Cost of Health Care Wrongly Put on Counties, Court Says

A California Court of Appeal ruled Friday that the state illegally shifted the costs of indigent health care to the counties and that state officials must provide up to $400 million annually in added funding to aid hundreds of thousands of low-income adults.

The three-member panel held unanimously that the Legislature violated the state Constitution in 1982 by transferring financial responsibility for care to the counties without providing enough funding for adequate services.

Two Orange County supervisors applauded the court’s decision. “I say ‘amen’ to the ruling,” said Don R. Roth, chairman of the Board of Supervisors. “We have been saying repeatedly, the state underfunds to the county and we have to pick it up through general funds.”

“Oh, I love it!” Supervisor Harriett M. Wieder said when told the news. “That’s so exciting! It made my weekend.”

Under the so-called Gann Amendment, added to the Constitution in 1980 under Proposition 4, the state may not avoid the amendment’s spending limits by shifting the costs of new programs or higher levels of services to the local government.

The court, ruling in a case from Alameda County, held that the shift of a large portion of the costs of medical indigent care to the counties constituted a “state-mandated new program” and that the counties must be reimbursed for the costs they were forced to assume.

Lawyers in the case and state officials agreed that the decision, if upheld, could result in hundreds of millions of dollars annually for Orange and other counties now hard-pressed to provide health services for the poor.

“The state will be obligated to rectify this tremendous under-funding of medical care for literally hundreds of thousands of people in California,” said Lois Salisbury of Public Advocates Inc. in San Francisco, an attorney for a group of taxpayers and aid-seekers who challenged the fund-shift in a lawsuit.

Salisbury said that in 1982, when the shift first occurred, the state provided about $520 million annually to the counties, representing about 70 cents of every dollar to be spent on indigent health care. Now, only $450 million annually is being provided, the state’s share has dwindled to 40 cents on the dollar, and many counties are unable to provide adequate care, she said.

Herbert Rosenzweig, Orange County medical services director, said the decision “could result in two things: more money to the county; or the state would be forced then to take these (medically indigent adults) and cover them” as they did before 1982. Either scenario would bring welcome relief to a strained health care system.

The county has received $33 million in state funds each year since 1982 for services to medically indigent adults, although the 1990-91 budget is expected to provide only $25 million, Rosenzweig said.

State Deputy Atty. Gen. Asher Rubin, representing the state officials named as defendants in the taxpayers’ suit, called the ruling “a shocking blow” to the legislative process. The appeals court improperly interfered with the Legislature’s prerogative to establish a new system of financing care in the wake of the Gann Amendment, he said.

Rubin said state officials plan to appeal the ruling to the state Supreme Court. If it is appealed, state high court action in the case could come by this spring.

Attorneys in the case said that if the ruling is not overturned, the state could meet the requirements of the decision either by providing additional funds directly to the counties or offering medically indigent adults coverage under the state’s Medi-Cal program.

Times staff writer Kenneth J. Garcia in Los Angeles contributed to this report.