In his January Budget, Governor Schwarzenegger proposed a $72.68 million reduction in core Medi-Cal reimbursement to California’s community health centers. This proposed reduction to federally qualified health centers (FQHCs) and rural health clinics (RHCs) amounts to up to a 20% cut in reimbursement to these vital safety net providers.  

FQHCs and RHCs are essential providers to California’s rural and urban communities. These facilities are located in the State’s most medically underserved areas, serving communities that would otherwise lack access to primary care services. By providing cost effective primary and preventative services, these health centers save the health care system money by reducing visits to more costly treatment settings, like emergency rooms. FQHCs and RHCs are the backbone of the State’s health care safety net.  

Unfortunately, these health centers are not financially diversified. Due to their non-profit status and the populations that they serve, these health centers rely on Medi-Cal payments to provide their services. Sixty-eight percent of all reimbursement for patient services is derived from Medi-Cal, with 40% of total health center revenue coming from Medi-Cal. Reducing this funding source would financially destabilize these providers.  

This reduction in FQHC/RHC reimbursement threatens the success of President Bush’s national community health center initiative in California. The President’s historic initiative to double the capacity of the nation’s FQHCs would expand access to affordable primary care for the nation’s underserved. Unfortunately, the FQHCs facing a cut to their reimbursement are the very ones being promoted by the President’s Initiative. Without stable Medi-Cal funding, the success of the President’s historic initiative is threatened.

• More information on Cutting FQHC/RHC Medi-Cal Reimbursement
• More information on FQHCs

The Governor has proposed obtaining a Medicaid 1115 demonstration waiver to restructure and reform Medi-Cal, a program that provides health coverage to 6 million Californians. As part of this waiver, the Administration is envisioning implementing premiums & co-payments for beneficiaries and a tiered benefit package based on mandatory and optional populations. The Administration estimates that implementation of the waiver will result in General Fund savings of $400 million in next year’s budget.  

The Administration will seek a Section 1115 Waiver to implement the Medi-Cal restructuring. Although 1115 Waivers require coverage expansions, the savings anticipated by the Administration shows its intent to reduce services as a primary focus of the waiver initiative. 1115 Waivers have resulted in service reductions in other states.  

While other states waivers do include small expansion populations, few are likely to benefit from the expansion of coverage. For example, Utah’s expansion program requires beneficiaries to pay a $50 annual enrollment fee, which is charged to even the lowest-income enrollees. Data from this new expansion program already shows the enrollment fee to be a significant barrier to access. In Oregon, providers are allowed to refuse service to a beneficiary who cannot afford the co-payment at the time of services.  

• More Information on How the Medicaid Waiver Can Impact FQHCs and RHCs
• More Information on CPCA Medi-Cal and Healthy Families Strategy

The proposal to cap Medi-Cal enrollment for immigrants will place almost 78,000 low-income immigrants on a waiting list for health care coverage in the first year. These immigrants are society’s most vulnerable populations in need of health care, including pregnant women, infants, elderly, and those diagnosed with breast or cervical cancer. Even without the proposed cap, immigrant children are already three times more likely to be uninsured than children in U.S.-born families, according to the California Policy Research Center.

The elimination of health care coverage for immigrant populations will also have a negative impact on safety net providers, including CCHCs. In 2002, CCHCs provided over 3 million patient visits to Medi-Cal recipients, representing approximately 33% of the patient encounters. However, because CCHCs see such a large percentage of uninsured patients, Medi-Cal accounts for a much greater share of clinic revenues, approximately 43%.^[1]

^[1]The cap on enrollment will result in greater numbers of uninsured immigrants, and a loss of important revenue for CCHCs.

• More Information on Cap on Immigrant Enrollment                
• More Information on CPCA Medi-Cal and Healthy Families Strategy

California’s Medi-Cal rates are already the lowest in the nation. According to the leading physician organization in the state, as many as 40% of private practice Medi-Cal providers could be lost if rates are lowered still further.

Furthermore, a provider rate reduction will also limit the number of health care specialists that accept Medi-Cal patients. Medi-Cal beneficiaries already have a specialist network which is less than half the size of the general population. The proposed reduction will result in limiting or possibly eliminating the ability of CCHCs to refer Medi-Cal patients for medically-necessary specialty care services.  

• More Information on Provider Rate Reduction
• More Information on CPCA Medi-Cal and Healthy Families Strategy

• One-Year Moratorium on New Adult Day Health Centers:

The Administration proposes a one-year moratorium on new adult day health care centers (ADHC) and on the expansion of existing ADHCs. In addition, the Administration proposes that ADHCs have therapy and transportation services removed from bundled reimbursement, and instead can seek reimbursement for these services separately.

• Medi-Cal Managed Care County Expansion

The Administration plans to expand Medi-Cal managed care beyond the 22 counties where it is currently offered. The current make–up of Medi-Cal managed care includes: 11 health plans in the Two Plan Model that participate in 11 counties: Alameda, Contra Costa, Fresno, Kern, Los Angeles, Riverside, San Francisco, San Joaquin, Santa Clara, Stanislaus, and Tulare. The Two Plan Model covers approximately 2.4 million enrollees. ^[1] 5 health systems with 539,000 Medi-Cal beneficiaries participate in the County Organized Health System in the 8 counties: Orange, Monterey, Santa Cruz, Napa, Solano, Yolo, San Mateo, and Santa Barbara^[2] . 9 health plans covering approximately 339,179 Medi-Cal beneficiaries operate in two counties (Sacramento and San Diego) that participate in the Geographic Managed Care Model. ^[3] For people with disabilities living in one of the eight counties participating in County Organized Health System, enrollment in managed care is required.

The Administration is recommending that the state consider the expansion of these models in some of the remaining 36 counties.

• Aged Blind and Disabled in Managed Care

The Governor proposes desire to encourage disabled Medi-Cal beneficiaries to enroll into Medi-Cal managed care plans. The proposal is an attempt to control cost because disabled Medi-Cal beneficiaries make up approximately 17 percent of the Medi-Cal population but account for 44 percent of Medi-Cal expenditures.^[4] Currently 21 percent of the Medi-Cal beneficiaries with a disability are enrolled in a managed care plan, while 64 percent of non-disabled beneficiaries have chosen managed care.^[5]