Last week was bittersweet for California’s Healthy Families Program.

A contribution of $81.4 million from the California First 5 Commission on Thursday was offset by the Managed Risk Medical Insurance Board announcement that Healthy Families must begin disenrollment of children effective October 1.

Healthy Families still has a shortfall of $112.6 million for the current fiscal year 2009-2010 and no funding solutions are in sight, said Ginny Puddefoot, deputy director of health policy, legislation and external affairs for MRMIB.

“It was the only good news in a very hard day,” she said of the First 5 contribution.

Puddefoot said the waiting list has grown to over 55,000 children since MRMIB suspended enrollment in Healthy Families on July 17.

“It’s important to emphasize that people are working hard to find funding,” she said. “A lot of people in the Legislature, the Governor’s office, children’s advocates and health plans are working to try and come up with additional funding.”

MRMIB is consulting with an independent actuary to streamline its costs, Puddefoot said. Reductions to Healthy Families coverage and increased family co-payments are also under consideration.

First 5, the children’s program funded by tobacco tax revenues, has financial problems of its own.

First 5 Executive Director Kris Perry said the $81.4 million contribution came from its reserve fund. “We will have approximately one year’s revenue left — $140 million, possibly less — because we project our revenue,” she said in a media briefing to announce First 5’s contribution.

A decline in tobacco tax revenues means even less income for First 5. Projected revenues for fiscal year 2009-2010 are $13 million less than the previous year, said Bill Madison, spokesperson for First 5. 

On July 15, First 5 Commissioners signed a Resolution to “join with like-minded public and private partners, including but not limited to health plans and philanthropic organizations” in an effort to stimulate funding resources for First 5’s programs.

The health funding crisis couldn’t have come at a worse time for California’s children.

“More parents are losing medical coverage, especially in this period of rising unemployment and economic instability,” said Madison.

“This is unprecedented, what’s going on now — the waiting list that was established on July 17,” said Wendy Lazarus, founder and co-president of The Children’s Partnership, a non-profit, national children’s advocacy organization. “This finding by the MRMIB that there were insufficient funds is just chilling to parents across the state and the leaders that have worked to get basic health care to kids.”

“We’ve got close to a million kids now without insurance,” she said. “With the big hole in Healthy Families it would add more than 500,000 kids to the ranks of the uninsured.”

Senate President pro Tem Darrell Steinberg’s lawsuit against the Governor (filed August 10, 2009) seeks to reverse all of the line-item vetoes including $50 million in funding designated for Healthy Families.

“That $50 million that could be restored if the ‘blue-pencils’ are found to be unconstitutional is a significant chip away at the $112 or $113 million that remains as a whole,” said Lazarus.

The reversal would not affect the $128.6 million already trimmed from Healthy Families by the Legislature in the July budget revision.

The timing of a reversal is key to keeping children in Healthy Families.

“We’re trying to get a judge to ask Controller Chiang not to honor the line-item vetoes until the lawsuit has been decided,” said Alicia Trost, press secretary to Senator Steinberg

Trost said her office is working with the Administration to expedite the process, but a court date isn’t likely until September. Her concern is that the reversal will be too late for children already scheduled to be disenrolled.

“In the meantime, we are hoping that groups step up to the plate and help contribute to Healthy Families so no one has to get kicked off the health care rolls,” Trost said.

Another possible funding source for Healthy Families is AB 1383, drafted in July by Assemblyman Dave Jones (D-Sacramento). The bill imposes a provider fee on hospitals for every Medi-Cal admission, and projected revenues of $4.3 billion are eligible for enhanced federal matching funds at 62%. The bill includes a provision, requested by Senator Steinberg, that $320 million be set aside for children’s health coverage programs.

AB 1383 passed the Senate Appropriations Committee just before the August legislative break, and the next stage of committee review and revision may take some time. The federal matching funds component of AB 1383 requires federal approval, so a final decision is unlikely before 2010.

Will the appeal for private sector funding be successful?

“It’s not sustainable, it’s not the way other states or other places in the country are approaching this,” said Lazarus. “We are truly the laughingstock. There are many other states that because of the recession and tough times are actually strengthening their children’s health programs.”

Lazarus doesn’t think foundations can provide long-term solutions for children’s health care.

“The private foundations have been outstanding in what they’ve been doing for the last 5-10 years to help support children’s coverage on the private side,” she said. “But they have always looked at their investments as a bridge to the time when we’re going to have a state-wide program that provides health care for all the kids who need it.”

The larger issue for Lazarus is one of responsibility.

“For anybody to think that the private sector can make much of a difference when you run the numbers — this is a public policy issue, and this is what California residents and voters have placed so high on their priority list,” she said. “The solution here has got to come as it is in other states, from California making this a priority and having our elected officials find the money to do this. It’s a choice.”

Until the funding dilemma is resolved, there are few options for uninsured children, said Puddefoot. “They’ll seek care with clinics and county providers and other sources of care for the uninsured,” she said. “We also expect that many families would seek care for their children from emergency rooms.”

Margaret T. Simpson can be reached at