$1.5 billion in Medicaid cuts and co-pays proposed by California governor

The budget request includes a previously blocked 10% Medicaid physician pay cut that will be considered by the U.S. Supreme Court.

By Doug Trapp — Posted Jan. 28, 2011

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California Gov. Jerry Brown on Jan. 10 proposed a $127.4 billion fiscal 2012 budget with hundreds of millions in Medicaid cuts to physicians, plus limits on doctor office visits for Medicaid enrollees and a variety of new Medicaid co-payments.

"These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice," Brown said in a statement. "For 10 years, we've had budget gimmicks and tricks that pushed us deep into debt."

The state faces a $25.4 billion deficit through fiscal 2012, which ends July 1, 2012. Brown proposed eliminating $14 billion of the deficit by using tax extensions and other new revenues, and the remainder by using cuts. Some of the tax extensions would require voter approval.

Brown's proposed Medicaid cuts and revisions would save the state about $1.5 billion. The revisions pertaining to physicians include:

  • Reducing Medicaid pay by 10% for doctors, pharmacies, home health care agencies, certain hospitals and others, saving $537 million.
  • Limiting Medicaid enrollees to 10 covered clinic and physician visits per year, saving $196.5 million.
  • Restricting enrollees to six prescriptions per month except for lifesaving drugs, saving $11 million.
  • Requiring $5 co-pays for Medicaid enrollees' physician office visits, $100 co-pays for each day of inpatient hospital care, and a $50 co-pay for all visits to emergency departments, among other co-pays. Combined with other cost-sharing, this would raise $557 million.

A federal court has blocked the 10% Medicaid pay cut, originally enacted by the Schwarzenegger administration in 2008, saying it was adopted without considering its impact on patients' access to care. But in a victory for the state, the U.S. Supreme Court on Jan. 18 agreed to hear the state's appeal of the lower court ruling. Brown's proposal assumes that the high court will side with the state and allow the cuts to be reinstated.

The nonpartisan California Legislative Analyst's Office said in a Jan. 12 report on the budget proposal that there's a significant chance the high court will rule against the state. However, the office's analysis concluded that Brown's overall budget was a good starting point.

California Medical Assn. President James G. Hinsdale, MD, said his state's Medicaid rates already are the lowest in the nation. "California's health care safety net cannot sustain these drastic cuts."

CMA spokesman Andrew LaMar said Brown's proposal is just the first step of a six- to nine-month process of shaping and debating the state budget. For years, California has been unable to adopt a budget on time or with realistic funding proposals, he said. The Legislature rejected a similar Medicaid co-pay proposal by Schwarzenegger last spring. State lawmakers also did not act on the former governor's proposal in December 2010 to place limits on Medicaid utilization.

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