Counties Win Suit Over Health Care Costs

In what may be a pyrrhic victory for local government, the California Supreme Court ruled Monday that counties can require the state to reimburse them for the cost of providing health care to the poor.

But what could have been a bonanza for counties may wind up costing them about $900 million because of a legislative maneuver intended to discourage counties from seeking repayment.

The ruling sent county and state officials scrambling for copies of the decision to determine what it might mean for government finances.

The dispute, sparked by a San Diego County lawsuit against the state, involves two years in which the state failed to reimburse counties fully for the cost of medical care for the indigent.

The state eliminated certain low-income adults without private medical insurance from Medi-Cal in 1982 but continued to provide counties with money to cover them until a state budget crisis in 1989.

The state reduced payments during fiscal years 1989-90 and 1990-91, prompting San Diego County to sue. The county claimed that the state owed it $22.6 million in unreimbursed costs.

The Supreme Court, in a 6-to-1 ruling, said the state should have fully reimbursed the counties for the health care program. In an opinion written by Justice Ming W. Chin, the court held that repayment was required under 1979’s Proposition 4, which said the state must pay counties for mandated programs.

The Legislature excluded the working poor and certain other indigents from Medi-Cal “knowing and intending” that counties would have to pick up the tab, Chin wrote.

A state commission will now determine how much money, if any, San Diego County is owed. Other counties that were forced to make up the state shortfall for similar programs during those years may also ask for reimbursement under the ruling. State officials were unable to estimate Monday how much other counties may now seek.

But in a maneuver known as a “poison pill,” the Legislature in 1991 said counties would lose hundreds of millions of dollars in state vehicle license plate revenue if San Diego County prevailed in the lawsuit.

This “poison pill” would undermine a 1991 state budget realignment in which the state shifted to counties additional programs, including health care for the working poor, and gave them sales tax and license plate revenue to pay for the added responsibilities.

State officials said they are not yet certain whether the ruling obligates the state to take away the license plate revenue, estimated at $898 million for the next fiscal year, from California counties.

“The [court’s] disposition is worded in a way that we cannot make a definitive legal determination today as to whether and when the poison pill would be activated,” said H.D. Palmer, assistant director of the state Department of Finance.

“Clearly, this ruling could have a major impact on indigent health care funding for counties,” he added, “and it could affect broader issues involving state and local government finances.”

Local government officials appeared skeptical Monday that the state would fulfill its threat because implementing the “poison pill” would require it to take back responsibility for several social service programs the counties are now financing.

County officials also suggested that the law may be challenged and blocked in court.

“Even though people are running scared of this poison pill,” said San Diego Chief Deputy County Counsel Diane Bardsley, “I don’t see how the state can terminate a funding source without taking the programs back.”

She said the legislative maneuver was intended to “bully” the county into giving up its lawsuit. “If they take away the money, they can take away the programs,” she said.

Deputy Atty. Gen. Richard T. Waldow, who represented the state in the San Diego County case, refused to comment on the ruling, referring all inquiries to the state Department of Finance.

Los Angeles County previously had filed a claim against the state for unreimbursed costs under the indigent medical care program but dropped the matter after a settlement was reached.

David Janssen, chief administrative officer for Los Angeles County, said he had no idea whether Monday’s ruling would have repercussions in Los Angeles.

“There is some satisfaction in winning,” Janssen said, “but it depends upon what the consequences are. . . . I think everybody is going to have to go back to their history books here and figure out what this means to the programs.”

Michele Vercoutere, an assistant division chief in the Los Angeles County administrator’s office, said the county settled its claim with the state for fear that it would lose even more money if the “poison pill” were triggered.

Justice Joyce L. Kennard, in a dissent, warned that the court’s ruling could come back to haunt counties and the poor.

“Today’s decision will immediately result in a reduction of state funds available to the counties,” Kennard predicted.

The Finance Department’s Palmer declined to estimate how long it will take the state to decide whether to activate the “poison pill” and take away the license plate revenue from the county.

“If it were activated,” he said, “the $898 million would be shut off starting July 1. But we’re not going to make a snap judgment on this.”

In Ventura and Orange counties, officials said it was too early to gauge what the impact of Monday’s ruling would be on their coffers. Pierre Durand, director of Ventura County’s Health Care Agency, said the important thing is that the state recognize that counties cannot afford to pay for health care costs for the working poor and others, whose numbers continue to grow as more employers decline to provide health care benefits.

“The counties alone cannot subsidize this service,” Durand said.

Staff writers Carl Ingram, Virginia Ellis, Armando Durazo and Carlos Lozano contributed from Sacramento.