Governor's "May Revise" on Health Care: Progress, but with Continued Cuts


Posted on 17 May 2013

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By Anthony Wright

Governor Jerry Brown announced his May Revision of the California State Budget on Tuesday, declaring for the first time in decades a multi-year balanced budget. In his brief remarks unveiling the proposal, the Governor highlighted planned investments in education, as promised in the campaign for Proposition 30 last fall, as well as the work to implement the federal Affordable Care Act (ACA).

In the May revision of the budget, Governor Brown moves towards a resolution for a timely Medi-Cal expansion as required under the Affordable Care Act. But the budget seeks a greater than 75 percent cut to county safety net funds, and would continue cuts to Medi-Cal provider rates and Denti-Cal.

While the Governor Brown has committed to a state-based Medicaid expansion with standard benefits under the ACA to start on January 1, the expansion is conditioned on an initial cut of $300 million and, eventually, $1.3 billion - over 75 percent of the funding now set aside to serve the 3-4 million remaining uninsured in California. These cuts would undermine the safety net of public hospitals, community clinics, and low-income health programs. The Governor's budget also continues Medi-Cal cuts to dental care as well as California's worst-in-the-nation Medi-Cal provider rates, thus missing an opportunity for targeted restorations to qualify for new federal matching funds that would help mitigate costs.

Overall, the Governor's May proposal budget makes progress from his previous proposals on the urgent work to expand Medi-Cal under the ACA, but it would also continue steep cuts to Medi-Cal benefits and provider rates, and it seeks to take county health funds that would undermine California's safety net of public hospitals, clinics, and county-based low-income health programs.

Medi-Cal Expansion

In his remarks, Governor Brown committed to implementation of the Affordable Care Act, to "expand Medi-Cal generously, boldly and prudently," and to be ready on day one. The budget includes $1.5 billion in federal funds to implement the Medi-Cal expansion (including only $21 million in state funds, largely for administration). Advocates have urged that California needs to move aggressively to take full advantage of the benefits of the Affordable Care Act, and this budget makes progress in getting the state to move forward on that goal.

While there are still significant differences to work out, the Governor and the Legislature are now closer to a resolution to take advantage of this historic opportunity to improve the health system we all rely on. New details for the Governor's proposal on Medicaid expansion include:

  • The commitment to a state-based expansion, rather than the previously-proposed county-based option that was widely seen as unworkable.
  • Medi-Cal benefits for the newly-eligible will be the same as for those that are currently eligible, including long-term care, which would be subject to an assets test.
  • The Administration proposes to shift pregnant women and recent legal immigrants that are now in state-funded programs onto private insurance through Covered California, but to provide "wrap around" coverage for all cost-sharing and benefits not federally-funded.
  • While the Governor continues to insist on linking Medi-Cal expansion to a state-county realignment, he is no longer seeking an "all-or-nothing" programmatic realignment of responsibilities, but rather a more flexible financial "mechanism" that recognizes actual costs and experience, and the differences between the counties.

More and Continued Cuts

That said, counties, health providers, and consumer advocates argue that the Governor's proposal takes too much money, too soon. As the federal Affordable Care Act is ready to expand coverage and increase investments in our health system, this state budget would seek to cut $300 million immediately, and $1.3 billion in 2016 - over 75 percent of the funds to serve the remaining uninsured through the county health infrastructure built up over years. Health advocates argue we should not prematurely reduce the resources already set aside to serve the 3-4 million remaining uninsured, and that we need to fulfill the promise of health reform to all Californians, including those who fall through the cracks.

At the time of transition to health reform, when the health care system will need all the capacity available, this budget would also go forward with big cuts for both public and private health care providers, which would make it harder for both the insured and the uninsured to get the care they need when they need it.

The Governor continues pending cuts to Medi-Cal provider rates, already some of the lowest in the nation, which prevent many Californians from getting in to see a doctor or specialist when they need it. The budget also continues the denials of key Medi-Cal benefits, including dental benefits, for over 3 million low-income Californians.

Canceling the pending Medi-Cal provider rate cut or restoring dental coverage would bring in one-to-one federal matching dollars for those now in Medi-Cal, and be fully federally funded for those newly-eligible under the Affordable Care Act. By not making smart, targeted investments and restorations, that money is not coming into our state, not helping families get needed care, not improving our health system, and not advancing our economic recovery.

Other Changes

The Governor's May Revise budget also makes other adjustments of note. The budget includes $71.9 million for increased county administration costs related to implementing the Affordable Care Act and enrolling Californians in new coverage. The Coordinated Care Initiative, to combine services for seniors and people with disabilities in both Medi-Cal and Medicare, will have an adjusted roll-out that starts its demonstration project in January 2014, pushed back from October of this year.

Furthermore, the budget also proposes to revive the Managed Care Organization tax as a sales tax on health plans, to help attract federal funds to support health programs in the budget. No longer included is a proposal to cut $135 million from Medi-Cal managed care plans from unspecified efficiencies.

The expectation is that the California Legislature will pass an adjusted budget on time, by June 15. Thus, the next four weeks are crucial for the implementation of the Affordable Care Act, the future of the Medi-Cal program, and the state's commitment to the remaining uninsured. More news will be forthcoming in the next few weeks as the process plays out.


Anthony Wright is Executive Director of Health Access California, a statewide health care consumer advocacy coalition of over 200 groups.

Any "extra" money coming in should be set aside to reduce our huge deficit. (It's too bad that Prop 98 will give schools most of the extra. They don't need it.)

No new programs should be funded and no programs, that have been dropped or reduced, should receive any more money. It's funny that Democrats never say anymore "spend more tax money;" they say "investment"..sounds better.

The state should not have agreed to participate in Obama care. The whole thing is too expensive. Hopefully, Congress will repeal Obama care and begin a single-payer system.