Medi-Cal Reform by Deukmejian Hinted

Gov. George Deukmejian’s top assistant indicated Friday that the governor would propose a major overhaul of the $5-billion Medi-Cal program next year in an effort to get control of runaway costs of the health care program for the needy.

The suggestion came as Deukmejian and top Administration officials held long meetings in the Capitol to seek ways to stem the tide of red ink and unexpectedly weak tax revenues that have created a projected $900-million shortfall in the state’s $37-billion budget.

The shortfall would virtually eliminate the state’s projected $1-billion reserve with the fiscal year only half over.

But Chief of Staff Steven A. Merksamer said the governor hopes to salvage $400 million to $600 million of the reserve through spending cuts. He said Deukmejian is reviewing a wide range of possible budget actions and will be ready to announce them next week.

“We are looking everywhere,” Merksamer told reporters.

One of the biggest problems is the Medi-Cal program, which is currently running over budget by a rate of about 10% a month. That rate of spending would produce a $280-million deficit by the end of the fiscal year June 30, according to Department of Health Services estimates.

With statutory requirements limiting the governor’s ability to cut spending in the medical services program, Merksamer expressed the Administration’s frustration and said “a major Medi-Cal reform effort” was necessary.

The last substantial reform of Medi-Cal occurred in 1982. Among its major features, the overhaul took aim at reducing hospital costs and shifted the fiscal burden of caring for the working poor from the state to the counties.

Serves 3 Million

Merksamer called the Medi-Cal program, which serves approximately 3 million low-income Californians, “one of the richest of its kind” in the nation.

Merksamer said the governor was soliciting “feedback” from the health-care industry and will not have a formal proposal until next year. Whatever shape such a proposal takes, it will likely meet opposition in the Legislature.

Anticipating such action by the governor on Medi-Cal, state Sen. Diane Watson (D-Los Angeles) two days earlier charged that Administration officials “deliberately low-balled” budget expenditure estimates earlier in the year “to force the Legislature into considering their Medi-Cal restructuring proposals.”

Democratic critics contend that the Republican governor ignored warnings as early as last February by then-Legislative Analyst William G. Hamm that the Administration was being too optimistic in forecasting both tax revenues and Medi-Cal expenditures.

Merksamer responded by noting that the lawmakers themselves ignored Hamm’s forecasts in approving the governor’s proposed budget in June.

“If they felt that Medi-Cal was not funded at an adequate level, they could have added to the budget. They didn’t. They accepted the numbers. They concurred in the numbers. They also concurred in the economic projections,” Merksamer said.,

Inherited Deficit

Deukmejian made the health of the state budget a cornerstone of his reelection campaign. The governor, noting that he inherited a $1.5-billion budget deficit when he took office in 1983, told voters in speech after speech that the state went from “IOU to AOK.”

Reminded of the governor’s stock campaign phrase, Merksamer tried to put the best face on the current fiscal situation, describing the budget problem as “a little bump on the road.”

On another matter, Merksamer said the governor is putting together a program that will allow millions of dollars more to be spent on highways without an increase in the gasoline tax. He provided no details but said a possible transportation bond issue was under consideration.