California tax hike could take pressure off Medicaid

A ballot measure for a $7 billion increase gains the support of state physicians and hospitals, who have been fighting fee cuts in the courts.

By , — Posted Feb. 10, 2012

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The California Medical Assn. on Jan. 31 endorsed a ballot measure proposed by California Gov. Jerry Brown that would increase certain state income and sales taxes to fund education and public safety programs.

In December 2011, Brown proposed two tax increases that would generate nearly $7 billion annually. The first would raise income taxes by 1% to 2% on individuals earning at least $250,000. The second would increase the sales tax by one-half cent. Both tax hikes would expire in 2016.

California Medical Assn. CEO Dustin Corcoran said Brown's proposal "is the only viable, balanced plan on the table to address the chronic budget crisis and protect essential health care services."

The California Hospital Assn. also supports the measure, said CHA spokeswoman Jan Emerson-Shea. She said the California Hospitals Committee on Issues -- the association's ballot initiative arm -- has contributed $500,000 to the campaign to get Brown's proposal on the ballot. The California Academy of Family Physicians supports efforts to raise new revenue to help ensure health care for vulnerable people, said CAFP President Carol S. Havens, MD.

Brown said lawmakers already have enacted deep cuts. The fiscal 2012 budget reduced spending by $10 billion. But these cuts have hurt schools and universities, imposed "debilitating reductions" to the state courts, and reduced funding for programs to assist the elderly and the disabled to levels not seen since 1983, Brown wrote in a Dec. 5 open letter to Californians posted on his website.

"The stark truth is that without new tax revenues, we will have no other choice but to make deeper and more damaging cuts to schools, universities, public safety and our courts," he wrote.

The state constitution requires two-thirds approval by both legislative chambers to increase taxes. Ballot measures bypass the Legislature but require hundreds of thousands of signatures before they can be put in front of voters.

California's financial difficulties continue. On Feb. 2, Brown signed a bill allowing the state to borrow $865 million from undesignated transportation funding to help fill a budget gap. California Controller John Chiang had warned lawmakers in January that the state could run out of money by early March. Chiang recommended $3.3 billion in short-term borrowing to close the gap.

Physicians win court round

Meanwhile, a U.S. district court on Jan. 31 blocked California from enforcing a 10% cut to the state's Medicaid payment rate. The preliminary injunction halts the reduction while a lawsuit over the cut continues.

The reduction, which Brown imposed last year, was approved by the Centers for Medicare & Medicaid Services in late 2011. The California Medical Assn. sued the state Dept. of Health Care Services and the federal Dept. of Health and Human Services over the cut. They said the pay cuts would harm patients already hit by a lack of available medical care.

In her decision, Christina A. Snyder, U.S. District Court judge for the Central District of California, questioned the cost studies that the California Dept. of Health Care Services relied upon to prove that the cut would not harm access to care. "The court finds that plaintiffs have shown a substantial likelihood of success of the merits of their claim that CMS' acceptance of DHCS' access analyses and monitoring plan was arbitrary and capricious."

The CMA applauded the court's decision, calling it "tremendous news for the future of medicine."

"Judge Snyder's prompt issuance of [the ruling] is evidence of the important nature of this case," said CMA President James T. Hay, MD. "The state's repeated attempts to slash Medi-Cal reimbursements have been halted once again. Rather than focusing on Medi-Cal cuts as a short-term budget solution, we should be working together to find long-term solutions."

Anthony Cava, a spokesman for the state health department, said he could not comment on pending litigation. However, he said the rate reductions approved by CMS are supported by extensive analyses conducted by the department.

"The findings showed that the approved reductions will allow California to continue to meet federal standards requiring an adequate level of access to care for beneficiaries," Cava said in an email.

Another lawsuit related to previous cuts enacted by the California Legislature is before the U.S. Supreme Court. At this article's deadline, a decision had not been issued in that case.

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