Further fee cuts force a Medi-Cal exodus

Experts warn that things may get much worse.

Chris Perrone, an analyst who tracks Medi-Cal issues for the California Healthcare Foundation, said Medi-Cal risks are becoming so unattractive to doctors that the program could soon "fall off the edge."

When lawmakers began to address the state's multibillion-dollar budget shortfall, Medi-Cal was the first program to be targeted with major cuts because of its size.

Funded jointly by the state and federal government, Medi-Cal is California's second-biggest expenditure after education. It is projected to cost $38 billion next year, with about $15 billion drawn from the state's general fund. The program serves 6.7 million poor, elderly and disabled people.

The projected savings from the cuts, say state officials: more than $500 million annually.

The Legislature's nonpartisan budget analyst, Elizabeth G. Hill, had advised against the cut because it could discourage so many doctors from taking Medi-Cal that patients would be forced into emergency rooms, where treatment is far more costly. The state will also lose hundreds of millions of dollars in matching federal funds.

"This is not being done lightly," said Sandra Shewry, director of the state Department of Health Care Services. "It is not a preferred policy direction so much as responsible management, given the resources of the state."

Shewry said Gov. Arnold Schwarzenegger had no choice after lawmakers earlier this year rejected his proposal for universal healthcare, which would have included a substantial boost in rates paid to Medi-Cal doctors, funded by billions of dollars in new fees.

--

A 'hidden tax'

Indeed, during the universal healthcare campaign, Schwarzenegger described Medi-Cal rates as so low that they contributed to a "hidden tax" on insured Californians, who were in effect subsidizing those with little or no coverage.

Cutting those rates even further is not a long-term solution, administration officials said, but the only immediate alternative was worse: cutting hundreds of thousands of Californians off Medi-Cal and scaling back benefits for those remaining.

The 10% rate reduction won't take effect until summer, but its consequences are already being felt.

"We will very likely be forced to close unless we can get some other outside funding," said Maureen Strohm, residency director for the USC-California Hospital family medicine residency program at California Hospital in downtown Los Angeles, which treats more than 4,000 patients. The cuts will leave a hole of hundreds of thousands of dollars in the clinic's budget, Strohm said.