Liberal Governor's Request for Medicaid Cuts Puts Democrats in Tough Spot

By Julian Pecquet, The Hill

July 20, 2011

President Obama and congressional Democrats have been put in a tough spot by California Gov. Jerry Brown’s (D) request to cut Medicaid spending 10 percent. 

Brown says he needs to make the cuts to the state Medicaid program, known as Medi-Cal, to ease his state’s severe budget woes. But advocates say cuts of that size would be devastating to California's most vulnerable residents.

The federal Centers for Medicare and Medicaid Services (CMS) — and, by extension, the White House — must choose between helping a first-term Democratic governor who has been a leader on healthcare reform and signing off on a policy that advocates say would be devastating to people with disabilities. 

CMS also has to weigh the potential fallout from the decision, since giving California carte blanche to make Medicaid cuts could open the floodgates for other states to make similar requests.

Brown's request has sparked an outcry from some members of his state's congressional delegation, with Rep. Dennis Cardoza (D-Calif.) leading the fight to protect the funding for people with intellectual and developmental disabilities.

"If the proposed cuts in the Medi-Cal rate go through," Cardoza recently wrote to CMS Administrator Donald Berwick, "I am deeply concerned that [some] providers [of services for the disabled] will have no option other than to close their facilities." 

The debate comes as California seeks to plug a $26.6 billion budget gap, the worst of the 50 states. To get there, the state last month adopted a bare-bones budget for 2011-2012 that slashes Medicaid by about $1.4 billion.

In a June 27 letter to the president, Brown urged Obama to approve the state's request. 

"California has enacted huge and extraordinarily painful spending cuts to close our multibillion-dollar budget gap," Brown wrote. "We did our part to reduce state and federal Medicaid spending by eliminating optional benefits, reducing provider payments and requiring beneficiary cost sharing."

The letter asked the president to reject other cuts that are reportedly on the table as part of the debt-ceiling talks, including proposals to bar states from taxing Medicaid providers and cutting Medicaid reimbursements at the federal level.

California needs CMS to approve the cuts because the federal government pays a portion of states' Medicaid costs. The state made its formal State Plan Amendment request on June 30 — the same day that the more than $10 billion in extra Medicaid dollars provided to the state by the 2009 Recovery Act dried up. 

Norman Williams, a spokesman for the California Department of Healthcare Services, said Medicaid is the state's second highest expenditure, and cutting it "has to be part of the budget solution."

The 10 percent cut, Williams added, isn't trying to target any specific population, but rather aims to protect the solvency of a Medicaid program more than 7.5 million people rely on.

The proposed cuts include a 10 percent reduction in Medicaid payments to hospitals, physicians, nursing facilities and other providers that Brown says would save $623.4 million in 2011-12. Cardoza and others are worried about the potential impact on intermediate care facilities for the mentally disabled, which rely on Medicaid for all their funding.

The cuts would affect about 7,000 residents at 1,000 facilities statewide, but advocates say about 150 are likely to close over the next 18 months if the cuts go through. Jim Gomez, CEO of the nursing-home lobby group California Association of Health Facilities, said the homes most at risk are in the San Francisco Bay Area and the Central Valley.

Besides Cardoza, several other Central Valley lawmakers have facilities that could be forced to close, leaving residents with few or no options. These include House Republican Whip Kevin McCarthy, whose office did not respond to requests for comment.

A spokeswoman for Cardoza said the lawmaker would “certainly welcome Rep. McCarthy’s support on this issue, but due to time constraints with the pending decision with CMS, Rep. Cardoza moved forward with the letter in an effort to get immediate action on this issue.”

Gomez said many of the residents have been in the five- or six-bed homes for years with the same fellow patients and caregivers. Forcing them to move into larger regional centers or skilled nursing facilities, as some have proposed, would be "a huge change in their life."

"You have to understand that in this population, many of them have spent 10, 20 years in the same home," Gomez said. "These residents would have to be placed somewhere else, and that would break up a family situation."

Gomez warned that his group, which is already suing California over a 2009 rate freeze, might expand its lawsuit to cover the 10 percent cut if CMS approves it. Cardoza hinted as much in his letter.

Moving the residents, he wrote, "could relegate them to a more restrictive environment, in violation of [their] rights."

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