Letter May Telegraph State-of-the-State and Budget Themes

Some clues as to the themes Gov. Arnold Schwarzenegger will sound January 6 when he gives his sixth – and final – State of the State speech can be found in a December 22 letter he wrote to California’s congressional delegation regarding federal health care legislation.

The contents of the three page letter also may forecast some of the action the GOP governor will propose January 8 in his budget, which must close a roughly $20 billion gap between spending commitments and revenue.

In his letter, Schwarzenegger details policy changes he says the federal government must take in order to not disadvantage California financially if a new health care system is enacted.

“Under nearly every scenario we can predict, the federal health care reform legislation being debated would cost California’s General Fund an additional $3 billion to $4 billion annually,” Schwarzenegger wrote.

“This crushing new burden will be added to a safety net that is already shredding under billions of dollars in unfunded federal mandates that we are struggling to meet.”

Among the key changes Schwarzenegger wants is greater flexibility to reduce the costs of Medi-Cal, the state’s health program for the poor.

The GOP governor says federal requirements, imposed on the state through Medicaid, already increase the cost of providing care under Medi-Cal, a situation that will escalate with the expansion of care contained in the federal health care bills.

An additional 2 million people would be added to Medi-Cal under the federal proposals.

Lowering the rates paid to persons who provide medical care under the program, limiting benefits to patients and increasing co-pays are powers Schwarzenegger wants Congress to give states.

He also seeks changes in the federal Medicaid reimbursement rate for states, which he says is unfair to California.

Schwarzenegger notes that lawsuits in federal court challenge some $1.4 billion in Medi-Cal reductions made as part of the effort this year to close a $62 billion hole in the current budget.

However, while courts have ruled against partial reductions, they have upheld complete elimination of what are know as “optional” Medi-Cal benefits.

As part of this year’s budget deal, adult dental care, one of the largest optional Medi-Cal benefits was eliminated to save $183 million.

So were acupuncture, audiology, speech therapy, chiropractic services, optometric and optician services, podiatry, psychologists and incontinence creams and washes.

Schwarzenegger and lawmakers also reduced spending for In-Home Support Services by $226 million but the cuts have not been implemented because of court challenges.

“California is now faced with a decision to eliminate the entire IHSS program,” Schwarzenegger says in his December letter. The state pays $2 billion of the costs of the $5.5 billion program. The federal government and counties split the remainder.

Another reason the GOP governor may propose the program’s elimination is that he is required by the state constitution to propose a balanced budget. He doesn’t have to sign a balanced budget, however.

Increasingly, Schwarzenegger has proposed spending plans that are more political chess moves than budgets, containing deep reductions in social programs that he knows the Democratic majority in the Legislature won’t embrace.

Eliminating in-home care and other social programs makes it easier to submit a “balanced” budget even though all participants in the process know that, six months or more later, such large-scale reductions won’t be part of the actual budget passed and signed into law.

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