The Federal Linchpin in Easing Health Crisis : Quickly getting U.S. waiver is essential for L.A. County

A major component of Los Angeles County’s jerry-built budget relies on additional federal funds for health care. A big unknown is whether Washington will provide the money. That will depend on whether Los Angeles County can get a waiver from federal Medicaid rules. The long-term implications are profound, because a waiver would jump-start the long-overdue reform of the county’s health care system.

For an exemption to be granted, the state must quickly apply for a federal Medicaid “demonstration” project on behalf of Los Angeles County. If approval goes through, it is expected that the federal government will immediately provide about $178 million--certainly no cure-all for a $655-million deficit in the health budget alone but real help nonetheless. More important, the waiver would provide the foundation for shifting the county from its old-fashioned, costly, inpatient hospital system to the less expensive outpatient model currently used by many private hospitals.

The current state and federal payment system, which provides most of the financing for the $2.5-billion-a-year county Department of Health Services, pays $1,300 a day for hospital stays but reimburses hospitals only a fraction of that for outpatient visits. Consequently the county health system has evolved around a hospital-based system. If the county is to move away from such a system, the federal waiver is considered essential.

The county is proposing a two-phase project. The first would provide federal Medicaid matching funds for outpatient services provided by county clinics to indigent patients. Presently, ambulatory care, especially in clinic settings, does not qualify for matching federal funds. Phase two would allow the state to direct some Medi-Cal funds away from hospitals so that the county could use the money to support a wide variety of health services, including outpatient clinics, public health services, AIDS projects, prenatal and perinatal services, trauma services and mental health services.

The goals of the demonstration project would be to stabilize the county health safety net, make a transition to an outpatient and preventive care system, and facilitate partnerships between public and private hospitals to provide care to indigent patients. The latter could include joint ventures as well as donation of services in kind as permitted under federal law. On Monday, the county solicited requests for public-private partnerships.

The proposed demonstration project would run for five years. The many details on funding are still being worked out by local, state and federal officials. Spearheading the effort here for the project is the county’s newly named health czar, Burt Margolin, head of the county’s Health Crisis Task Force, which issued an important report on the problem last month.

County health care services have already been subject to sizable cutbacks. Last week the County Board of Supervisors slashed more than $500 million from the budget. More cutbacks may be in store. County documents show that health clinics might begin turning away some of the sick and needy as soon as next week. Qualifying for a waiver to secure desperately needed funding must be a top priority--one free from politics and partisanship. The health of Los Angeles County depends on it.