State ignores law requiring annual Medi-Cal payment studies

When Gov. Arnold Schwarzenegger and lawmakers agreed last month to cut 10 percent from what the state pays Medi-Cal doctors, they did so without knowing how it might further limit services to the poor.

That's because for years the state has been ignoring a law requiring the Medi-Cal director to conduct an annual review in order to keep doctors' reimbursement rates competitive with other insurance programs.

"I've never seen these reports," said Assemblywoman Patty Berg, D-Eureka, a member of the Assembly Health Committee. "I think some of these reports haven't been done in so long that they're pretty much forgotten."

Medi-Cal physicians have received only one across-the-board increase in the past 20 years.

Now a coalition of doctors, hospitals, medical providers and local governments is considering a lawsuit against the state to fight what they consider to be devastating cuts. Led by the California Medical Association, the coalition is being joined by San Francisco Mayor Gavin Newsom, who is considering a run for governor in 2010.

"We have no choice," Newsom said Tuesday during a visit to Sacramento.

Passed in 1976, the law requires the Medi-Cal director to conduct an annual review of what doctors get paid to ensure "reasonable access of Medi-Cal beneficiaries to physician and dental services." It was intended to ensure that patients covered under California's low-income health insurance program have adequate access to doctors and dentists.

The report has not been done for the last 15 years, said Sandra Shewry, director of the Department of Health Care Services, which oversees Medi-Cal.

In recent years, the department has been tracking Medi-Cal rates to Medicare rates, which are viewed as a better benchmark, said Stan Rosenstein, director of Medi-Cal. Such information is available from private foundations, including the Kaiser Family Foundation, which compares such rates.

Shewry characterized the law as a holdover from when health care made up a much smaller portion of the state budget.

The health department used to adjust reimbursement rates in its annual budget request and the Legislature approved the administration's recommendation. But all that changed in the early '80s when the state hit a financial crisis, Shewry said.

Since then, Medi-Cal spending has been negotiated between the governor and lawmakers as part of the budget process. At $36 billion, Medi-Cal is the state's second-largest general fund program behind education. Even if the department asked for an increase, she said, lawmakers may not oblige.

"It really is an obsolete statute," Shewry said.

Last month the Schwarzenegger administration proposed – and the Legislature approved – cutting Medi-Cal reimbursement rates by 10 percent and delaying payments by one to two months to help stave off a cash-flow crisis. The administration is also proposing cuts to some benefits, including dental and eye care for adults.

Critics say administration officials and lawmakers are making these cuts without a good understanding of their statewide impacts.

"Here you have this statute that's being ignored and the medical program that's supposed to be a safety net has frayed and eroded," said Ned Wigglesworth, a spokesman for the California Medical Association. "The funding decisions have been made unnecessarily in the dark."

Berg said having more information would have been helpful as lawmakers considered the 10 percent trim. But, she said, the reality of the situation is that not much can be done while the state faces a remaining $8 billion shortfall through June 2009. Berg estimated the deficit will likely grow to $10 billion with the continued high cost of energy and high unemployment rate.

"I probably don't have to wait for a report to know the rates are too low," Berg said.

Every time revenues fall, the conversation in the Capitol turns to a mix of rate cuts, benefit reductions and eligibility changes, said Angela Gilliard, legislative advocate for the Western Center on Law and Poverty.

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