U.S. to Extend Waiver on L.A. County Health Funds

Ending a cliffhanger debate that has long jeopardized Los Angeles County’s overstressed health care system, federal officials Tuesday cleared the way for the release of more than $1 billion that will keep clinics open and provide medical care to poor people.

After a roller-coaster month of negotiations--capped last weekend by a meeting between President Clinton and county Supervisor Zev Yaroslavsky--federal officials agreed late Tuesday to extend a waiver of Medicaid rules for five years. That waiver translates into $1.2 billion for the county over that time.

Without it, officials had warned of layoffs and reductions in service to the nearly 3 million largely poor, uninsured residents served by the county.

The waiver allows the county to receive federal reimbursement for treating patients in outpatient clinics and is intended to shift the county health system’s emphasis from hospitals to smaller, more dispersed clinics. The county needed a waiver because federal rules normally allow reimbursement only for hospital care, not clinic treatment. It was originally granted in 1995 as the county tottered on the brink of bankruptcy, and was extended Tuesday even though the county failed to carry out all the reforms it promised five years ago.

As they did in 1995, officials pledged Tuesday to take advantage of the federal aid to bring about greater reforms. The affected money represents a significant portion of the overall county health care spending of $2.4 billion.

With the waiver in hand Tuesday, county officials were elated and relieved.

“We’re off the hot seat,” Supervisor Yvonne Brathwaite Burke said. “We have some time, and the important thing is, we have time to plan.”

Financial Penalties

The new federal aid comes with strings attached, however. Financial penalties will be imposed if the county again fails to fully implement its reforms. And the amount of money the county can receive declines steadily over the five years. Afer that time, it ends and cannot be renewed.

Meanwhile, the county will be forced to reform its system, a mission that has been a challenge. Among other things, the county had promised to boost outpatient visits to 3 million annually, but is hundreds of thousands of visits behind schedule. County officials also have fallen short of their cost-cutting goals.

Unless there are further changes, those problems will arise again, despite Tuesday’s breakthrough. Even with the waiver, county officials calculate that within four years, the Department of Health Services will again run significant deficits that will have to be covered by either new revenues or cuts in services. Still, the release of the money buys precious time.

“That’s both good news and bad news,” Yaroslavsky said of the waiver being granted.

“We have to get to work.” Overall, he said, “It’s a good day for the county.”

In a statement, Gov. Gray Davis hailed the deal, which includes $300 million in state funds. “The waiver will help L.A. County serve its health care beneficiaries, and for the first time, hold L.A. accountable,” he said.

Before the deal is final, it must be formally approved by state officials and submitted to the federal Health Care Financing Administration, which administers Medicaid (known in California as Medi-Cal). But officials expect no snarls and hope for finalization by the end of the week.

The aid, said Sen. Dianne Feinstein (D-Calif.) in a statement, “will allow the uninterrupted operation of Medicaid services and avoid serious layoffs.”

Feinstein has long played an important role in the fight for the money. It was at a Feinstein fund-raiser Saturday, held at the home of billionaire Ron Burkle, that the senator brought Yaroslavsky and Clinton together. The two discussed the monthlong logjam that had spread panic throughout the county health system.

Yaroslavsky said he spoke with the president about the negotiations involving county, state and federal officials. Three days later, a deal was made.

Even before the negotiators completed their daylong meeting in Washington, supervisors were backing away from plans to freeze contracts with about 170 community clinics if the waiver was not renewed. The move began to calm a health system that has been in a daily panic.

Had the waiver not been renewed, the county faced a $250-million deficit in its current budget and a hole of up to $700 million in coming years.

Union leaders, who were instrumental in securing the original waiver, organized rallies and lobbied the state and federal government. Health providers lobbied as well.

Supervisors initially had hoped that the extension would be granted by April. But several forces conspired to take the already-tottering health system to the brink again.

At least publicly, the county’s performance was not the main bone of contention. County officials had admitted their shortcomings but cited other significant changes in their medical system--more than tripling their outpatient sites since the first waiver was granted, for example.

Instead, the dispute centered on money. The state government had not contributed last time, but now the federal government wanted Sacramento, with its $13-billion surplus, to chip in.

Tobacco Settlement

In the end, the federal government will pay $900 million over five years toward the restructuring of the county’s health system. The state for the first time will contribute $300 million--which will free up more federal matching funds--and the county will pay $400 million more than it now spends.

The county plans to pay its bill with money from the national settlement of the lawsuits against the tobacco industry.

“We are paving the way to greater self-sufficiency,” Supervisor Gloria Molina said in a statement.

The state’s contributions come through technical changes in the way it funds the county health system.

The agreement also contains a provision for a $40-million worker retraining program--funded jointly by the state and county--to prepare county workers for the transformed system. A favorite issue of the county’s powerful Service Employees International Union, Local 660, it was hailed by the union general manager, Annelle Grajeda.

Overall, she said, the waiver “provides the care our members need.”

With the federal money declining over time, though, the county will be faced with a projected $111-million deficit in four years and a $350-million hole in the fifth and final year.

Grajeda said that those numbers, while intimidating, can be dealt with, especially if the economic boom continues. And she said that four years is an eternity in the arcane, politically tinged world of county budgeting.

“There’ll be a way to make that up without much hardship,” she said.