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Governor's 2010 Budget Imposes Severe Cuts to Healthcare in California
On Friday, Gov. Arnold Schwarzenegger declared California in a state of emergency as he revealed his $82.9 billion state spending plan. The budget will require severe cuts to health care and social services, pay cuts for State employees, and heavy reliance on increased federal funding. This proposed budget plan will attempt to close an 18 month $19.9 billion deficit, with more than $8 billion of this deficit occurring within the current 2009-2010 state budget.
The governor also declared an emergency session of the Legislature to address the $8.9 billion deficit of the current fiscal year, giving lawmakers only 45 days to agree on budget proposals. The Legislature will propose an alternative budget and deficit reduction plan to the Governor within the 45 days, but like last year this process could go back and forth a couple times before the Legislature and Governor come to an agreement on the current year budget cuts and/or revenues, and then they will still need to tackle and agree on the upcoming 2010-11 state budget.
Click here to view various Democrat/Republican elected officials and various organization's responses.
Below are two different budget scenarios: one if the federal government provides increased aide to the state in the amount of more than $6.9 billion; and the second lengthier list of program cuts and changes.
Even if Schwarzenegger succeeds in obtaining the federal funds, his budget plan would cut $2.9 billion in funding from health and human services programs (Theriault/Harmon, San Jose Mercury News, 1/8).
Health care programs slated for cuts under the governor's proposal include:
- Adult day health care services: Schwarzenegger's plan aims to reduce state spending by $104 million by eliminating adult day health care services (Halper/Goldmacher, Los Angeles Times, 1/9).
- First 5: The governor also is seeking to siphon more than $500 million of funds from Proposition 10 early childhood health and education funding (Wilson/Kisken, Ventura County Star, 1/9).
- Healthy Families: In addition, the budget plan would tighten eligibility requirements and cut the eligibility income from 250% to 200% of federal poverty level for California’s program to ensure health care coverage/insurance for children living in low income families. Healthy Families, California's Children's Health Insurance Program, which is largely paid for by federal State Health Insurance Program funds currently provides health care insurance for more than 900,000 children. The proposal also would raise family contributions and end vision coverage under the program (Los Angeles Times, 1/9). Officials say the changes would end services for 200,000 children statewide (Small/Stoltze, "KPCC News," KPCC, 1/11).
- In-Home Supportive Services (IHSS): The governor's proposal also would cut $950 million from the state's IHSS program (Gardner/Marelius, San Diego Union-Tribune, 1/9). The change would restrict IHSS eligibility and reduce caregivers' pay to the minimum wage (Halper/Goldmacher, Los Angeles Times, 1/9).
- Medi-Cal: Under the governor's plan, copayments and premiums would rise for beneficiaries of Medi-Cal, the state's Medicaid program. The plan also would eliminate Medi-Cal coverage for documented immigrants who have lived in the U.S. for less than five years (Ventura County Star, 1/9). In addition, the proposal would reduce Medi-Cal eligibility to the minimum required by federal law ("KPCC News," KPCC, 1/11).
- Mental health care: Schwarzenegger also called for a move that would divert $450 million from the proceeds of the Proposition 63 tax for mental health funding. Voters rejected a similar proposal last year (Ventura County Star, 1/9).
In a slight gain for state health services, Schwarzenegger announced a proposal to recruit 107 new investigators to oversee the discipline of nurses and other health care workers. Health care board budgets and licensing fees would fund the $12.8 million program (Ornstein/Weber, Los Angeles Times, 1/9).
In other funding reductions, the governor's budget plan would cut $1.4 billion from state worker compensation packages. The plan would end the furlough program, cut 5% from state worker paychecks and redirect an additional 5% of wages to employee pension costs.
In addition, Schwarzenegger's budget would reduce prison spending by $1.2 billion (Sacramento Business Journal, 1/8). Most of the prison spending reductions would come from cuts to health care expenditures (San Diego Union-Tribune, 1/9).
The Governor proposes to implement additional spending cuts and certain tax increases if the state does not receive the $6.9 billion in additional federal funds assumed in the proposed 2010-11 Budget. These spending cuts and tax increases would be made on a dollar-for-dollar basis to reflect the amount by which federal funds fall short of the 5 percent level assumed by the Governor. The Governor cannot implement these cuts and revenue increases unilaterally, so this proposal would have to be part of budget negotiations with the Legislature. The Governor’s [no increased federal aid] proposal includes a total of $4.6 billion in spending reductions. The Governor proposes to:
• Eliminate the CalWORKs Program ($1.044 billion).
• Use Proposition 63 funds to pay for existing mental health services, a change that would require approval by the voters ($847 million).
• Reduce Medi-Cal eligibility to the minimum allowed under current federal law and eliminate most remaining optional benefits ($532 million).
• Reduce state employee salaries by an additional 5 percent ($508 million).
• Eliminate the In-Home Supportive Services (IHSS) Program ($495 million).
• Redirect additional county savings from the Governor’s proposed program reductions to offset state costs ($325 million).
• Eliminate non-court required rehabilitation programs, implement “banked parole” for low-risk serious and violent offenders, increase the number of crimes for which convicted felons serve their sentences in local jails, and increase the number of parolees supervised by each parole agent ($280 million).
• Eliminate the Healthy Families Program ($126 million).
• Eliminate various health services programs funded by Proposition 99 ($115 million).
• Eliminate funding for enrollment growth at the UC and the CSU ($111.9 million).
• Make an unallocated reduction to trial courts ($100 million).
• Freeze the level of the awards and income eligibility for Cal Grants ($79 million).
• Eliminate funding for the Transitional Housing Placement for Foster Youth-Plus Program ($36 million).
The Governor’s proposal includes a total of $2.4 billion in revenues, which would be raised by extending several of the temporary tax increases enacted in the February 2009 budget agreement and delaying implementation of some of the corporate tax cuts that were included in recent budget agreements. These changes would remain in effect for one year. The Governor proposes to:
• Extend suspension of a business’s ability to claim net operating loss deductions ($1.2 billion).
• Extend reduction in the dependent tax credit from $319 to $102 ($504 million).
• Delay the ability of businesses to share certain tax credits among members of a unitary group ($315 million).
• Delay the implementation of changes to the formula used to allocate corporate income to California for tax purposes ($300 million).
• Reduce the amount of losses that businesses are allowed to carry back and reduce prior years’ taxes to 30 percent ($20 million).
Medi-Cal Program:
[
The Medi-Cal Program is particularly singled out for program changes and cuts] Medi-Cal Program
The Governor proposes a number of reductions to the Medi-Cal Program for total savings of $1.1 billion in 2009-10 and 2010-11. Some of the proposals have been rejected by the Legislature in previous years. Specifically, the Governor proposes to:
• Impose limits on Medi-Cal services and require increased copayments, premiums, or both for savings of $750 million in 2010-11. The Administration has not yet specified how these reductions would be made. The proposal to limit Medi-Cal services follows last year’s elimination of 10 benefits, including dental care for adults, podiatry services and incontinence creams and washes.
• Eliminate Medi-Cal eligibility for certain immigrants who have been living in the US for less than five years effective March 1, 2010 for total savings of $118 million through 2010-11. The Governor proposed, and the Legislature rejected, this cut in each of the two previous years. Pregnant women and certain other immigrants would not lose Medi-Cal benefits.
• Eliminate Adult Day Health Care benefits effective March 1, 2010 for total savings of $104 million through 2010-
11. Last year’s budget limited benefits for Adult Day Health Care to three days a week, but that reduction was blocked by the courts in September 2009.
• Assume savings of $26.4 million in 2010-11 from a Medi-Cal Anti-Fraud Initiative, targeting pharmacies, physicians’ services, transportation, and medical equipment. The July 2009 budget agreement also assumed savings from Medi-Cal anti-fraud measures.
• Reduce family planning reimbursement rates effective March 1, 2010 for total savings of $28.7 million through 2010-11. The governor proposed, and the Legislature rejected, this cut last year.
Other Health Programs the Governor proposes to address:
• Limit eligibility for Healthy Families to children in families with incomes through 200 percent of the federal poverty line effective May 1, 2010 for savings of $10.5 million in 2009-10 and $63.9 million in 2010-11. Another decrease of $3.9 million would come from the disenrollment of severely disabled children qualifying for California Children’s Services under the Healthy Families Program. This reduction in eligibility was proposed in the Governor’s May Revision last year. Currently, children in families with incomes up to 250 percent of the poverty line are eligible for the program. If passed, approximately 240,000 children could lose coverage, according to previous estimates from the Administration.
• Increase premiums for some children in the Healthy Families Program. The Governor also proposes to eliminate vision benefits for children in this program. These two actions effective July 1, 2010 would save a total of $21.7 million in 2010-11. Currently, children in families with incomes between 151 percent and 200 percent of the federal poverty line pay $16 per child per month for Healthy Families, up to a maximum of $48 per family. The premium increases would result in premiums of $30 per child per month, up to an increase per family of $90 per month. As of November 1, Healthy Families enrollees began paying higher premiums and co-pays as a result of legislation passed in 2009.
California Work Opportunity and Responsibility to Kids (CalWORKs) Program
The Governor proposes to:
• Reduce CalWORKs grants by 15.7 percent effective June 1, 2010 for savings of $68.9 million in 2010-11. This cut would reduce the maximum monthly grant for a family of three in high-cost counties from $694 to $585. Previously, the February 2009 budget agreement reduced CalWORKs grants by 4 percent effective July 1, 2009. This proposal also would result in savings of $42.7 million in the Department of Developmental Services budget and $18.3 million in the California Student Aid Commission due to the shifting of federal funds.
• Eliminate CalWORKs benefits for legal immigrants who have been in the US for less than five years effective June 1, 2010 for savings of $22.5 million in 2010-11.
Other areas of cuts and program changes proposed by the Governor:
Supplemental Security Income/State Supplementary Payment (SSI/SSP) Program
The Governor proposes two changes that would result in total savings of $21.8 million in 2009-10 and $285.1 million in 2010-11. Specifically, the Governor proposes to:
• Reduce maximum SSI/SSP grants for elderly and disabled individuals from $845 per month to $830 per month, the minimum allowed by federal law, effective June 1, 2010, for savings of $13.7 million in 2009-10 and $177.8 million in 2010-11. Previously, the February and July 2009 budget agreements cut the maximum SSI/SSP grant for individuals from $907 to $845 between May 1 and November 1, 2009, and cut the maximum grant for couples from $1,579 to $1,407 during the same period. The grant for couples is already at the minimum level permitted by federal law, and therefore the state cannot cut it further.
• Eliminate the Cash Assistance Program for Immigrants (CAPI) effective June 1, 2010 for savings of $8.1 million in 2009-10 and $107.3 million in 2010-11.
• Limit IHSS services to individuals with “functional index” scores of 4.0 and higher, effective June 10, 2010, for savings of $56.6 million in 2009-10 and $650.8 million in 2010-11.
• Use First 5 funds to support children enrolled in programs administered by the Department of Developmental Services and the Department of Social Services for state savings of $550 million in 2010-11 – a change that would require voter approval.
• Increase counties’ share of the cost of certain human services programs for state savings of $505.5 million in 2010-11.
• Eliminate the California Food Assistance Program (CFAP) effective June 1, 2010 for savings of $3.8 million in 2009-10 and $56.2 million in 2010-11.
Child Care and Development Programs
The Governor proposes to:
• Reduce CalWORKs Stage 3 child care [which provides child care subsidies for mothers re-entering the workforce] funding by $122.9 million “to achieve additional ongoing Proposition 98 General Fund savings.”
• Reduce the reimbursement rate limits in voucher-based [child care] programs – including the non-CalWORKs Alternative Payment Program and CalWORKs Stage 2 and 3 child care – from the 85th percentile to the 75th percentile, based on the 2005 Regional Market Rate survey, for savings of $77.1 million in 2010-11.
State Employees
The Governor proposes to cut state employees’ compensation and benefits in 2010-11, rather than continue the three-day-per-month state worker furloughs, which began in February 2009:
• Reduce state workers’ pay “across-the-board” by 5 percent, for General Fund savings of $529.6 million.
• Increase state employees’ retirement contributions by an additional 5 percent of salary, reducing state employers’ contributions by an equal amount, for General Fund savings of $405.8 million.
• Issue an executive order requiring state departments, other than constitutional offices, to reduce personnel costs by 5 percent by July 1, 2010, for General Fund savings of $449.6 million.
• Reduce costs for state employees’ health coverage by contracting directly with a lower-cost health insurance provider or through the California Public Employees’ Retirement System, for General Fund savings of $152.8 million beginning in January 2011.
• Reduce “prefunding” of retiree health care costs for savings of $98.1 million in 2010-11.
K-12 Education.
The Governor’s Proposed Budget would reduce Proposition 98 funding by $892.6 million in 2009-10 and by $1.540 [and makes a number of other program changes and funding cuts impacting community colleges, corrections (prisons), local government, and labor workforce development programs.]
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Health Reform Update: Message from NRHA
The Senate voted on December 24th to pass its version of Health Care Reform H.R. 3962, the Affordable Health Care for Americans Act of 2009, with a final vote of 60-39. With its passage, this version of the bill will now make its way to the President’s desk to become law.
There were many positive rural provisions included in both versions the bill. Among them were rural health care workforce improvements (training grants, AHECs, graduate medical education improvements, redistribution of residency slots, national health service corps, undergraduate medical education, national health care workforce commission), Medicare/Medicaid improvements (physician fee schedules, adequate pharmacy reimbursement, changes to Independent Medicare Advisory Board, critical access hospital billing issues), Indian Health services, small business tax credit, funding increase for community health centers, 340B drug program expansion, establishment of the Office of Minority Health, etc. To view full summary of rural-friendly provisions prepared by the National Rural Health Association, click here.
However, several crucial provisions were excluded from the final bill, including:
- Critical Access Hospitals:
- “necessary provider” language
- Bed Flexibility
- Stimulus HIT Incentives
- Rural Health Clinic’s increasing payment cap
- Strengthening State Office of Rural Health authorization language, etc.
Click here for more information on rural provisions not included in the final bill.
The NRHA will continue to converse with their champions at the Capitol and encourages others to do the same by making phone calls or sending emails to members of congress regarding the importance of the existing rural provisions as well as those outstanding that are vital to the final bill. The 21st Annual Rural Health Policy Institute in Washington, DC on January 25-27 is also a great way to reach congress. Attendees may visit members of congressional staff in their offices to discuss progress and upcoming issues regarding implementation and improvements to healthcare. Click here for more information.
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3720 Folsom Boulevard, Suite B, Sacramento, CA 95816
Telephone: (916) 453-0780| Fax: (916) 453-0783
E-mail: advocate@csrha.org
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