California Gov. Arnold Schwarzenegger's aggressive plan to put the state's fiscal house in order has raised the hackles of providers and patient advocates statewide-and has prompted two often-competing labor unions to join forces in opposing budget cuts that could threaten access to healthcare services.
As part of an effort to fill the state's yawning budget gap, Schwarzenegger has proposed $2 billion in midyear spending cuts to an array of services, including government insurance programs for low-income families.
The governor has deemed these short-term cuts a necessary adjunct to his long-term economic recovery plan, which includes a $15 billion bond issue to cover current debt and a balanced-budget requirement that would prevent deficits in the future. The long-term reform package, which was passed by the state Senate in an 11th-hour session Dec. 12, will go before voters on the March 2 ballot.
Schwarzenegger last week invoked emergency powers so that he could immediately impose $150 million of the cuts without approval from the Legislature, which has recessed for the holiday season. His unilateral decision allows the state's director of finance to eliminate up to 5% of any line item in the current budget. The rest of the midyear cuts, however, will need to be approved by lawmakers, which likely will reconvene only after Jan. 10, when the governor unveils his proposed budget for fiscal 2005, ending June 30.
Critics contend the cuts are bound to backfire. "They are penny-wise and pound-foolish," said Donna Gerber, director of government relations for the California Nurses Association.
Last week, the CNA and the Service Employees International Union announced an unlikely partnership, pledging to jointly oppose the proposed budget cuts and ward off attempts by hospital and insurance groups to undermine implementation of pending healthcare legislation. In the past, contentious battles between the two labor unions have complicated and even stalled passage of state laws.
Among other things, Schwarzenegger's plan calls for slashing physician payment rates for Medi-Cal, the state's Medicaid program, by 10%. That's on top of a 5% reduction already set to take effect Jan. 1. It also recommends capping enrollment in the state's Healthy Families program, which provides healthcare coverage to children of the working poor.
The governor has called the proposed cuts an unpleasant necessity. "It is really tough to make painful decisions," he said publicly this month. "I hate to do it, but this is what has to be done."
The California Medical Association argues that the proposed Medi-Cal reimbursement cuts would reduce the number of physicians willing to treat Medi-Cal patients, making it even more difficult for the program's 6.5 million enrollees to see a doctor. That, in turn, would force more patients to seek emergency-room treatment-at costs far greater than the $161 million the cuts are designed to save in fiscal 2004.
"Patients who cannot find care will increasingly turn to emergency rooms for basic care or ignore problems and see their health conditions turn into emergencies," said CMA President Ronald Bangasser. "This is an inefficient and expensive way to provide healthcare."
According to the California HealthCare Foundation, nearly half of the state's doctors remain unwilling to treat Medi-Cal patients, despite a long-awaited 16% rate increase passed in August 2000. "The proposed cuts would essentially turn back the clock three years," said Chris Perrone, senior program officer for the philanthropic foundation, which last week awarded $5 million in assistance grants to local programs providing insurance to low-income residents. "A reduction of that magnitude would deter even more physicians."
Last month, the CMA and a coalition of healthcare advocates sued the state for passing a 5% Medi-Cal reimbursement cut for 2004, arguing that federal law requires Medicaid payments to be sufficient to enlist enough providers so that services are available to the same extent that they are to the general public. A federal judge in Sacramento is expected this week to rule on the CMA's request for a preliminary injunction.
Meanwhile, the CNA and SEIU have vowed to challenge the governor's plan to cap Healthy Families at the current 730,000 enrollees. Such a cap would save an estimated $11 million this fiscal year and $61 million in fiscal 2005. But it also would put tens of thousands of children on waiting lists for health insurance, denying them access to cost-efficient preventive care, Gerber said. Although some 300,000 children are eligible but not yet enrolled in the program, the cap would allow new enrollees to join only as others drop out.
"When you cap coverage, you force those families to deal with healthcare only when it's an emergency," Gerber said. "You're putting extra financial strain on vulnerable populations while leaving federal (matching) funds on the table." For every dollar cut from Healthy Families, the state loses two dollars in federal funding, she said.
The two unions also have teamed up to defend the state's new nurse-staffing regulations, set to go into effect Jan. 1, 2004. Hospital groups have been lobbying the governor-so far unsuccessfully-to delay or revise the law, arguing that compliance would be nearly impossible given the nationwide nurse shortage (Dec. 8, p. 10). The legislation, signed by Davis in 1999, requires hospitals to maintain minimum nurse-to-patient ratios.
The unions got a boost in their efforts to protect another controversial healthcare law earlier this month, when a California judge blocked a measure that sought to repeal the state's mandatory health insurance legislation, set to go into effect in 2006. The California Chamber of Commerce, which has sought to rescind the law, has appealed the decision.