Capitol Alert: Despite First 5 funds, Healthy Families expected to roll back coverage

Children's health care advocates got both a boost and a blow today, as the California First 5 Commission announced it would contribute $81.4 million to the state's Healthy Families health insurance program.

But members of the Managed Risk Medical Insurance Board, which runs Healthy Families, still had to tell the program's administrators to begin disenrolling children Oct. 1 to help close a funding shortfall.

"It was a day of very good news and very bad news for kids," said Wendy Lazarus, founder of Children's Partnership, a nonprofit child advocacy organization. "I think the First 5 contribution shows tremendous leadership."

"(But) this is a really dark, grim situation for kids in California," Lazarus said. "I don't think anyone living here ever thought we would see a day where kids with very low income can't get heath care."

The 12-year-old program provides low-cost insurance to about 900,000 children and teens in low-income families that aren't poor enough to qualify for Medi-Cal. Adults in many of the families are working, but their jobs don't provide health coverage or don't cover dependents.

The Legislature reduced the Healthy Families budget by $128.6 million in its budget revision last month, and Gov. Arnold Schwarzenegger used his line-item veto to cut $50 million more.

Senate President Pro Tem Darrell Steinberg, who along with Assembly Speaker Karen Bass requested the First 5 funds last week, said in a statement that he hoped "this action will motivate others to step up to the plate."

Even with the First 5 contribution, unless additional funding is obtained, children whose one-year anniversary in the program falls in September will be dropped from coverage starting Oct. 1, said MRMIB Deputy Director for Health Policy Legislation Ginny Puddefoot. Puddefoot said the program would give families subject to disenrollment 30 days' written notice.

"This is a terrible thing and we really recognize the difficulty for children and families at this time, and we are hopeful that we will find a way to avoid having to disenroll children from the program," Puddefoot said. "We're all working really hard, the Legislature, the governor's office, advocates. Everyone is working really hard to try to find additional funding so that we would not have to actually move forward with that step."

Initial estimates projected that more than 600,000 children would be affected by the disenrollments, but Puddefoot said those figures did not account for the First 5 funding, which is expected to prevent about 200,000 children up to age 5 from losing or being denied coverage. Funding shortages forced the program to freeze new enrollments for the first time in mid-July. More than 55,000 children had been added to a waiting list for new applicants as of Tuesday, Puddefoot said.

First 5 Executive Director Kris Perry said she hopes the group's contribution would open the door to more funding opportunities to preserve health care access for children.

"The $81.4 million is the first step towards solving that budget shortfall. We know they are looking for additional cost savings as well as added revenue to fill the rest of the gap. We hope our contribution can stall additional wait listing or disenrolling of children as soon as possible," Perry said.

The board is still considering various other options for restructuring the program and saving costs without disenrolling children. Those options, some of which could require approval from the legislature, will be discussed at an emergency meeting scheduled for next Thursday.

Lazarus remained optimistic that alternative steps could be taken to avoid disenrolling children from the program.

"There is still time. Those disenrollment actions will not actually kick a kid off coverage until Oct 1, so we're pulling with everybody to use the next 45 days to find the rest of the money and to join with First 5 to keep kids taken care of properly," she said.