Medi-Cal: Provider rate cuts are necessary

California's fiscal year 2008-2009 budget enacted several 10% Medi-Cal provider payment reductions, according to Toby Douglas, director of the California Department of Health Care Services and the state's Medi-Cal director. Later in that fiscal year, the legislature lowered those reductions to 5% for pharmacy benefits and long-term care services, amended the reductions for hospital inpatient services to a lesser of two amounts, and lowered the reductions to 1% for the other provider payments, he says.

"Court action prevented some of the reductions from going into effect, and the state was unable to realize the full amount of budgeted savings," says Mr. Douglas. "However, the other reductions remain in place today."

No rate reductions were enacted in fiscal years 2009-2010 or 2010-2011, Mr. Douglas reports. However, the state's governor recently signed legislation to implement new payment reductions of 10% for nursing and subacute facilities and intermediate care facilities for the developmentally disabled, and adjust current provider payment reductions to bring them up to 10% for fiscal years 2010-2011 and 2011-2012.

"The reductions are necessary in an era of dwindling resources and budget deficits," says Mr. Douglas. "Medi-Cal, as the state's second largest general fund expenditure, must be part of the solution."

More flexibility sought

Mr. Douglas says that he does not believe the payment reductions have negatively affected Medi-Cal beneficiaries' access to services. He says that it is also important to note that the recently enacted legislation, which provides the authority to implement new payment reductions, requires the director of the Department of Health Care Services to determine compliance with applicable federal requirements before implementation.

"We are dedicated to ensuring adequate access. We've approached the issue most recently through California's Medicaid Section 1115 waiver," says Mr. Douglas. This allows the state to transition tens of thousands of seniors and people with disabilities from the current fee-for-service program into managed care, he explains.

Beneficiaries will obtain assistance with navigating the health care system, says Mr. Douglas, and will benefit from getting a medical home that ensures provider network adequacy and specialty services. "This increased access to services will help to improve health outcomes," he adds.

With growing enrollment in Medi-Cal and rising costs for providing medical services, including prescription drugs and inpatient and outpatient services, says Ms. Douglas, the state must find ways to manage the program while living within its means.

"We are seeking to obtain more flexibility from our federal partners to make targeted reductions in benefits and reimbursements rates that would provide critical savings for the state," he says.

Contact Mr. Douglas at (916) 440-7400 or