Medi-Cal Takes Hit in Budget War

California’s budget logjam began to claim victims Tuesday, as state officials warned that many payments to nursing homes and clinics from Medi-Cal, the major government health program for the poor, would stop for the rest of the month.

And the state controller is expected to announce today that if a budget isn’t passed by July 1, California’s community colleges risk losing about $192 million that will be owed them by the end of July. College officials said some schools could be compelled to close summer school and defer paychecks.

Colleges in 34 districts borrowed money at the beginning of the school year in anticipation of shortfalls and “should not have a problem,” said Scott Lay, budget director for the Community College League of California. But some schools in the other 38 districts were depending on the infusion of money from the state and could face “a real crisis,” he said.

The grim news came as state senators, quarreling bitterly, made a fruitless attempt to pass a budget on a party-line vote. Later, a frustrated Senate President Pro Tem John Burton (D-San Francisco) admitted that lawmakers will now almost certainly miss the July 1 budget deadline.

“The problem is we’re at this impasse,” Burton said. “You’ve got an obligation to take your best shot before the end of the fiscal year, and that’s what we did.”

Highlighting the tension between Democrats and Republicans, Senate GOP leader Jim Brulte didn’t even show up at the 2 1/4-hour floor debate over the Democratic budget proposal Tuesday until the very end, just in time to vote “no.”

Brulte said he opted to watch one of the year’s most important floor debates on television instead. “I was eating lunch, having conversations with people and making press calls,” he said.

Democrats used the vote to draw a line in the sand, warning Republicans that they would not make any more cuts to programs and challenging the GOP to come up with a better proposal that actually spells out what would get cut and by how much. To hammer home their point, they intend to put the same plan up for a vote again today, possibly Thursday, and again on Monday.

Republicans said they will not stand down.

“Let this be a message to Democrats that the weak-kneed Republican sellouts of the past are nowhere to be found today,” said Sen. Rico Oller (R-San Andreas).

Health-care workers were already beginning to feel the effects of the state’s budget problems on Tuesday, as they braced for the state to miss its Medi-Cal payment.

Late last week, the state Department of Finance sent a letter to legislative budget leaders warning that unless lawmakers appropriate money to close the shortfall, payments to certain health-care institutions “will cease to be made.” Under federal law, the state must keep up payments to individual providers, including doctors and pharmacists.

“Losing a week of Medi-Cal payments, when clinics are struggling to meet payroll, will put clinics in a very difficult financial situation,” said Carmela Castellano, chief executive officer of the California Primary Care Assn.

A two-thirds vote of the Legislature is required to pass a bill covering the $727-million shortfall. For medical care provided after the new fiscal year begins on July 1, the state can tap a $1-billion loan to make payments, according to the state Department of Health Services.

State officials and health-care experts said it is unusual for state medical payments to be in jeopardy at this point in the budget cycle.

“We’ve never had a deficiency this large,” said Stan Rosenstein, deputy director of medical care services in the Department of Health Services. Still, Rosenstein said he expected that the lawmakers will ultimately pass the legislation and medical providers will be paid, if late.

Among those hardest hit will be adult day-care centers. Statewide, 90% of the frail and elderly seniors served at adult day-care centers receive Medi-Cal, according to Lydia Missaelides, executive director of the California Assn. for Adult Day Services. Many of the smaller adult day-care centers operate on a paycheck-to-paycheck basis and may not be able to survive a two-week payment gap unscathed.

“This would be like getting notice on Friday that you’re not going to get your paycheck for two weeks,” Missaelides said. “Plus your employer tells you, ‘And by the way, I don’t know when if ever you’re going to get the two weeks of pay you just worked for.’ ”

As for what effect such a halt on payments would have on patients, it is still too early to tell, said Sherreta Lane, vice president of reimbursements for the California Healthcare Assn.

“From the patient perspective it might not be as visible or noticeable,” Lane said. “The worst case is that providers have already rendered services and it could be a long time for them getting paid.”

While recipients of state funds hoped for quick compromise, none came together Tuesday. A Democratic proposal for a half-cent sales tax increase remained a key sticking point. That extra money would be used to pay $10.2 billion of the state’s shortfall over the next five years. Democrats abandoned their proposals for increasing the income tax on high earners and hiking taxes on tobacco.

“We have certainly not placed in front of you a long list of taxes,” Sen. Jack Scott (D-Altadena) said to Republicans. He warned that continued inaction on the budget into July would have “very radical consequences, perhaps involving the bankruptcy of the state and the shutdown of state government.”

California is currently running on borrowed money for the first time in the state’s history. State finance officials have warned that when an $11-billion bridge loan runs out in August, they will have no way to pay to keep the government running absent a budget.

Sen. John Vasconcellos (D-Santa Clara), the Legislature’s longest-serving member, accused Republicans of “lacking integrity” in the budget debate by distorting the facts. He and other Democrats noted that the overwhelming majority of the budget goes to support education and health care programs that Republicans support.

“Be more mature than headline hunting, than 30-second spot-grabs,” he said. “Being here is a sacred trust.”

Republicans continued to blame Democrats for the state’s financial woes.

Sen. Tom McClintock (R-Thousand Oaks) said “hell deserves no worse” than the budget proposed by Democrats. He noted that in addition to the sales tax, it relies on a $4-billion vehicle license fee hike that Davis imposed last week by administrative order, a move that Republicans said was illegal and would not hold up in court.

“We are facing this unprecedented point of fiscal insolvency because of a budget passed by this Senate that is not nearly as bad as the one before us today,” McClintock said, referring to the budget lawmakers approved last year, which quickly fell billions of dollars out of balance.

Democrats acknowledged their latest budget proposal would also fall out of balance. But they have proposed a bipartisan commission that would work on fixing the structural problems within the state budget that regularly cause revenues to fall below spending. That commission, Democrats said, would bring proposals for reforming the state’s tax system before voters next March.

Gov. Gray Davis, meanwhile, criticized Republican opposition to a tax increase before two dozen representatives of local government, business, education, public safety and environmental groups.

Davis said he had challenged Republican legislative leaders to put together an investment banking team that would loan California the money to meet the current-year deficit without imposing a new tax, but the GOP lawmakers have yet to do so.

“If they don’t finance the deficit [with a new tax], this place is going to look like Atlanta after Sherman went through it,” said Davis.

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Times staff writers Carl Ingram, Gregg Jones and Lisa Richardson contributed to this report.