Health care changes tweaked
Questions persists on how the governor's new Medi-Cal plan will affect providers and beneficiaries.

By Clea Benson -- Bee Capitol Bureau
Published 2:15 am PST Tuesday, January 18, 2005

When he unveiled his first budget last year, Gov. Arnold Schwarzenegger proposed saving $400 million with dramatic reforms in Medi-Cal, the gigantic health insurance program for the disabled, elderly and poor that covers one in six Californians.
But the governor later scrapped that idea to avoid a bruising political fight with Democrats. Instead, he kicked off a year of talks with everyone from hospital administrators to needy citizens about improving the unwieldy, rapidly growing safety net that consumes 15 percent of the state budget.

In his proposed budget last week, Schwarzenegger produced the result: a more measured approach to overhauling Medi-Cal that would cut substantially less than last year's proposal. The new plan would move many elderly and disabled recipients into managed care, institute monthly premiums for about 500,000 people just above the poverty level, and cap dental benefits at $1,000 a year. Expected savings to the state: $12 million next year and $142 million over the next five years.

Administration officials describe it as a balanced approach to saving money and providing services.

"The administration has been very attentive to the importance of maintaining coverage, of not taking actions that will contribute to more people being uninsured and putting further pressure on the regrettably already fairly fragile health-care delivery system," said Kim Belshé, secretary of the California Health and Human Services Agency.

Though the concept is drastically scaled back from last year's, getting it approved could be Schwarzenegger's toughest test yet. To get Democratic support, the administration will need to convince advocates for Medi-Cal users and providers that the changes would protect their services and their livelihoods.

But first, the Republican governor will have to convince the Bush administration, which splits the cost of Medi-Cal with the state, that the plan will save money.

Ultimately, the success of the whole Medi-Cal overhaul rests on the most arcane piece of the plan - a proposal for changing the way the government hands out Medi-Cal dollars to hospitals that treat a high volume of uninsured patients.

Belshé and other state officials have been meeting with federal officials throughout the past few months to try to work out a deal.

While advocates for the different groups served by Medi-Cal say they are skeptical about the governor's plans to expand managed care and start charging premiums, they are most concerned about the outcome of those discussions with the Bush administration.

President Bush is widely expected to seek cuts in Medicaid, the federal program that funds Medi-Cal, when he presents his budget next month.

"All of these specific (proposals) are secondary to the result of the negotiation with a federal government that is actively looking to cap funding for health care, and that is where the biggest trepidation is," said Anthony Wright, director of Health Access, a nonprofit group that advocates for affordable health care.

The problem is this:

Some hospitals get special Medi-Cal funds to offset the cost of treating a high volume of uninsured patients, in recognition that those institutions probably couldn't keep their doors open otherwise. The amount those so-called "safety net" hospitals get is based on how many Medi-Cal patients they treat, on the theory that hospitals with lots of low-income insured patients probably also are seeing many needy patients without insurance.

While some of these institutions are private, many are run by counties or the University of California.

"These dollars help keep hospitals open that provide critical services, not only to the Medi-Cal and uninsured populations but really to all of us," Belshé said. "Many of these hospitals have emergency rooms that we all use and depend on."

At the same time, Schwarzenegger's proposal to shift more Medi-Cal recipients to private managed care would mean that public hospitals would see a decrease in Medi-Cal patients and a corresponding drop in the amount they receive to treat the uninsured.

So the Schwarzenegger administration wants the federal government to approve continued payments to safety-net hospitals for treating the uninsured without linking those payments to Medi-Cal services.

But to get Bush administration approval for the whole plan at a time when the federal government is adamant about controlling costs, the state has to promise that spending on these hospital payments won't increase beyond a certain amount. Under Schwarzenegger's proposal, counties would bear the responsibility for unforeseen cost increases at public hospitals, such as a disease epidemic or a natural disaster.

Public hospitals and county administrators are wary.

"The only mechanism for growth is for counties to spend more money," said Rachael Kagan, a spokeswoman for the California Association of Public Hospitals.

Assuming the Schwarzenegger administration can work out a deal with the federal government that counties also will accept, Medi-Cal users and providers are scrutinizing other parts of the plan.

Though the elderly and people with disabilities make up only about 25 percent of Medi-Cal users, the costs for treating them take up about two-thirds of the Medi-Cal budget. So the governor is proposing to shift about 800,000 people - 550,000 of them elderly or disabled - into managed care in 27 counties where managed care is most readily available.

The group would be phased into managed care over about 18 months, starting in 2007, after the state ensured that local medical providers were able to accommodate people with severe disabilities.

Cheryl Bergan, a policy analyst at the California Foundation for Independent Living Centers, said she was pleased with the apparently gradual approach, though she has concerns about the proposals that would cap dental benefits and charge premiums for people above the federal poverty level.

The disability-rights community also expects to fight the governor's proposed cuts to the wages of home-care workers, a benefit paid in part by Medi-Cal.

"It sounds like they understand the access needs of people with disabilities," Bergan said. "We need to make sure we can get in the door, that they can weigh us in our wheelchairs, that materials for people who are blind are available. ... There are still a few questions out there, but by and large, they dropped some of the things that were more complicated and probably would have resulted in an administrative nightmare."

Some advocates predict that instituting small monthly premiums - $4 for children and $10 for adults - for half a million people above the poverty level would be an administrative nightmare. They point out that the administration's fiscal projections estimate that 20 percent would drop off the Medi-Cal rolls completely for failing to keep up with the payments.

"The biggest concerns (about the Medi-Cal redesign) are not with the immediate impacts but with the secondary impacts that are more severe," Wright said. "The concern with premiums is less about the 550,000 people who have to pay more to get needed health coverage, it is the potentially 110,000 folks who will fall off the rolls as a result. The impact is less on the 3 million who will have their dental benefits restricted, but it's the 124,000 of them who will have more than $1,000 in costs for dental care.

"The concern with managed care is not only that (the elderly and disabled) will lose access to their doctors and specialists that they've come to rely on, but that changes the financing system of the hospitals we all rely on."