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California's sick waste of free money

A hospital provider fee would keep the state from missing out on federal Medi-Cal reimbursements.

July 18, 2009

The federal government has free money for California, in the form of reimbursement for Medi-Cal expenses -- if only the state would pick it up. But to pick it up, the state needs to put up matching funds at a time when there isn't exactly a lot of extra cash lying around.

Nearly half of the other states qualify for their full federal reimbursement by imposing a provider fee on hospitals, and California lawmakers and the Schwarzenegger administration are discussing a similar move. It's a good idea. But they aren't yet ready to impose a fee because they're still in talks with private hospitals that oppose the move. The delay means California could again leave too much federal money on the table.

Assemblyman Dave Jones (D-Sacramento) has come up with a way to stake a claim to federal medical reimbursements for the current fiscal quarter and the next one, and still leave enough time to get skeptical hospitals on board with a provider fee. AB 1383 would lay down a marker of sorts that would permit the state to apply for the money once it passes a follow-up bill that would address all the thorny details about which hospitals pay how much and which reimbursement dollars go to which state programs.

Skeptics say there's little chance of reaching agreement on that follow-up bill before the Legislature concludes its business in September. We're not quite so hopeless; agreement may well be within reach. But either way, the state ought to take an unmistakable step toward grabbing its full reimbursements by quickly adopting AB 1383 and allowing talks on the fee details to go forward.

A provider fee makes sense. Last year, California hospitals lost by some estimates $3.8 billion in unpaid Medi-Cal costs; in exchange for paying a fee, they would be reimbursed much of those costs. Even the supposed net losers -- the hospitals whose patient mix consists mostly of the privately insured rather than lower-income Medi-Cal enrollees -- could benefit. The higher reimbursements elsewhere decrease the burden on emergency rooms while keeping interdependent hospitals strong. Those hospitals still may not see it that way, but there is room for negotiation to limit their losses or secure for them some benefits if the state can buy itself another month or so to work out the details.

A provider fee strongly resembles a portion of the healthcare reform plan that Gov. Arnold Schwarzenegger, to his credit, called for in 2007. The plan fell short, but it got a crucial conversation started. It's a conversation that should continue, especially now, when California needs every dollar it can get.

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