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California Gov. Jerry Brown
After his budget address, California Gov. Jerry Brown told the media, “When you add a million people or more to the Medi-Cal system,” that puts pressure on provider rates.
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Regional News/West: California's give and take

Medicaid cash infusion comes with provider cuts

By Andis Robeznieks
Posted: January 19, 2013 - 12:01 am ET

California Gov. Jerry Brown is asking the state to put an additional $350 million toward Medi-Cal, the state's Medicaid program.

But anyone cheered by the prospect, which was included in a $98 billion budget proposal this month and aimed at expanding eligibility for the program under the federal healthcare reform law, was soon deflated. Brown also intends to move forward with a disputed 10% cut to provider payments.

It may take six months before primary-care physicians in the state see a Medicaid pay increase promised under the Patient Protection and Affordable Care Act.

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The situation reflects a broader predicament as the federal government prepares to infuse billions of dollars into state Medicaid programs to expand coverage for lower-income Americans while states continue to look for ways to relieve the pressure the programs exert on their budgets.

A federal judge had blocked the rate cuts for physicians, clinics, nursing facilities, optometrists, therapists, laboratories, dental care, durable medical equipment and pharmacies, which the CMS approved in October 2011. Last month, however, a three-judge panel from the 9th U.S. Circuit Court of Appeals lifted the injunction.

Assuming “positive resolution in March,” this will result in savings of $431 million for the state, according to the California Department of Health Care Services.

The California Hospital Association, California Medical Association and several other organizations sued to prevent the cut from taking effect. CHA spokeswoman Jan Emerson-Shea said her organization would fight on.

“We're looking at months, if not years, of litigation. This is a long way from being resolved,” Emerson-Shea said. The CHA will ask the full appeals court to review the decision.

Medi-Cal has almost 8.2 million enrollees. Its caseload represents 21.7% of the state's population, according to the budget proposal. The federal contribution to California's program has been at the lowest amount allowed by law, 50%, since the inception of Medicaid in 1965. Mississippi, the state with the highest federal contribution, gets 73%, and the national average is 57%.

Physicians, especially primary-care doctors, are entering a state of uncertainty. They are looking forward to a boost from the Affordable Care Act's Medicaid parity provision, which provides federal funding for two years to bring Medicaid fee-for-service payments to Medicare levels for family physicians, general internists, pediatricians and related subspecialists.

Under Medi-Cal, these physicians can get between $18 and $24 for an office visit. Under Medicare rates, the visit could be around $52 and $54, depending on the physician's location.

Although the provision went into effect Jan. 1, the CMS did not issue the final regulations on the provision until November. States now have until March 31 to amend their Medicaid plans to reflect the parity provision. The CMS has 90 days to respond after that. The increased payments will then be issued retroactively.

The California Department of Health Care Services notified physicians that implementation is expected “to occur during the summer of 2013.” The uncertainty is leading to frustration, said Lisa Folberg, California Medical Association's vice president of medical and regulatory policy. “It's been one hit after another for physicians—and this was kind of a beacon in the fog for California providers,” she said.

Dr. Steve Green, president of the California Academy of Family Physicians, said practices may resist taking on new Medi-Cal patients even as the program begins covering more residents under the Affordable Care Act.

“The way Medi-Cal pays, there is no room for a 10% cut—practices are either not making anything or losing money,” Green said. “I think people need to realize there's a difference between saying a patient's insured and them actually having access to care.”

Circuit Judge Stephen Trott, who wrote the opinion lifting the injunction against the pay cuts, was not impressed with that argument. “The term 'cost' is not as free from ambiguity as the plaintiffs would have us believe,” he wrote. “The term 'cost' may also include items such as contract prices to suppliers and service providers, which may themselves be negotiated and reduced if reimbursement rates are reduced.”

Chris Perrone, deputy director of the California HealthCare Foundation's Health Reform & Public Programs Initiative, said that, with increasing federal control of Medicaid programs, states “have a shrinking number of levers” to ease the burden on their budgets.

One lever is eligibility, another is provider payments and a third is moving enrollees away from fee-for-service and into managed care, which California has expanded rapidly in the past two years, now covering 4.8 million beneficiaries under versions of that model. “The state is moving full-speed ahead on that,” Perrone said.

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