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FY 2010-11 State Budget Revise

The Governor released revisions to his fiscal year (FY) 2010-11 state budget proposal on May 14, 2010, projecting a budget gap of $20 billion. To balance the budget in the face of significant revenue losses, the May budget revision proposes deep reductions and, in some cases, program eliminations.

There are a number of reductions within the Medi-Cal program that will directly impact hospitals. The January budget proposed a cost-containment plan to save $750 million in Medi-Cal. Today’s revision proposes the following to achieve $523 million in savings:

Utilization Controls ($90.2 million)

  • Elimination of specified over-the-counter drugs ($13 million).
  • Maximum annual benefit on various durable medical equipment and medical supplies ($3.8 million).
  • Limit on prescriptions to six per month ($4.2 million), excluding long-term-care residents.
  • Limit on the number of physician or clinic visits to 10 per year, excluding long-term-care residents ($69.2 million).
  • Increased Cost Sharing ($218.8 million)
  • $50 copayments on emergency room (ER) visits ($41.5 million).
  • $100 per-day copayments and $200 maximum for hospital stays ($59.1 million).
  • $5 copayments on physician/clinic/dental/pharmacy visits ($118.2 million).
  • Other Program Changes ($213.7 million)
  • Freeze hospital rates at the current level for both contracting and noncontracting hospitals ($64.9 million).
  • Enroll seniors and people with disabilities in managed care ($137.3 million).
  • Reduce radiologist rates to 80 percent of Medicare rates ($10.5 million).
  • No longer pay Medicare Part B premiums for certain beneficiaries ($1 million).

The revised budget assumes an increase in federal funds of $1.6 billion ($55 million more than in the January budget) as a result of 1) relief through the new Section 1115 waiver; 2) federal reimbursement for costs of incarcerating undocumented immigrant felons; 3) funds owed to the state for incorrect Medicare disability determinations; and 4) recalculation of state Medicare Part D clawback payments.

This budget proposes to extend the AB 1383 hospital fee for two additional quarters to conform to the expected extension of the American Recovery and Reinvestment Act, resulting in $160 million savings in Medi-Cal. The budget still calls for the elimination of adult day health benefits as proposed in the January budget.

There were rumors that the May budget revision would propose to eliminate the Healthy Families program; however, that is not the case. The revise proposes an increase in funding of $64 million for the Healthy Families program to restore benefits for children in families from 200 percent to 250 percent of poverty. Consistent with cost-containment proposals in Medi-Cal, the budget plan requires copayments of $15 to $50 for ER visits and copayments on hospital inpatient services of $100 per day with a $200 maximum.

CHA issued the attached media statement today, and will issue more details on the FY 2010-11 state budget revision in an upcoming Budget Watch. For a copy of the state budget revision, visit the Department of Finance website at www.dof.ca.gov.

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