Governor Brown Signs Bills Including Medi-Cal and Healthy Families Cuts

In a press conference on Thursday, March 24, 2011,, Governor Brown signed budget bills containing $14 billion in cuts and other expenditure reductions. This is roughly half of the solutions needed to erase the state’s massive budget deficit, which is projected to be over $26 billion. Included in the bills signed were cuts to the Medi-Cal and Healthy Families programs, which CMA had strongly opposed.

The cuts signed on March 24 included:

• A 10% reduction in Medi-Cal provider reimbursement rates.
• Mandatory Medi-Cal co-payments for physician office visits ($5), non-emergency use of the ER ($50), and inpatient hospital stays ($100 per night up to a $200 maximum).
• A “soft cap” on physician office visits of seven per year. This is termed a “soft cap” because physicians will be allowed to authorize more office visits if they feel they are medically necessary.
• Increases in premiums and co-payments for children enrolled in Healthy Families.
• Elimination of vision services in Healthy Families.

CMA was successful in working with emergency physicians to remove provisions from the budget that would have eliminated the Maddy Funds. As of the writing of this memo, CMA is still negotiating a possible compromise Maddy proposal to allow the state to obtain a federal match for some of the Maddy Funds, while retaining funds to maintain the funds’ core purpose of offsetting losses from caring for the uninsured.

Next Steps

The budget bills contain language prohibiting the state from implementing the Medi-Cal cuts unless and until the federal Centers for Medicare and Medicaid Services (CMS) approves them. CMA will therefore be advocating strongly for CMS to deny these cuts.CMS turned down the last such proposal from the state, relative to the 2008 Medi-Cal cuts. While that issue is technically under appeal, the state has not presented any new evidence that would cause CMS to change their opinion.

In Sacramento, the governor and legislative leaders are still negotiating on two major proposals needed to close the rest of the budget deficit: extending temporary tax increases for five additional years and eliminating redevelopment agencies.

During his campaign last fall, Governor Brown promised that he would not raise taxes without putting them to a vote of the people. Because of that, he is planning to call a special election later this spring to allow the public to vote on whether to extend tax increases approved in 2009. Most of those tax increases are set to expire on July 1, 2011. Therefore, the governor will need to call the special election next week to allow 90 days lead time and still allow the vote to happen before the taxes expire.

In order to call the election in a very short timeframe, the governor needs two Republicans in each house of the Legislature to vote for it. Several Republican senators have been in active negotiations with the administration on a package of legal and regulatory reforms that would convince them to cast their votes to place the taxes on the ballot.

If those talks fail, the administration will have to propose $12 billion more in expenditure reductions.