States, providers see red

July 1 marked the start of the fiscal year for many states, but budget stalemates brought on by the recession had providers holding their breath.

In hardest-hit California, Gov. Arnold Schwarzenegger declared a fiscal emergency after legislators failed to close a $24 billion budget gap. The move gives lawmakers 45 days to pass a budget. Meanwhile, the state will have to begin issuing IOUs in lieu of payments.

For now, HME providers are safe. A special fund pays Medi-Cal providers in the absence of a budget, but it is not a bottomless pot, said Bob Achermann, executive director of the California Association of Medical Product Suppliers (CAMPS).

“It's hard to say when - it could be as little as 30 days - the fund is exhausted,” he said. “It's happened in the past and when they don't have money to pay medical providers, you get in the same IOU situation.”

Illinois providers are also playing a waiting game. On July 1, Gov. Pat Quinn vetoed a budget approved by lawmakers, saying it left a $9.2 billion funding gap.

“If they allow this to go on much longer, social services is where the cuts are going to be made,” said Tom Renk, executive director of the Illinois Association for Medical Equipment Services (IAMES). “The governor is appealing to the legislature to balance the budget and that requires tax increases and cuts in service levels, and no one wants to do that now.”

No budget means no money to pay state workers, including those who process Medicaid payments.

“The overall process of health care is going to be even slower,” said Renk. “Even if they had payments (ready to send) nothing is going to happen.”

Things are slightly brighter in North Carolina, which passed a temporary spending budget July 1. Providers there narrowly averted a crisis in recent weeks, staving off the state's proposal for a single-source provider for HME. At the state's request, HME stakeholders submitted their own proposal to reduce expenditures by $3.5 million.

Lawmakers had indicated the proposal would be accepted, but providers weren't celebrating yet.

“Until the budget is signed and agreed upon, nothing is certain,” said Beth Bowen, executive director of the North Carolina Association of Medical Equipment Services (NCAMES). “We do not expect (the single-source provider provision) to reappear, but it will be a couple of weeks before we get the final budget.”