California Budget Plan Would Lead to Reduced Federal Matching Funds for Medicaid, SCHIP

California would lose about $1.5 billion in federal matching funds for health care services and other programs under Gov. Arnold Schwarzenegger's (R) proposed fiscal year 2008-2009 budget, according to an analysis by the Assembly Budget Committee, the Sacramento Bee reports (Whitney, Sacramento Bee, 1/15).

Under the proposed spending plan, funding for Medi-Cal, the state's Medicaid program, would be reduced by about $1 billion to $13.6 billion. The proposed budget would reduce by 10% Medi-Cal reimbursement rates for physicians and hospitals, which already are among the lowest in the nation. In addition, two-thirds of Healthy Families beneficiaries would pay higher premiums under the proposal. Healthy Families is the state's version of SCHIP. The budget plan also calls for eliminating some Medi-Cal services, including most dental services for the three million adult Medi-Cal beneficiaries, and includes cuts to HIV/AIDS drug assistance and prevention programs (Kaiser Daily Health Policy Report, 1/11).

Medi-Cal likely would experience a larger funding cut because less matching federal funding would be awarded to the program, and proposed funding cuts for Healthy Families would translate to a corresponding loss of $76.1 million in matching federal money.

Under the governor's budget, dental coverage for Healthy Families beneficiaries would be limited to $1,000 per child, and premiums for families would increase by $3 per child to avoid tightening eligibility requirements for the programs. Kim Belshé, secretary of the state Health and Human Services Agency, said there will be enough funding in the proposed spending plan to accommodate a projected increase of 65,000 children covered by the program (Sacramento Bee, 1/15).

Budget Analysis
The nonpartisan state Legislative Analyst on Monday criticized Schwarzenegger's decision to order across-the-board spending cuts in an effort to address the state's $14.5 billion budget deficit, the Ventura County Star reports.

Legislative Analyst Elizabeth Hill told lawmakers that the governor's spending plan "fails to differentiate between the importance of various state programs." She added, "All state programs are not equally valuable." Hill advised the Legislature to "collectively attempt to determine which programs are most important" and consider revenue-generating options, such as eliminating tax credits and raising user fees for some state services (Herdt, Ventura County Star, 1/15).