Cuts to Medi-Cal Threaten Access to Care

October 23, 2013

Employees fill orders at a specialty pharmacy operated by ModernHealth in North Hollywood. Sherri Cherman, ModernHealth’s president and chief operating officer, says if state officials impose a 10 percent cut next year, the company will have to drop out of the Medi-Cal network. Photo: Chris Richard

Employees fill orders at a specialty pharmacy operated by ModernHealth in North Hollywood. Sherri Cherman, ModernHealth’s president and chief operating officer, says if state officials impose a 10 percent cut next year, the company will have to drop out of the Medi-Cal network.
Photo: Chris Richard



Correction appended to end of story.

By Chris Richard

Medi-Cal, the Medicaid program for 8.5 million impoverished Californians, will greatly expand with the implementation of the Affordable Care Act next year.

But even as the state Department of Health Care Services prepares to accept an estimated 1.1 million newly-eligible people into the program, California is reducing its payments to many doctors and pharmacies by at least 10 percent.

That’s bringing warnings it may be increasingly difficult to find health-care providers willing to serve Medi-Cal patients.

Mark Dressner, president of the California Academy of Family Physicians, noted that health-care reform is expected to bring a surge of new patients across the board.

“If you as a physician have a choice, are you going to take new patients who are insured through Covered California – and there’s going to be millions of them – or are you going to take new Medi-Cal patients where you are going to be making less than anyone else taking Medicaid in the United States?” he asked.

According to a study by the nonpartisan California Budget Project, California physicians received just 51 percent of what Medicare paid for the same services last year. Only doctors in Rhode Island and New Jersey received less.

Some 57 percent of California physicians accepted new Medi-Cal patients in 2011, the second-lowest rate after New Jersey, the CBP reported.

The new reductions arise from the clash between Gov. Jerry Brown and state legislators over balancing California’s budget in 2011.

That year, the state government faced a $26 billion deficit. Brown sought to make up part of the difference by extending expiring fees and taxes, but Republican legislators balked. So Brown cut $10 billion in spending, including Medi-Cal reimbursements.

The California Medical Association and other professional medical groups sued to block the lowered fees, but lost. The 10 percent cuts are now being implemented by the state Department of Health Care Services. In addition to the original reductions, the department will withhold another 5 percent to recoup overpayments.

State officials reduced payments on Sept. 5 for dentists and medical-transport workers. Medical-supply companies will see their rates cut Oct. 24, while lower reimbursements for affected doctors, clinics and pharmacies go into force on Jan. 9.

California Department of Finance spokesman H.D. Palmer acknowledged that the state is in better financial shape than it was two years ago.

“We indicated when we passed the budget in June that the budget was balanced, but there are a number of risks to the budget that could knock it in the wrong direction,” Palmer said, pointing to the recent government shut down and the debt ceiling crisis as examples of unexpected challenges.

“That is why the budget assumes that the budget reductions of previous years are ongoing in nature.”

At the same time, in an effort to keep primary-care physicians in the Medi-Cal network, the state plans to increase their rates (but not those of specialists) to match Medicare’s for 2013 and 2014, retroactive to the beginning of this year. The federal government is paying for the increase as part of the Affordable Care Act, but only for two years.

East Oakland pediatrician Brian Blaisch says he could use the raise. Currently, Medi-Cal pays him about $40 per office visit, roughly $30 less than he’d receive from Medicare, Blaisch said.

He’s made a personal and financial commitment to making medicine available to the poor. Nearly 90 percent of his 1,500 patients are on Medi-Cal. To make ends meet, he moonlights at two hospitals, working 60-hour weeks. Still, Blaisch said the state rates are so low that he can only occasionally take on new Medi-Cal patients.

He’s also concerned about the steady decrease in specialists. Only primary-care physicians receive the states’ rate increase.

Currently, there’s just one dermatologist in the Oakland area where he can refer patients. The same goes for rheumatologists, Blaisch said.

Dressner, who works in Long Beach, said he recently spent 11 days trying to find a plastic surgeon who would accept Medi-Cal to treat his patient’s infected arm. He knows of just one cardiologist nearby who will accept the state payment.

“He’s been so stressed, he’s talked to me about, ‘Maybe it’s time I get out of Medi-Cal. I just can’t do it any more.’” Dressner said. “And this is a guy we should be making a hero of, and instead we’re going to give him a pay cut, cutting him 10 percent.”

He gave a bitter half-laugh.

“Or 15 percent, retroactive, because he owes money.”

In some instances, when regulators are convinced that the increases will jeopardize Medi-Cal recipients’ access to treatment or medicine, they’ll grant exemptions to the cuts, DHCS spokesman Tony Cava wrote in an email.*

Sherri Cherman, president and chief operating officer at ModernHealth, a specialty pharmacy based in Monrovia east of Los Angeles, hopes to receive such a dispensation. The company provides medications to transplant recipients, as well as to people suffering from cystic fibrosis and AIDS and other chronic diseases, Cherman said.

In addition to providing the drugs at Medi-Cal rates, the business assigns workers to help frail patients manage their health and medication schedules.

“Our profit margin is single digits for the very expensive medications that we dispense. If there is a 10 percent cut to a single-digit profit margin, obviously that doesn’t work,” she said.

Cherman said she’s told state and federal regulators that ModernHealth would have to stop accepting Medi-Cal rather than accept the reduced rates. She said she finds that decision wrenching.

“There would virtually surely be people who couldn’t get their medicine,” she said, explaining that ModernHealth dispenses some “limited distribution” drugs, not available to all pharmacies.

Jon Roth, chief executive officer of the California Pharmacists Association, said pharmacies throughout the state face similar difficult choices.

“On the one hand, we’re implementing the Affordable Care Act, and that means people getting insurance, about a million in Medi-Cal, and at the same time, we’re reducing provider payments to a point where pharmacists, physicians, dentists, everybody are going to be leaving the provider network for Medi-Cal,” he said. “From a health policy standpoint, that makes zero sense to me.”

Correction. As this version of the article states, the Department of Health Services grants “exemptions” the Medi-Cal rate cuts in order to ensure access to care. An earlier version described these exemptions as “waivers.”

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