County Ups the Ante in Health Care Funding Fight

The Board of Supervisors declared Tuesday that it has reached an impasse in its negotiations with the state and federal governments over health care funding and abruptly halted all expansion of its growing outpatient programs.

Lawmakers said they are freezing up to $30 million in expenditures “to lessen the catastrophic meltdown” in public health services that could result should a key federal waiver not be renewed.

The board’s move ups the ante in a three-way game of chicken among Los Angeles, Sacramento and Washington over who will fund the county’s public health system, which was saved from bankruptcy in 1995 by a $1-billion waiver of federal Medicaid rules that expires June 30.

County officials had hoped to have a five-year extension approved by last month, but the federal government has asked California to kick in more money and the state has generally been unwilling to do so.

With no meetings involving the three levels of government since March, supervisors have been planning for the worst.

“I have not experienced anything like this since the days when [then-Mayor] Tom Bradley and [then-Los Angeles Police Chief] Daryl Gates didn’t talk to each other while the city was burning,” said Supervisor Zev Yaroslavsky, who proposed the freeze with Supervisor Mike Antonovich. “The impasse we are at threatens almost 3 million people who depend on us for service.”

The decision to freeze all new expenditures on waiver-related outpatient care, officials say, jeopardizes the financial future of more than 100 nonprofit clinics with which the county has contracted under the waiver. Those clinics’ contracts were scheduled to be renewed next month but will remain in limbo under the new policy.

“This will throw many of them into a tailspin,” Mandy Johnson, executive director of the Community Clinic Assn., said of Tuesday’s action. “It’s going to start dominoing in decision-making in clinics over the next couple of weeks.”

State health officials Tuesday sent a letter to Secretary of Health and Human Services Donna Shalala, urging her to intervene. “The state is willing to meet at a moment’s notice,” the letter said.

Chris Peacock, a spokesman for the Health Care Financing Administration, the federal agency that decides on the waiver, said that productive discussions are still going on.

“We still hold the same goal, that any extension of the county’s waiver provide stability” for Los Angeles’ growing uninsured population, he said. But he did not want to get into details or specifically address the supervisors’ contention that negotiations have reached an impasse.

Though the troubles with the county’s waiver have been known for weeks, Tuesday’s action indicated to many that the situation has hit a new low. “It’s not a lack of money,” said Beth Osthimer, a lawyer for San Fernando Valley Neighborhood Legal Services. “It’s a lack of political leadership.”

“What this means,” said Annelle Grajeda, general manager of Services Employees International Union, Local 660, which represents most county workers, “is that when there are budget surpluses in all three of those entities in the government--the feds, the state and the county--they can let the uninsured go without health care.”

What it also means is that county officials have traded in their months-long tight-lipped approach to waiver negotiations for a strategy of drawing dire scenarios to pressure the state and federal government into meeting their demands. Some privately hope that newspaper articles will escalate the pressure on Washington and Sacramento.

Virtually everyone expects the waiver to be extended, given that, in August, Los Angeles will host the Democratic National Convention, where Vice President Al Gore--who is close to several supervisors--is expected to become the party’s nominee for president. Indeed, Shalala, who earlier this month visited a clinic that treats patients using waiver money, has been quoted as guaranteeing that the waiver will be granted. And more than two dozen members of Congress, including many Republicans, have sent a letter to Health Care Financing Administration endorsing the waiver.

But county officials are increasingly nervous that they will get what some call a Band-Aid waiver that would only last a few months, then leave them staring down deficits that are projected to grow to $700 million in a few years.

The prosperous economic times have ironically complicated the county’s efforts to keep its health system afloat. Each branch of government thinks another should pay more.

The county has proposed spending half of its $120-million annual haul from the national settlement of lawsuits against the tobacco industry and is bitter that the state, with its $13-billion surplus, has not made similar offers.

Gov. Gray Davis’ revised budget, released this month, does include some additional health care money, but officials remain unclear how much of that would go to Los Angeles County.

Meanwhile, the Health Care Financing Administration has been repeatedly criticized by congressional Republicans this year for giving breaks to politically connected HMOs and governments, including Los Angeles County. The agency is driving a harder bargain now than five years ago, some say.

The battle of wills has frustrated many. “I’ll go to bed tonight with a good night’s sleep. I’ll still be able to see my doctor,” said one supervisor’s aide. “But what about the uninsured?”

Those fears, expressed more strongly Tuesday than ever before, have already begun to cripple the county’s delicate health care network, medical officials said. “The unraveling has already begun,” said Osthimer of Neighborhood Legal Services.

Some clinics have been seeing far more uninsured patients than their current contracts pay them for, and had hoped to have their allowance upped in coming weeks.

Now all bets are off.

If existing contracts cannot be changed, “that would be a disaster for the county,” said Diane Chamberlain of the Valley Community Clinic.

Johnson of the Community Clinic Assn. said many clinics function on tight budgets and could not bear the stresses of the coming months without secure funding.

“They could face financial hardship and closure should this funding stream go away,” she said. “A lot of people are going to be losing a lot of sleep over this issue.”