Ill Omen for Davis’ Bid to Cut Medi-Cal

It happened once before: A governor trying to plug a budget shortfall slashed Medi-Cal reimbursements to doctors and other health providers. Doctors sued. And a federal court halted the fee cuts.

That was 1987 and the governor was George Deukmejian.

A similar situation is developing now as Gov. Gray Davis confronts a budget gap he calculates at $34.6 billion. Last week, the governor proposed cutting Medi-Cal reimbursements to doctors and other medical providers by 15%, which would save $1.4 billion annually, about half of which comes from the state general fund.

But Davis, like Deukmejian, could face a legal blockade. Federal regulations require states to provide indigent people in public insurance programs like Medi-Cal with adequate access to medical services. The California Medical Assn., representing 34,000 of the state’s physicians, and other medical providers are preparing lawsuits to stop the cutbacks.

Even without the latest fee cuts, academic researchers say many of the 6.4 million Medi-Cal patients have had trouble finding doctors to treat them.

“It’s already quite clear that California provides quite a bit less access in Medicaid than some other states do,” said Dr. Andrew Bindman, a professor of medicine at UC San Francisco who has studied Medi-Cal extensively. “We’re already swimming against a tide.”

A 2002 survey by the nonpartisan Medi-Cal Policy Institute found that 56% of Medi-Cal patients reported difficulty finding physicians. The perceived difficulty was even worse among those in Medi-Cal HMOs.

And, according to a forthcoming UC San Francisco report for the Medi-Cal Policy Institute, the percentage of primary care physicians accepting Medi-Cal in urban counties continues to decline. Fifty-five percent accepted new Medi-Cal patients in 2001, down from 60% five years earlier

Trade groups representing health professionals note that the state’s reimbursement to doctors already ranks 42nd among states when adjusted for cost of living differences, according to a 2001 study by the Lewin Group. Davis’ proposed cuts would lower the state’s ranking further.

If the 15% fee cut is implemented equally across the board, a physician would be paid $20.40 to see a returning patient, down from $24.

Medi-Cal managed-care plans would also see their monthly fees lowered when their contracts come up for negotiation.

Even after a rate increase in August 2000, Medi-Cal paid only 35% to 60% of what commercial insurers paid for a host of services, according to a 2001 study by PricewaterhouseCoopers.

Some state officials have questioned the wisdom of cutting Medi-Cal reimbursements. A year ago, when Davis first proposed a 10% fee reduction for this year’s budget, the state’s legislative analyst’s office determined that officials did not adequately consider how the move would affect poor people’s access to treatment.

According to the analyst’s report, “the evidence suggests that the rate reduction could negatively affect access to care and quality of care.”

The federal government requires that reimbursements be sufficient to enlist enough providers so that Medicaid beneficiaries have the same access to care and services as the general population. Medi-Cal is the state’s version of Medicaid.

Federal judges have found that the state ran afoul of the so-called “equal access” requirement three times since 1987, once as alleged in the doctors’ lawsuit against the Deukmejian administration.

In 1990, a federal judge ruled that the state provided inadequate access to dental care for Medi-Cal enrollees, in response to a lawsuit filed by the Western Center on Law and Poverty. As a result, the state increased payments to dentists. The same lawsuit also forced the state to increase payments for maternity care.

Then, in 1997, the U.S. 9th Circuit Court of Appeals agreed with hospitals suing the state that reimbursements for outpatient services were too low. The court ruled that the state’s payment rates must “bear a reasonable relationship” to the cost of providing those services.

In settling the case in 2000, the state agreed to a one-time payment of $350 million to the hospitals, as well as a 30% fee increase in July 2001 and an additional 3.3% increase in each of the three subsequent years.

The California Medical Assn. is hoping to persuade lawmakers to reject the reimbursement cuts this year. Short of that, “I would predict that the board will believe that legal action is required if these cuts proceed,” said Dr. Jack Lewin, chief executive officer of the CMA.

Lewin said doctors want to preserve an average 16.7% increase in reimbursements that took effect in August 2000, the first across-the-board rate hike for physicians since 1985.

Although acute-care hospitals are exempted from the cuts, the nursing home industry contends the fee cuts would force hundreds of facilities into bankruptcy. “If we’re not able to legislatively win this, we will go to the courts,” said Jim Gomez, president of the California Assn. of Health Facilities.If the provider groups sue, some of their strongest evidence may be Davis’ own words. Last fall, when he signed a measure to avert fee cuts in the current year’s budget, he said that California’s low Medi-Cal rates before he became governor reduced physician access within the program.

Any savings achieved from rolling back rates, the governor added, “would be offset by costs associated with increases in emergency room visits, administrative costs of implementing rate reductions and the loss of physicians who would surely leave the Medi-Cal program.”

State health officials said they do not want to speculate on possible lawsuits arising from the proposed fee cuts. “Are the proposed cuts painful? Absolutely,” said Lea Brooks, a spokeswoman for the Department of Health Services. “Are there other solutions? The governor is all ears to ideas that will responsibly balance the budget.”

Doctors who serve Medi-Cal patients say they are in a bind.Dr. Toni Johnson-Chavis, a pediatrician in Compton, said she won’t turn her back on her Medi-Cal patients, but she has little room in her practice to accept new ones.

“What I’m saying is I’m full,” said Johnson-Chavis, chief executive of Omnicare Medical Group. “If we have a further cutback and we don’t have new [doctors] who come into the area, we’re going to have big problems with access to care.”