, seniors, working families and children. 

Most of Gov. Schwarzenegger’s budget is based on passing the buck to Congress.  In essence, life-sustaining services in California will be either eliminated or drastically reduced unless California receives $6.9 billion in federal aid.  Without these funds, significant health care cuts will be triggered.  The proposed $532 million cut to Medi-Cal by reducing eligibility will take one million Californians off Medi-Cal.  The proposed $126 million cut achieved by eliminating Healthy Families will remove one million children from this lifesaving program.

This approach is a lose-lose scenario — it puts lives at risk while turning away billions in matching federal funds.  Most notably, the governor proposes a rate cut for family planning services, for which the state receives $9 from the federal government for every $1 the state invests. 

To make matters worse, even if we get these federal funds, the governor’s budget still makes health care inaccessible to more Californians.  While our representatives in Congress are talking about insuring millions of Americans, California’s governor is making proposals that will make our health care crisis even worse.

While it is clear that further pain will be felt in resolving our budget crisis, dismantling California’s health care system is not an option. 

Our budget crisis is so bad and has gone on so long, that one key question must be asked: how much are Californians willing to tolerate?  This is their budget and, as the Legislature crafts a budget over the coming months, we need the people to weigh in on how they want this crisis resolved.

The governor proposes $8.5 billion in cuts.  This abstract number translates into unthinkable choices.  Do you want to destroy our public health care system?  Do you want sick children refused treatment?  With so many lives at stake, the Legislature needs you to help plot a better course for California.

Penny Wise, Millions Foolish

Sen. Denise Ducheny (D-San Diego)
Chair, Senate Budget Committee

California’s budget and health care outlook are dire for fiscal year 2010-2011 and beyond. Our health care safety net is provided by the services of California’s Medicaid program, Medi-Cal, and other health programs such as Healthy Families, which insures children from low-income families.

In order to maintain federal reimbursement eligibility for these program dollars, California’s budget must contain a minimum level of state funding. Additionally, in order to receive the one-time money from the American Recovery and Reinvestment Act for such programs, California cannot change its eligibility levels or procedures, further limiting the state’s ability to reduce costs to such programs in order to close the $19.9 billion budget gap ahead of us.

Yet, the recent budget proposal released by the governor proposes, once again, to balance a large portion of this year’s budget solution on the backs of those who receive services from these programs: the elderly, low-income and disabled.

The increase in individuals who are eligible for these programs is due in large part to the growing number of unemployed Californians who are in need of assistance. Reducing or eliminating state funding for these health care programs would not only leave the state without millions of federal matching dollars, but would further leave a gaping hole in the health safety net for the most vulnerable Californians.

For example, the governor proposed to change eligibility for Healthy Families to reduce child enrollment and has further proposed a trigger that would eliminate the program altogether should he fail to secure more federal funds. These same Californians will be served in much more expensive emergency settings when minor health issues become crises.

This trigger could also eliminate other programs that were created as cost-saving measures, including the In-Home Supportive Services program, which assists the elderly and severely disabled by allowing them to receive in-home care rather than placing them in vastly more expensive nursing home facilities. The state already receives federal reimbursement to operate this program and could lose out on those monies while exposing the state to higher costs by paying for nursing/residential home care.

We must have the courage to renew our social compact to provide health care to the most vulnerable among us, our elderly, disabled and children. Placing our state finances at risk by cutting programs that save money has exacerbated our fiscal problems for years. Doing so in health and human services programs not only ignores our fiscal health by increasing costs, it sacrifices our shared humanity by placing public health at risk and endangering the lives of millions of Californians.

Health Care Services Once Again at Risk

Jean Ross
Executive director, California Budget Project

California is facing two intertwined crises — an economic crisis and a budget crisis — that have left California’s families and the state’s budget in tatters.  Last year, Gov. Schwarzenegger and the Legislature cut $32.5 billion from the 2008-2009 and 2009-2010 budgets, including $5 billion from health and human services programs. They slashed funding for community clinics, eliminated many optional Medi-Cal benefits, including dental services for most adults, and reduced payments to public hospitals. 

Yet no sooner had policymakers taken steps to close last year’s unprecedented budget shortfall than another began nipping at our heels. California’s current $18.9 billion gap — a $6.6 billion shortfall in the remainder of 2009-2010 and a $12.3 billion gap in 2010-2011 — comes as legislators have exhausted all easy options and as a full economic recovery still looms far off.  American Recovery and Reinvestment Act funding has provided an important stopgap, preventing even deeper cuts from taking place. Yet without an extension, these funds will expire at the end of the year and so, too, will the federal protections for Medicaid eligibility.

What will happen to California’s health care programs and services this year? Will California be able to meet the current and future needs of Californians, who, because of the economic crisis, are turning to programs like Healthy Families and Medi-Cal in growing numbers? Unfortunately, there are no easy answers.

California’s budget gap is so large that nothing can be taken off the table, particularly health care services, which account for approximately one-fifth of the budget. But a balanced approach that includes additional revenue and federal aid is essential to blunt the impact of further cuts.

California must also fully repeal — not merely delay — corporate tax cuts that were included in recent budget agreements. These tax cuts, which will benefit a handful of the state’s most profitable corporations, were slipped into budget agreements with no public hearings and will cost as much as $2.5 billion a year. That’s a price tag California cannot afford.

The good news is that national reform efforts have raised awareness about the necessity for affordable health care. Let’s hope that as national reform efforts move forward, California’s policymakers continue to work toward budget solutions that don’t undermine the availability of health care here at home.

Cutting Health Care Programs Is Shortsighted

Jeffrey Luther
Past president, California Academy of Family Physicians

Health care is a dire, unmet need for millions of Californians, not just a luxury for those who can afford it. As advocates for our patients, and those whose only recourse may soon become the emergency department, family physicians are calling on our elected leaders to increase sources of revenue to balance California’s budget, instead of eliminating essential health services as Gov. Arnold Schwarzenegger has proposed.

It’s extraordinarily shortsighted to cut the very programs that provide essential health and human services to children, adults and elders living in poverty. These services keep people healthy and keep health care costs down.

Legislators should eliminate corporate welfare instead of ignoring the well-being of Californians who work for low wages or have lost their jobs or who are disabled or chronically ill. Corporate tax cuts enacted in 2008 and 2009 will cost the state an estimated $8.7 billion in lost revenue over the next eight years and at least $2 billion annually thereafter. To help balance that corporate giveaway, the governor proposes cutting $2.4 billion in health services over the next 18 months.

His plan cuts $1.2 billion from Healthy Families providing health coverage to children in low-income families, Adult Day Health Care, Family PACT’s family planning services, and In-Home Supportive Services, which allow people to remain safely in their homes instead of nursing homes and hospitals. We could avert every one of these cuts if we stopped subsidizing private corporations.

The governor and our state senators and Assembly members should also consider enacting soft drink and tobacco taxes, an oil severance tax and an increase in the state’s vehicle license fee — all ways California could raise revenue without damaging the economy.

The pain of balancing the budget should not be felt disproportionately by those most needing services. If one measure of a good government is how well we care for everyone, the state of California is failing.

By better funding health and human services, the state could draw down millions more dollars in federal matching funds. By under-funding health care, we leave money on the table and allow our hard-earned federal tax dollars to flow to other states to fund their health care programs instead.

The academy supports the governor’s efforts to obtain a fairer share of federal tax dollars the people of California pay, but this money alone won’t be enough to solve the state budget crisis. For that, we need to collect the same corporate taxes that other states do.

Proposed Budget Might Devastate Safety Net

Carmela Castellano-Garcia
CEO, California Primary Care Association

While we strongly support Gov. Schwarzenegger’s desire to draw down additional federal funds and will work to this end, the cuts proposed by the governor’s budget will devastate the safety net to the point that it might not be able to sustain itself.  The cuts include $750 million of so-called cost containment strategies in Medi-Cal, a $100 million cut in Adult Day Health Care and the elimination of Healthy Families for children from families whose incomes exceed 200% of the federal poverty level. The proposal includes Healthy Families participants assuming additional costs for all children in the program, which will reduce access for the children most in need.  These are just some examples of how this budget fails the people of California.

These cuts are a problem for clinics because clinics rely on Medi-Cal for the majority of their income.  Our community clinics and health centers already operate on the leanest of budgets and the governor’s proposed cuts to Medi-Cal will jeopardize their ability to keep their doors open, which will cost the state more money by forcing our patients to seek more costly care elsewhere, such as hospital emergency rooms.

These current proposed cuts are devastating enough without the governor additionally proposing trigger cuts that would eliminate the Healthy Families program, the Family PACT program, the In-Home Health Services program, and drop one million people including hundreds of thousands of children from the Medi-Cal program.

These so-called trigger cuts would leave the safety net tattered in shreds. Last year, the governor’s budget included significant revenue increases that helped to save these vital programs, but he has failed to even propose any major revenue increases, which are required if he wants to maintain his commitment to the children and other vulnerable populations.

The governor must include revenue that can come from a myriad of sources including the closing of corporate tax loopholes, a tax on oil profits, and by increasing taxes on tobacco and alcohol.  Any of these proposals are superior to asking our seniors and children to go without the help they need.

California’s health centers urge the governor to re-evaluate his budget priorities and propose a budget that puts the needs of the people of California first.