Media Statement

California Hospitals Explore Possible Provider Fee in Order to Increase Medi-Cal Payments to Hospitals
Increased Federal Matching Dollars Also Would Expand Children’s Health Care Coverage

California’s Medi-Cal program provides essential health care services to the poorest and most vulnerable Californians. Yet, the state ranks dead last in the nation when it comes to funding health care for these patients. In 2008, California hospitals lost more than $3.8 billion in unpaid Medi-Cal costs.

In light of the state’s ongoing fiscal crisis and catastrophic Medi-Cal payment shortfalls, the California Hospital Association (CHA) Board of Trustees is exploring the possibility of imposing a fee on hospitals for the specific purpose of generating matching federal Medicaid funds. These funds would be used to increase Medi-Cal payments to hospitals and provide funding for children’s health care coverage.

Under a preliminary two-stage proposal announced today, hospitals would pay $1.8 billion in fees to the state. These funds would be matched by federal monies, returning an estimated $3.6 billion in block Medi-Cal supplemental payments. These funds would then be redistributed to hospitals in the form of higher Medi-Cal payments. An additional $300 million would be available to pay for coverage for uninsured children under California’s Healthy Families program. The first stage of the proposal would be a legislative bill that sunsets on December 31, 2010. A 2010 ballot initiative, with protections for hospitals, would become effective on January 1, 2011, if approved by voters.

California currently leaves more than $2 billion in available federal monies “on the table” because of the state’s inability to fund its share of Medicaid matching dollars. This proposal, if successful, would reduce the “cost-shift” that results from the underfunding of the Medi-Cal program, without increasing taxes to the public. As a result, the proposal would help to contain health care costs.

The proposal is a “work-in-progress” and no final decisions about whether to proceed have been made by the CHA Board.