Counties, State in Health-Care Budget Showdown

By Alex Matthews and John Howard, Special Report from Capitol Weekly

A major budget battle has erupted between the Brown administration and California’s counties over health-care spending, with the governor hoping to divert some $2.5 billion from the counties over the next three years.

At issue is money – initially, $300 million — that the counties use to provide care for the indigent. But Brown in his 2013-14 draft budget wants to hang on to that money, saying the indigent will be covered by Medi-Cal as the new federal health care reforms kick in at the beginning of next year. The counties gained the funds in 1991 in order to provide services that they say are more than simply coverage for medically indigent people. They say there are “some serious problems with (Brown’s) assumption” and that they will lose serious money if Brown’s plan is approved.

“Along with core education, this is the big money issue of the year,” said Anthony Wright, executive director of Health Access, an advocacy group that seeks the expansion of quality care to low- and moderate-income Californians. “That $300 million is just the down payment. It’s $900 million the second year and $1.3 billion the third.”

Medi-Cal, California’s version of Medicaid, is a state-run program financed jointly by California and the federal government that provides care for nearly 7 million poor people, including children. 

Brown, who has described himself as “tight with a buck,” told the counties’ representatives that the state shouldn’t “double-pay” the counties for performing services covered by Medi-Cal, which be financed entirely with federal money beginning next year and continuing through 2016. 

"I want you to share at least $300 million with the state. So that's the bottom line," he said, according to news reports. 

While the federal government will cover the costs of insuring new patients through Medi-Cal, Shawn Martin of the Legislative Analyst’s Office said that administrative costs of the expansion will likely be split between the state and federal government.

However, the realignment money will not necessarily be allocated to those costs but rather returned to the state indirectly. The proposal asks that the counties use the money to fund programs, such as some CalWORKS services and CalFresh administrative costs, that the state would normally cover, according to Brian Uhler from the Legislative Analyst’s Office.

But the counties are concerned at the potentially escalating costs.

“I think he’s legitimately concerned about keeping things on the straight and narrow from the fiscal standpoint, we share that concern,” said Gregg Fishman, a spokesman for the California State Association of Counties. “But we also see that the $300 million he’s talking about in the first half of 2014, that goes up to $900 million the next fiscal year, and $1.3 billion in the fiscal year following that.”

The $300 million covers the second half of the 2013-14 fiscal year, from Jan. 1 through June 30. By some estimates, about two million more patients will be added to the Medi-Cal rolls, but the precise size of the Medi-Cal expansion is unknown. Currently, about seven million people in California do not have health insurance. 

According to Anthony Cava, a spokesman for the Department of Health Care Services, though the expected savings per year provided are estimates, “The actual amount of savings shifted will be based upon a mechanism we are developing with the counties to determine the actual cost counties incur for providing health care services.” 

However, the counties aren't convinced that the Affordable Care Act will free them of all costs entailed in caring for the medically indigent. Fishman mentioned a USC study that found up to half of the state's uninsured people could remain uninsured up to five years after the implementation of federal health care reform, due to various barriers to enrollment. 

“At the end of the day,” Wright added, “they (the counties) have the obligation to provide health care. This will have to be resolved in the next couple of weeks.” 

The constitutional deadline for passing the budget is June 15 for the fiscal year beginning July 1, which means the clock is ticking.

The governor’s proposal is his latest major policy initiative involving local governments. It continues a pattern, dubbed realignment, set by a number of administrations in which local governments pick up the tab for services that are offered statewide, or in which the locals assume some state responsibilities and receive funding to offset their costs. 

A health-care realignment was approved in 1991 in which the counties assumed the burden to provide care for medically indigent adults, as well as other services, including public-health functions, disease and epidemic control, wellness programs, and burn and trauma centers, among others. Many of these services are not covered through Medi-Cal, however — which means that the governor’s capture of the $300 million will leave the counties making up the difference on their own.

“Of that (amount) we get, more than half, about 54 percent, goes to public health functions that the Affordable Care Act does not cover,” Fishman said. “That leaves 46 percent up for grabs. In a perfect world, you could flick a switch and all the medically indigent would be covered. But this is the real world, not a perfect world, and there will remain a residual amount of people who will remain uninsured.”

Fishman added that the counties are already spread thin financially by other realignment responsibilities such as the 2011 Public Safety Realignment and asking them to re-allocate the money for these health services and take on new responsibilities is not fiscally feasible. 

“It represents a real significant amount of money to counties that are struggling to take care of the medically indigent now and will have a significant amount of residual uninsured people to take care of even after the affordable care act is implemented,” he said.

The issue goes beyond merely the amount of money they will lose; it is also a matter of timing, Fishman said. The counties, in effect, say the funding shifts should occur gradually and parallel the shifts of patients to Medi-Cal.

“To start this transfer of cash right away is going to hurt the health safety net. There are a lot of unknowns here,” Fishman added. “Our proposal to the governor is that the ACA is going to cover 100 percent of the state cost for the first three years. There is plenty of time to leave the money flowing as it is to care for the medically indigent. Then, after two years, we’ll have enough data to say what these (costs) actually are…We’re just saying let’s wait until we know for sure how much savings the counties will realize.”

There also is uncertainty surrounding the fiscal impact of the shift to Medi-Cal for rural as well as urban counties. The latter rely on the County Medical Services Program to cover indigent patients, a program that is funded mostly on a per capita basis

For 12 counties whose coverage of the medically indigent is based solely in their county hospitals, as well as for another 11 that Fishman described as a hybrid of the two systems, however, the consequences also are unclear.

“The impact is going be different, how is it going to be different and to what degree it is going to be different is almost a county-by-county thing,” Fishman said. “It isn’t one size fits all, as much as we would like to say that it is, it really isn’t.”

For Wright, the issue is more than a debate over the budget. 

“This is not just a budget issue, or just a fight between the state and counties. It’s about a basic commitment to health care,” he said.

About CountyNews' Partnership with the Capitol Weekly: In order to better inform our readers, we have partnered with Capitol Weekly to provide a closer look at legislative and regulatory issues impacting local government. We believe this unique collaboration fills a critical void in mainstream reporting in the Capitol and offers a window into the players and processes affecting city and county government in California. See more special reports here, and send us tips here.

Tips, Opinion and Feedback

Have feedback, comments or a opinion piece you'd like to submit?

Get in touch with us and see our opinion guidelines here