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Economic Downturn Threatens California’s Health Care System

December 26, 2008 at 6:10 PM EST
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Recent economic problems have created budget shortfalls in many states, but California is worse off than most. Faced with a massive deficit, state lawmakers might have to raise taxes or cut health care services. Betty Ann Bowser reports.
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MARGARET WARNER: Next, the consequences for public health care programs from the big budget woes facing states like California. Betty Ann Bowser has our Health Unit report. The unit is a partnership with the Robert Wood Johnson Foundation.

SOCIAL WORKER: What does it say on the instructions?

JAMES NUNEZ, patient with cerebral palsy: It says about four to six cups of water.

BETTY ANN BOWSER, NewsHour correspondent: For months now, James Nunez has been worried that his medical safety net is collapsing.

JAMES NUNEZ: I’m really scared if I don’t get the help that I need.

BETTY ANN BOWSER: The 49-year-old has cerebral palsy and is developmentally disabled. He also needs new glasses and has serious dental problems.

Because he gets assistance from the state of California under a Medicaid program called Medi-Cal, he has free health care. He also gets home visits from social worker Brooke Burroughs, who’s teaching him how to cook and do other household tasks.

SOCIAL WORKER: All right, how long does it say to have it on for?

BETTY ANN BOWSER: But now his health and many of the services that allow him to live independently may be in trouble.

JAMES NUNEZ: I won’t get well. I won’t get glasses. I probably won’t see, or I’ll probably wind up dead or something if I don’t get the help. And it’s really scary.

BETTY ANN BOWSER: Nunez is worried, because he knows the state of California is going broke.

Because of the economy, states all over the country are experiencing massive budget deficits. But nowhere is the situation worse than here in California, where lawmakers are staring at a potential $40 billion deficit over the next year-and-a-half.

KIM BELSHE, California Health secretary: We cannot cut our way out of this problem entirely.

Legislators stumped over budget

Kim Belshe
Secretary of Health and Human Services
If California runs out of cash, California has no cash to pay bills, whether it be a doctor, a hospital, a state employee, a nursing home provider, someone on public assistance. If there's no cash, there's no cash.

BETTY ANN BOWSER: Kim Belshe is California's secretary of health and human services. It provides health care to 1 out of 6 Californians. Like most states, Medicaid is the second-biggest expenditure in the budget.

KIM BELSHE: If California runs out of cash, California has no cash to pay bills, whether it be a doctor, a hospital, a state employee, a nursing home provider, someone on public assistance. If there's no cash, there's no cash.

BETTY ANN BOWSER: Twice, Governor Arnold Schwarzenegger has called the legislature into special session with marching orders to come up with a solution that would eliminate the deficit and meet the state's constitutional requirement to balance the budget.

Even though lawmakers have worked late nights, they remain at loggerheads over what to do.

REPRESENTATIVE: A tax increase on the hard-working people of the state of California...

BETTY ANN BOWSER: Most of the Republicans have signed a pledge not to raise taxes under any circumstances, including a budget meltdown. Instead, they want to cut Medi-Cal and other social programs. David Cogdill is the Senate minority leader.

DAVID COGDILL, Republican state senator: It really goes beyond the pledge. Every one of us that signed it believes that, again, this government is over-bloated, that it needs to be reined in, that we need to put the kind of disciplines in place that make sense before we ask the taxpayers for more money.

REPRESENTATIVE: I ask our Republican colleagues, will they meet us halfway? Will they work with us to make sure we solve the other half? All you want is concessions from us.

BETTY ANN BOWSER: The Democrats say social programs like Medi-Cal are needed now more than ever. The jobless rate here hit 8.4 percent last month. Many of those people also lost their health insurance and are now looking to the state for care.

Republican Schwarzenegger has offered up a budget that cuts income eligibility for Medi-Cal from $18,000 a year for a family of three to $13,000 and eliminates all dental, vision, and podiatry care. To generate revenue, he would raise taxes.

The governor has also made a dire prediction if there is no compromise.

GOV. ARNOLD SCHWARZENEGGER, R.-Calif.: California faces a growing financial crisis. And if don't put aside our ideological differences and negotiate and solve this problem, we're heading towards a financial Armageddon.

How many would be affected?

Kim Belshe
Secretary of Health and Human Services
The consequences are real, and they're real to the people for whom my agency is responsible, and that is low-income, vulnerable Californians.

BETTY ANN BOWSER: Any time lawmakers want to raise taxes, they have to get a two-thirds majority. But last week, using an arcane loophole in the state law, Democrats passed a budget with a simple majority that had no cuts to Medi-Cal and a $9.3 billion increase in taxes.

GOV. ARNOLD SCHWARZENEGGER: I will not sign the bill that was sent down to me.

BETTY ANN BOWSER: That same day, Schwarzenegger said he would veto it. So now the legislature is back to Ground Zero, two special sessions and still no budget.

Meanwhile, the calculator outside the governor's office shows the deficit is growing $40 million a day.

KIM BELSHE: The consequences are real, and they're real to the people for whom my agency is responsible, and that is low-income, vulnerable Californians. If California does not make progress in its budget, we will run out of cash as early as February and March of next year. And those providers who provide a disproportionate number of services to people on Medicaid, they will not be able to keep their doors open.

BETTY ANN BOWSER: There are no solid estimates on how many people's health care would be affected if the state runs out of money, but most officials agree it would be in the millions.

The Sacramento County Department of Human Assistance is already seeing an infusion of new people applying for Medi-Cal.

Director Bruce Wagstaff says they're not only seeing longer lines; they're also seeing a new kind of client.

BRUCE WAGSTAFF, Sacramento City, human assistance: We're seeing folks applying for aid, medical and for the other programs, we never had before, low-income families, families with earnings. So there's really -- I think the effects of the economy are showing up that way, as well.

More people in need of services

David KAtz
CommuniCare Health Services
There are many, many people losing their health insurance.

BETTY ANN BOWSER: Applications are up 10 percent alone in Wagstaff's offices since last year. And in a nearby county, there's been a whopping 67 percent increase in people applying for Medi-Cal.

INTERVIEWER: Has any of you been convicted of a drug felony?

BETTY ANN BOWSER: Many of those people have trouble finding doctors who will take Medi-Cal so they turn to California's network of community clinics, which also depend on state funding.

Because of budget cuts earlier this year, CommuniCare, the parent company that owns this clinic in Davis, had to reduce its doctor's hours and lay off staff. More cuts are on the table now in Sacramento.

DR. DAVID KATZ, CommuniCare Health Services: We're going to go over your health care today.

BETTY ANN BOWSER: Dr. David Katz is medical director.

DR. DAVID KATZ: There are many, many people losing their health insurance. We can see them here in our clinic and do a few tests. And we have a little bit of medicine we can dispense.

But if they need prescriptions or they need to see a specialist or they need a C.T. scan or a surgery, they're in big trouble.

BETTY ANN BOWSER: Even people with Medi-Cal have problems these days finding specialists who will take them. Katz says it can take weeks to find an orthopedic surgeon or a cardiologist who will accept his Medi-Cal patients.

California has some of the most generous Medicaid benefits of any state in the country, but it ranks 43rd, near the bottom, in reimbursement rates to doctors. That's why a growing number of doctors, like Carla Kakutani, have stopped taking new Medi-Cal patients altogether.

DR. CARLA KAKUTANI, family physician: Our staff has had to tell patients who haven't otherwise been connected with the practice up to now that we can't take their Medi-Cal. It costs about $50 to $55, just in overhead, not counting the physician salary, but just to keep the lights on and the staff paid. Medi-Cal has paid somewhere around the order of $25 for a, you know, routine patient visit.

Lawmakers will convene again

Drew Altman
Kaiser Family Foundation
[W]e're in an historic recession. And more and more people are unemployed. They have nowhere to turn but Medicaid and the Children's Health Insurance Program. So states are really -- you know, they are between a rock and a hard place.

BETTY ANN BOWSER: So you get to some point where you're asked to become a charity?

DR. CARLA KAKUTANI: Essentially, yes.

BETTY ANN BOWSER: James Nunez has struggled for months to find a primary care physician that will accept his Medi-Cal. Three other people at this table at the school he attends weekdays have the same problem, so they all seek care at local clinics.

JAMES NUNEZ: They denied me twice, and I went to the clinic, you know.

BETTY ANN BOWSER: So you don't have a primary care -- a family doctor right now?

JAMES NUNEZ: No, because they said they don't take it anymore or it's hard to get in.

BETTY ANN BOWSER: Nineteen states have either enacted or proposed Medicaid cuts because of dwindling revenues. Drew Altman, president of the Kaiser Family Foundation, headquartered in Menlo Park, says when hard times hit states have few choices that aren't painful.

DREW ALTMAN, president, Kaiser Family Foundation: You don't want to throw people out of nursing homes or institutions for the disabled. And then you're looking at eligibility cuts or slowing enrollment in the program.

But we're in an historic recession. And more and more people are unemployed. They have nowhere to turn but Medicaid and the Children's Health Insurance Program. So states are really -- you know, they are between a rock and a hard place.

BETTY ANN BOWSER: Governor Schwarzenegger has called the lawmakers back for a third special session. He says he will also start laying off state employees in February. That's when California's number-crunchers say the state will no longer be able to pay its bills.

Some of the jobs on the chopping block could be people who work with the disabled, the mentally impaired, and the elderly with very low incomes, people like James Nunez.