Media Statement

May Revision to Proposed State Budget Presents Opportunities, Challenges to California Hospitals
Proposal to Move Healthy Families Kids to Medi-Cal Raises Concerns About Access to Care

California’s struggling economy and long-term structural deficit continue to pose daunting challenges for our state’s elected leaders. Although today’s announcement that tax revenues will be $6.6 billion higher than anticipated over the next 14 months is good news, the state continues to face a sizeable budget deficit. A balance of revenues and expenses is required to solve the state’s short- and long-term budget woes.

The May Revision to the proposed 2011-2012 state budget presents both opportunities and challenges to California’s community hospitals. Most notable is the proposal to transition children enrolled in the Healthy Families Program (HFP) into Medi-Cal managed care plans. While this recommendation is expected to save the state’s General Fund an estimated $31 million, access to care for children throughout the state must be ensured. Many physicians who treat HFP participants do not contract with Medi-Cal. If children currently enrolled in HFP are unable to find new physicians, they may seek care in more expensive hospital emergency rooms.

Medi-Cal is among the lowest paying Medicaid programs in the nation. Shifting the HFP population into Medi-Cal potentially represents yet another financial squeeze on hospitals and other providers in an already severely underfunded program.

The May Revision calls for a new, one-year Medi-Cal hospital fee program to be implemented starting July 1, 2011. This recommendation comes as the state is implementing a six-month hospital fee program (January 1 – June 30, 2011) and on the heels of a successful hospital fee program which ended in December 2010. Although financial modeling is still underway, it is expected that the 2011-2012 fee will generate $320 million in General Fund revenues to the state. CHA is the sponsor of SB 335 (Hernandez & Steinberg), the bill that will serve as the legislative vehicle for the fee program.

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