CDCAN REPORT #012-2011: Governor proposes huge cuts to Medi-Cal

SACRAMENTO, CALIF  (CDCAN) [Updated 01/10/2011  03:30 PM  (Pacific Time)] -  As reported earlier this morning, Governor Jerry Brown’s proposed State Budget for 2011-2012 calls for over $12.5 billion in permanent spending reductions, including $1.7 billion in cuts in State general spending for Medi-Cal that calls for imposing a permanent 10% reduction to Medi-Cal providers, limits or caps on spending of certain Medi-Cal services, elimination of Adult Day Health Care and Multipurpose Senior Services Programs and imposing co-payments or share of costs for certain Medi-Cal services, such as emergency room and doctor visits.

California faces a budget shortfall of over $25 billion and projected on-going budget deficits through at least 2016 of over $20 billion unless permanent action is taken by the Governor and Legislature.

In addition to $12.5 in proposed spending cuts, the Governor today proposed a budget plan that calls for $12 billion in revenues, including a five year extension (requiring voter approval in a special election in June) of about $8 billion in temporary tax increases that are scheduled to expire this year.

The budget plan also calls for some one time solutions including $1.8 billion in borrowing from special funds, $1.7 billion in property tax shifts, $1.0 billion from shifting funds from the Proposition 10 Children and Families First reserve fund to pay for children’s health services, and $0.9 from the Proposition 63 Mental Health Services Act fund balance to pay for three mental health community-based programs including AB 3632 special education mental health services.

Governor Assumes That Legislature Will Act To Pass Early Budget By March

The Governor’s proposed budget plan assumes it will be on a fast track, with the Legislature approving the entire budget package, including necessary budget related bills by March to allow enough time for certain proposals – including extension of tax increases – to be placed on the ballot for voter approval in a special election, likely to be held June 15th.

That means the Legislature would have to move quickly in the next several weeks as it did in 2009, when it approved mid-year reductions and the 2009-2010 State Budget in February 2009 – four months early.

That means the normal budget process – where there are budget subcommittee hearing beginning in late February through early May – may not likely happen this year as it did in 2010 and previous to 2009, if the Governor has his way.  There will likely be a budget revision proposal however in June – instead of May - after the special election, depending on what the voters do and also any new proposals advanced by the Governor.

Healthy Families Program Cuts Proposed

The Democratic Governor is also proposing elimination of the vision benefit, increasing co-payments and monthly premiums for children and families in the Healthy Families program – the program matched by funding from the federal State Children’s Health Insurance Program (SCHIP) that serves over 900,000 children across the State who are not eligible for Medi-Cal but whose family incomes are at or below 250% of the federal poverty level ($44,100 per year for a family of four).

Proposes Shifting Proposition 63 Funding for Mental Health Programs

The Governor also proposes to use existing fund balance from the Proposition 63 Mental Health Services Act to fund 3 mental health programs: Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program that services over 230,000 children and young adults who are Medi-Cal eligible; Medi-Cal mental health managed care and the mandated mental health services for special education students under AB 3632.  The Governor proposes to replace the funding used from the fund balance of Proposition 63 with another source of revenue during the 2012-2013 State Budget year that begins July 1, 2012.

Huge Cuts Proposed For In-Home Supportive Services

As reported in earlier CDCAN Reports today, the Governor’s proposed cuts to In-Home Supportive Services, including making permanent the across the board 3.6% in IHSS hours for all recipients, which goes into effect February 1, 2011 (that cut was approved as part of the 2010-2011 State Budget in October) and increasing that reduction by another 8.4% (or a total of 12%) effective July 1, 2011.

The Governor also proposes elimination of domestic and related services for persons under age of 18 living at home, and also for adults residing in a “shared living” arrangement.

More significantly, the Governor is proposing that all persons for applying for services under IHSS and all persons currently in the program would be required to have a certification from a physician that they are “at risk” of being institutionalized in order to be eligible for the program.  The Governor’s budget assumes that about 40,000 or more people would, for various reasons, no longer be eligible for IHSS due to this new requirement.

$750 Million Reduction For Developmental Services

Also reported earlier in a previous CDCAN Report today was the Governor’s proposal for a $750 million reduction in state general fund spending for developmental services that includes the 21 non-profit regional centers.

The bulk of that cut will most likely come from the 21 non-profit regional centers who coordinate community-based services and supports to over 240,000 children and adults with developmental disabilities.  The regional centers contracted under the Department of Developmental Services (DDS) also coordinate the state’s early intervention program – called Early Start – that serves over 25,000 infants.

The proposed $750 million reduction does not include any lost federal matching funds which would like push the total reduction in spending in developmental services to close to $1 billion (all funds).  This reduction is on top of 2009’s permanent and on-going $500 million reduction (including federal funds lost) in developmental services (the bulk of it impacting regional center funded services).

The $750 million reduction in State general fund spending proposed by the Governor would include the continuation for at least another year of the existing 4.25% reduction in payments to most regional center providers and to regional center operations which was scheduled to end as of June 30, 2011.  That reduction would, under the Governor’s proposal, continue at least through June 30, 2012 – though the savings or reduction amount actually is permanent. See below and also CDCAN Report #010 and #011 for further details on the IHSS and developmental services proposed cuts.

The reduction also would be achieved through several unspecified measures, including imposing new accountability and transparency measures; and implementation of a statewide purchase of services standards – first attempted in 2002 by Governor Gray Davis.

CDCAN Note: CDCAN has scheduled toll-free conference calls on the budget, and also on sharing updates, information and next steps, including problem solving and addressing significant trends and issues dealing with developmental services (regional centers and developmental centers) on January 14, 21 and 28  (Fridays) at 1:30 PM to 2:30 PM – and after that, every two weeks. Other separate conference calls (different from CDCAN Townhall Telemeetings) will be scheduled on an on-going basis covering other areas, including Medi-Cal, IHSS, etc.   See separate CDCAN Report for details.

SUMMARY OF PROPOSALS IMPACTING PEOPLE WITH DISABILITIES, MENTAL HEALTH NEEDS, THE BLIND, SENIORS & FAMILIES:

MEDI-CAL PROGRAM REDUCTION PROPOSALS

Medi-Cal serves about 7.7 million Californians – well over 1.7 million of those children and adults with disabilities (including developmental), the blind, seniors.  The Medi-Cal program – which is what California calls the federally matched funded Medicaid program – has an annual budget of $41.6 billion of which $13 billion is State general funds, $24.1 billion is federal funds and $4.5 billion from other funds).

10% MEDI-CAL PROVIDER RATE REDUCTION

• Proposes to reduce by 10% Medi-Cal provider payments to physicians, pharmacies, clinics, medical transportation, home health agencies, Adult Day Health Care, certain hospitals and nursing facilities.
• Proposes to reduce provider rates by 10% for long term care facilities, including nursing homes
• Rate cut would result in reduction to the Medi-Cal program (or savings to the State) of $9.5 million in State general funds during the remaining months of the 2010-2011 State budget year that ends June 30, 2011 and another $709.4 million in State general funds during the entire 2011-2012 State budget year that begins July 1, 2011.

CDCAN NOTE:

• Proposal for rate reduction assumes that California will eventually prevail in several federal court cases that have for now, blocked Medi-Cal provider rate reductions.  It is anticipated that the US Supreme Court will decide this month (January) whether or not to take up those cases (if it decides not to, then the rulings of the US 9th Circuit Court of Appeals blocking those cuts would stand).  If the US Supreme Court decides to take up those cases, the Governor’s proposed budget assumes the US Supreme Court would decide the cases by July 1, 2011 – and that the State would win.
• If the US Supreme Court does not take up the cases (which means the 2008 rate reduction would remain blocked) the Governor would still go forward with his proposal for a 10% Medi-Cal provider rate cut, but says it would do so by complying with the court’s requirement for the State to follow a certain process to enact a rate reduction for Medi-Cal providers.

ELIMINATION OF ADULT DAY HEALTH CARE

• Proposes elimination of Adult Day Health Care program Medi-Cal optional benefit, effective during the 2010-2011 State Budget year that ends June 30, 2011.
• Elimination would result in a reduction to the Medi-Cal program (or savings to the State) of $1.5 million in State general fund during the remaining months of the 2010-2011 State budget year and another  $176.2 million State general funds in the 2011-2012 State budget year and beyond.

CDCAN NOTE:

• About, according to the Governor’s proposal, 27,000 adults use Adult Day Health Care program services provided by over 330 providers.
• Governor Schwarzenegger made similar proposals to eliminate Adult Day Health Care in previous years, including last year, which the Legislature rejected.
• Even if Adult Day Health Care centers are not eliminated, the Governor is proposing 10% rate reduction to Adult Day Health Centers to take effect during the remaining months of the 2011-2012 State budget year that ends June 30, 2011.
   

ELIMINATION OF THE MULTIPURPOSE SENIOR SERVICES PROGRAM (MSSP) MEDI-CAL OPTIONAL BENEFIT

Governor Brown proposes elimination of these services under this Medi-Cal optional benefit, resulting in a reduction or a savings to the State of $19.9 million in State general funds during the 2011-2012 State budget year that begins July 1, 2011.

CDCAN NOTE:

• The Multipurpose Senior Services Program sites provide case management services for seniors 65 years or older (and currently eligible for Medi-Cal) who are certified or certifiable for placement in a nursing facility but who wish to remain their community. 
• The program has 41 sites across California serving about 11,789 seniors per month. 
• This Medi-Cal waiver program is administered under the California Department of Aging.
• Governor Schwarzenegger previously proposed a similar proposed elimination of this program in previous years, which was rejected by the Legislature.
   

ELIMINATION OF OTHER MEDI-CAL OPTIONAL BENEFITS

• Proposes elimination of over-the-counter cough and cold medications and nutritional supplements as Medi-Cal optional benefits
• Elimination would result in a reduction to the Medi-Cal program (or savings to the State) of $556,000 in the remaining months of the 2010-2011 State Budget year that ends June 30, 2011 and another $16.6 million in State general funds for the entire 2011-2012 State Budget year that begins July 1, 2011.

CDCAN NOTE:

• Governor Schwarzenegger proposed – and the Legislature approved – permanent elimination of 9 Medi-Cal optional benefits, including dental, for adults, that went into effect July 1, 2009. 
• The adult Medi-Cal optometry benefit was restored last June.  In addition a federal court in Sacramento ruled that certain optional benefits, such as adult dental, provided by rural health clinics, were restored if accessing those certain benefits from those clinics.
• It is not certain if the federal government has yet approved the State plan amendment to the State’s Medi-Cal State Plan to eliminate the 9 Medi-Cal optional benefits for adults.

LIMIT USE (UTILIZATION) OF SERVICES

Governor proposes the following limits in the use of certain Medi-Cal services, to take effect, if approved by the Legislature, no later than October 1, 2011 (based on the time needed to obtain federal approvals, and provide required notification to providers and recipients):

• Hearing Aids – would set a yearly maximum dollar cap of $1,510
• Durable Medical Equipment – would set annual maximum cap of $1,604
• Incontinence Supplies – would set annual maximum cap of $1,659
• Urological Supplies – would set yearly maximum cap of $6,435
• Wound Care – would set annual cap of $391
• The reduction or savings to the State for limits on medical supplies and equipment would be $9.8 million in State general funds in the 2011-2012 State budget year and would impact over 20,000 persons in the Medi-Cal program.
• Prescriptions (other than life saving drugs) – would limit to six per month (reduction or savings to the State of $11.1 million in State general funds in 2011-2012 State budget year
• Doctor Visits – would limit the number of doctor visits to 10 per year (reduction or savings to the State of $196.5 million in State general funds in the 2011-2012 State budget year and would reduce number of visits annually by recipients to doctors from 3.3 million to 2 million.

CDCAN NOTE:

Governor Schwarzenegger previously proposed identical or very similar proposals last year and in previous years – all rejected by the Legislature.

MEDI-CAL SHARE OF COST (CO-PAYMENTS)

• Would require a mandatory $5 co-payment on physician, clinic, dental, and pharmacy services ($3 on lower-cost preferred drugs). These co-payments would results in a reduction to the Medi-Cal program or savings to the State of $294.4 million in State general funds during the 2011-2012 State budget year that begins July 1, 2011. 
• Would require a $50 co-payment on emergency room services (resulting in a reduction to the Medi-Cal program or savings to the State of $111.5 million in State general funds during the 2011-2012 State budget year.
• Would require a $200 maximum co-payment for hospital stays (resulting in a reduction to the Medi-Cal program or savings to the State of $151.2 million in State general funds during the 2011-2012 State budget year.)

CDCAN NOTE:

• For the dental co-payment (which would go into effect, if approved by Legislature, on May 1, 2011), these mandatory co-payments would take effect October 1, 2011 (based on the time needed to obtain federal approvals and provide required notices to providers and persons in the Medi-Cal program.
• The total reduction to the Medi-Cal program from the co-payment proposals would total $180,000 in State general funds for  the remaining months of the 2010-2011 State Budget year that ends June 30, 2011 and another $557.1 million in State general funds for the entire 2011-2012 State budget year that begins July 1, 2011.
• Governor Schwarzenegger previously proposed identical or very similar proposals last year and in previous years – all rejected by Legislature.

MENTAL HEALTH COMMUNITY-BASED SERVICES

• Governor proposes using the current $2 billion Proposition 63 Mental Health Services Act, approved by voters in 2004, to fund certain existing mental health community services.
• The proposal would call for using the balance of the Proposition 63 funding to fund the Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program that services over 230,000 children and young adults who are Medi-Cal eligible.
• Proposal would call also for using the Proposition 63 fund balance to fund mental health managed care, which is a locally based managed care system for Medi-Cal mental health services. 
• The proposal would also use the Proposition 63 fund balance for funding required mental health services for special education students, including students in out of state residential facilities under AB 3632.
• Under the Governor’s proposal, the funding of these three programs using the Proposition 63 fund balance would result in a savings in State general fund spending of $861.2 million in the 2011-2012 State budget year that begins July 1, 2011.
• The Governor’s proposal calls for replacing the Proposition 63 funds used, with a yet unspecified dedicated revenue source, to occur in the 2012-2012 State budget year that begins July 1, 2012. 

CDCAN NOTE:

The Governor’s proposal assumes that it will not be necessary to have voters approve these changes – though some advocacy groups disagree.

HEALTHY FAMILIES PROPOSED REDUCTIONS

This program is matched by funding from the federal State Children’s Health Insurance Program (SCHIP) and serves over 900,000 children up to age 19 from low income families (up to 250% of the federal poverty level or $44,100 per year for a family of four) who do not qualify for Medi-Cal

VISION COVERAGE ELIMINATION

• Governor Brown proposes elimination of separate vision coverage benefit for all children in the Healthy Families program (would result in a reduction to the program or savings to the State of $0.9 million in the remaining months of the 2010-2011 State budget year that ends June 30, 2011 and about $11 million in State general funds in the 2011-2012 State budget year)
• Proposal, if approved by the Legislature, would take effect June 1, 2011, after required notifications to providers and persons in the program.

MONTHLY PREMIUM INCREASE

• Proposes increase in Healthy Families monthly premiums with incomes at or above 150% of the federal poverty level (impacting 565,000 children) for a reduction to the program or savings to the State of $1.9 million in State general funds during the remaining months of the 2010-2011 State budget year that ends June 30, 2011 and another  $22 million in State general funds for the 2011-2012 State budget year that begins July 1, 2011. 
• Premiums would increase for families with incomes between 150% to 200% of the federal poverty level by $14 per child (from $16 to $30 per month per child) and increases the maximum limit for a family with three or more children by $42 for a family maximum of $90 per month
• Proposes for families with incomes from 200% to 250% of the federal poverty level increase in monthly premiums by $18 per child per month (from $24 to $42) and the maximum limit for a family with three or ore children would increase by $54 to $126.
• No increase is proposed for families with incomes under 150% of the federal poverty level.

CDCAN NOTE:

• Under the 2010 federal poverty level guidelines, a family of four at 150% of the federal poverty level would be making an annual income of $33,075.  A family of four at 200% of the federal poverty level would be making an annual income of $44,100 and at 250%, their income would be $55,125 per year.   A family of four at 100% of the federal poverty level is making an annual income of $22,050. 
• Governor Schwarzenegger made nearly identical proposals last year and in previous years that the Legislature rejected.

INCREASE HEALTHY FAMILY CO-PAYMENTS

• Would increase co-payments for emergency room visits from $15 to $50
• Would increase co-payments for inpatient stays from $0 to $100 per day ($200 maximum)
• This proposal puts the Healthy Families co-payments in line with the co-payment proposal for the Medi-Cal program and would take effect October 1, 2011 after required notices are sent out to providers and persons in the Healthy Families program.
• Would result in a reduction to the program or savings to the State of $5.5 million in State general funds during the 2011-2012 State budget year.