New Medicaid Rules Shift $12 Billion in Health Care Costs to California
[Posted 03/03/08]

At a time when California is already grappling with  a $16 billion budget shortfall, the federal government has introduced a plan to reduce the amount of money it gives states for Medicaid and other social services, putting further strain on California’s Medi-Cal program.

This week, the Centers for Medicare & Medicaid Services (CMS) is implementing the first in a series of new Medicaid rules that would shift billions in health care costs to state and local governments.  The rules would limit how much states could pay health care providers, ban the use of federal Medicaid money to train doctors, set new limits on Medicaid payments to hospitals and nursing homes operated by state and local governments, and limit Medicaid coverage of rehabilitation services for people with disabilities, including serious mental illnesses. The rules are scheduled to take effect over the next several months.

Some estimates indicate that California alone would lose $12 billion over five years.

One of the rules would ban the use of federal Medicaid funds to help pay for physician training, a use that has been allowed since the program began in 1965. According to Dennis Smith, director of CMS’ Center for Medicaid and State Operations, the Bush administration believes “that paying for graduate medical education is outside the scope of Medicaid’s role, which is to provide care to low-income people.”

Stan Rosenstein, California’s Medicaid director, believes using funds for physician training is justified because “interns and residents provide a tremendous amount of care to Medicaid beneficiaries.”

Governors of both parties have strongly objected to the new rules and have asked Congress to stop implementation of the regulations, which could have a devastating effect on the nation’s health care system.  For states already grappling with rising health-care costs, the new rules will force them to consider cutbacks in services, leaving the most vulnerable Americans without access to health care and other vital services.

Contact: Elizabeth McNeil, 415/882-3376 or emcneil@cmanet.org.