California Budget Delay Could Affect Payments To Medicaid Providers

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California has exhausted a $2 billion safety-net fund intended to help pay Medicaid providers during budget impasses, the San Diego Union-Tribunereports. Since July 1, California has been without a budget for thecurrent fiscal year. The Assembly approved a spending plan, but SenateRepublicans are demanding deeper spending cuts, which exceed the $722million operating deficit projected in the plan (Mendel, San Diego Union-Tribune, 7/28).

The$2 billion Medical Providers Interim Fund, created in 1998, receives $1billion from the state and $1 billion in federal matching funds tocontinue paying Medicaid providers when there is no state budget.

The state Department of Financesaid the $2 billion fixed amount was estimated to be enough to covertwo months without a budget. However, the amount has not kept pace withinflation, and an accounting change has increased Medicaid paymentrates.

Possible Effects

H.D. Palmer,spokesperson for the Department of Finance, said the ongoing budgetstalemate forced the state to cut a payment to Medicaid managed careplans from $223 million to $143 million.

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If the Legislature doesnot pass a budget by Thursday, Medicaid will not be able to make anestimated $227 million payment to hospitals and nursing homes.

Duane Dauner, president of the California Hospital Association,said the payment can amount to 60% or more of revenue for hospitalsthat treat large numbers of Medi-Cal beneficiaries. He added, "Many ofthese facilities operate on very thin financial margins and do not havethe reserves to operate without Medi-Cal payments."

Jim Gomez, president of the California Association of Health Facilities,said, "If the state budget is not enacted within the next few days, thestate will not be able to pay providers for 24-hour care for nearly6,000 developmentally disabled individuals living in more than 1,000community-based small-group homes throughout California."

Failed Legislation

Legislation sponsored by the health facilities association to doublethe reserve fund to $4 billion has failed two years in a row.

The state Assembly Appropriations Committee this year did not approve the bill (AB 237),by Assembly member Audra Strickland (R), after a committee analysisargued that recent state budget experience indicated that an increaseto the emergency fund was unnecessary (San Diego Union-Tribune, 7/28).

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Reprinted with permission fromkaisernetwork.org.You can view the entire KaiserDaily Health Policy Report, search the archives, andsign up for email delivery at kaisernetwork.org/email. The Kaiser Daily Health Policy Report is published forkaisernetwork.org,a free service of The Henry J. Kaiser Family Foundation.

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