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Governor's January Budget Takes Aim at Health & Human Services
01/11/2012

On January 5th, Governor Jerry Brown released his January budget proposal, which calls for significant changes to Medi-Cal, the California Work Opportunities and Responsibility to Kids (CalWORKs) program, and childcare benefits. These cuts come after several years of cuts to health and human services programs. This just weeks after the catastrophic state Supreme Court's ruling last week that eliminated redevelopment agencies without an option to continue.


On January 5, 2012, Governor Jerry Brown released his January budget proposal, which proposed significant changes to Medi-Cal, the California Work Opportunities and Responsibility to Kids (CalWORKs) program, and childcare benefits for CalWORKs and former CalWORKs families. These cuts come after several years of cuts to health and human services programs, including those signed into law by the Governor last July which enacted the deepest cuts to low-income families in two decades. The cuts will further endanger our state's most vulnerable children.  Housing remains funded at dismally low levels, catastrophically exacerbated by the state Supreme Court's ruling last week that eliminated redevelopment agencies without an option to continue. This will result in the loss of $1 billion in housing funds annually. The Governor's budget proposes a tax increase in the top income brackets that will generate $6.9 billion annually. The deficit, though, is estimated to be $9.2 billion. To cover the rest of the gap, the Governor proposes deep cuts to CalWORKs and MediCal rather than provide a revenue proposal sufficient to meet the gap. In short, the plan asks poor families to make up the difference, the very families with the least ability to do so.
 
The Governor's January health, human services and housing budget proposals are summarized below. Visit www.wclp.org and www.hhsnetworkca.org for more details and responses to these proposals as they become available, as well as learning about opportunities to advocate against them.
Health Care Proposed Cuts
Governor Brown's budget cuts $842.3M from Medi-Cal and attempts to integrate several complicated programs, including Medi-Cal, Medicare, and Healthy Families. It would eliminate the Managed Risk Medical Insurance Board (MRMIB) and transfer responsibility for Every Woman Counts, Prostate Cancer Treatment, and FamilyPACT from the Department of Public Health to the Department of Health Care Services (DHCS). The past several enacted budgets imposed drastic cuts and significantly reduced patient care. The Administration has already eliminated ten essential benefits from Medi-Cal for adults, such as podiatry, psychiatry, and dental care, and is seeking federal permission to require co-payments from all Medi-Cal beneficiaries as well as limit doctor and clinic visits for adults. Specifically, the Governor's proposed budget would:
 
• Mandatorily Enroll "Dual Eligibles" in Managed Care: Transition close to 1.2 million beneficiaries who are eligible for both Medi-Cal and Medicare, known as "dual eligibles," into managed care plans. As it stands, Medicare is the primary payer for most hospital, physician, and skilled nursing services. Medi-Cal covers any leftover cost-sharing and services not covered by Medicare, including long-term or nursing care. The Medi-Cal portion has traditionally been paid through a Fee-For-Service model. This transition is a complicated and multi-year process that would start January 1, 2013, where Medi-Cal benefits would be phased from FFS to managed care. The transition to integrating Medicare would occur over a 3-year period, starting with 8 to 10 counties that have yet to be selected. In-Home Supportive Services, Home and Community-Based Services, and nursing home care would become managed care benefits under this proposal as well. DHCS estimates this proposal would cut Medi-Cal spending by $678.8M in 2012-13 and $1B in 2013-14.
 
Earlier this year, DHCS started the transition from Fee For Service to Managed Care for close to 400,000 Medi-Cal beneficiaries who are either elderly or have a disability, a similar population to dual eligibles. The transition has been fraught with problems, including defaulting beneficiaries into health plans that do not include their existing providers and making it extremely difficult to receive exemptions to leave managed care. This has kept persons with high health needs from getting the care they need in a timely manner. Considering the needs of the dual eligible population, the readiness of DHCS to take on over 1 million more beneficiaries into a transition is troublesome.
 
• Expand Medi-Cal managed care to all 58 California counties: Currently there are 28 mostly rural counties that operate Medi-Cal through a Fee-For-Service model; the other 30 California counties have some form of Medi-Cal managed care. DHCS would conduct a bidding process for managed care models in the 28 counties. DHCS estimates a $2.7M reduction starting in June of 2012 and $8.8M in 2013-14. The willingness of physicians to join health plans in sparsely populated areas remains to be seen, and could create problems for network adequacy.
 
• One-year health plan lock-in for Medi-Cal beneficiaries. Currently Medi-Cal beneficiaries are able to change health plans each month. This proposal would lock beneficiaries into a plan for a year, with only one annual chance to change their health plan. DHCS estimates this would cut Medi-Cal funding by $3.6M in 2012-13 and $6M in 2013-14. As beneficiaries are enrolled into plans that they did not choose, it is imperative that they have the option to change plans should they find out later that their preferred provider does not participate in the plan in which the beneficiary was defaulted. As many of the new managed care enrollees tend to see multiple providers and specialists regularly, the need for flexibility and the right to change plans is imperative.
 
• Reduce Healthy Families managed care plan rates by 25.7 percent effective October 1, 2012 to make them commensurate with Medi-Cal rates.
 
• Transition children from Healthy Families to Medi-Cal: Similar to the Governor's proposal from the 2011 May Revise, this would move approximately 875,000 children over a nine-month period, beginning October 1, 2012. This would start with children who can stay in the same health plan, then to children who will need transitional assurances, and lastly those in Fee-For-Service counties. Possible benefits of transitioning children would include access to Medi-Cal entitled benefits, the Early Periodic Screening Diagnosis and Treatment Program, significantly better due process, and reduced cost sharing. Some children will have to move from Healthy Families to Medi-Cal under the federal Patient Protection and Affordable Care Act which requires that children up to 133 percent of the Federal Poverty Level enroll in Medi-Cal.
 
• Benefit Change "Flexibility": DHCS would have the authority, without a formal regulatory process, to make some changes in benefits and payment levels in Medi-Cal. Stakeholder input would be sought before changes were made. Estimated savings are $75M annually.
 
• Medical Therapy Program Eligibility: Impose new income eligibility standards whereby only families with annual incomes less than $40,000 or CCS-related expenses above 20% of annual income would be eligible for the Medical Therapy Program.
 
• Eliminate the sunset date on taxes on Medi-Cal Managed Care plans, which have provide funding through a federal match. Combined with other factors upon which DHCS has pegged their assumptions, this would alleviate General Fund spending by $161.8M in 2012-13 and $259.1M in 2013-14.
 
• Change the method in which Federally Qualified Health Centers and Rural Health Centers are paid. The proposal changes how the state will make clinics' payments by moving from actual cost and volume to a fixed payment. DHCS estimates this will cut $27.8M in 2012-13 and $58.1M in 2013-14.
 
• Impose cost sharing in the AIDS Drug Assistance Program to the maximum percentage allowed under federal law. Clients would see their copayments go up to between $28 and $385 monthly, depending on their income.
CalWORKs Benefits Cuts
The Governor's proposal reduces expenditures by $946M, redirects $736.4M of TANF funds to the Student Aid Commission to pay for CalGrants and creates three new CalWORKs programs:
 
CalWORKs Plus - For adults meeting work participation requirements via unsubsidized employment. Adults can stay on aid up to 48 months and can receive a higher earnings disregard of $200 a month (Up from current EID of $112 a month). Child-only cases where adults are meeting the work requirements after the 48 months will continue to benefit from the higher earnings disregard.
 
Basic CalWORKs - For first 24 months a family can get cash aid and welfare-to-work services subject to CalWORKs sanctions. If an adult is not meeting work participation after 24 months or they have 3 months in sanction status the adult is disenrolled and the children are placed in Child Maintenance Program.
 
Child Maintenance Program - Child-only cases and cases disenrolled from Basic CalWORKs will be placed into a separate state program. Grant levels will be reduced by 27% for these cases, reducing the average child-only grant from $463 a month to $391 a month. The large majority of the cases in this program would be ineligible for the CalWORKs Plus or Basic CalWORKs programs even when adult household members are working.
 
Other proposals include:
 
• Eliminate Young Children Exemptions on July 1, 2012: The proposal eliminates the suspension of the welfare-to-work requirement for families with children under 24 months. Beginning July 1, they will be subject to the work rules.
 
• Cal-LEARN: By statute the Cal-LEARN intensive case management is set to be restored after being suspended for one year. The budget proposes permanent repeal of the case management services.
 
• Fund a Work Incentive Nutritional Supplement Program: This program would provide a $50 stipend to CalFRESH non-assistance cases in which adults are meeting TANF federal work participation requirements. These families would count towards the state's federal CalWORKs work participation requirement.
 
• Consolidate Child Care Stage 1, 2 and 3 into a single program: Program would be managed by the counties. The budget also eliminates 61,000 stage 3 slots by reducing the maximum income levels.
 
• Bring CalWORKs work requirements into compliance with federal rules: This appears to include the following: (1) Reducing the weekly work rate from 32 to 30 hours; (2) Requiring families with children under 6 years of age to work only 20 hours a week; (3) May eliminate the ability to count non-core counseling and family reunification hours towards 20-hour work requirement; (4) May require adults in self-initiated programs to meet welfare to work requirements.
 
• Eliminate all Non-Federal Exemptions from Welfare-to-Work (WTW): Calls for repeal of all exemptions not permitted under federal law, including requiring relative caretakers to work. Welf. & Inst. Code §11320.3 (b) sets out the WTW exemptions. Federal law only provides exemptions from welfare-to-work for the following adults: (1) A minor parent and not the head-of-household or spouse of the head-of-household; (2) An immigrant who is ineligible to receive assistance due to his or her immigration status; (3) A person receiving Supplemental Security Income (SSI).
Housing Cuts From Last Year Ruled Constitutional
For years, housing funding in the budget has been minimal, after peaking at approximately $500M in 2000-01. Two bond issues in 2002 and 2006 provided funding, but those proceeds are essentially gone. The major continuing source of housing funding has been the $1B per year in redevelopment funding dedicated by law to housing funding.
 
On December 29, 2011, the state Supreme Court ruled that the Legislature's action to eliminate redevelopment agencies, part of last year's budget's package, was constitutional, while declaring unconstitutional the ability for agencies to continue in operation provided that certain payments were made to various local agencies. As a result, the $1B in housing funding was also eliminated.
 
This catastrophic decision was not addressed in the January budget. Non-budget legislation will be introduced quickly to attempt to retain redevelopment and its housing in some form. The Governor continues to express opposition to redevelopment, however. He said in his budget press conference that he would not support any redevelopment changes and that "Our position is that the Supreme Court has invalidated [redevelopment] and that's where it stands."




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