President George W. Bush’s hazy plan to strip away federal funding for safety-net hospitals could bleed dry the funds of Natividad Medical Center, say Monterey County hospital officials.

As vaguely outlined in his State of the Union last week, Bush wants to redirect $30 billion in Medicare and Medicaid funds, and distribute the money to states to help poor residents buy private insurance. California hospitals that serve a large volume of low-income clients—like Natividad in Salinas—would lose at least $700 million a year under Bush’s plan, according to the California Hospital Association.

Laura Zehm, chief financial officer of Community Hospital of the Monterey Peninsula, says the president’s proposal is dangerous.

“So much of our health care,” she says, “is dependant on federal funding and to change that overnight might have unexpected and unfortunate consequences.” Zehm also severs on the Natividad Board of Trustees. CHOMP would not likely lose federal funds, she says, but Natividad could take a big financial hit.  

Bush’s proposal would draw from funds set aside for hospitals that serve an uneven segment of uninsured and low-income people. Natividad received more than $22 million in so-called “disproportionate share hospital” funds last fiscal year. That same year, federal reimbursements for Medicare and Medicaid patients accounted for 80 percent of the county hospital’s revenue, according to Harry Weis, Natividad’s chief financial officer. Weis works for a consulting firm that took over Natividad in November to turn its finances around.

Hospital officials don’t know how much of this money Natividad would lose under the White House’s unspecified plot, but any shift in funds could impair the hospital’s fiscal recovery.

The centerpiece of the Bush Administration’s health care reform is to give a tax break to most people who have health insurance. Insured families would pay no income or payroll taxes on their first $15,000 of compensation and insured individuals wouldn’t pay taxes on their first $7,500 of wages. People whose insurance cost exceeds the deduction cap would receive a tax hike.

The White House says the strategy will make private health insurance more affordable for US citizens. But legislators in the Democratic-controlled Congress call the proposal an attack on employer-provided insurance.

John Fletcher, senior vice president for finance and information technology at Salinas Valley Memorial Healthcare System, says Bush’s proposal is a piecemeal approach that will not solve the nation’s health care crisis. Similar to his failed attempt to privatize social security, Fletcher says Bush wants to shift the burden of providing health care from government programs to the private sector.

“This is taxation without representation,” Fletcher says.

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With many agricultural and hospitality workers unable to get health insurance through their seasonal jobs, Monterey County residents rely heavily on government-sponsored health care and affordable clinics.

About 120,000 patients a year turn to Clinica De Salud Del Valle de Salinas, a system of clinics in the Salinas Valley that provides low-cost medical attention.

Max Cuevas, chief executive officer of Clinica De Salud, says about 45 percent of the clinic’s patients can’t afford health insurance but pay for their visits on a sliding scale based on income. Estimating that private health insurance costs $10,500 for an average family, Cuevas says a tax break at the end of the year would not make health insurance affordable for the county’s large pool of uninsured and underinsured residents.

“I’m not convinced that the write off itself would be a great incentive,” Cuevas says.

About 70,000 people, or 15 percent of Monterey County’s population, lack health insurance, according to a 2003 survey. In 2005, the county had 71,000 Medi-Cal recipients.

For the county’s undocumented immigrants who don’t qualify for federal or state-subsidized insurance, the emergency room is sometimes the only place they can receive medical attention. But by the time people wait to get treatment in the emergency room, Cuevas says, “it’s too late and it’s more expensive.”

While Bush’s plan does not create new funds to increase health care coverage, Governor Arnold Schwarzenegger wants to put new money—$10 billion to $15 billion—into the state’s health care system.

Schwarzenegger’s plan, which he unveiled last month, relies on contributions from hospitals, doctors and employers who do not provide insurance to pitch in to a state pool that will subsidize health insurance for low-income residents. Very poor residents would be covered under an expanded version of Medi-Cal. Insurers would be required to guarantee health coverage and individuals and employers would get tax breaks for purchasing insurance.

Monterey County health care officials say they prefer Schwarzenegger’s comprehensive approach to addressing the state’s 6.5 million uninsured residents over Bush’s proposals, but they are waiting to see how it pencils out.

“You might say [the governor’s] proposal is so big that there is something for everyone to like and dislike,” says Alan McKay, executive director of Central Coast Alliance for Health, a nonprofit health plan that includes Medi-Cal and Healthy Families.

Under Schwarzenegger’s proposal, an uninsured family of four earning $30,000 a year would be able to buy basic coverage from the state for a $900 premium. Both Republican administrations in Washington, DC and in Sacramento tout the tax breaks this same family would receive. Under the governor’s plan, the state would give the family an $85 tax cut and a $250 increase in earned income tax credit. Bush’s rewriting of the tax code would give the family another $1,150 in tax cuts.

But if the federal and state governments collect less money from taxpayers, some critics say that social programs—like health care—will inevitably get shortchanged. For either proposal to work more people will have to become privately insured, thus reducing reliance on government-funded medical coverage. But it’s the changeover that worries McKay. “This emphasis, to kind of rebalance the health care economy, typically raises a lot of concern about the transition period at least,” he says.