Government

California budget fix includes health care cuts

Reductions to Medicaid and CHIP lack specifics and may rely on questionable federal assistance.

By Doug Trapp — Posted Aug. 5, 2009

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California leaders solved a $24 billion state budget deficit in late July with the help of $1.5 billion in spending reductions to Medi-Cal and Healthy Families, the state's Medicaid program and Children's Health Insurance Program, respectively.

But the health cuts were less drastic than earlier proposals, such as Gov. Arnold Schwarzenegger's call to eliminate Healthy Families altogether. Most of the state budget reductions affected funding for prisons and education, including $9.4 billion in cuts to schools and colleges. The agreement also relies on billions removed from local governments and $2 billion in borrowing, among other provisions.

"With this budget, California has safely navigated the greatest economic crisis since the Great Depression," Schwarzenegger said July 24. He signed the measure July 28.

The budget bills adopted by the California Legislature in late July close the second huge deficit the state faced this year. Lawmakers in February adopted measures designed to fill $36 billion of a $42 billion deficit for fiscal years 2009-10, but voters on May 19 rejected five ballot issues that would have raised $6 billion for the February fix. This and further declining revenues left the state with a $24 billion deficit.

Schwarzenegger and state leaders were in a stalemate for weeks over the budget. Republicans refused to support tax increases, and Democrats did not have the two-thirds majority needed to adopt them. Democrats, however, did not support many of the deeper service cuts Republicans wanted.

The budget bills remove $173 million from Healthy Families -- nearly half of the program's budget, noted California Medical Assn. President Dev GnanaDev, MD. This will trim enrollment in the program, which covers about 1 million people, by hundreds of thousands, Dr. GnanaDev said. "These cuts dramatically increase the long-term health care costs borne by taxpayers, as the patients shut out of these programs now must turn to costly and overcrowded emergency rooms for care," he said.

The Medi-Cal cuts remain vague, said California Medical Assn. spokesman Andrew LaMar. California is expecting the federal government to provide $1 billion in additional Medicaid support, a plan that the medical society called "shaky." Also, $323 million of the Medi-Cal cuts have not been specified but will be identified by the state's Medi-Cal director at a later date, LaMar said. State budget documents assert that California paid more than its share for the Medicare, Medicaid and Social Security programs.

Lawmakers' attempts to cut Medi-Cal more deeply have been blocked by courts. A July 9 federal appeals court ruling found that California legislators violated federal law by adopting a 10% across-the-board cut to Medi-Cal pay for physicians and other health professionals in 2008. The state is asking the appeals court to reconsider the ruling.

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