Some See Health Funds Peril in Budget Deal

WASHINGTON — The balanced budget deal working its way through Congress could have a particularly harsh financial impact on California hospitals that serve the poor and on health maintenance organizations in the state that serve the elderly, Los Angeles County supervisors and members of Congress warned Wednesday.

The county would be “really the big banana” in feeling the sting of potential health care spending cuts, said Zev Yaroslavsky, chairman of the Board of Supervisors, as he and his colleagues from major urban counties lobbied hard at the White House and in Congress.

County Supervisor Yvonne Brathwaite Burke said that the budget deal, now being fleshed out by congressional committees, could strip away $100 million or more from the $330 million in federal aid that the county receives annually for hospitals that serve large numbers of poor and uninsured people.

“We can’t take any more cuts,” Burke said at a news conference where she and Yaroslavsky warned that the county could be forced to shut down hospital services if the full cuts are imposed.

The problems for California arise from the determined efforts of President Clinton and Republican congressional leaders to achieve a balanced federal budget in five years. A key building block of their deal is an agreement to cut $115 billon from the growth of Medicare spending over the next five years.

Medicare funnels extra money to local hospitals caring for large numbers of the poor and uninsured. This is a key revenue source for public hospitals in Los Angeles County, where one-third of the population lacks health insurance and an estimated 40% of the patients at these hospitals are indigent. If the federal money is cut back, the hospitals will have to curtail services or get more revenues from local taxpayers.

After a visit to the White House, Yaroslavsky and Burke expressed some hope that the final legislative package will direct more money toward public hospitals bearing the heaviest burden of caring for the poor and uninsured.

Officials at the White House and sources in Congress offered little hope that the proposed $16 billion in total cuts for hospitals would be changed. But the sources agreed that the distribution of the remaining revenue may be altered to assure that more goes to hospitals with the greatest burdens.

One factor working in favor of this prospect, Zaroslavsky said, is that “California has its act together” in its lobbying effort. He noted that Republican Gov. Pete Wilson and the overwhelming majority of the state’s 52-member House delegation are united in fighting against the severe budget cuts for hospitals.

On another Medicare front, the developing budget legislation poses a threat to the generous benefits enjoyed by California senior citizens served by health maintenance organizations. And as in the case of hospital funding, California legislators have joined in a bipartisan effort to prevent that from happening.

At issue is a proposed new formula for calculating payments to HMOs that enroll Medicare recipients. The formula would shift the federal payments away from high-cost areas, such as Southern California, New York and Florida, and funnel more funds to rural areas.

“We’re getting nailed,” said Rep. Brian Bilbray (R-San Diego), a member of the House Commerce Committee, which is considering the matter.

“Some of us have been flagships of cost containment, but you can’t get around the fact that the price of land is twice as much in California as the national average,” said Bilbray, arguing that payments to HMOs should “reflect economic reality.”

In California’s competitive insurance market, HMOs offer Medicare patients extras such as free prescription drugs, eyeglasses and physical exams, none of which are covered in the regular Medicare program. They also waive co-payments and deductibles. In return, Medicare enrollees agree to stay within the HMOs’ networks of doctors and hospitals.

California legislators fear that a change in the payment system that would dramatically cut the reimbursement to HMOs in the state would in turn force them to drop benefits such as drugs and glasses.

“Any abrupt change in urban areas can have a harmful effect,” Rep. Henry A. Waxman (D-Los Angeles) warned his colleagues on a House Commerce subcommittee earlier this week.

Bilbray, a conservative Republican, and Waxman, a liberal Democrat, rarely find themselves on the same side of political issues, but they are allied in an effort to prevent cutbacks in benefits for Medicare enrollees in high-cost urban areas.

“We will still be under siege,” Bilbray said Wednesday. “But we are trying to counter with a coordinated bipartisan effort from California, something Washington hasn’t seen much in the past.”