ABLEnews Extra

                   "Prescription for Disaster"
          
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Sacramento--A high-level dispute between state Medi-Cal officials and
a federal health agency is expected to cost California counties nearly
$2 billion in the next two years and plunge the state's debt-ridden
budget an additional $400 million into the red.
   
Any day now, state officials are expecting to receive a letter from
Washington formally refusing to pay for three years' worth of Medi-Cal
bills from county public health programs. For many counties in the Bay
Area--which already have spent a fortune providing services on the
assumption that the money eventually would be repaid by the federal
government--that decision will leave gigantic holes in their budgets
this year and next, possibly forcing layoffs or severe curtailments of
health care programs for the poor.
   
Santa Clara County faces a potential loss of $16 million for the three
years. That would be on top of an expected $30 million to $40 million
shortfall in the county's $1.2 billion budget for fiscal 1996, which
begins in July.
   
"We're in a real crisis situation," county Supervisor Ron Gonzales
said. "The alarm clock has been ringing. Any county relying on state
and federal aid has got to wake up."
   
In San Mateo County, health services Director Margaret Taylor said she
is bracing for up to $10 million in cuts starting June 1 if federal
money owed for the past three years doesn't materialize. The county
could cut one-fourth of clinic services used by 24,000 people a year
and eliminate half of the beds for seriously mentally ill people at
the county's lock-in facility.
   
It could lose more than 20 public health nurses who make house calls
for people with AIDS, disabled people and battered women. It could cut
basic non-emergency services for abused elderly people and people with
Alzheimer's disease. And the county hospital could start diverting
emergency room patients to other hospitals in the area.
   
All told, the cuts could lead to 100 layoffs and drastic service
reductions. "It would be the worst cuts we've ever faced," Taylor
said. "I know they didn't cut this much after Proposition 13."
   
Although Medi-Cal recipients still would be able to receive services
and medication from private doctors who agreed to serve them, they
would have a much harder time getting appointments at clinics or the
county hospital, Taylor said.
   
"The private (health) community's going to end up seeing more Medi-Cal
patients," she said. "This is really a problem for all of us in health
care."
   
Alameda County faces a potential loss of $10 million this year and $12
million next year. That would be on top of an expected $100 million
shortfall in the county's $1 billion budget for the fiscal year that
begins in July.
   
"It could bring down our whole medical care system," said Gail Steele,
president of the Alameda County Board of Supervisors. "It couldn't
possibly be worse. I guess the federal government is dismantling all
services to the poor. The ramifications are almost too dire to
imagine. It's a prescription for disaster."
   
The Medi-Cal administrative funds have been used to pay for public
health nurses, mental health workers, social workers, and dental
prevention programs in local schools. About 25 percent of the Medi-Cal
money pays for programs at county hospitals, including translation
services and helping determine whether people are eligible for
Medi-Cal, officials said.
   
The cut would force the county to lay off employees and dismantle
programs, although it is too early to discuss specifics, county
Administrator Steve Szalay said. He said officials are limited in what
they can cut because they have control over only about $240 million of
the $1 billion budget. The rest comes from funding sources that
earmark the money for specific programs.
   
"What makes it worse is that the county situation is really bad," said
Yolanda Baldovinos, deputy director of the county health care services
agency. "I think we're looking at the worst year in our history. The
people who have the most difficult time getting medical help will be
hurt."
   
Other county officials were more conservative in predicting the impact
the funding cuts would have on Santa Clara County, noting that the $16
million makes up only a little more than 1 percent of the annual
budget. "We're not going to react by shutting anything down at this
point," said Gary Graves, the county budget director. "For now, we're
going to push it into next year and take a good look at services and
develop a plan that makes sense."
   
The Medi-Cal administrative funds have been used to pay for public
health nurses, mental health workers, alcohol and drug prevention
programs, probation services and other services for the needy. One of
the largest shares of funding, $4.5 million, was to help defray costs
of Medi-Cal administration at Santa Clara Valley Medical Center, such
as salaries for workers who help determine eligibility and provide
clerical and support services.
   
Medical center Director Robert Sillen said Monday there could be
potentially serious cuts in personnel or services but that
administrators hoped ongoing negotiations would lead to restoration of
at least some of the funding.
   
The funding situation adds to an existing budget crisis at the medical
center. Earlier this month, Sillen announced he will attempt to make
$60 million in cuts over the next three years at the medical center
because of a drop in revenues and plans for a new hospital wing.
   
Only five counties--Alpine, Mariposa, Modoc, Mono and Sierra--did not
participate in the Medi-Cal program involved. All other counties are
likely to wind up holding the bag.
   
The costly debacle is yet another example of what happens when state
lawmakers--instead of raising taxes or cutting services--try
accounting tricks to balance severely strained budgets.
   
In this case, a bill that was passed unanimously by the California
Legislature and signed by Gov. Pete Wilson in October 1991 shifted a
slew of expenses that were being paid by the counties onto the
shoulders of the federal government.
   
"When budgets get tight, it's sort of a cottage industry to find ways
to get the Medi-Cal program to pay for things," said Bill Wehrle, a
Medi-Cal expert for the Legislative Analyst's Office. "This particular
innovation turned out to be a little more creative than the feds cared
for, at least so far."
   
   Bill sought maximum payments
   
The bill bluntly said its purpose was to restructure Medi-Cal's
billing processes to achieve "maximum possible federal financial
participation." Sponsored by former state Sen. Dan McCorquodale,
D-Modesto, the measure reclassified a lot of the work already being
done by public health nurses and social workers to make it appear they
were doing work the federal government would pay for.
   
Officials familiar with the bill said the idea originated in San Mateo
and Los Angeles counties and was eagerly seized upon by state health
officials and the Wilson administration as a way of saving dwindling
state resources.
   
There was only one problem: The federal Health Care Financing
Administration, the agency that pays for Medi-Cal, never agreed to go
along with it.
   
Margaret Pena, a lobbyist with the California State Association of
Counties, said state and county officials apparently were under the
impression that HCFA had approved the scheme, since officials with
HCFA's regional office in San Francisco had an active role in helping
the state formulate the plan.
   
But at a high-level meeting in Washington in January, Pena said, top
HCFA officials made it clear the idea had never been sent up the line
for approval in Washington.
   
   Feared setting precedent
   
"We were told that it was one thing to provide input and advice but
that it was something else to approve it," Pena related. She said HCFA
brass told state and county officials there was no way the federal
government was going to pay California's bills because that would open
the floodgates to the other 49 states.
   
"They said they were looking at an exposure of $10 billion," Pena
said.
   
HCFA paid the first bill the state sent it, for $17 million, but when
It got a second bill for $315 million, red flags went up all over the
agency, according to an HCFA official who asked not to be named.
   
The agency dispatched a team of auditors to Los Angeles County--which
turned in the biggest portion of the bill by far--and afterward
announced it was withholding payment on the state's entire bill
because the charges appeared improper.
   
The auditors found Los Angeles was charging Medi-Cal for such things
as the time probation workers spent with prison inmates, the lectures
deputy sheriffs gave schoolchildren on the evils of drugs, and
arranging for baby sitting for indigent patients.
   
In response to the extensive audit findings, state Health and Welfare
Director S. Kimberly Belshe said HCFA had no right to tell the state
how to run its program and that the San Francisco office had given
"implicit approval" to the idea.
   
If the money is not paid, Belshe warned, it "puts county health
programs at risk of closure."
   
It also throws an already unbalanced state budget even further out of
whack. Despite HCFA's apparent rejection of the state's claims last
year, Wilson's budget writers went ahead and included in the 1995-'96
budget released in January a figure of $200 million a year they
expected to receive from the counties as part of the federal Medi-Cal
payments.
   
Pena said the counties believe they do not have to pay this money to
the state unless they get the money from HCFA first, "and so far, no
one from the state has disagreed with that interpretation."
   
That means state budget writers will have to trim the money from the
budget or find another source to tap for the revenue.
   
Pena said the state and counties intend to appeal HCFA's decision to
the courts and estimated it will be two or three years before the case
is decided.
   
"However, they won't be paying us the money in the meantime," she
said.

[Medi-Cal Rift Could Cost Big Bucks, Gary Webb and Elizabeth
Wasserman, San Jose Mercury News, February 28, 1995]

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