Showdown Seen After Vote to Cut Health Funding

By LAURENCE DARMIENTO

Staff Reporter

Stand by for Act II of the health care saga.

After voting last week to make deep cuts in county health department services, L.A. County supervisors are headed on what some claim is a politically calculated showdown with state and federal officials this fall.

The supervisors moved to save $57 million in the fiscal year starting July 1 by closing 11 clinics, eliminating all in-patient services at an Antelope Valley hospital and cutting 5,000 jobs despite having reserves that could easily cover the shortfall.

A second set of cuts could come as soon as October and dwarf those made last week that would involve closing additional clinics and eliminating all in-patient services at two more hospitals.

The two sets of cuts would total $500 million when fully implemented in July 2003 unless, that is, state or federal officials come to the rescue.

“It’s a big game of chicken that basically has to be played,” said Dr. Robert Tranquada, chairman of L.A. Care Health Plan, a public health maintenance organization that serves 775,000 poor county residents. “The real quandary is how do you get the attention of the people who control the money, and in effect that is what this strategy will do.”

Supervisors, moving forward last week despite a hearing room jammed with hundreds of protesters, contended the cuts are necessary to “soften the landing” as the department’s projected deficit grows to $709 million in the next three years.

The county’s deficit is the result of several factors, including a $1 billion federal bailout that runs out in three years. But that only accounts for a third of the projected $709 million deficit. Also contributing: rising wages and heath care expenses, reduced reimbursements from other sources, and the nation’s largest uninsured population.

While supervisors acknowledge that the cuts will show state and federal officials what could happen if the department doesn’t receive additional funding, they deny any political strategy.

“This is not a rush to judgment. This is not a political ploy,” said Supervisor Don Knabe. “We are trying to get their attention in the sense we have a severe crisis on our hands, but this is what we will have to do if help is not on the way.”

Supervisor Yvonne Brathwaite Burke agreed. “None of us want to do this,” Burke said. “The state is in a terrible fiscal situation, and the federal government has been very clear to us that we have bring down our system to what resources are provided. There is no bluff.”

Cuts and condemnation

But Tranquada said the moves appear calculated to draw the attention of state and federal officials. The early cuts, eliciting broad condemnation by health care users and advocates, show that the board is serious. Then, they will warn of later cuts that would be worse.

The Coalition for Healthy Communities, which includes four dozen groups, including the Service Employees International Union that represents 19,000 county health workers, also claims that the supervisors are strategizing.

Coalition members note that the health department has $170 million in unallocated reserves, while the county has an additional $500 million in general reserves that could buy time to think out any cuts while continuing to negotiate for additional funding with state and federal officials.

(County officials dispute the latter figure, but acknowledge some reserves.)

“The supervisors seem to be operating under the mistaken assumption that the most effective way to get the attention of state and federal officials is by moving forward rapidly with the dismantling of valuable assets of the health care system,” said Bart Diener, assistant general manager of the SEIU’s Local 660.

As evidence of what they say is the hasty nature of the plan, critics note that the supervisors took their vote after just 75 minutes of testimony and failing to conduct an assessment on how service reductions will affect health-care countywide. (The supervisors also voted to work with the region’s hospital association to study the effects of the plan on private hospitals.)

Hal Dash, a political consultant with Cerrell Associates, thinks there’s political logic to the supervisors’ methods, and that real cuts may only come after an evaluation of the political landscape.

Actual reduction of services still requires additional hearings and actions by supervisors.

“To say the words ‘move quickly’ creates a sense of urgency and panic among the special interest groups,” said Dash, who represents the University of Southern California and several private clinics. “I think the supervisors want to see everybody’s cards, how many nurses show up (and complain), how many doctors, how many health care providers.”

He added that such a strategy allows the supervisors to “pick the low-hanging fruit” first, saving money on relatively simple and smaller cuts first, while delaying tougher cuts until later.

Deeper cuts in October

Indeed, Health Director Dr. Thomas Garthwaite has laid out two likely scenarios under which the department would operate in the future.

The first involves the set of cuts the supervisors agreed to last week, as well as a host of changes that are intended to improve efficiency, saving as much as $150 million.

The second involves the substantially deeper cuts on the horizon in October if no additional financial help comes through and the $2.9 billion department budget must be slashed by the full $709 million. There also could be something in between, or even fewer cuts, depending on the exact level of outside financial assistance.

One other reason could be behind the supervisor’s rapid downsizing: an effort to protect their reserves. Any success in loosening up either state or federal purse strings will likely come only after a high-stakes showdown, in which the department plays out its hand and painful cuts are made. The department could delay those moves, but that would also mean dipping into and potentially cleaning out reserves.

The sooner that showdown comes, the better, says Dash, who does not believe that ultimately the county system will be allowed to fall apart.

“The state of California, the city, the feds, nobody can afford for the county health system to fail,” he said.