Wilson Considers Severe Cuts in Health Services

Gov. Pete Wilson is reviewing an internal Administration plan to cut as much as 15% from the state budget for health services by ending state licensing of nursing homes, slashing payments to doctors and hospitals that care for the poor, and cutting access to programs for children and victims of AIDS, The Times has learned.

The plan also would cap the number of days the state would pay for low-income invalids to stay in nursing homes and exclude from Medi-Cal people whose health care bills threaten to impoverish them. They would become eligible for state-subsidized health care only after their bills pushed them into poverty.

Wilson ordered his Health Services Department to prepare the list of cuts, but the governor has kept the options secret to prevent opponents from building a case to stop the reductions. Wilson is meeting daily with leading lawmakers from both parties in hopes of crafting a consensus that they can push through the Legislature on short notice to erase the state’s budget gap.

Administration officials declined to comment in detail on the list, which was obtained by The Times from a source outside the Administration who opposes the cuts.

“Every state program is at risk of being cut,” said Shannon Bowman, a spokeswoman for the Health and Welfare Agency. “At this point, we’re looking at everything.”

Medical industry officials said many cuts under consideration would be unfair to the patients who depend on state-subsidized care and unwise for the state. Critics also said the state may pay more in the long run if patients kept from getting drugs or physician care end up in hospital emergency rooms instead.

“We believe that health care programs have been reduced to the bare bones,” said George Cate, a lobbyist for the California Medical Assn. “There’s no more room for any cuts in some of these vital programs.”

The cuts on the Health Department’s list are in addition to proposals Wilson made in January to limit hospital stays to 60 days per year and eliminate state-paid visits to dentists, psychologists, chiropractors, podiatrists and other specialists.

Wilson in March asked every department in state government to rank its programs and suggest cuts that would yield a 5%, 10% or 15% reduction in services paid for by the general fund, where most of the state’s tax dollars are deposited. He has since said cuts as deep as 30% might be needed because the state will spend $44 billion this year but will have only $38 billion to spend next year unless lawmakers and the governor raise taxes or postpone repaying part of the deficit in the current year’s budget.

A 15% cut in the Health Department would save the state about $811 million. California would forfeit another $700 million in federal funds by reducing spending on services supported by matching funds from Washington.

The Health Department’s list prioritizes 25 items in the order the department would prefer to implement them. Money saved by intensifying fraud prevention efforts is listed as the first action to be taken, while the proposal to cap nursing home stays is proposed as the last resort.

As part of its plan to achieve a 5% reduction, the department recommends eliminating state licensing of nursing homes, although a parallel federal certification process would remain for any facility that accepts payments from Medicare or Medi-Cal. State officials said about 1,150 of 1,200 nursing homes undergo the state and federal reviews.

Also on the 5% list are proposals to eliminate state Medi-Cal payment for incontinence supplies--adult diapers--and to stop providing health care services not required by the federal government. Among those services not required of the state are hemodialysis, physical therapy, hearing aids, eyeglasses, medical equipment--including wheelchairs and crutches--and heroin detoxification, among other things.

The state would continue to provide prescription drugs but would attempt to save $18 million a year by limiting the availability of single-source medications.

The plan also calls for reducing by 10% fees paid for surgery, anesthesia and psychiatry and freezing at Oct. 1, 1992, levels the rates paid to hospitals for inpatient care.

To save 10% of the Health Department budget, the state would do all these things and more. Among the next tier of cuts would be a reduction of 10% in hospital rates and the elimination of state-paid care for the medically needy--mostly the working poor with catastrophic medical expenses which, in essence, threaten to bankrupt them.

This round of cuts also would reduce eligibility for children’s health services, an AIDS drug program and a program for adults with genetic diseases, including hemophilia, cystic fibrosis and sickle-cell anemia.

To cut 15%, the department would eliminate state-paid nursing home care for the medically indigent, eliminate care for medically indigent children, and cap reimbursement for nursing home care at 240 days per year.

The proposal to cap long-term care days would require nursing homes or hospitals with so-called skilled nursing facilities to discharge invalid patients after eight months or continue to care for the patients without reimbursement from the state. Several industry sources said it was too drastic to be a serious option.

“Limiting the days of coverage to 240 is so unconscionable and counter to the public interest it is not credible,” said Duane Daunner, president of the California Assn. of Hospitals and Health Systems. “It’s like saying we can’t afford to maintain the roads so we’re going to shut down the freeways after 240 days.”

Other proposals also came under attack.

Cate, of the Medical Assn., said a 10% reduction in fees paid to doctors would only prompt more doctors to abandon Medi-Cal, making it even more difficult for poor patients to find a physician to care for them.

“Doctors, if they do participate in Medi-Cal now, are doing so in many cases at a loss,” Cate said. “If you punish them further by reducing fees again, in some cases it’s the last straw, and you lose that provider forever from the Medi-Cal program.”

Daunner said the state needs to implement a program to manage the care of the most expensive patients. He said fewer than 2% of the Medi-Cal patients account for more than one-third of the program’s costs.

“You reduce costs by lowering consumption,” he said. “Simply cutting back on payments to hospitals does nothing to change or improve the system. It just further exacerbates the problems for those hospitals that have the highest percentage of patients who can’t afford to pay their bills.”

The doctors association, Cate said, favors increasing taxes to stave off cuts. The group would start with a 25-cent increase in the tobacco tax, which was raised by the same amount in 1988. The association also suggests postponing a state accounting change, a move that would push nearly $1 billion in Medi-Cal expenses to the next fiscal year.