The state hasn't passed a 2008-09 budget, so community health clinics and other providers that serve the poor are relying on reserves and loans to keep their doors open.
On Thursday, the state ran out of money for Medi-Cal payments to clinics, hospitals, medical equipment suppliers, adult day health care centers and others.
Even if a budget is passed, most of those health care providers are faced with payments deferred until September. The state is required to pay physicians, nurse practitioners and pharmacists.
Health advocates say clinics in disadvantaged areas such as the San Joaquin Valley might have to reduce hours, turn patients away or even close clinics.
"We need a budget now," said Dr. Thom Mahoney, director of clinical affairs for the California Primary Care Association, which represents 600 safety-net clinics in the state. "Unfortunately, in some areas, including the Central Valley, there is a real possibility of clinics closing down."
Mahoney spoke at a news conference Thursday at the Tenaya Drive clinic in Modesto operated by Golden Valley Health Centers, which has no plans to reduce hours or close clinics. Golden Valley has primary care clinics in Stanislaus and Merced counties serving about 75,000 patients, including members of low-income families, farmworkers and homeless people.
About 60 percent of its budget comes from Medi-Cal and state grant programs.
Executive Director Michael Sullivan said the health system has reserves to last two months, then it would be unable to pay its 450 employees. But other clinics in the valley are not on such solid footing, he said.
Golden Valley is talking with its lender about a $4 million extension on its line of credit, he said.
The state created an emergency fund to pay Medi-Cal providers when the state budget isn't passed by the July 1 start of the fiscal year. This year the $2 billion fund lasted less than four weeks.
Health providers that serve the state's 6.6 million Medi-Cal recipients also took a hit when the Legislature and Gov. Schwarzenegger agreed to a 10 percent across-the-board cut in Medi-Cal reimbursements, effective in July.
State leaders, in an effort to erase a $15.2 billion deficit, have considered changes that would make fewer people eligible for Medi-Cal, the state health program for the poor, and reduce funding for dental care, vision services and services for children with genetic diseases.
Dr. Silvia Diego, medical director for Golden Valley clinics in the county, said Medi-Cal patients already are feeling the pinch. Diabetic patients at risk of losing their sight are unable to get appointments with optometrists because vision benefits are on the chopping block.
Golden Valley has plans for converting a warehouse at the Tenaya clinic for dental care, but it sits empty because of uncertainty about state dental benefits.
Raising taxes the only way?
Every day, the Golden Valley clinics see new patients as private physicians leave the Medi-Cal program, Diego said.
Health care advocates have argued that raising taxes is the only way to prevent drastic cuts to health services.
"Let's face it, there are people in the state of California who can afford to support more revenue through taxes, and we think you have to put that on the table," Sullivan said. "If you don't do that, you are going to put this $15 billion deficit on the backs of California's poor."
The state Department of Health Care Services has promised to pay the clinics after the budget is passed. As the providers submit claims, the agency will issue IOUs that can be used to obtain loans from banks.
The Stanislaus County Health Services Agency won't have to borrow money for its clinics during the budget impasse, said Managing Director Mary Ann Lee. She said county coffers temporarily can cover the agency's cash needs.
She said she was more concerned that additional funding cuts could be part of balancing the state budget, such as less funding for California Children's Services. Also, if fewer people are eligible for Medi-Cal benefits, it could hurt efforts to keep the county clinics afloat.
Oak Valley Hospital District can absorb the losses until September without cutting back at its community health centers, a spokeswoman said.
State Sen. Dave Cogdill, R-Modesto, the Senate Republican leader, said the Medi-Cal rate cuts were not the way to reduce spending and wants to see the money put back in the budget. But he wasn't prepared to support higher taxes.
"If you look closely enough and are willing to stand up against the special interests, you can find what's needed to make spending reductions and not make dramatic cuts to essential services," he said.
Cogdill said Republicans are making progress in resolving issues with Democratic lawmakers, "but it appears we are definitely in a stalemate."
In the meantime, businesses that serve Medi-Cal patients are trying to deal with the cuts.
Wade Fullmer, owner of the independent Richland Pharmacy in Turlock, said the lower rates forced him to stop accepting new Medi-Cal customers this month. He's losing $5 to $50 every time he dispenses a brand name drug for a Medi-Cal patient and can take as much as a $200 hit on expensive drugs for cancer patients.
He has notified Medi-Cal patients that he can't fill their prescriptions in August unless they change to less costly generics. Among his clients are patients in several nursing homes whose medications are covered by Medi-Cal.
For people who need mental health medications, the older generic drugs have more side effects and in some cases there are no substitutes, Fullmer said. Some of his customers who are covered by a state program for people with genetic disabilities are scrambling to find other pharmacies, he said.
Turlock resident Stephen Jones is afraid the program no longer will pay for the drugs his daughter takes for Huntington's disease, costing more than $400 a month.
"It is frustrating," he said. "Here you have all these people who have genetic problems and they are just going to be thrown aside. It's a lousy, cheap shot."
Bee staff writer Ken Carlson can be reached at email@example.com or 578-2321.