Governor Orders 10% Cut in Some Payments by Medi-Cal

The Deukmejian Administration, in further cost-cutting moves, Tuesday ordered a 10% reduction in rates paid to doctors and hospitals for many outpatient medical services to the poor and announced new plans to reduce soaring costs in the state prison system.

Critics of the cuts in the state’s $5-billion Medi-Cal program, which provides medical services to about 3 million low-income Californians, immediately attacked Gov. George Deukmejian for being a Scrooge because of the Christmas-week announcement.

Announcement of the Medi-Cal cutbacks, expected to save the state $18.7 million, followed by a day the governor’s order for a 2% cut in nearly all state administrative operations because of a projected $900-million budget shortfall.

The 10% Medi-Cal rate reduction will take effect Feb. 1 and last until the end of the fiscal year, June 30.

State Finance Director Jesse Huff said payments will not be cut to providers of obstetric and maternity services or doctors and hospitals providing in-patient hospital and emergency services.

Nursing homes and convalescent hospitals will also be spared cuts.

The cuts in the Medi-Cal program had been predicted for days by Deukmejian’s critics, who claim the governor is playing “political games” by singling out Medi-Cal to bear the brunt of the state’s budget problem.

Administration officials say the budget deficiencies have been created by a sharp drop in expected tax revenues as well as higher-than-anticipated costs of some state programs, primarily Medi-Cal and prisons.

The budget problem was made known just six weeks after Deukmejian successfully concluded his reelection campaign by promising that he had turned state finances from “IOU to A-OK.”

Huff said Tuesday that the budget shortfall in the Department of Corrections was brought on by “an unanticipated increase of over 6,000 felons in the state’s prison population” and was projected at one point at $103 million.

But Huff said the deficiency could be reduced to about $60 million through a “re-evaluation” and “refinement” of budget projections as well as various savings on training, overtime and operating expenses.

Critics of the Medi-Cal cuts pointed out that the governor ignored warnings made as early as last February that the Administration was not budgeting enough money to properly finance the program. Deukmejian aides challenge that claim, noting that the Legislature adopted the Department of Finance’s budget estimates along with the governor.

Still, Assemblyman John Vasconcellos (D-San Jose), chairman of the Assembly Ways and Means Committee, insisted of the Medi-Cal shortfall: “Everyone but the Administration projected it.”

Commenting on Tuesday’s announcement, Gladden V. Elliott, a San Diego radiologist and president of the California Medical Assn., said:

“By making a cut precisely where it will do the most harm to the less fortunate among us, the governor has chosen to be Scrooge with the poor people of California. We are watching a cynical attempt on the part of the governor’s people to fool Californians into believing that the Medi-Cal program’s costs are escalating wildly, when in truth the original budget figures were deliberately kept unrealistically low to improve the Administration’s fiscal projections.”

Elena Ackel, an attorney for the Legal Aid Foundation of Los Angeles, was similarly critical of the 10% rate cut.

“It is ridiculous,” she said. “It is difficult enough now for Medi-Cal patients, particularly in the specialties. People call us wanting to know what doctors will take Medi-Cal patients. We can find general practitioners, but try to find a cardiologist, an orthopedist, a rheumatologist. It is the last straw.”

Finance Director Huff, in making the announcement of the Medi-Cal and prison budget actions, said: “The Administration will continue to look within state government for other cost-saving measures to ensure California’s fiscal integrity.”

Deukmejian, in moving quickly on the budget problem, has ruled out a tax increase. The governor said that although the budget deficiencies will eat into the once-projected $1-billion surplus, he wants to finish the year with at least some money in reserve.