Healthcare Business News

California docs face 10% Medicaid cut … but it could have been worse

By Andis Robeznieks
Posted: January 10, 2014 - 3:45 pm ET

Financial experts are projecting that the California state government will be seeing a modest budget surplus, and this has resulted in a bad news-good news situation for its doctors: A scheduled 10% Medicaid pay cut will go forward, but plans to make those cuts retroactive to June 2011 will not.

Elimination of the retroactive cuts is “a huge win for physicians and patients,” said Dr. Richard Thorp, president of the 39,000-member California Medical Association. But he lamented how the pay cut will still go forward, even as some 3 million new patients are expected to join Medi-Cal, the state Medicaid program, over the next two years.

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“Unfortunately, even with the retroactive cut eliminated, California is still last on the nation's Medicaid reimbursement rate list and has what are arguably the highest practice costs across the country,” Thorp said in a news release. “While this budget will provide some relief to physicians who may have otherwise been forced to stop taking new Medi-Cal patients altogether, it does not go far enough.”

The cut was approved by the state in 2011, but its implementation was blocked by a court injunction. The injunction was lifted in December 2012 by a three-judge federal appeals court panel. The CMA appealed to have the case reviewed by a 9th Circuit Court of Appeals 11-judge panel, but its petition was rejected in June 2013.

Gov. Jerry Brown's proposed $155 billion fiscal 2015 budget calls for “forgiving” the retroactive cuts, while reiterating how the provider pay cuts will result in $282.8 million in savings next year. The cost of Brown's forgiveness was projected as $5.8 million for fiscal 2014 and $36.3 million in the next fiscal year.

In addition to doctors, retroactive payment cuts would not be imposed on clinics; “certain drugs that are typically high-cost and used to treat serious conditions”; dentists; intermediate-care facilities for the developmentally disabled; and medical transportation providers, according to the budget summary.

In all, Medi-Cal has a $74 billion budget for fiscal 2015, with $45.8 billion coming from the federal government, $23.9 billion supplied by the state, and the rest coming from reimbursements or other nongovernment sources.

While the group appreciates that the governor won't pursue retroactive cuts, CMA spokeswoman Molly Weedn said it doesn't necessarily take the sting out of the coming cuts.

“What does it save doctors?” Weedn asked of the governor's proposal. “It doesn't save them anything.”

California's state government has gone from having a $26.6 billion budget deficit in 2011 to a surplus projected to be around $4.2 billion for fiscal 2014, which ends June 30. The governor's proposed budget calls for $670 million in new Medi-Cal spending for mental health, substance abuse, adult dental, and specialized nutrition services. The increase boosts the state's general fund portion of its Medicaid budget from $16.2 billion to $16.9 billion, up 4.3%.

“By no means are we out of the wilderness,” Brown said at a news conference, citing long-term liabilities and debts that still needed paying. “We must be very prudent in the way we spend public funds.”

In the release, Thorp noted that the state was in “dire financial times” when the Medicaid pay cut was approved by the Legislature, but said the economic climate has improved and so “the state should not continue to balance the budget on the backs of California's neediest patients and their doctors.”

In his budget message, Brown cautioned against thinking the nation and the state's economic clouds have lifted.

“Given the vagaries of the business cycle, and particularly the volatility of capital gains income, we must be ever vigilant in the commitment of public funds,” Brown said. “In addition, past budgetary borrowing, unfunded retirement obligations, bond costs, and deferred maintenance have created a mountain of long‑term liabilities that totals hundreds of billions of dollars. In the face of such liabilities, our current budget surplus is rather modest. That is why wisdom and prudence should be the order of the day.”

In California's budget process, the governor will release a revised budget in May and the Legislature should approve a final document in June.

Follow Andis Robeznieks on Twitter: @MHARobeznieks

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