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State's Hospital Funding Revamped

Schwarzenegger's pact with U.S. would shift 554,000 elderly, blind and disabled to HMOs. Critics say it would hurt safety-net facilities.

June 23, 2005|Jordan Rau and Charles Ornstein | Times Staff Writers

SACRAMENTO — Half a million elderly, blind and disabled Californians now enrolled in Medi-Cal -- including all of those in Los Angeles County -- would be shifted into managed care as part of a complex deal with the federal government, the Schwarzenegger administration announced Wednesday.

The pact dictates how California can spend $18.4 billion in Medicaid money over five years and amounts to an overhaul of hospital financing in the state.

Administration officials called the agreement the best means of preserving federal assistance for hospitals at a time when U.S. health officials are cracking down on liberal spending of Medicaid dollars and threatening $10 billion in nationwide cuts.

"Our state's approach to hospital financing has to change," said S. Kimberly Belshe, the secretary of Schwarzenegger's health and human services agency. "If we want to secure federal funds, we have to play by the rules of the federal government."

The elderly, blind and disabled often are the most expensive patients to treat. Moving these patients into HMOs is in line with an earlier proposal by Schwarzenegger and rejected by the Legislature in May.

While the new accord is being hailed by the Schwarzenegger administration, it is being received with trepidation by the state's hospitals, Democratic lawmakers and advocates for patients. Overall, they say, the plan could leave the hospitals that care for most of California's poor and underinsured with insufficient aid.

The large-scale switch to managed care is one of the most controversial aspects of the pact, and critics questioned whether it was essential to satisfy federal officials.

"One-size-fits-all does not fit for the disabled community," said Angela Gilliard, a legislative advocate at the Western Center on Law and Poverty. "Some folks have some very delicate conditions, and they're very nervous about going into the managed care system, where their specialists may not be there."

The accord requires the state to move 554,000 elderly, blind and disabled people from 35 counties into managed care between January 2007 and mid-2008, state officials said. A third of them -- 174,586 -- are in Los Angeles County.

The administration said the changes were needed to contain costs. The theory behind managed care is that it saves money because hospitals and doctors are paid fixed monthly rates to provide all the care patients require. Patients also have a limited choice of medical providers.

The elderly and people with disabilities make up about 23% of the state's 6.8 million Medi-Cal beneficiaries. But because of the severity of their ailments, they account for 57% of medical expenses. A Public Policy Institute of California study projected that the state's $33-billion annual Medi-Cal spending would more than double over the next decade if the system were left unchanged.

"The federal government was very clear in saying that 'in order for us to invest more money in the program, we want to see some reforms,' " Belshe said at a Capitol news conference.

Michael Chee, a spokesman for Blue Cross of California, said managed care provides patients with complex health needs the services they can't get in traditional Medi-Cal, including disease management and, in some cases, transportation. "It's a much better environment for them," Chee said. "It's a much better array of services."

Opponents said managed care could be unsettling for these particularly frail classes of patients. They also questioned whether the state could move as quickly as the Schwarzenegger administration had committed to, given the complications in setting payment rates, enticing doctors into managed care plans and helping reluctant and often confused patients shift to potentially unfamiliar caregivers.

"Without any guarantee that their long-standing physicians will become a member of the managed care plan, we're talking about disruption," said Deborah Doctor, a legislative advocate based in Sacramento for Protection and Advocacy Inc., a disability rights group.

"The challenge for Los Angeles is going to be enormous, just because of the numbers," said Sen. Denise Ducheny (D-San Diego), noting that it took Orange County two to three years to phase in its mandatory managed care program.

Some family members and caregivers voiced concern as well.

Valerie deChadenedes, a 20-year-old San Franciscan with Rett syndrome, a neuromuscular disorder that has left her dependent on a wheelchair and unable to speak, sees about five specialists regularly, her mother, Audrey, said.

"A crisis can come up at any point, and I can just go straight to her neurologist," she said. "I know so many kids like my daughter and more complicated than my daughter. I'm not sure they really understand how complex that can be and that they'll be able to design a system that will be able to handle the kinds of things that can come up."

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