Medi-Cal Is No Cadillac Program : To Cut It Is to Deny Basic Health Care to Those Who Need It Most

The recently appointed Joint Medi-Cal Task Force has been holding hearings around California, trying to understand why Gov. George Deukmejian ordered 10% cuts in many provider payments and a 5% reduction in the total Medi-Cal budget for next year. The governor’s men have said that Medi-Cal costs are out of control, that it’s a “Cadillac” program, that cutting Medi-Cal is the only way for the state to live within its means.

What have we learned so far about the Medi-Cal crisis?

Medi-Cal costs are not out of control. Medi-Cal does have a funding shortfall this year, now pegged at $178 million. But the shortfall exists not because program costs were unexpectedly high but because the governor’s Department of Finance, ignoring the advice of the Department of Health Services and the independent legislative analyst, under-budgeted the costs of the program for this year.

Contrary to popular belief, Medi-Cal costs have been growing more slowly than other general fund spending, and more slowly than the statutory state spending limit. In fact, Medi-Cal is the only major state program that has stayed under the so-called Gann limit.

Where costs of the Medi-Cal program have grown, it was because the Legislature passed, and the governor signed, measures to support higher income eligibility limits and higher provider rates. Increases in eligibility limits occur automatically as a protection against inflation. Provider rate increases have been approved whenever a good case is made for the increase. For example, the Little Hoover Commission’s investigation into the too-often-inadequate conditions in nursing homes culminated in major reforms of nursing-home regulation and in Medi-Cal rate increases targeted to improved nursing-home care. Other major provider rate increases were given by restoring temporary cuts made in 1982. Even so, overall, most provider rates have increased by a total of only 2% in the last five years.

Medi-Cal is not a Cadillac program. The Administration charges that Medi-Cal offers benefits not always found in private health packages. The fact is that the costs of these benefits are minimal. For example, Medi-Cal covers acupuncture and chiropractic care, but these cost only $1.5 million, or 0.06% of the total state program costs. Furthermore, since 1979 the costs of private insurance for state employees have risen faster than Medi-Cal costs. Medi-Cal is not an extravagant program; it is a program providing the elderly, disabled and the poor, at a lower cost, the same basic medical services that most of us take for granted.

Medi-Cal is a bargain compared to the programs of other states. According to the legislative analyst, no matter how you look at it--cost per patient, cost per total population or cost as a percentage of personal income--California’s program is one of the cheapest in the nation. On a per-recipient basis California ranked 47th among the states in 1984-85 Medicaid spending; only Alabama, Mississippi and West Virginia spent less. California does qualify more people for Medi-Cal--more of the frail aged, the disabled, and sick children. But our low costs and wider eligibility mean that California’s program does more with less than any other state in the nation.

How do we do it? How can we manage to serve such a large share of the poor and spend so little? By paying doctors, hospitals and other providers far below the going rates, and in some cases even less than it costs them to provide the services.

According to the California Public Hospital Assn., we have under-funded the costs of Medi-Cal by $2.5 billion since 1982. And we have under-capitalized our county hospital systems by $1.5 billion. We reimburse physicians at an average of 40% of their charges to other patients. If the proposed 10% rate cuts take effect, we will be paying pharmacists less than it actually costs them to purchase drugs wholesale.

What is happening now? We are starving the program and driving private providers out of Medi-Cal. Today in many areas of the state it is already difficult or impossible for a Medi-Cal patient to get a doctor--any doctor. The Administration’s proposed 10% provider rate cut has been the last straw. According to the California Medical Assn., 29% of surveyed physicians currently participating in Medi-Cal said that if fees were cut they would cut back on the number of Medi-Cal patients that they treat; 15% would stop seeing any new Medi-Cal patients; 31% said that they would drop out of the program completely. Several hospitals in the last 60 days have closed their doors to Medi-Cal patients, and many more are considering doing the same.

Where do these people go when no private practitioner will treat them? To a county hospital? Many counties have no public health-care programs. For example, the county hospital in Fresno serves a six-county area in a 150-mile radius. Counties that do have health facilities are overwhelmed and severely under-funded due to past state program cuts. The proof can be seen in any county emergency room or obstetrical clinic.

Obstetrical care is a good example. A recent report by the Child Health Network documents the situation for pregnant women since the last round of Medi-Cal cuts: 15 counties have no obstetrician willing to see Medi-Cal mothers; 11 others had more than 990 eligible mothers per Medi-Cal obstetrician. In many of these counties there are no public clinics to fall back on. Where public clinics exist, they are overloaded. Waits for prenatal care are up to five months in Los Angeles.

The result is that women are not receiving needed prenatal care, one of the most cost-effective health services known. According to the Department of Health Services, the chances of getting prenatal care in the first three months recently declined for all ethnic groups; for blacks it is the lowest since 1973. This lack of access to prenatal care means more problem pregnancies, more costly deliveries and poorer health for California’s children. Between 1983 and 1984 the overall share of babies born with low birth weight increased. After steady declines, infant mortality increased between 1982 and 1983 for black children. In the starkest of terms, it means that some mothers and their babies will needlessly die or suffer life-long disabilities that could have been prevented.

Another example of the effects of the 1982 cutbacks was the experience of indigent adults who lost their Medi-Cal coverage and had to seek care at public facilities. Studies have documented that many fewer people received needed care, dangerous conditions went untreated, and people died from treatable conditions. The same thing will happen to the remaining Medi-Cal recipients if disillusioned providers leave the program.

The solution isn’t to cut public health programs. The governor’s advisers suggest cutting $250 million out of Medi-Cal and leaving the $25-million hole in funds for county indigent medical services. Unfortunately, they have identified the wrong problem and have come up with a disastrous solution. The Medi-Cal program and county programs for the medically indigent suffer from a lack of funding; further reductions will bring the system to the verge of collapse.

The task force hasn’t yet found the ultimate solution. But we are learning a lot about the problems in the public health system. We are also searching for creative ideas to help solve these problems--ideas that would represent a common ground of concern and practicality betweenDemocrats and Republicans on the task force, and between the Legislature and the governor.

An innovative solution may well require reform and restructuring of the system. But it surely will also require a broader and more stable funding base for the future. Whatever changes we make, our efforts to rebuild these programs must reaffirm our shared commitment to provide decent health care for the poor.