California hospitals’ unhealthy dependence on government

While many Americans are eager for the U.S. Supreme Court this year to decide the constitutionality of President Barack Obama’s health care overhaul, a federal judge in Los Angeles has just made a misguided decision that cuts right to the root of the government’s role in controlling people’s access to medical care, whether state legislators or federal judges have the power to decide how much to spend from the state treasury and health care providers’ unhealthy and unsustainable dependency on government.

Gov. Jerry Brown announced last month that the state government would take in $2.2 billion less than expected in tax revenue. This shortfall triggers automatic cuts in state spending. Obviously, spending on Medi-Cal (California’s version of the federal Medicaid health care program for the poor) must continue to be a target.

Unfortunately, California’s health providers insist on living in a dream world in which fiscal reality gives way to magical judicial thinking.

Although the U.S. Department of Health and Human Services had approved the state’s previous cuts to hospitals, of over 20 percent, U.S. District Judge Christina Snyder issued an injunction against the state Dec. 29, announcing that “the state’s fiscal crisis does not outweigh the serious irreparable injury the plaintiffs would suffer.”

These plaintiffs are not patients, but hospitals, which have developed an unhealthy addiction to government reimbursement. Their lawsuit, California Hospital Association vs. Douglas, pitted the ability of California to control its costly Medicaid programs against the so-called “right” of providers to receive reimbursements high enough to entice them to treat Medi-Cal dependents.

The federal law governing federal grants to states’ Medicaid programs demands that payments be sufficient to enlist enough providers. But Medi-Cal has not paid satisfactory rates for years. In 2009, the physician-recruiting firm Merritt Hawkins & Associates surveyed waiting times at 15 U.S. metropolitan areas. Only 11 percent of cardiologists in Los Angeles accepted Medicaid patients, and the medical specialty with the highest Medicaid acceptance rate, 58 percent, was dermatology.

According to Stephen Zuckerman of the Urban Institute, and colleagues, Medi-Cal’s fees for physicians grew 2 percent from 2003-08, while overall inflation was 20 percent. And the Medi-Cal fees were only 56 percent of the fees paid by Medicare, the federal medical program that covers seniors.

A 2001 study by the California HealthCare Foundation concluded that only half of California’s physicians accepted Medi-Cal patients. A 2004 paper by Mathematica Policy Research Inc. reported that 41 percent of adults on Medi-Cal delayed care because of cost or insurance problems.

Unfortunately, more people are falling into dependency on Medi-Cal, despite its long record of poor access to care. Between June 2004 and June 2010, average monthly enrolment jumped by almost one-eighth, from 6.4 million to almost 7.2 million – and the Urban Institute forecasts it will jump another 20 percent from 2014-19, as Obamacare kicks in.

Pharmacies and assisted-care facilities have separate lawsuits winding their way through the federal judiciary, and Judge Snyder already blocked other Medi-Cal cuts in 2010. It’s understandable that providers are dissatisfied with government bureaucracy and inadequate reimbursement; but any judicial reprieve will be unsustainable. If providers want to earn adequate reimbursement from Medi-Cal, they need to embrace wholesale Medicaid reform.

Even President Obama, whose 2009 law will increase the number of Medicaid dependents nationwide by 16 million to 18 million, has proposed reducing Medicaid spending in his recent deficit-reduction plan by $72 billion over 10 years.

Although this is a trivial amount, it shows which way the wind is blowing.

Resistance to Obamacare shows that the American people are less inclined than ever to funnel their health care dollars through unaccountable layers of government. Rather than investing in lawsuits that cannot give them real relief, California’s health care providers need to free themselves from government dependency.

Reforms, such as federal block grants to Medicaid programs and vouchers for Medicaid beneficiaries to use for private health plans of their choice, will lead to a far better business environment for providers than will a Supreme Court victory.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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