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Think Tank

What Will Post-Budget Health Care Look Like in California?

California’s recently approved budget includes several cuts to health care and related social service programs. In addition to a $1.3 billion reduction in Medi-Cal, cutbacks are also in store for In-Home Supportive Services, senior services, AIDS services, mental health programs and welfare. Although the Healthy Families program for children will not be eliminated as Gov. Arnold Schwarzenegger (R) proposed, it will be cut by $178.6 million.

Even proponents of this budget are not pleased with the result and nobody expects this spending plan to resolve California’s financial problems as the economy continues to struggle and tax revenue lags.

The legality of some cutbacks — those made by Schwarzenegger using the governor’s line-item veto authority — is being challenged in court. But those cuts represent a relatively small portion of the overall reductions about to take place in health and human services programs throughout the state.

We asked several state leaders to respond to two questions: What is health care in California going to look like after these cuts, and what are the prospects for replacing the funds in the future?

Notably absent is a response from the governor’s office. We invited someone from Gov. Schwarzenegger’s administration to contribute. His press office declined.

We did get responses from:

Safety Net Fraying, Especially in Rural Areas

Desirée Rose
Executive Director, California State Rural Health Association

The recent state budget cuts are creating financial devastation for California’s rural health care safety net at a time when the demand for services is increasing sharply, and rural California — representing 85% of the state’s landmass and home to five million people (15% of the state’s population) — needs them the most.

Rural Californians had difficulty accessing appropriate health care services prior to the cuts. There are 935 residents per doctor in rural California compared with 460 in urban areas of the state, and approximately 45% of rural Californians live in areas designated as Primary Care Health Professional Shortage Areas. The discrepancy in access to dental health is even more considerable.

The budget signed by the governor has literally crippled the rural health care safety net and will inevitably lead to premature deaths of California’s most vulnerable populations if they have no insurance and are denied access to readily available health care.

Among the worst cuts has been the governor’s line-item veto of the traditional clinic programs, including Rural Health Services Development, Expanded Access to Primary Care, Indian Health and Seasonal Agricultural Migratory Worker.

With his blue pencil, the governor stripped community clinics of $35 million in necessary funding to help provide 1.6 million patient visits to uninsured Californians. The traditional clinic program cuts, in addition to the loss of optional benefits, and the slash to the Healthy Families program compound the already strained financial situation rural providers are faced with.

Budget reductions have already forced rural clinics across the state to lay off workers, eliminate critical health and social service programs, and in some cases to close their doors all together.

For thousands of rural residents, the nearest provider is now hours away, and with a poor transportation infrastructure, this makes access to needed services next to impossible for California’s oldest and sickest populations.

California currently has an 11.6% unemployment rate, up from 7.1% just a year ago. In rural counties, the unemployment rate has escalated up to an average of 13.8%.

The Kaiser Family Foundation states that for every percentage point rise in the unemployment rate, 1.1 million more people will go without health insurance. The loss of access to health care via primary care clinics will inevitably shift the cost of the uninsured to hospital emergency departments and eventually to paying consumers.

The prospects for replacing the funding losses from the budget cuts are dismal. The Managed Risk Medical Insurance Board is engaging California’s First 5 and other philanthropic groups in hopes of filling the $50 million loss to Healthy Families.

AB 1383, a bipartisan bill introduced by Assembly member Dave Jones (D-Sacramento) in February, attempts to address the Medi-cal cuts by imposing provider fees on hospitals — fees that could be matched by federal recovery dollars, potentially increasing funding for children by $320 million. Unfortunately, the bill is on hold in suspense file in the Senate.

In the short term, legal action is required to reverse the line-item vetoes made by Gov. Schwarzenegger to prevent further harm to the most vulnerable among us. However, without large-scale reforms to California’s government infrastructure to facilitate a better functioning, more cost-effective system, we will repeatedly face a health care crisis with each budget negotiation, putting the lives of thousands of children, elderly and the disabled on the line.

Budget ‘Solution’ Only Temporary

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

The budget adopted by the California Legislature last month provides a very temporary solution to the state’s continuing budget shortfalls and policy gridlock. The temporary nature of the solution is seen by the frequent use of the terms “assumes”, “borrows” and “delays” in the state Legislative Analyst Office’s review of the 2009-2010 budget.

Under the heading of “assumes” and “unspecified,” the Legislative Analyst counts $4.4 billion. Under “borrows, shifts or delays,” the Analyst counts another $5.3 billion. For the next budget some of the temporary taxes adopted in February expire and some of the federal stimulus money goes away.

Even if the economy roars back, California will face state budget shortfalls far into the future.

How has this happened? There are three principal reasons. First, in 2000 when the economy boomed, the legislature with large bipartisan votes continued a series of tax cuts ($10 billion in total) and implemented increases in education and health care. Then the dot-com boom disappeared and the state has faced a structural budget gap between normal year revenues and spending ever since.

Second, California and other states face plunging revenue from the nation’s deep and continuing recession. A large part of what we face today is nobody’s fault, and the choices we face as a state are between bad and bad. I think additional federal aid to all states and localities is needed for this no-fault dilemma but that does not seem to be in the political cards today.

There is a part of California’s continuing budget saga that is our fault and for which we need to find a solution. Residents tell leaders, “Don’t cut services, don’t raise my taxes (maybe you can raise someone else’s taxes),” and elected leaders say, “We hear you loud and clear.”

It is easy to blame elected leaders who seem to have difficulty agreeing on much of anything in California. But until we as residents find a way to send them a clear message with budget arithmetic that adds up, we are part of the problem and not part of the solution.

And then there is the constant barrage of chatter about “living within our means” and “excessive state spending” even though with the recent budget cuts, today’s spending is far below the increase in caseloads and inflation over the past 10 years. And the share of the state economy that goes to the state budget in 2009-2010 will be the lowest since Proposition 13 was passed in 1978.

Health care advocates must fit their hopes and dreams into the context of helping to solve California’s overall budget challenges. The thought of advocates for education, health care, social services and infrastructure fighting among themselves for sacred dollars is no solution, in my opinion.

Health Care Set Back Decades by Cuts

Carmela Castellano-Garcia
President and CEO, California Primary Care Association

Just when we thought cuts to health care couldn’t possibly get any worse and we were prepared for what the state had in store us, Gov. Schwarzenegger decided to pull out his “blue pencil” and unilaterally slash an additional $500 million from an already devastating state budget package.

Now, and after nearly two years of non-stop cuts, one-sided sacrifices and pain dished out by our state lawmakers, California’s health care system and safety net programs have truly been stripped to their bare bones. Even if Legislative Democrats and affected stakeholders are successful in fighting the governor’s authority to make these recent reductions, the damage has already been done and health care in California has been set back decades.

All told, state budget actions over the last 18 months have crippled the state’s health care provider networks, exacerbated its work force shortages, increased the number of uninsured people and likely driven state health care costs up, not down.  

At a time when the economy is faltering, the unemployment rate is rising, and droves of newly uninsured patients are being created every day, California’s safety net of community clinics and health centers is losing its ability to continue to meet the needs of the state with the largest underserved population in the nation.

Already, dozens of health center sites in California have been forced to close or are in jeopardy of closing because of our cuts-oriented budgets. In the best cases, health centers are being forced to lay off staff, reduce facility hours, and as a last resort, cut back on vital services to patients.

California’s community clinics and health centers are now operating in an environment where they lack the resources to provide dental, podiatry, optometry, psychology and a host of other critical Medi-Cal services that were somehow deemed “optional” by lawmakers. They now have to absorb the new costs of treating our state’s most vulnerable children and seniors because the governor has slashed the Healthy Families funding and programs for the elderly and disabled.

And, in perhaps the biggest targeted blow they have ever experienced, health centers now have to find new ways of continuing to care for our state’s vast uninsured urban, rural, farm worker and Native American populations because the governor blue penciled out traditional clinic programs — Expanded Access to Primary Care, Rural Health Services Development, Seasonal Agricultural Migratory Workers, and Indian Health — from our general fund expenditures.

Gov. Schwarzenegger has stated that clinics will get help from federal stimulus funding and federal health care reform, and can therefore endure. But I’d like to remind him and his legislative colleagues that the elimination of Medi-Cal Optional Benefits and traditional clinic programs alone have negated the impact of the federal stimulus dollars health centers have received to serve the uninsured.

The elimination of the clinic programs brings every health center in California into the negative category.  For the one hundred clinics in California that did not receive any stimulus funding, one will close at the end of this month with others likely to follow.

What good will federal health care reform be if there is no health care system in California to build on?

It is time that our state leaders start to understand how their shortsighted decisions are destroying the future of California.