California physicians eye $42 billion state deficit

As California Gov. Arnold Schwarzenegger and state lawmakers negotiate a solution to the state's projected $42 billion budget deficit, physician groups warn that cutting health care access will cost the state more money in the long run.

Schwarzenegger and the lawmakers have been unable to agree on a solution to close the anticipated $14 billion gap in the state's fiscal 2009 budget, which ends on June 30. If no action is taken, the deficit would balloon to $42 billion one year later.

By Feb. 1, the state will have exhausted all of its emergency sources of revenue. On that day, California Comptroller John Chiang will begin delaying payments for state tax refunds, public assistance and several other state programs. But Medicaid pay for hospitals and physicians will not be stalled, said Chiang spokesman Garin Casaleggio.

"Delaying these payments will get us through the next few months, but it will not solve the problem," Chiang said. "Only the governor and the Legislature have the power to avoid this drastic and painful path."

Jeffrey Luther, MD, president of the California Academy of Family Physicians, said state leaders haven't reached a budget agreement because neither side is giving ground. New taxes require the approval of 60% of the Legislature. There are enough anti-tax Republicans to block tax increases proposed by the Democratic majority, which prefers to maintain services, Dr. Luther said. Meanwhile, Schwarzenegger in January vetoed a Democratic budget for 2009-2010 because it did not contain billions in spending reductions he sought.

"We're faced with part of the Legislature that only wants to cut services, and the other part that's trying to cut services and raise new revenue," Dr. Luther said.

Schwarzenegger has backed Medicaid eligibility reductions and requirements for twice-annual Medicaid reenrollment, but Dr. Luther warned that limiting health care access has a long-term price. "They ultimately will increase costs, because preventive care and chronic care of diseases will be delayed and [emergency department] costs will go up."

Schwarzenegger called for more bipartisanship during his Jan. 15 state of the state address. "Conan's sword could not have cleaved our political system in two as cleanly as our own political parties have done," he said.

The governor and the Legislature last February approved 10% across-the-board cuts to Medicaid physician fees effective July 1, 2008. But a coalition of health care organizations -- including the California Medical Assn. -- sued the state and secured an injunction to block the cuts in August 2008. That lawsuit is still pending.

The state needs to embrace spending limits and other fiscal reforms before increasing taxes and fees, said Assembly Republican Caucus Chair Cameron Smyth. "These include a constitutional spending limit and a strong rainy-day fund, forcing the Legislature to live within its means and stop the gross overspending that has contributed significantly to our budget deficit."

The projected $42 billion deficit would be equal to nearly half of the governor's $97.7 billion fiscal 2010 budget proposal. For that reason, the CMA still fears that cuts may be proposed that affect physicians. "Everything is at risk when you're looking at a budget deficit that's approaching half the size of your entire budget," said CMA spokesman Andrew LaMar.