California has very generous funding for family planning clinics, serving people under 200 percent of the federal poverty level. California also has really crappy funding for Medicaid, the federal-state health program for low-income families and children; the state recently cut reimbursement rates to providers and pharmacies by ten percent. That's a bit of a problem, as the Affordable Care Act—Obamacare—pushes more and more people toward Medicaid. In particular, it's a problem for California's family planning clinics, which are expected to start seeking reimbursement from Medicaid instead of from the old Family PACT program.
According to Kaiser Health News:
For the last 15 years, such clinics have been paid through a robust state program called the Family Planning Access Care and Treatment Program, or Family PACT. It is the first and largest program of its kind, covering the cost of family planning services for nearly 2 million uninsured women and men, with no cap on spending. Nearly 60 per cent of Planned Parenthood's income is from the program. But this year, its revenue streams are going to start shifting dramatically: 84 per cent of the clinic's patients became eligible for Medicaid, or Medi-Cal as it is known in California, on Jan. 1, because of the expansion of care for the poor under the federal health care reform.
Quoting Kathy Kneer, the president and CEO of Planned Parenthood Affiliates of California, the article says "clinics will lose money on every Medicaid patient."
Isn't there an old joke about losing money on every sale and making it up in volume? Yeah, it's a bit of a dark joke.
Physicians in general already face this problem. When the latest Med-Cal rate cut was announced, Bloomberg pointed out that a gynecologist in Folsom, California was paid $95 to $200 for pelvic exams by private insurance, but $25 by the state plan even before the ten percent haircut. As a result, just 57 percent of California physicians accepted new Medi-Cal patients in 2011, which was the second-lowest rate after New Jersey. That rate is unlikely to rise with the lower reimbursements, even as 1.1 million Californians were expected to join the Medi-Cal roles as part of the Obamacare grand plan.
California Healthline quoted Jon Roth, CEO of the California Pharmacists' Association, saying, "The margin in drug products is roughly two percent to four percent. If you're looking at a 10 percent reduction, you're immediately upside down and dispensing medication at a loss."
The solution? Many pharmacies say they won't provide medications on which they take a big loss. Pharmacies in other states have flat-out refused Medicaid patients, so this shouldn't come as a surprise.
California's Family PACT program may well have been too generous to begin with—especially in a state with long-term financial difficulties that it's still just papering over. But at least that scheme paid for services rendered. That stands in stark contrast to the Affordable Care Act's promise of expanded services which governments are already unable to afford to an ever-widening pool of recipients who are bound to be disappointed.