California Gov. Schwarzenegger Releases Revised Budget That Includes Additional Cuts to Health Care

California Gov. Arnold Schwarzenegger (R) on Wednesday released a revised fiscal year 2009 state budget that includes deeper cuts to health and social service programs than previously proposed, the Sacramento Bee reports (Yamamura, Sacramento Bee, 5/15). Schwarzenegger added $1.04 billion in cuts to health and human services from his initial budget proposal in January (Fernandez, San Francisco Chronicle, 5/15).

Schwarzenegger in January proposed a $101 billion state budget for FY 2008-2009 that called for reduced funding for health care programs and other services to help close a projected $14.5 billion budget shortfall. The state Legislature in February approved Schwarzenegger's proposed $1.3 billion Medi-Cal reimbursement reduction, which would take effect on July 1, as part of a proposal by Gov. Arnold Schwarzenegger (R) to reduce funds for all state services by 10% in an effort to address the budget deficit for fiscal year 2009 (Kaiser Daily Health Policy Report, 5/6).

Revised Budget Proposal Details
The revised budget seeks to close a $15.2 billion state budget shortfall for FY 2009 and build a reserve of $2 billion (Sacramento Bee, 5/15). The revised plan includes $31 million in savings by reducing the Medi-Cal income eligibility threshold to 61% of the federal poverty level for a two-income household. In addition, the revised budget would reinstate a rule that a family's primary wage earner could work no more than 100 hours per month to be eligible for coverage (Harrison, Eureka Reporter, 5/14).

The revised budget also includes $111 million in funding cuts to health care programs for documented immigrants (Steinhauer, New York Times, 5/15). Low-income documented residents who have been in the U.S. for five years or less would be eligible for health care only in cases of emergency and pregnancy; if they needed nursing homes; and for breast and cervical cancer treatment.

In addition, in-home supportive services for seniors and people with disabilities would be restricted, and only the most severely impaired would receive aides for household tasks, although in-home medical assistance would continue. The cuts would affect about 84,000 people, or about one-fifth of program beneficiaries, according to the Los Angeles Times (Halper/McGreevy, Los Angeles Times, 5/15). The new budget proposal also includes hundreds of millions of dollars in cuts to a program that supplements salaries of in-home support-services workers who care for the elderly. The revised budget does not include a federal cost-of-living increase to a cash assistance program that helps the elderly, blind and disabled (Zapler, San Jose Mercury News, 5/15).

Lottery Changes
In addition to program cuts, Schwarzenegger plans to close the budget gap by selling $15 billion in bonds based on anticipated lottery revenue (Williams, AP/Contra Costa Times, 5/14). David Crane, an adviser to Schwarzenegger, said the plan would let the state borrow $15 billion over three years from a Wall Street bank in exchange for "the right but not the guarantee" of future net incomes from expanded state lottery revenue. Crane also said that under the plan, the bank would "take all the risk" and the state would never have to repay the bank if lottery revenue fell short of expectations.

Crane said that in order for the plan to work, the lottery would need to be altered so that it could double its performance and create higher payouts than are currently allowed under state law (New York Times, 5/15).

The plan must be approved by the state Legislature, and voters in November must approve the plan on a statewide ballot measure. If lawmakers and voters do not approve the measure, Schwarzenegger plans to increase the state sales tax by one cent, which would only need approval from the Legislature (Skelton, Capitol Journal/Los Angeles Times, 5/15).

Prospects/Reaction
According to the Mercury News, the revised budget was "met immediately by bipartisan resistance in the Legislature," which would have to approve the health care cuts by a two-thirds vote (San Jose Mercury News, 5/15). According to health care advocates, Schwarzenegger's proposed cuts would deny Medi-Cal coverage to hundreds of thousands more people and reduce access to care for many more. Consumer advocate Anthony Wright of Health Access called the governor's plan "a massive step backward" for the state's already hurting health care system (San Jose Mercury News, 5/15).

Of the proposed cuts to health care programs, Schwarzenegger said, "I know this is going to be very difficult, and I know this is going to be very painful. This is why I had a hard time making those cuts," adding, "But the absolute bottom line is that we cannot spend money that we do not have. Plain and simple" (Yi/Vega, San Francisco Chronicle, 5/15).

Carmella Castellano-Garcia, president of the California Primary Care Association, said some of the health care cuts "are anti-immigration provisions."

Richard Frankenstein -- president of the California Medical Association, which has filed a lawsuit to block the Medi-Cal cuts -- said the cuts will "shut doctors' offices, hospitals, pharmacies and clinics ... across California" (Fernandez, San Francisco Chronicle, 5/15).