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News Release

HHS APPROVES RENEWAL OF CALIFORNIA MEDICAID WAIVER PLAN TO CONTRACT WITH HOSPITALS
Agreement Includes $250 Million in New Federal Funding for Los Angeles County Hospitals

HHS Secretary Tommy G. Thompson today announced an extension of a longstanding waiver for California's Medicaid program that will allow preferential payment for certain hospitals that treat the state's most vulnerable residents who need hospital care.

"This agreement will allow uninterrupted funding for hospitals that provide critical services to California's neediest citizens," Secretary Thompson said. "The agreement also brings some stability to Los Angeles' safety-net hospitals that treat the poor."

Officials from HHS' Center for Medicare & Medicaid Services (CMS) and the state of California worked for several months on the agreement, which includes the two-year renewal and a total of $1.8 billion in supplemental payments for 2003. Under the previous waivers agreements, the state's supplemental payments averaged about $1.4 billion per year. The agreement effective Jan. 1, 2003, includes firm, aggregate spending caps and imposes new reporting requirements on the state to assure strict compliance with spending limits.

California Health Secretary Grantland Johnson and CMS Administrator Tom Scully reached an agreement on the Selective Provider Contracting Program (SPCP) waiver, which covers 250 California hospitals that competitively bid on the opportunity to provide inpatient services to MediCal recipients in the state's fee-for-service program. More than 90 percent of California's Medicaid fee-for-service hospital payments are made through this SPCP waiver. The two-year waiver runs through Dec. 31, 2004.

As a condition of the agreement, HHS required that funding be directed to Los Angeles County public hospitals of at least $150 million over the next two years and the state of California has indicated it will allocate another $100 million from its federal SPCP funds for a total of $250 million to LA County hospitals. The sources of new funding include the following:

• a minimum $100 million from the MediCal SPCP waiver;
• $50 million from the proposed settlement of the Orthopaedic Hospital v. Belshe lawsuit, a suit by all MediCal hospitals against the state program, that has been pending for over 10 years. HHS' payment would be conditioned on the $50 million being directed to the L.A. County public health system, and;
• the state of Californian has indicated that it will allocate an additional $100 million funding over two years to LA County hospitals from its federal SPCP funds.

Under its current agreement with HHS, Los Angeles County was to receive $135 million for fiscal 2004 and $86 million for 2005. The new agreement will provide $250 million in federal funds over the next two years to LA County hospitals, increasing federal funding levels to a total of approximately $236 million for both FY 2004 and 2005.

"Today's agreement extends a critical program for California's low-income patients and the hospitals that serve them," Scully said. "It also allows the Los Angeles County health system to ensure that it continues to provide stable, reliable health care services to thousands of county residents."

Under the SPCP waiver, participating hospitals agree to accept lower per-day rates in return for a higher volume of California Medicaid beneficiaries who are required to use those facilities. The waiver also allows the state to calculate the savings from these lower rates, and use the savings to make supplemental payments to hospitals considered to be "safety net" facilities that treat a high rate of low-income or uninsured patients.

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Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

Last Revised: February 7, 2003