Final fiscal year 2002-03 budget cuts to California's health care programs were modest in comparison to proposals made earlier in the year, according to a report released by the California HealthCare Foundation (CHCF). The analysis of individual state health care programs shows that while some did experience sizeable reductions, others received increases to meet increasing demands or to expand efforts.

"Though the budget was balanced with less pain to health programs than expected, the prognosis for coming years is not good," said Chris Perrone, acting director of the California HealthCare Foundation's Medi-Cal Policy Institute. "Projected state deficits amounting to $9 to $12 billion through 2008 will force the Legislature to revisit health care spending plans as early as this January, when budget planning starts again."

The report, "Health Policy Changes in the 2002-03 California Budget," details how cost-saving measures included in the $13 billion annual health care budget affect Medi-Cal; the Departments of Developmental Services, Mental Health, and Alcohol and Drug Programs; the Healthy Families Program; and the Emergency Medical Services Authority. Research for the report was done by the California Budget Project.

Spending for the state's largest health care program, Medi-Cal, increases by just 1% in the current fiscal year -- assuming that $400 million in federal government commitments are honored, according to the report. The Medi-Cal budget is $9.8 billion and accounts for three-fourths of General Fund expenditures for health care.

Savings are expected to be found primarily through purchasing and management efficiency efforts, improving Medi-Cal anti-fraud and medical case management programs, and by reducing the funding that counties get to administer Medi-Cal. Actual benefits were largely untouched, with the exception of a reduction in the dental benefit for adults, the report said.

However, the report notes that cost-saving actions could adversely impact health programs at the county level. "Coupled with other reductions in state funding for programs administered by the counties—and depending on how counties react—there might be delays in processing Medi-Cal applications and possibly an increase in the number of Californians without access to care," said Perrone.

According to information contained in the report, the total state health care budget for 2002-03 is 5% less than last year. The final spending plan was approved September 5, 2002, by Governor Gray Davis.

One program that fared well is Healthy Families, which covers children in families with incomes between 200 and 250% of the Federal Poverty Level. Based on full receipt of promised federal funds, its budget is expected to expand by 22%, enough to accommodate an additional 65,000 eligible children through June 2003. While support from the General Fund was cut by 85%, Tobacco Settlement Funds will be tapped to make up the difference.

• Reducing General Fund expenditures for cancer research by $12.5 million;
• A 34% reduction in local assistance for the mentally ill and a $12 million reduction for mental health support of special education students;
• Scaling back by $5.4 million the growth in the Early and Periodic Screening, Diagnosis, and Treatment Program; and
• Holding back $24 million in funding for county programs providing health care to indigent adults.
  Programs given a net funding increase included:
• $29 million to support the Emergency Medical Services Authority for trauma systems and preparing for the threat of bioterrorism;
• $27 million for HIPAA compliance efforts;
• $75 million to support community services for the developmentally disabled; and
• $4 million increase in the Childhood Lead Prevention Program. "The final health care budget appears to reflect voter sentiments," said Perrone. "A poll conducted by the California HealthCare Foundation during the summer budget debate indicated that 94% of California voters would have favored tax increases rather than accept major cuts to health programs."

  Confronting a $24 billion deficit, state lawmakers sought to close the budget gap through a variety of strategies, including loans, spending deferrals, funding shifts, and revenue increases, the report noted.

  The California HealthCare Foundation is an independent philanthropy committed to improving California's health care delivery and financing systems. CHCF's Medi-Cal Policy Institute is an objective source of information on the Medi-Cal and Healthy Families programs. The report and additional information related to Medi-Cal and the budget are available through the link below.