A Rosy Budget Outlook, With a Thorn

Buoyed by higher tax revenues from a hot housing market, Los Angeles County leaders are preparing to dramatically expand services for the homeless and boost public safety. But as they gear up to debate an anticipated $20-billion budget this summer, they still face a looming crisis in the county’s gargantuan health system.

If trends continue, mounting healthcare costs driven in part by the uninsured could push the nation’s most populous county more than $1 billion in the red in three years.

And because the county carries so much of the burden of caring for uninsured patients and providing emergency care to all, such a fiscal meltdown could threaten the entire regional healthcare system, health experts warn.

“It’s deja vu all over again,” said Sam Garrison, policy manager for the influential Los Angeles Area Chamber of Commerce. Spurred by more than a decade of crises, the chamber last year joined others in advocating that control of the health system be taken from the Board of Supervisors.

“This affects the overall quality of life in Southern California. It affects workers who have to wait in line in emergency rooms. It affects businesses,” Garrison said.

“It’s just not a system that works anymore.”

County supervisors have taken some steps to rescue the $3.7-billion system, which last year served more than 700,000 patients. “We’re in much better shape than we were a decade ago,” Supervisor Zev Yaroslavsky said recently.

Indeed, even with the projected shortfalls, the county does not face the crisis it did in the mid-1990s, when a $655-million hole in the health services budget threatened to bankrupt the county.

Today, Los Angeles County is in far better financial shape, according to bond rating agencies, which give the county high marks for fiscal discipline.

And, thanks to surging tax revenues and years of conservative budgeting, the county is positioned to increase services next year for the homeless, foster children and residents of crime-ridden neighborhoods patrolled by the sheriff.

County Chief Administrative Officer David Janssen is scheduled to release details of the proposed budget Monday.

The five supervisors, who as the county’s elected executives have responsibility for setting the budget, have already voted for a major expansion in services to the homeless, approving a $100-million plan amid growing publicity about conditions on skid row in Los Angeles.

In the coming year, the supervisors are expected to boost staffing for the Sheriff’s Department, which has struggled to reduce violence in the jails and in such neighborhoods as Compton, where gang violence skyrocketed last year before Sheriff Lee Baca moved more deputies into the area.

Last year, the supervisors also increased spending on public safety, which they consistently say is their top priority.

Several supervisors said they also want to increase spending on the Probation Department, which operates the third-largest juvenile detention system in the nation, behind Florida and Texas. The county system has been beset for years by rioting and escapes.

“Probation has got issues, just like the Sheriff’s Department,” said Supervisor Don Knabe. “We have got to make sure that we have the proper resources.”

While surging local taxes are fueling public safety spending, more state and federal dollars could boost other county services.

A state ballot initiative passed in 2004 could send about $166 million more to care for mentally ill county residents, according to the chief administrative office.

And a key decision by the federal government last month could free hundreds of millions of dollars to provide added services for children in the county’s $1.5-billion foster care system.

Despite the rosy outlook for many of the county’s overburdened services, a cloud continues to hang over the health system.

And many observers express concern that supervisors have not developed a comprehensive plan to deal with that.

It is not a new state of affairs.

Battered by escalating healthcare costs, uncertain state and federal funding and an enormous population of low-income patients, Los Angeles County’s public hospitals and clinics have been hobbling from crisis to crisis for more than a decade.

Today, county officials estimate that more than two of every three patients who visit a county health facility do not have insurance, saddling the county with their treatment costs.

“Basically, the system is vastly overpromised and underfunded,” said Jim Lott, executive vice president of the Hospital Assn. of Southern California, which has long pressed for reforms.

“They do more than any public health system in California and maybe on the whole West Coast,” Lott said. “But they have no permanent, solid funding source.... The whole model is flawed.”

The financial strains come on top of problems with Martin Luther King Jr./Drew Medical Center, which repeatedly has been cited for serious lapses in care.

Twice since 1995 the federal government has rescued the county system, pumping in an additional $2.1 billion to stave off a collapse.

County leaders have also taken steps to prop up the system, pushing a 2002 tax increase to pay for trauma centers, cutting back services at some facilities and scaling back expensive hospital care.

More recently, the county has boosted the local tax dollars it puts into the system, which is still overwhelmingly supported by state and federal money. Next year, the county plans to commit nearly $50 million more.

Earlier this month, the county’s interim health director, Dr. Bruce Chernof, reported that the anticipated shortfalls could be dramatically reduced if new money from a tobacco tax initiative on the November ballot and a change in federal rules materialize.

Instead of facing a $1.2-billion shortfall in three years, Chernof predicted it could be closer to $555 million.

“There is a light at the end of the tunnel,” Yaroslavksy said, cheering Chernof’s projections.

Many others, including Supervisors Knabe and Mike Antonovich, are not so sanguine.

“The county, and the doctors in particular, are making some heroic efforts to provide services,” said Elena Ackel, an attorney with the Legal Aid Foundation of Los Angeles, which had sued the county on behalf of poor patients.

But Ackel said she foresees more cutbacks in care. “I think it’s going to get worse,” she said.

For years, health policy analysts and medical professionals have urged county leaders to be more aggressive about reforming the system, including taking on union contracts, civil service protections and the county’s relationship with medical schools.

“I think politics remains a big barrier,” said USC associate professor Michael Cousineau, noting how the supervisors have fought to preserve the hospitals in their respective districts, sometimes at the cost of the entire system.

Politics helped drive out the county’s last health director, Dr. Thomas Garthwaite, who said he left last year in part out of frustration over the pace of reform.

“If there is something I can say after having moved to the private sector, it is that there are better structures for running a health system,” said Garthwaite, who now heads Catholic Health East, a network of 31 hospitals on the East Coast.

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Where it goes

Healthcare dominates Los Angeles County’s budget. The demand for care at county hospitals remains high, and federal funding has dwindled.

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The Budget

Revenue

State: 25%

Federal: 23%

Other: 34%

Local property taxes: 18%

Expenditures

Social services: 24%

Health: 23%

Public protection: 19%

Special funds/services: 21%

Other: 13%

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Source: Los Angeles County Department of Health Services, Los Angeles County chief administrative office