State Plan for Poor’s Healthcare Draws Fire

Times Staff Writer

Gov. Arnold Schwarzenegger’s new proposal for financing medical care for the uninsured and poor has led to an unusual rift with state hospital leaders, who fear it could spark the closure of more facilities.

At issue is $2 billion that California has been receiving each year from the federal government. The money has been distributed to public and private hospitals that carry a heavy load of Medicaid and indigent patients.

Of those 133 safety net hospitals, the 57 in Los Angeles County are among the largest and best funded and therefore the most potentially vulnerable to the changes, hospital officials say. Los Angeles County-USC Medical Center received $57 million and Harbor-UCLA Medical Center got $28 million in 2002, the most recent year for which the county has detailed data.


But the Schwarzenegger administration is being forced to transform the way California obtains Medicaid money from Washington as federal officials become less tolerant of the tabulations used by this state and many others to warrant extra money.

With California’s Medicaid arrangement expiring at the end of the month, hospitals and healthcare advocates are warning that the replacement solution Schwarzenegger has crafted could place new financial burdens on counties already squeezed by their own fiscal pressures.

The complaints also have resurrected charges that the governor has failed to live up to his campaign promise to wrest more money from Washington as “the Collectinator,” his self-applied moniker.

“We don’t understand why Gov. Schwarzenegger is siding with the Bush administration, as opposed to California’s hospital and healthcare community,” said Anthony Wright, executive director of Health Access California, an Oakland-based advocacy group. “We fear that this not only shifts the risk and responsibility to the counties, but could lead to a ratcheting down of local healthcare services up to and including the closure of public hospitals.”

Though the federal government generally gives $1 for each dollar that state government spends to treat the poor, many states -- including California -- have devised creative, though legal, accounting techniques that have allowed them to leverage even more money from Washington.

In New Hampshire, one of the more successful states at this, lawmakers often refer to those efforts as “Mediscam.”

Some states have used the additional money to shore up budget deficits or on areas not related to healthcare, such as transportation.

California has always used its extra Medicaid money for healthcare. But it has gone not only for Medicaid patients -- who are cared for by 280 hospitals that contract with the state -- but also for hospital care for indigent people not covered by Medicaid. Those patients include illegal immigrants and adults without children.

Under the current system, the state figures out which hospitals care for the larger proportion of Medicaid recipients and indigents and then divides the federal money accordingly.

Knowing that Washington would not accept the continuation of this practice, the Schwarzenegger administration devised a new proposal, which if approved in Washington would govern how California received money for the next five years.

Under the new plan, counties and the University of California -- which runs some of the larger medical centers -- would have to submit specific details on the care they were giving patients who qualified for matching funds.

Kim Belshe, head of Schwarzenegger’s Health and Human Services Agency, said the new arrangement has been designed so that it would allow California to collect $671 million more in federal money next year than its current $2 billion, and would protect the state from losing $281 million from Medicaid cuts already prescribed by Congress.

The deal also would allow California to continue to receive $368 million it uses for indigent care.

“The deal on the table is a very good deal, particularly in light of where the federal government is on this matter,” Belshe said. “It is a better deal than any other state has received that is in any similar situation.”

But California would not see increases in the later years of the five-year arrangement. Hospitals say that is not good enough when inflation and higher costs are increasing their needs every year.

In a June 1 letter, the California Hospital Assn., normally an ally of the governor, wrote, “We are certain that some public and private safety net hospitals would close” if the administration pushed ahead with its plan.

The letter said the association “will have no choice but to oppose” the plan if its concerns are not resolved. Though hospitals have no power to spike the deal with the Bush administration, they have substantial sway in the Legislature, where Schwarzenegger will have to go for related changes to state law.

Hospital officials say the Schwarzenegger plan would make funding for private safety net hospitals very unstable because they would have to rely on the state’s general fund for annual allotments, instead of being entitled to cover a set amount of costs. Of the nine hospitals that closed in California, five were private and in Los Angeles County.

Any shortfall in Medicaid money would force public hospitals to seek the difference from counties that in future years could have problems coming up with amounts needed to keep pace with inflation and higher populations.

“That basic shift is of great concern to us because of the long-run implications,” said Douglas Bagley, chief executive officer of the Riverside County Regional Medical Center, a 250-bed safety net hospital. “There’s a potential here for a long-term cost shift from states to counties.”

About $60 million of his hospital’s $280-million annual budget comes from those additional funds, he said.

California’s congressional delegation is also alarmed by the possibility of lower Medicaid payments to the state. The delegation last month sent a unanimous letter to Mike Leavitt, head of the U.S. Department of Health and Human Services, asking for full federal funding that would “allow reasonable future growth.”

The letter noted that California has a “significantly higher number” of uninsured and Medicaid-eligible people than do other states.

Administration aides and hospital officials met Wednesday in hopes of reaching some mutually acceptable changes. Hospital officials said that they were encouraged by the talks but that no resolution was reached.

“We really do believe the administration has been working diligently to resolve our concerns,” said Jan Emerson, a vice president of the hospital association.

But the administration has made clear it has no intention of abandoning the basic framework of its plan. “There’s been a paucity of viable alternatives that have been presented by our critics,” Belshe said.