Home Preserving Access to Health Care Preventing Health Care Budget Cuts Hospital Financing Fact Sheet

Governor Arnold Schwarzenegger’s Administration is negotiating with George W. Bush’s Administration to change the way that public hospitals are paid by the Medicaid program (known as Medi-Cal in California). There is no deal yet -- but the resulting five-year agreement will affect access to care for the uninsured, trauma and emergency services for all, and inpatient and outpatient services for Medi-Cal, uninsured, underinsured, immigrant and indigent patients statewide.

Issues of Concern for Health Advocates:

• The Cap: The waiver would set an amount of funding for California for each year for the next five years. In doing so, it would prohibit the ability to bring in new federal dollars in the next five years, when safety-net hospitals will need the ability to respond to a growing uninsured population and unforeseen health needs.
• The Structure, and Shift of the Financial Burden: The plan to switch to a reimbursement system of “certified public expenditures” is not just an administrative change: it would shift the responsibility of drawing down funds from the state to the counties. It would leave the counties with the financial burden for funding the hospitals while waiting for a reimbursement, and if any reimbursement was turned down. The structure of the proposal would eliminate all state funding for county and University of California hospitals, making them dependent on county resources and federal matching funds.
• The Amount of Money: We need new money from the federal government –at least $1 billion a year in new money—just to raise California from last place in Medicaid spending per beneficiary. The Administration has asked for a maximum of $700 million, yet public hospital are already fragile and confronting a growing uninsured population.
• The Distribution of Money: Even if California brings in at least $700 million, the proposal may distribute that money to a broader range of providers. Unless this proposal was accompanied by additional money, this “safety net pool” would divert needed dollars away from existing safety-net hospitals. It would also create a divisive dynamic, forcing safety-net providers to focus energies on dividing a pot of money, rather than urging for needed new dollars.
• The Process: The waiver process has not included consumer and constituency groups. It is likely to be decided privately between the state and federal government, without full evaluation of its impact to the state and specific hospitals.

The Interaction with the Federal Medicaid Cuts: An agreement with the Bush Administration on hospital financing would likely satisfy the President’s goal to cut and/or cap Medicaid. While it is questionable whether any waiver can protect California’s revenues from Congressional budget action, any agreement would provide an implicit support for these federal proposals that would undermine Medicaid.

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