Analysis of Arnold's Cuts To Health Programs

MEMORANDUM

TO: Interested Persons
FROM:Virginia Knowlton
RE: Rough & Dirty Analysis of the Governor’s 2004-05 Budget Proposal

DATE: January 9, 2004

Major actions in the Governor’s proposed 2004-05 Budget affecting people with disabilities include the following:

Medi-Cal
The Budget continues the Mid-Year Reduction proposals, including a 10% provider rate cut, enrollment cap for immigrants (at 909,500 beneficiaries) and elimination of the Wage Adjustment Rate program.

The Budget proposes to restructure the Medi-Cal program by obtaining a Medicaid Demonstration Waiver. The restructuring would encompass the following principles: (a) simplification of eligibility standards; (b) maintenance of core benefits for all children and "those adults most in need;" (c) continued coverage for higher-income adults with a choice of benefit packages; (d) implementation of co-payments and premiums; and (e) expansion of managed care.

Although no specifics are provided, major programmatic reforms could include:

Alignment of Medi-Cal eligibility standards and processes with those of CalWORKS and SSI/SSP.
Implementation of a multi-tiered benefit & premium structure, with more comprehensive benefits available to those who pay premiums.
Imposition of co-payments along with provision of legal authority for providers to require the co-payment as a condition of providing non-emergency care.
Conforming the basic Medi-Cal optional benefit package to that of private health plans.
Expanding managed care into additional counties, reviewing and reforming managed care reimbursement policy and "encouraging" the enrollment of Aged, Blind and Disabled into managed care.
The Budget also proposes a number of anti-fraud and audit measures, assessment of a quality improvement fee on Medi-Cal managed care plans, county administration cost controls, a one-year moratorium on new Adult Day Health Centers (ADHCs) and on certification of increased capacity of existing ADHCs, a 10% interim rate reduction for cost-reimbursed acute care hospitals, and a revised rate methodology for federally qualified health centers and rural health clinics.

Medi-Cal for Immigrants
The Budget continues the Mid-Year proposal to cap enrollment at the January 1, 2004 level, an estimated 909,500 clients.

Healthy Families Program (HFP)
The Budget continues the proposed Mid-Year Reductions that would cap enrollment in HFP at the January 1, 2004 level, an estimated 732,300 children. It would also establish a two-tiered benefit structure, beginning in 2005-06, for children with family incomes between 201% and 250% of the federal poverty level (FPL). These families would be offered a basic benefit package excluding vision and dental at current premium levels, and a comprehensive package including all benefits with a higher monthly premium.

Children’s Medical Services
Decrease of $40.7 million for Children’s Medical Services Programs, affecting California Children’s Services (CCS), Genetically Handicapped Persons Program (GHPP) and Child Health and Disability Prevention (CHDP) programs. The CCS and GHPP enrollment caps that were proposed as part of the Mid-Year Reductions are continued in the proposed Budget. Enrollment in CCS would be capped at 37,600 clients and GHPP at 1,679 clients. The Budget also proposes imposing co-payments in GHPP.

HIV/AIDS Treatment and Prevention
Decrease of $6.6 million, or 2%, from current year funding with likely impact to AIDS Drug Assistance Program (ADAP). The ADAP enrollment cap proposed in the Mid-Year Reductions would be continued, at 26,479 clients.

Medi-Cal County Mental Health
Realignment
Realignment funding is expected to increase by $174 million. This increase is unlikely to keep pace with caseload growth and inflation.

Managed Care
Managed care will receive an increase of $5.1 million from the General Fund for caseload growth. ($10 million total increase including federal matching funds.)

Early Periodic Screening, Diagnosis, and Treatment Program (EPSDT)
The Budget proposes implementing a number of cost-containment efforts, including: (a) cost surveys accompanied by rate adjustments, (b) targeted claims audits, (c) pursuing federal authority to narrow the medical necessity criteria, (d) "restructuring existing programs," which effectively means eliminating the Children’s System of Care program.

Children’s System of Care Program
As noted above, Children’s Systems of Care funding is slated for elimination. This represents a $20 million cut. The Administration’s rationale for eliminating this program is that it is no longer necessary due to EPSDT increases.

Early Mental Health Initiative Program
Funding for this program would be cut to half the current year level, from $10 million to $5 million.

Integrated Services for Homeless Adults
The Budget continues funding of $54.9 million General Fund for this program.

State Hospitals
The Budget proposes cutting General Fund expenditures for the state hospitals by $17.2 million next year and $25.6 million the following year. A small proportion of the General Fund savings would be achieved by imposing indeterminate commitments on people committed under the Sexually Violent Predator (SVP) category. Most of the savings would be achieved by keeping people in county jails instead of transferring them to the state hospitals. The Department of Mental Health (DMH) would be required to develop a process to prioritize patient intake based on need for treatment.

The Budget allocates $24.9 million General Fund to continue bringing Coalinga State Hospital on line, $6.8 million General Fund for increased costs associated with capital outlay projects at Atascadero and Patton State Hospitals and construction of Coalinga State Hospital, and $429,000 General Fund for other capital outlay projects at Atascadero and Metropolitan State Hospitals.


Federal Managed Care Regulations
The Administration may attempt to secure additional modifications to relieve DMH of the requirement to provide informational materials to beneficiaries.

Preadmission Screening and Resident Review (PASRR)
PASRR evaluates whether nursing home (including IMD) placement is appropriate for people being admitted to nursing homes, and whether there are community alternatives to institutionalization. An increase of $471 million from the General Fund ($1.9 million including federal matching funds) is budgeted to pay for expansion of the program as a result of the settlement in the Davis v. Laguna Honda Hospital lawsuit.

Developmental Services
In contrast to the proposed Mid-Year Reductions, the Budget does not propose to cap enrollment or eliminate service categories. However, it would reduce General Fund support for regional center purchase of services (POS) by $100 million through cost containment efforts. Although no details are provided, the Administration indicates that such efforts would include: (a) establishing statewide POS standards, (b) imposing a co-payment, (c) implementing a standardized rate structure, (d) requiring that services be provided in the least costly manner possible, and (e) prioritizing need.

The Budget includes an unallocated $6.5 million General Fund reduction to Regional Center Administration.

Developmental Centers
The Administration states that it will revisit the issue of developmental center closure "as part of the overall strategy to define a manageable service delivery system." The Administration states that, "although it cannot happen immediately," it is "committed to enhancing the existing system of community-based services to a level where hopefully large State-run institutions are no longer necessary and as many individuals as appropriate can live in their communities."

The Administration proposes that developmental center food services be contracted out.

Long-Term Care Ombudsman Program
This program received an increase of $2.3 million in federal Medicaid reimbursements.

Programs for Immigrants
The budget proposes to eliminate various programs that serve immigrants and establish a single county block grant to fund safety net services for immigrants. Programs subject to elimination include CalWORKs benefits for recent legal immigrants, the California Food Assistance Program, the Cash Assistance Program for Immigrants (CAPI) and Healthy Families Program for Immigrants. Funding for immigrant safety net services would also be reduced by $6.6 million General Fund.

SSI/SSP
The Budget would suspend the January 2005 State cost of living adjustment (COLA) of 2.8% and pass through the January 2005 federal COLA of 1.8%. Maximum grant levels would remain at $790/month for individuals and $1,399/month for couples, which reflects the 2.1% federal COLA that was passed through effective January 1, 2004.

In-Home Supportive Services (IHSS)
The Budget continues the Mid-Year reduction proposal to eliminate the State-only funded (or "Residual") IHSS program. Approximately 75,000 Californians would be affected by this proposal.

The Budget also proposes to eliminate domestic and related serves for recipients who live with family members.

In addition, the Administration proposes to:

Revise IHSS need assessments to "reduce over-authorization of service hours."
Reduce State funding for worker wages and benefits.
Make the Employer of Record requirement optional to counties and eliminate the State share for certain collective bargaining agreements.
Make the Advisory Committees requirement optional to counties.
Housing
The Budget proposes a $4 million General Fund appropriation for the Emergency Housing and Assistance Program, which provides operating grants for shelters. This represents a cut of $1.3 million from 2003-04.

The Budget does not propose any additional shift of Proposition 46 funds, although it assumes that $5 million in previously awarded housing funds will fall through and be recaptured.

Special Education
Special Education is not affected by the Administration’s proposal to eliminate separate funding for 22 categorical programs and would retain its separate funding. Special Education would receive a $74.5 million increase in federal funds and a $70.0 million increase in Proposition 98 moneys to fund a 1.84% Special Education COLA.

The Budget includes $21.2 million for the High School Exit Exam. Funding for AB 3632 is unclear at this moment.

http://www.pai-ca.org/PublicAffairs/CABudget2004-2005.htm