Deep State Cuts Compound County Health Problems
By LAURENCE DARMIENTO
Staff Reporter
Already facing a $688 million deficit when a federal bailout runs out in four years, the county health department’s financial outlook could hardly get much worse except it has.
The department took another hit last week when Gov. Gray Davis announced that he would slash state health spending by $760 million as part of his plan to close a gaping $23.6 billion budget deficit.
Department officials project that the cuts will cost $13 million to $19 million in direct funding, and far more indirectly through a downsizing of the state Medi-Cal program, which provides health coverage to the poor.
By one estimate, 400,000 to 600,000 Californians could be dropped from Medi-Cal rolls through a combination of tougher eligibility and additional paperwork requirements. Perhaps half will be from Los Angeles County, putting an additional strain on a safety-net system already running at overcapacity.
In addition, the state’s rapidly deteriorating budget caused the governor to pull back a pledge made a few months ago to expand the state’s Healthy Families program, which covers children of the working poor, to 300,000 parents.
The new developments come at a time when the county faces an estimated $125 million in annual cuts from the federal government, which has been seeking to help balance its own budget by curtailing burgeoning health care spending.
“All the elements are in place to truly make this the worst time we have had here in the L.A. County health care system,” said Fred Leaf, the department’s chief operating officer. “Any dollar amount lost, whether it’s $1 million or $50 million, poses more of a problem than it otherwise would.”
The core dilemma remains the department’s dwindling federal bailout. That funding, secured two years ago, gave the department nearly $1 billion to avert insolvency. But the funding steadily phases out and will run out in the 2005-2006 fiscal year, leaving the nearly $700 million deficit.
Restructuring planned
To address the huge budget gap, department Director Thomas Garthwaite is developing a plan to be presented to county supervisors next month that would restructure the department. Details remain to be seen, but preliminary plans call for turning two of the county’s five general acute care hospitals into outpatient clinics and consolidating many other services.
(Garthwaite, recovering from a detached retina suffered two weeks ago, was not available for comment about the latest state budget cuts.)
“The problem is you have all these cuts that are piling on top of one another,” said Beth Capell, a consultant with Health Access, a statewide health care advocacy group.
Included is the loss of what county officials believe will be $125 million in federal Medicaid funding the county has been able to access through a loophole because of the high number of poor people it serves.
That funding, called the Upper Payment Limit, is being phased out by the Bush Administration because some states used financial maneuvers to redirect the money for non-health care needs. The reductions will start this year and take full effect by the end of the decade.
A federal judge dismissed a lawsuit last week by the American Hospital Association and other plaintiffs that sought to overturn the administration’s decision.
Moreover, federal officials have been tinkering with formulas that determine how much medical care providers receive from the Medicaid and Medicare programs. The department has not yet determined how it may affect Los Angeles County but state officials fear that California may get hit with a $400 million cutback in Medicaid funding alone.
Losses in fees
Most of the state hits will come from the governor withholding an additional $31 million statewide in healthcare administrative fees, meaning $6 million to $12 million in reduced funding for the county. Also out of the governor’s budget is $25 million to support operations of the state’s overcrowded emergency rooms, a nearly $7 million loss for the county.
Leaf said the county has no way to make up any more funding losses, which will result in direct cuts to patient services. “It’s critical that the public truly understands what the impact will be,” he said.
Moreover, the loss in federal and state funds comes at a time when health care premiums are skyrocketing, which is expected to cause more small employers to reduce or even eliminate health insurance. This places an even greater burden on the county system and private clinics and hospitals that provide care to those who can’t pay for it themselves.
“I don’t think the county system is going to crash, but I think we are going to definitely see major cuts in infrastructure,” said Jim Lott, executive vice president of the Healthcare Association of Southern California, the regional hospital trade group. “And all the hospitals are frightened by this.”
