County Urged to Tap Reserves for Health Department

By LAURENCE DARMIENTO

Staff Reporter

Instead of cutting deeply into services for thousands of poor patients, officials of the area's hospital industry want the county to dig deeper into its $500 million reserve to prevent the public health system from falling apart.

Meanwhile, the Service Employees International Union, which represents county health workers who face layoffs by the thousands, is exploring whether there is support for an initiative that would raise additional tax revenues for the health department, now facing its biggest financial crisis.

With its nearly $1 billion federal bailout set to run out in three years, the county faces a budget deficit that will reach $365 million in the fiscal year starting July 1, 2003 and balloon to $688 million two years later.

As a result, county health officials are weighing various options to start downsizing the department as soon as this fall. Those range from shutting half of the county's six hospitals to a less drastic reduction and consolidation of inpatient and outpatient services.

County officials say that without additional outside funds from the state or federal government, cuts are inevitable. But hospitals industry officials are joining other critics who argue that the county should consider spending additional local revenues, if only as a stopgap.

"If the county had no money we would have a legitimate gripe with the feds and the state," said Jim Lott, executive vice president of the Healthcare Association of Southern California, the region's hospital trade group. "The county of Los Angeles does have a reserve and they have the statutory responsibility by law to provide care for the indigent."

Industry officials are concerned because their already overcrowded emergency rooms are closed to new patients about a third of the time and many of those patients are uninsured and can't pay their bills as it is.

But if the county health system, which services 800,000 patients, were drastically downsized, emergency rooms likely would be swamped with additional indigent patients in effect shifting the financial burden for caring for the uninsured to the private sector.

The hospital association wants the county to consider digging into an estimated $500 million reserve, while the SEIU points to $172 million the county has set aside from the nationwide settlement with tobacco companies, among other funds that could be tapped.

Drawing from those funds could slow the process of reducing services as soon as this fall, something health director Dr. Thomas Garthwaite says is necessary to close the projected $365 million deficit the department will face in July 2003.

"We are in the middle of a short-term recession and we don't want to be Pollyannish about that," said Kathy Ochoa, a health policy analyst with the SEIU. "On the other hand we have to figure out how to ride this recession out without producing long-term damage to the department."

Tobacco settlement funds

However, county Chief Administrative Officer David Janssen dismissed the idea that the county has extra funds that it is not spending to help resolve the funding crisis.

County supervisors have $172 million in tobacco settlement funds for the health department, but only to "transition to a health system we can afford," he said.

And while the general reserve totals roughly $500 million, already $67 million is being used to balance the county's $16.2 billion budget, and only about $170 million is unallocated.

The rest is either set aside for capital projects or cannot be touched pending resolution over whether it was properly collected under Proposition 62, which requires a public vote for certain tax measures.

While that leaves unspent funds, county officials do not believe it is prudent to run through all its reserves on the health department in one year especially when the budget gap is expected to worsen the following year, he said.

(The health department is already tapping $292 million of its own $314 million reserve to balance the 2002-2003 fiscal year budget that starts July 1.)

Moreover, the recently revised state budget will decrease state funding to the county by nearly $300 million and a variety of other departments are taking cuts in the proposed budget as it is.

"On Tuesday, we had almost 1,000 people in the board room making sure the board understood that the $100 million reduction in the sheriff's department was (their) priority one," Janssen said.

Lott agreed it's going to be a "food fight" for any additional revenues and that "the politicians are going to have to decide who to cater to, the constituency that supports law enforcement or a constituency (the indigent) that no one cares about."

Meanwhile, the SEIU has decided to commission a poll to determine if county residents would be willing to pay additional taxes to increase the funding stream for the health department. The initiative is just in the research stage but during past health department funding crises among the tax ideas that were floated were assessments on cable installation and hotel beds, Ochoa said.

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