LOS ANGELES -- The costs have not been totaled, but observers agree that California's new budget will probably increase the strain on a health-care system already under pressure.
The problem is not direct funding for health care, which has been left relatively intact. Instead, the budget restructures Medi-Cal, the state-sponsored health program for the needy, and slashes state aid to county governments.
The aid cuts could translate into deep reductions for county hospitals, the "safety net" of California's health-care system. Analysts say that will cause a decrease in certain levels of health services for the poor, including preventative care. Cutting down on prevention may well mean higher costs for the state down the road.
In the long term, the budget reductions may also make access to the tax-exempt market harder to come by for county facilities already burdened with increasing numbers of indigent and Medi-Cal patients. Some facilities, many of them also suffering from outdated medical equipment and dilapidated buildings, may have trouble just staying afloat. The fact that Gov. Pete Wilson singled out for a veto an item that would have helped hospitals with bonding costs has added to the misgivings.
In the short run, however, most agree that the $57.5 billion state spending plan adopted Sept. 2 will have little impact on tax-exempt bonds sold by some of the 274 nonprofit hospitals and 128 county and local health-care facilities in California.
"It is a very precarious year, but I don't feel we've got any bondholders in jeopardy or any defaults on the immediate horizon," said Kathleen Hamilton, executive director of the California Health Facilities Financing Authority, a state agency that helps nonprofit health facilities and county hospitals sell debt and obtain loans.
She noted that most debt issued by the agency has bond insurance backing, but said the authority has "certainly been hearing a lot of anxiety about the budget impacts."
The new budget will not make things any easier for hospitals already operating on the margin. The budget revamped and cut Medi-Cal funding by over $300 million, the state Health and Welfare Agency says. The state expects to spend $12.9 billion on Medi-Cal in fiscal 1993, with $5 billion from the general fund, according to the agency.
Although the budget pares certain property taxes for counties, it also allows them to scale back indigent care programs as revenues shrink.
The budget also limits Medi-Cal eligibility for nonresidents, requiring a potential beneficiary to demonstrate residency in California, and restricts eligibility for undocumented persons to emergency room and pregnancy-related services.
Nonprofits Better Off
The budget reforms reflect Gov. Pete Wilson's commitment to moving more Medi-Cal beneficiaries into managed-care programs. The budget attempts to shift portions of Medi-Cal from a fee-for-service system to a system much like a Health Maintenance Organization, where users pay a flat monthly fee.
Nonprofit facilities are not expected to be as severely affected as county facilities because they have lower percentages of Medi-Cal patients.
"I don't see anything in the budget that has an impact on nonprofits," said Barbara Shipnuck, a Monterey County supervisor, Ms. Shipnuck was recently named chairwoman of a special National Association of Counties health-care task force. She said the county system is most risk, but that it is too early to determine the impact.
County hospitals in California serve the majority of uninsured and poor people. These hospitals provide 24-hour trauma centers, neonatal intensive care units, and infectious disease treatment.
County facilities have the additional load of receiving low state reimbursement rates for Medi-Cal and handling increasing numbers of patients who cannot pay for services.
In 1990, county hospitals provided over 60% of care to the uninsured and medically indigent populations in their countries. The rapid population growth in California and the rise in Medi-Cal recipients further strains hospital resources.
Richard Warren, Chief administrative officer for Washington Township Hospital District in Fremont, called county hospitals the "linchpin" of California's health-care system.
"When the county hospitals start going under, then the nonprofits are going to be in trouble," he said.
Although the exact impact of the budget remain uncertain, county hospital officials were relieved the cuts were not deeper in a year of enormous budget pressures for the state.
"It's not going to be an easy year, but a lot worse could have happened," said Katherine Pierce, a spokeswoman for the California Association of Public Hospitals.
"The real victory is that the program was left relatively intact. But one item sends a bad signal about the administration's understanding and long-term commitment to hospitals and capital improvements," she said.
The negative signal is Gov. Wilson's line-item budget veto of $50 million general obligation bond issue that would have reimbursed hospitals for capital improvements.
Hospitals with a greater share of Medi-Cal patients would have received a greater amount of the money. The bonds were part of legislative approved in 1989, and Ms. Pierce said the veto does not bode well for new capital improvements to California's hospital system.
Although the bonds would not have cost the state money this year, the governor said he rejected the measure because of the "general fund exposure inherent in this provision."
Another wild card in the budget fallout is the indirect way millions of dollars of cuts to counties, cities, and special districts will affect health care in the state. While it is too early to tell, rural and smaller communities are expected to be harmed the most.
"The real open-ended question now is how the cuts to local government trickle down. In some areas that will be a big problem," Ms. Pierce said.
Many county hospitals already bear a disproportionate share of the burden for providing care to Medi-Cal and indigent patients. As the economy deteriorates, many experts predict the amount of people with no health insurance will increase, further straining these hospitals.
"It's very scary," said Ron Youngren, president of the Association of California Hospital Districts. "If you look at the budget, it takes away the most from hospitals that are carrying the load for most of the government patients."
District hospitals, which are created by local voters and run by elected trustees, can collect a percentage of property taxes that are sometimes used to secure bonds. These hospitals sidestepped a bigger budget hit this year, Mr. Youngren said.
Legislators wanted to capture 30% of certain local property tax revenues in order to bridge the state's $10.7 billion budget gap. However, when hospital administrators argued that millions of dollars of bonds secured by those taxes could be in jeopardy, lawmakers limited their plan to other special districts and exempted hospitals.
But it is increasingly difficult for hospitals already operating on the margin to obtain tax-exempt loans from the state, and these facilities often need the money the most because they serve many of the uninsured and indigent.
"This budget will agitate the difference between the have and have-not hospitals," Mr. Youngren said. "Some, like Kaiser Permanente [Medical Care Program], which made $400 million last year, can go to the state treasurer and get cheap money, but smaller hospitals will be cut off entirely or have to pay more to get loans."
Ms. Hamilton acknowledged there is some truth to Mr. Youngren's complaint.
"It's frustrating, but [the California Health Facilities Financing Authority] can only finance what a bank will underwrite," she said.
Ms. Hamilton said the authority has set up a special task force to consider whether nonprofit health-care facilities should have to serve a minimum amount of indigent patients in order to receive tax-exempt financing.