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California Cuts Medicaid Payments Amid Wave of New Users

Many physicians, as well as dentists and pharmacies, will see their fees cut 10 percent under a 2011 deal by Governor Jerry Brown to balance an $86 billion budget. Photographer: Andrew Harrer/Bloomberg
Many physicians, as well as dentists and pharmacies, will see their fees cut 10 percent under a 2011 deal by Governor Jerry Brown to balance an $86 billion budget. Photographer: Andrew Harrer/Bloomberg

When Ruth Haskins, a gynecologist in Folsom, California, does a pelvic exam and pap smear on a woman with insurance, she gets $95 to $200. If the patient is elderly, federal Medicare pays $36. For the low-income on Medicaid, the state gives $25, and it’s about to go down.

The reduction comes as Medi-Cal, California’s Medicaid program for 8.5 million people too poor to afford health care, is on the verge of adding 1 million participants under President Barack Obama’s health-system overhaul, according to the state Health Care Services Department.

Finding doctors willing to treat them may be harder. The biggest U.S. state by population is projecting its first budget surplus in almost a decade and spending $1.5 billion to expand Medi-Cal. Yet many physicians, as well as dentists and pharmacies, will see their fees cut 10 percent under a 2011 deal by Governor Jerry Brown to balance an $86 billion budget.

“While the budget has indeed been brought into balance, that balance is by a narrow margin,” H.D. Palmer, a spokesman for Brown’s Finance Department, said by e-mail. “That’s why the budget assumes that the difficult but necessary reductions that helped bring the budget into balance are ongoing.”

Brown, a 75-year-old Democrat, came to office in January 2011 facing a $26 billion deficit through June 2012. He pressed lawmakers to cover part of the shortfall by extending expiring taxes and fees. When Republicans blocked the plan, the governor cut $10 billion in spending, including Medi-Cal reimbursements.

Cutting Time

Doctors temporarily staved off the reduction with a federal lawsuit, but lost. The 10 percent cuts are now being implemented by the health care department. In addition, to make up for higher reimbursements while the cuts were delayed, the agency will withhold another 5 percent to recoup overpayments.

The cuts took effect Sept. 5 for dentists and medical-transport workers, and will hit medical-supply companies Oct. 24. Many physicians, clinics and pharmacies will see their reimbursements lowered starting Jan. 9.

That will be just in time for California to expand Medi-Cal eligibility by about 1.4 million adults with incomes at or below about $15,900, slightly above the federal poverty line, starting Jan. 1. About 1.1 million are projected to join.

California doctors already have the third-lowest Medicaid payments in the U.S., at 51 percent of what Medicare paid for the same services in 2012, according to the California Budget Project, a nonpartisan research group in Sacramento. Only Rhode Island and New Jersey were lower.

Few New

Just 57 percent of California physicians accepted new Medi-Cal patients in 2011, the second-lowest rate after New Jersey, the budget group said in an April report.

Patient advocates say the flood of new Medi-Cal patients may be unable to find doctors, clinics and pharmacies willing to take them.

“We can take only up to 20 pregnant patients per month,” said Haskins, who practices obstetrics and gynecology in Folsom. “As it approaches five Medi-Cal patients in a month, we have to say no, I’m sorry, I can’t take any new Medi-Cal patients.”

“With the anticipated decrease in state reimbursements, that number will certainly go down.”

To limit an exodus of doctors from Medi-Cal, raises are coming for primary-care physicians. Under the Affordable Care Act, their Medi-Cal rates will rise to the level of Medicare’s for 2013 and 2014. While doctors have yet to see the boost, the health care department said they’ll be retroactive to Jan. 1.

Pay Raise

For Randall Hepworth, a pediatrician in suburban Sacramento, that means he’ll get $75 to examine a low-income child with a sore throat, up from the current Medi-Cal rate of about $26. That will bring the rate for low-income patients close to those with private insurance, where the average reimbursement is $70 to $85.

Besides the higher rates for primary-care doctors, a bill awaiting Brown’s signature would exempt some hospital-based skilled nursing facilities from the Medi-Cal cuts. For most others in medicine, however, the reductions remain.

Few providers are more vulnerable to the cuts than specialty pharmacies such as ModernHealth, based in Monrovia, east of Los Angeles.

The company, which employs 300 people, supplies medications to AIDS patients, transplant recipients and other chronically ill people. The drugs sometimes cost tens of thousands of dollars a year, said Sherri Cherman, the president and chief operating officer.

Losing Money

“We have a higher percentage of our revenue from these plans like Medi-Cal than other pharmacies might,” she said by telephone. “For us, a 10 percent cut for medicines we’re making only 3, 4 or 5 percent on doesn’t make any sense at all. It will drive of us out of business.”

That situation presents few choices for her patients, Cherman said, as well as “a huge moral quandary” for the company.

“We won’t be able to pay our rent or our people with this 10 percent cut, but how do you do that to the patients?” she said. “We would have no other option than to disenroll from Medi-Cal.”

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