Governor Jerry Brown released his proposed 2012-13 budget on January 5, 2012, five days before the state constitutional deadline of January 10. The budget aims to fill a projected shortfall of $9.2 billion dollars ($4.1 billion in the current budget year and $5.1 billion in 2012-13) and create a $1 billion reserve, for a total of $10.1 billion in “solutions.”
The Governor proposes to close the deficit through a combination of $4.1 billion in cuts to public programs, coupled with $5.1 billion in new revenues from a proposed tax initiative that will appear on the November 2012 ballot, and approximately $1 billion in borrowing and fund shifts.
The Governor further proposes a series of “trigger” cuts, which would be implemented if the tax initiative is not successful. The vast majority of these cuts would fall on K-12 education, the University of California system, and the California State Universities. None of the “trigger cuts” are health-related, meaning that all of the cuts listed below are proposed to be implemented regardless of the tax initiative.
Of concern to physicians, included in the 2012-13 budget proposal are the following:
- Elimination of the Healthy Families Program and transition of enrollees into Medi-Cal. This proposal would transition all 900,000 Healthy Families children into Medi-Cal. While the Governor claims that this proposal would “prepare the state for health reform,” federal reform would only move about one-quarter of the children from one program to another. This proposal moves well beyond this, and will strain the already overburdened Medi-Cal delivery system. The budget further proposes to reduce the capitation payments made to Healthy Families plans by 25.7%, lowering them to the rate paid to Medi-Cal Managed Care plans. This could create pressure on physician rates. Estimated savings: $64.4 million (2012-13) and $91.5 million (2013-14)
- Elimination of the Managed Risk Medical Insurance Board (MRMIB). MRMIB oversees Healthy Families, the Major Risk Medical Insurance Program (MRMIP), the Pre-Existing Condition Insurance Program (PCIP) and the Access to Infants and Mothers Program (AIM). Under this proposal, all of these programs would be transferred to the Department of Health Care Services (DHCS). MRMIP and PCIP, both of which serve individuals with pre-existing conditions, would be eliminated in 2014 when the federal ban on pre-existing conditions exclusions is implemented.
- Mandatory enrollment of Medi-Cal/Medicare dual eligibles into Medi-Cal Managed Care. Under this proposal, all 1.2 million dual eligibles would be required to join a managed care plan, which would coordinate benefits from both programs. Recently adopted CMA policy (HOD 203-11) specifically opposes this move. Estimated savings: $678.8 million (2012-13) and $1 billion (2013-14)
- Medi-Cal Managed Care expansion into rural counties. The Governor proposes to expand the Medi-Cal Managed Care program into rural counties that do not currently have managed care infrastructure. This transition would happen gradually over time. Estimated savings: $2.7 million (2012-13) and $8.8 million (2013-14)
- Medi-Cal Managed Care open enrollment limited to once per year. Under current rules, Medi-Cal managed care patients can change plans monthly. This plan would limit this process to once per year.
- Changing payments for Federally Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs). The Budget proposes to eliminate the prospective payment system and move FQHCs and RHCs to a bundled rate.
- Broadened DHCS Scope: The FamilyPACT program, the Every Woman Counts program and the Prostate Cancer Treatment Program would be moved to DHCS. The funding for these programs is not proposed to be reduced.
- Securing “operational flexibilities” in the Medi-Cal program (benefit design, service delivery, etc.). This proposal is largely undefined, but could include reducing benefits or changing care delivery models. Estimated savings: $75 million (2012-13)
- Elimination of the Department of Mental Health (DMH) and the Department of Alcohol and Drug Programs. This proposal builds on a process begun in the previous budget, when DMH was moved into DHCS. This proposal would take the next step, eliminating both departments and moving their functions to several departments, predominantly DHCS.
- Increase rates paid to Medi-Cal Managed Care Plans: Ironically, the budget proposes to increase the rates paid to Medi-Cal Managed Care plans by 3.61%. Estimated Increase: $261 million.
Timelines and Next Steps
The Budget Committees in both houses of the State Legislature will begin considering the Governor’s budget in the next few weeks. The California Medical Association will be actively lobbying against reductions to health care programs and will inform members and staff as appropriate.