Oooops! $1.9 Billion Medicaid Error Adds to California's Deficit Woes

Jerry Brown

It sounds harsh, but it’s time we faced the facts.

People who work for the government are, generally speaking, not the brightest bulbs in the room.

It pains me to point this out because I’m a sympathetic person and I hate seeing unqualified and incompetent people put in a position where they are likely to fail. But what other conclusion can you draw from the catastrophic accounting mistake by the California government that added fully $1.9 billion to the state’s Medicaid bill?


Associated Press:

“There’s no other way to describe this other than a straight up error in accounting, which we deeply regret,” said H.D. Palmer, a spokesman for the Department of Finance.

The agency followed its normal practice by waiting to report the errors in the governor’s next budget, he said.

Brown’s deficit projection was driven by more than just the accounting error, Palmer said, noting that California tax collections came in below expectations for most of the first half of the fiscal year.

The massive hole in the Medi-Cal budget surprised state lawmakers.

“It makes you wonder what else is not right. … When something like this happens, the trust factor gets eroded, and you lose confidence in what’s being provided to you,” said Sen. John Moorlach, a Republican from Costa Mesa who serves on the Senate budget committee.

Making up for the Medi-Cal shortfall will mean the state can’t spend money on other priorities, such as college scholarships or paying down long-term pension liabilities, Moorlach said.

How about canceling that ridiculous high-speed rail project? You can send a lot of kids to college by getting rid of that white elephant.

The Medi-Cal program, California’s version of Medicaid, is jointly funded by the state and federal governments to provide health coverage for people with low incomes.

It covers one in three Californians, at a total cost of more than $100 billion annually. About a sixth of the money comes from the state general fund and most of the rest from the federal government.

The Department of Finance said it did not account for $487 million in rebates from drugmakers that the state must pay the federal government to reimburse Washington for its share of Medi-Cal drug costs.

The state also miscalculated costs for the Coordinated Care Initiative, an experimental program in seven counties to improve care for a group of high-needs patients eligible for both Medi-Cal and Medicare, the federally funded health plan for seniors and people with disabilities.

Officials double-counted some of the expected savings, leading to a budget hole of $913 million, and undercounted the costs in San Mateo and Orange counties by $573 million.


No doubt, the defenders of California government will say, “It could happen to anybody. Why pick on them?”

The point is that it doesn’t happen to anybody. An accountant in the private sector who made a two-billion-dollar error would be fired on the spot.  Can you imagine an accountant for Exxon double counting “expected savings”? The person would have to be near brain death for that to happen.

This is not a question of inadequate government pay not attracting the very best minds and most skilled workers to the public sector. In general, public-sector pay outstrips that for similar jobs in the private sector — sometimes by a considerable amount. Rather, it is the type of personality that gravitates to government work. Those who fear competition and pay raises based on performance rather than longevity are far more comfortable working for government than some others. In other words, go-getters need not apply for government work.

No word on anyone being disciplined for this gargantuan error. Would you expect anything more?



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