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⭒ New Developments

California 2010-2011 Budget: Impact on Health and Human Services

On Monday, October 8, 2010, Governor Schwarzenegger signed California’s $87.5 billion budget, after line item vetoes of an additional $963 million, including more cuts to Health and Human Services programs serving low income persons, children, elders and persons with disabilities. The Governor’s line item vetoes targeted mental health services, HIV/AIDS prevention and treatment programs, community-based programs for seniors and substance abuse programs, among others.

First – the good news: The new budget does not include a number of the drastic cuts proposed in the Governor’s May budget revision, including elimination of CalWORKS (California’s aid to families program), reductions in reimbursements for adult day health care services or drastic cuts to the IHSS program. Although the budget estimates $300 million in spending reductions from IHSS, only $35 million will be an actual cut by imposing a 3.6% reduction in caregiver hours.

The bad news: The budget still includes elimination of the Department of Aging’s Community Based Services programs and millions of dollars in cuts to child welfare programs, development disability programs and child care programs.

With no new revenue streams and no new taxes, Sacramento sources are already estimating a $23 billion budget deficit for next year

Following are a list of the major Health and Human Services cuts included in the final budget:*

• Department of Aging/Community Based Services programs: General funds of $6.4 million, which were restored by the legislature were cut by the Governor. These programs include Alzheimer’s Day Resource Centers, Brown Bag program, Respite, and Senior Companion.

• Substance Abuse Offender Treatment Program: Eliminates state funding of $18 million

Department of Health Care Services

• A decrease of $187.1 million General Fund by enrolling seniors and people with disabilities in managed care and deferring a managed care payment for two-plan and geographic managed care counties.
• A decrease of $84.5 million General Fund by freezing daily per diem hospital inpatient rates at current levels. This rate freeze is part of a transition to a new diagnosis-related payment (DRG) methodology that will provide fiscal incentives for cost effective and appropriate care (similar to Medicare).
• A decrease of $43.9 million General Fund due to a change in the methodology used to determine the appropriate funding growth for County Administration.
• A decrease of $26.4 million General Fund (including associated support costs) by strengthening efforts to identify, prevent, and detect fraud in high-priority areas, such as pharmacy, physician services, transportation, and durable medical equipment.
• A decrease of $15.2 million General Fund because of a recent pharmacy settlement with AstraZeneca. This national settlement resolves/addresses whistleblower lawsuits and federal investigations into marketing practices for the schizophrenia drug Seroquel.
•A decrease of $13.6 million General Fund by reducing radiology rates to 80 percent of the corresponding Medicare rate.
• A decrease of $10 million for various clinic grants.
• A decrease of $3.1 million General Fund by eliminating certain over-the-counter drug benefits (acetaminophen products) for adult beneficiaries.
• A decrease of $1 million General Fund by no longer paying Medicare Part B premiums for beneficiaries whose income exceeds the Medi-Cal threshold.

Department of Public Health

• A decrease of $52.1 million to the Office of AIDS
• A decrease of $18 million for the Infectious Disease Branch’s Immunization Program.
• A decrease of $7.6 million in local assistance funding for the AIDS Drug Assistance Program (ADAP).

Department of Developmental Services – Regional Center cuts

•A decrease of $25 million to regional center operations and provider payments. Reductions will be increased from 3 percent to 4.25 percent. •A decrease of $5 million to the regional centers in 2009-10. Funding for Adult Day Health Care Services (ADHC) will be reverted because the ADHC reductions were enjoined by the court.

Department of Mental Health

• A decrease of $52 million from eliminating state funding for the AB 3632 mandates.
• A decrease of $30.4 million and 144.4 positions to the state hospitals related to an estimated decrease in 2010-11 caseload and the implementation of cost containment measures.

Department of Social Services

• A decrease of $365.9 million from utilizing an advance of Temporary Assistance for Needy Families Block Grant funds for the quarter ending June 30, 2011 in lieu of General Fund. This will provide one-time General Fund relief without any adverse program impacts.
• IHSS: A decrease of $300 million in the In-Home Supportive Services (IHSS) program, comprised of (1) using IHSS provider-generated revenue to draw down additional federal funds and offset General Fund expenditures in the program ($190 million), (2) imposing a 3.6-percent across-the-board reduction to the hours assessed for IHSS recipients ($35 million), and (3) reflecting an updated caseload estimate based on an actual decline in recipients as compared to the previous caseload projection ($75 million).
• A decrease of $80 million to maintain the level of funding in the Child Welfare Services program that was included in the 2009-10 Budget.
• A one-time decrease of $70 million from eliminating state funding for the Seriously Emotionally Disturbed portion of the Foster Care program.
• A decrease of $12.4 million from reducing the reimbursement rates for license-exempt child care providers. This reduction saves federal funds in the Department of Social Services budget, which can be transferred to the Department of Developmental Services budget for use in lieu of General Fund.

Community Care Licensing

This Department, which licenses and oversees thousands of day care and residential facilities for children and adults, including nearly 7,800 Residential Care Facilities for the Elderly (RCFEs), has suspended the processing of new applications for all providers, provider appeals and staff training and will focus on complaints, incident report, enforcement actions (and follow-up actions), annual inspections and five-year inspections due to budget cuts and a hiring freeze.

*Source: California Department of Finance

For more information on California’s final 2010-11 Budget see:

California Budget Project:

California Department of Finance:

The Full Budget Summary, including the Governor’s veto remarks.