California lawmakers block health care cuts

Reviewed by James Ives, M.Psych. (Editor)Jun 23 2020

Gov. Gavin Newsom and Democratic state lawmakers agreed Monday on a state budget plan that would avoid the deep cuts to essential health care services that the governor had initially proposed.

Even though the state faces a massive budget deficit, legislators flatly rejected Newsom's proposed cuts to safety-net programs intended help keep older adults and low-income residents out of long-term care homes, the epicenters of coronavirus outbreaks.

"The demand for these services is even more imperative, even more needed," said Sen. Richard Pan (D-Sacramento), who chairs the Senate Health Committee. "The more people keep out of nursing homes, the better."

To address the estimated $54 billion deficit in the 2020-21 state budget, the deal relies partly on drawing down state cash reserves and rainy day funds. But it still includes cuts, such as reductions to state employee pay and deferred payments to K-12 public schools. It also counts on future federal COVID-19 relief aid from Congress.

Lawmakers, still finalizing details, are expected to vote on the proposal later this week. Newsom must sign it by July 1, when the spending plan would take effect.

Newsom negotiated the plan with legislative leaders, including Assembly Speaker Anthony Rendon and Senate President Pro Tem Toni Atkins. In a joint statement, they described an unprecedented pandemic that has forced them to "make hard choices and figure out how to sustain critical services with much less."

"In the face of these challenges, we have agreed on a budget that is balanced, responsible and protects core services — education, health care, social safety net and emergency preparedness and response," they said.

In May, Newsom proposed $14 billion in cuts, including the elimination of several Medi-Cal services, along with sweeping cuts to other safety-net programs and education. He had described the cuts as painful, but necessary to balance a state budget decimated by the novel coronavirus. For instance, the state has been hit by plummeting tax revenues and additional costs related to pandemic response, such as paying a record number of unemployment claims. California's unemployment rate was 16.3% in May.

However, lawmakers balked at cutting Medi-Cal programs amid the pandemic, which has hit older people and those with chronic health conditions the hardest. About one-third of Californians are enrolled in Medi-Cal, the state's Medicaid program for low-income people.

"We're relieved that many of the worst of the cuts were prevented. We're going to need to fight for federal funds and state funds in the future," said Anthony Wright, executive director of the advocacy group Health Access California.

Among the Medi-Cal programs that will remain funded in the final budget are ones that aim to keep older Californians out of nursing homes: the Multipurpose Senior Services Program, which links social workers to seniors still living in their homes, and Community-Based Adult Services, which provides recreation and medical care to seniors and people with disabilities.

Californians who rely on caregivers paid by the state to help them live at home no longer have to worry about a 7% cut Newsom had proposed for In-Home Supportive Services. And the budget preserves funding for "optional" Medi-Cal benefits, such as adult podiatry care, eyeglasses, speech therapy and hearing exams — benefits that lawmakers had just recently restored after they were cut in the last recession.

"A lot of these benefits are benefits provided in the private market," said Linda Nguy, a policy advocate at the Western Center on Law & Poverty. "Having a lower standard for public programs for low income and communities of color is problematic, especially in a public health crisis."

Lawmakers also rejected Newsom's plan to redirect $1.2 billion from Proposition 56 funds to help pay for a projected surge in Medi-Cal enrollment. That money, raised by a tobacco tax, now helps pay physicians, dentists and other health care providers who treat Medi-Cal patients.

Pan said it is important those payments continue, as mandated by Proposition 56. "I appreciate the governor respected the will of the voters," he added.

The Newsom administration estimated that counties will lose $1.7 billion in public health funding between January 2020 and the end of June 2021 because of lower sales tax revenues and vehicle license fees. To help them make up for that loss, the budget includes $750 million in state money, and counties would get an additional $250 million if the federal government approves new COVID-19 relief money for states.

That's far less than what counties throughout California say they need for COVID-19 response and other public health programs.

Not all state health care programs escaped budget cuts.

The expansive health care agenda outlined at the beginning of the year by both the governor and the legislature is on hold, including an effort to expand Medi-Cal coverage to undocumented immigrants 65 and older; a new initiative to shelter homeless people, called "CalAIM"; and a revamp of the mental health care system.

"We made compromises across the spectrum," Newsom told reporters Monday. "This is a multiyear framework. We're not solving for everything. We have a lot of work to do for the next few years."

The budget deal did not include $4 billion requested by the California Hospital Association, which has said hospitals statewide have lost about $15 billion because the pandemic has forced them to buy masks and other protective equipment, cancel elective surgeries and free up hospital beds.

California hospitals have received about $3 billion in federal funds, said Carmela Coyle, president of the association. However, it is not nearly enough to offset the huge revenue losses that have triggered furloughs and layoffs she said.

"Without financial relief from the state, hospitals may have to continue workforce reductions, pay cuts and more," Coyle said in a statement. "This is a time when hospitals urgently need state support so they can remain open, staffed and ready."

This KHN story first published on California Healthline, a service of the California Health Care Foundation.