The Orange County Register: Economic downturn adds to Medi-Cal costs–.html


April 13, 2011
Updated: 2:13 p.m.

In California’s state Capitol, they call it counter-cyclical, a clinically mundane term used to describe the volatile rollercoaster effect of a bad economy on government-run social programs. As the economy and tax revenues decline, demand for many state-run programs increases, putting more stress on the budget when it can handle it least.

The grand-daddy of all counter-cyclical programs is Medi-Cal, the state and federal program that provides health care for the poor.

“In California, the primary catalyst of growth in the Medi-Cal program in recent years has been the economic downturn,” said Anthony Cava of the Department of Health Care Services, which manages the Medi-Cal program.

Medi-Cal is California’s version of the nationally implemented Medicaid program and it provides more than 7.7 million low-income families, children, and elderly, and disabled Californians will health care and other vital human resources. Costs for the program are split by the federal and state governments, with a total price tag of about $53 billion this year.

On the surface, Medi-Cal costs in the state’s general fund appear to have risen by about 40 percent over the past ten years, increasing from about $9 billion in 2000-01 to $12.7 billion this year. That increase was driven by rising health care costs and changes in the rules that made more people eligible for the services.

But even that increase obscures the fact that the federal government, as part of the 2009 stimulus bill, dramatically increased its share of the costs. And that extra federal aid is about to expire, leaving California taxpayers responsible for a larger portion of the costs. Without the cuts adopted as part of this year’s budget negotiations, the state’s costs were projected to rise to $17 billion next year, a 40 percent increase in one year alone.

That shock to the system comes at the same time as the state’s economic problems have led to more unemployment, more poverty and more people dependent on the state for their health care. Meanwhile, the federal health reform bill passed last year envisions another big expansion of the program, albeit one funded largely by the federal government.

“It is tragic that we’re facing this historical downfall when health reform is just around the corner,” said Assemblywoman Holly J. Mitchell, D-Los Angeles.

The passage of the Affordable Care Act by Congress and President Obama in 2010 was a national call for all citizens to receive some form of adequate and affordable health care. It lays out a series of health care requirements for states to fulfill within the following decade.

Among other things, the new law requires health care programs like Medi-Cal to expand the health services they provide and make those expanded services available to a more diverse population. The federal government then reimburses states like California for most of the costs of implementing the changes required by the law.

“If you take into account all ten years of the first implementation and you pencil it out, the federal government is bearing something like 98 percent of the cost,” said Anthony Wright, Executive Director of Health Access, a statewide health advocacy organization.

But the question of whether or not California can seize those federal funds rests in part on the state’s ability to fund initial improvements to the Medi-Cal system within the next two years before most of the federal requirements take effect.

For example, the Affordable Care Act requires that Medi-Cal be made available to all individuals within 133 percent of the federal poverty line – that’s an annual income of about $14,500 per person — regardless of whether or not they have children or are disabled. That would add an estimated 2 million people to the Medi-Cal rolls, according to the non-partisan legislative analyst.

California managed to implement this provision ahead of time by requiring counties to provide health services for this particular population. As a result, the state negotiated an agreement with the federal government that should bring an additional $10 billion to California, paid out over the next ten years.

But the federal call for expansion is at odds with the statewide call for frugality. With a $26 billion budget gap to fill, legislators have approved roughly $1.6 billion in cuts to Medi-Cal.

As a result, Medi-Cal recipients will be expected to pay co-payments for hospital and routine doctor’s visits and prescription drugs. They will also face limitations on how many times they can visit a doctor in a year. Doctors, hospitals and clinics that serve Medi-Cal recipients will see a 10 percent decrease in their reimbursement rate.

Funding for Medi-Cal is far-reaching and affects programs administered by state departments outside of the Department of Health Care Services. It directly funds services, such as In-Home Supportive Services, primary, and acute care, and it provides funding for programs operated by other departments, including the Departments of Aging, Developmental Services, and Mental Health.

Because the money is used for so many different programs, the effects of budget cuts are diverse and far-reaching. Not surprisingly, so is the public outcry.

Assemblywoman Mitchell estimates that at least 1,000 people came to her sub-committee to testify against proposed cuts during eight hearings spread over two weeks.

“With Medi-Cal, it was a very diverse group,” Mitchell said. “One particularly poignant witness was a woman who was disabled at the hands of her ex-husband…she suffered multiple strokes and she used a motorized wheelchair…these motorized wheelchairs are very heavy and they burn through batteries. With some of these cuts, she won’t be able to get those batteries she needs for her wheelchair.”

Advocates like Wright said cuts like these could jeopardize California’s ability to snag federal health reform dollars.

“Its unfortunate that Medi-Cal is seen as a big item to cut rather than an essential funder of our health care system and as the main way by which the state gets federal dollars back,” said Wright.

But there’s no arguing with an empty bank.

“When there’s going to be major cuts, then health and human services is first in line. (Medi-Cal) is the biggest line item in the budget,” said Wright.

Independent of the reforms required by the new federal law, California is at the shore of significant influx in Medi-Cal enrollment. With a generation of post-WWII baby boomers reaching age 65 this year, the number of elderly Californians newly eligible for Medi-Cal could increase, and that has huge implications for the cost of the program.

“While the largest group of beneficiaries (75%) is families and children, a disproportionate share of Medi-Cal spending (63%) is for seniors and persons with disabilities,” said a 2010 budget report by the LAO.

It costs the state about $2,200 per year to provide care to the typical low-income child on Medi-Cal and $2,600 for his or her parents, according to a recent report by the California Health Care Foundation. But it costs $9,400 for the typical senior and more than $15,000 for a disabled child or adult.

But health department officials and Assemblywoman Mitchell both stated that the state has no choice but to implement budget cuts.

“With growing enrollment and rising costs for providing medical services, including prescription drugs and inpatient and outpatient services, the state must live within its means,” said Cava.

The Washington Post: Obama announces framework for cutting deficit by $4 trillion over 12 years

By Lori Montgomery and Zachary A. Goldfarb, Wednesday

April 13, 10:43 PM

President Obama entered the debate about the national debt on Wednesday after months on the sidelines, offering a plan to trim borrowing by $4 trillion over the next 12 years by combining deep cuts in military and domestic spending with higher taxes on the wealthy.

In a stinging rebuke to Republican budget-cutters, Obama acknowledged that the debt must be tackled faster than he has previously proposed, but he rejected GOP calls to make fundamental changes to Medicare and Medicaid and to scale back his initiative to expand health-care coverage to the uninsured.

“We don’t have to choose between a future of spiraling debt and one where we forfeit investments in our people and our country,” he said. “To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I’m president, we won’t.”

Obama announced his framework for deficit reduction in a speech that at times employed the highly partisan words he used on the campaign trail. But it included only a few notable, and largely incremental, policy proposals.

And even as he joined the battle, Obama immediately volleyed the substantive work of debt reduction back to Capitol Hill, calling on lawmakers to reach “a final agreement on a plan to reduce the deficit” before the Treasury breaches the $14.3 trillion legal limit on borrowing in early July. The country could face devastating economic consequences if it were to stop borrowing and default on its obligations.

Obama said the talks, to be led by Vice President Biden, would begin in early May, after lawmakers return from a two-week Easter break. With polls showing rising public anxiety about the tide of red ink, many lawmakers say they cannot vote to raise the debt limit without some new mechanism to control spending.

Obama never mentioned the highly technical issue of the debt limit, casting the congressional discussions as an effort to “find common ground” in “this larger debate we’re having about the size and role of government.” But lawmakers and other observers said they had little doubt about the true aim of the talks, which the president said should include 16 lawmakers — four from each party in each chamber.

“This is the ‘debt crisis avoidance committee,’ ” said Robert L. Bixby, executive director of the nonprofit Concord Coalition, which advocates for balanced budgets. “Since there’s not a whole lot of time to actually fix Medicare and Social Security and rewrite the tax code, they are probably going to resort to some sort of procedural device,” he said.

The White House has urged Congress to approve an increase in the debt limit without attaching other provisions, an idea lawmakers in both parties call unrealistic. But after meeting with the president early Wednesday, House Speaker John A. Boehner (R-Ohio) said Obama signaled that he might be willing to consider a bill that includes spending limits.

In fact, the president offered his own alternative Wednesday: a “debt fail-safe trigger” that would cut spending across the board if lawmakers did not approve policies that would set the debt on a downward path by 2014. The trigger should spare Social Security, Medicare and programs for the poor, Obama said, and should raise taxes by cutting dozens of tax breaks that benefit people and corporations.

Republicans blasted the president’s plan, rejecting the need for additional tax revenue. With the critical vote on the debt limit looming, Senate Minority Leader Mitch McConnell (R-Ky.) called Obama’s insistence on higher taxes “counterproductive.”

“The American people are well past the point of believing that Washington will be able to make good on all its promises and that entitlement programs will be strong and solvent if Democrats are allowed to raise taxes,” Mc­Con­nell said in a statement.

Boehner also declared tax increases “a non-starter.” And, in an interview, House Budget Chair­man Paul Ryan (R-Wis.) accused Obama of abdicating leadership at a crucial point in the debate over the nation’s fiscal future with his proposal for another round of bipartisan talks.

“Delegating leadership to other people in other bodies is not what we need right now,” he said. “I think the president’s giving a speech today because he’s getting a lot of criticism for avoiding this issue. But you can’t fix these things by giving speeches.”

Reaction among Democrats was supportive but muted. Although Obama offered little guidance for navigating the immediate legislative battles, Democrats said he effectively highlighted the philosophical divide between the parties heading into the 2012 presidential campaign.

“He laid out the choices very clearly,” said Rep. Chris Van Hollen (Md.), the ranking Democrat on the Budget Committee. “The question is not whether you reduce the deficit, but how. And he clearly outlined the choices in front of the American people.”

Although Obama stumbled when describing some of his own proposals, he was eloquent in savaging the budget blueprint House Republicans announced last week, calling it a “deeply pessimistic” vision of the national character and of government’s ability to solve society’s most basic problems. He said the plan “would lead to a fundamentally different America than the one we’ve known throughout most of our history.”

The framework Obama offered builds on the budget proposal he sent to Congress in February and adds recommendations from the bipartisan fiscal commission he appointed last year.

That panel proposed to cut $4 trillion from deficits over a decade. The House GOP plan would cut deficits by about $4.4 trillion over a decade. Obama proposed to reduce borrowing by $4 trillion over 12 years, including $3 trillion over the next 10 years.

In addition to detailing his plan, the president tried to explain how the nation dug itself so deeply into hock. Among the culprits, he said, are politicians who tell people the debt is driven by “waste and abuse” rather than spending on valued programs, such as a strong military, education, Social Security and Medicare.

“Because all this spending is popular with both Republicans and Democrats alike, and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse,” he said.

But Obama has at times done the same. In his first address to Congress, one month after taking office, he pledged to cut deficits in half by the end of his first term. And he said he would start by going “line by line through the federal budget in order to eliminate wasteful and ineffective programs.” His team, he said, had already identified $2 trillion in savings over the next decade.

The assertion was false. Although Obama’s team had forecast a $2 trillion reduction in the deficit, it was not through cutting wasteful programs. Half of it would come through lower projected spending on the wars in Iraq and Afghanistan. Most of the rest would come from higher taxes.

Staff writer Felicia Sonmez contributed to this report.