Health care cuts upheld by California court

State authorities continue to land in the courts as more of their attempts to solve budget shortfalls come at the expense of health care programs.

In California, a coalition of health clinics and disability support centers are challenging an appeals court ruling upholding Gov. Arnold Schwarzenegger's line-item vetoes to a budget revision that slashed various health and social service programs.

In Minnesota, a lawsuit filed March 4 by a group of indigent patients enrolled in a public medical assistance program may have prompted Gov. Tim Pawlenty to reverse course on plans to cut the program's budget.

California's 1st District Court of Appeal on March 2 ruled unanimously that Schwarzenegger acted within his constitutional authority when he vetoed an additional $300 million in health spending -- including $60 million from Medicaid and $50 million from the Children's Health Insurance Program -- from a revision of the 2009-10 budget. The adjustments were part of a second attempt to close the state's then-estimated $42 billion deficit. They came on top of reductions lawmakers already approved in an earlier budget revision, cutting Medicaid and CHIP by $300 million and $125 million, respectively.

The court rejected the plaintiffs' arguments that since the Legislature already approved those cuts, the later budget revision did not include new appropriations subject to the governor's override.

"The governor and Legislature had a deal as far as what the midyear budget revisions were going to be, and the governor reneged on that deal and exercised authority he didn't have," said Jim Mangia, president and CEO of St. John's Well Child & Family Center, the lead plaintiff in the case.

The federally qualified community health center in Los Angeles lost $1 million in annual funding, Mangia said, forcing the facility to cut back on critical services for uninsured patients, including asthma and immunization programs.

"These cuts were broad and deep and had a profound impact on critical health care and social services organizations. It basically decimated the safety net in California," Mangia said. His organization, along with the other plaintiffs, are appealing the decision to the state Supreme Court.

California Senate President Pro Tempore Darrell Steinberg, who intervened in the lawsuit, said the ruling ratified the far-reaching impact of the governor's cuts. The senator, a Democrat, also expressed concern about what he called an "unprecedented amount of power" the ruling gives to Schwarzenegger and future governors.

Schwarzenegger maintains that the actions were legal and praised the court decision. Rachel Arrezola, his spokeswoman, said the governor was forced to make difficult cuts after the Legislature failed to balance the budget.

Minnesota program safe for now?

Meanwhile, General Assistance Medical Care patients in Minnesota may have gotten what they ultimately sought through their lawsuit contesting the constitutionality of Gov. Pawlenty's proposal to defund the program by $16 million.

The move would have ended GAMC -- which provides health coverage to residents with incomes less than 75% of federal poverty level -- on April 1, at least a month earlier than expected. Citing budget constraints, Pawlenty proposed transferring the patients to a cost-sharing Medicaid expansion program known as MinnesotaCare.

But that would mean higher out-of-pocket costs and restricted benefits for GAMC patients who cannot afford the gaps in coverage, said Anne Quincy, an attorney with Mid Minnesota Legal Assistance, a public interest law firm that helped file the case.

"We passed a law that appropriated funds for [GAMC] and hadn't used them all, and you can't end a program that has funds allotted to it," she said.

The patients sought an injunction to stop the defunding in the hopes of giving lawmakers more time to come up with another plan. A Ramsey County, Minn., trial court on March 5 denied the request because negotiations were ongoing, but it urged lawmakers to resolve the issue.

Pawlenty and lawmakers responded with a new proposal to continue GAMC until June 1, after which patients will be shifted into a scaled-down version allowing them to seek care through a hospital-based coordinated care system.

The governor's office would not comment on the lawsuit, but in a statement announcing the new plan, it said it included "meaningful health care reform and important cost savings."

At this article's deadline, formal legislation had not been drafted. If the plan to continue GAMC patients' coverage is approved, the lawsuit likely will be dropped, Quincy said. Until then, a court hearing is set for June 3.

The Minnesota Medical Assn. did not take a position on the case but testified in support of preserving GAMC and other safety net programs. MMA President Benjamin H. Whitten, MD, said the lawsuit was "a symptom of a shortsighted attempt to achieve savings on the backs of the most vulnerable."

He added that the newest plan -- which is expected to cut doctor pay and draw on money from a physician tax meant to fund MinnesotaCare -- is likely no more than a stopgap measure. "If we are going to provide this care, then we ought to address it head-on with broad-based funding mechanisms, and not be looking at it as the first place to cut."