Budget Deficit Deepens Crisis for Medi-Cal

Medi-Cal officials say they expect to run out of money in the next couple of weeks, and very likely will be unable to meet June payments to hospitals, nursing homes, doctors and others tending to the health needs of the poor.

The shortfall, coming at the end of the fiscal year, could delay paychecks of health care workers, force layoffs and reduce services to Medi-Cal patients. It is part of the estimated $3.6 billion the state lacks to meet financial obligations by the end of the fiscal year on June 30. The unexpectedly large deficit was disclosed by Gov. George Deukmejian on Thursday.

A bill to supplement Medi-Cal’s budget and those of other state programs is on the Assembly floor, but may not win legislative approval in time to save health care providers from significant interruption in income. Many health care facilities rely on the Medi-Cal reimbursement--distributed in scheduled payments four times a month--to meet payroll and other financial obligations.

Hardest hit would be nursing homes that depend to the greatest degree on Medi-Cal for their cash flow. Statewide, about 62% of nursing home patients are covered by Medi-Cal.

Also hurt would be hospitals in poverty areas where a high percentage of patients are covered by Medi-Cal.

“This is going to kill us,” said Dave Helmson, program director for the California Assn. of Health Facilities, which represents 950 of the state’s 1,300 nursing homes. “We aren’t sitting there on a lot of cash.”

Because of slow legislative progress on the deficiency bill and state budget, Helmson said he has warned association members not to expect Medi-Cal money until mid-July. He predicted staff layoffs and reduced services to patients, and said the cash-flow crisis could force already financially strapped nursing homes to close. He added that many homes will need bank loans to ride out the fiscal drought.

Ben Thomas, supervisor of Medi-Cal payments for the California Department of Health Services, said the department is working on a priority system to distribute the remaining money to the neediest health care providers.

“Our intent is to pay nursing homes and hospitals first,” Thomas said. Exactly how far Medi-Cal’s remaining fiscal 1989-1990 money will stretch won’t be known until Monday. But without quick legislative action, Thomas said the program will be broke by June 1.

Medi-Cal found itself $65 million short last year and, as now, was relying on the passage of a deficiency bill for additional money. But the bill failed to pass before the end of fiscal 1988-89, so Medi-Cal delayed payment owed in the final week of June to July, taking money from the 1989-90 appropriation, said Kirk Stewart, a budget analyst in the state Department of Finance.

As a result, Medi-Cal began the current budget year with $65 million less than its anticipated expenses. State finance officials hoped the money would stretch, but by January it was apparent the appropriation was insufficient, Stewart said.

That led Deukmejian to propose that the final payment of June, 1990, be deferred to fiscal 1990-91--as had been done the year before. This would create a one-week delay in Medi-Cal payments.

But because of other cost overruns in the $7.5-billion Medi-Cal program, health care providers are now looking at the possibility of four weeks without checks, if the deficiency bill fails to pass in time, according to Medi-Cal officials.

The bill must pass by June 4 in order for Medi-Cal officials to authorize the scheduled June 8 payment and avoid much of the delay, said Judi Smith, consultant to the Assembly Ways and Means Committee, whose chairman, John Vasconcellos (D-San Jose), is the deficiency bill’s sponsor. Payments also are scheduled on June 15, 22 and 29, although the last one is slated to be paid after July 1. Of $322 million in additional spending the bill would authorize, $168 million is earmarked for Medi-Cal, Smith said.

But the bill has twice failed in the Assembly, most recently on May 10, Smith said. Last year’s deficiency bill did not pass until September.

Those whose financial health is tied to Medi-Cal’s reacted angrily to news of the shortfall and its likely consequences.

“This is just another political shell game where the politicians make poor people and the hospitals that serve them the victims,” said David Langness, vice president of the Hospital Council of Southern California, which represents most of the region’s 290 hospitals.

Langness bitterly described last year’s solution to the Medi-Cal shortfall as akin to “trying to make your blanket look longer by cutting a foot off the bottom and sewing it onto the top.”

Jack Light, a spokesman for the California Medical Assn., which represents the state’s 60,000 doctors, blamed the problem on “chronic and deliberate under-budgeting” of Medi-Cal that this year he said will have disastrous consequences.

Light also attacked the plan of Medi-Cal officials to pay nursing homes and hospitals before doctors, saying that will further discourage doctors from accepting Medi-Cal patients.

He said most of the 35,000 doctors who participate in the program already limit their Medi-Cal caseload because of routine payment delays and low rates of reimbursement. There are shortages of participating doctors in some areas and in certain specialties like obstetrics and orthopedic surgery. Light said these will worsen if Medi-Cal welshes on its June obligations.

“The reaction of many doctors will be ‘Medi-Cal has done it again; I’ve had it,’ ” Light predicted.