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Higher costs could be unintended consequence of deep cuts

Eliminating home care, adult day care and other state services is likely to push recipients into more expensive programs, experts say.

July 19, 2009|Michael Rothfeld and Evan Halper

SACRAMENTO — Irene Steinlage has trouble walking, getting dressed, making her bed, taking a bath. She has stayed in her Folsom home with the help of a health aide, one that Gov. Arnold Schwarzenegger says the state can no longer afford.

The governor's plan to take away such care is meant to save money. But it could end up costing California more by forcing the 85-year-old, who has Parkinson's, osteoporosis and other ailments -- and thousands like her -- into nursing homes.

"I couldn't possibly afford a nursing home," Steinlage said. So the state could be saddled with a Medi-Cal tab that is triple the cost of her home care worker, who receives $10.40 an hour five days a week.

As the governor and legislative leaders race to cut programs to plug a $26.3-billion deficit, advocates and experts say that eliminating some services will push people who rely on them into costlier alternatives.

It is a matter of constant debate in budget negotiations: Do those costs ultimately leave the public paying more than they would if taxes were raised to keep the services intact?

Administration officials say tax hikes would further damage the economy, push revenue down and drive businesses and entrepreneurs out of the state, in addition to forcing California to reduce services even further.

"As much as we believe those cuts will result in greater expense down the line -- especially in healthcare -- we have to do it because I can't promise the people something we don't have," Schwarzenegger said in a recent interview on KXJZ-FM (90.0) in Sacramento.

He says California can no longer afford to provide services that are far more generous than other states offer. Administration officials also say it is just as likely that the cuts would force people like Steinlage into a relative's home -- where the state does not have to pay for care -- as it is that they would move to a state-funded nursing home.

Others say the experience of governments that have closed gaping deficits with deep program cuts suggests that the price of doing so is hefty.

"It's pay now or pay later," said Nicholas Freudenberg, who co-wrote a study of the long-term effects of service reductions made in the aftermath of New York City's fiscal crisis of 1975.

His 2006 study, published in the American Journal of Public Health, found that less than $10 billion in cuts to healthcare, education and law enforcement in New York City over four years led to at least $54 billion in additional costs over a 20-year period, using 2004 dollars and adjusted for inflation. Consequences included higher rates of HIV, a worsened tuberculosis epidemic and a spike in homicides.

"Those potential epidemics that are being seeded by Gov. Schwarzenegger's cuts will not come in his term or the terms of people who are making these decisions," Freudenberg said. "It will be several years down the line."

Large service reductions are probably inevitable. Democrats have abandoned their calls for more tax hikes and agreed to work with the governor and GOP lawmakers on a budget solution that does not include them.

The governor has proposed eliminating CalWorks, the state's welfare program, and Healthy Families, which insures low-income children. Welfare, which costs $219 a month per person, is cheaper than foster care, where advocates say some children will wind up if their families lose public assistance. The monthly foster care bill is $1,981.

The governor's budget plan would also shut down the state's poison control service, a $5.9-million program used by 330,000 people per year. Poison control experts say the elimination of a hotline would lead to as many as 164,000 extra emergency room visits.

Those visits would cost the healthcare system somewhere in the range of $70 million per year, according to Stuart Heard, executive director of California Poison Control System.

Roughly 15% of the patients who use poison control are on Medi-Cal, meaning the government would end up paying for their emergency room visits.

"We believe we save the state more money than we cost them," Heard said.

Another element of Schwarzenegger's plan would end an adult day care program that provides medical and therapeutic services to the frail elderly. The cut is intended to save the state $170 million.

But if even 20% of the recipients of the program are forced into nursing homes as a result of the service cut, as healthcare advocates have predicted, any savings to the state would be entirely wiped out.

About 27,000 other low- income seniors rely on a program that provides them with brown-bag lunches. The food is donated by farms and other food producers, and the program is run mostly by 900 volunteers. The state contributes $541,000 for administrative services.

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