California Set to Open New Marketplace for Affordable Health Coverage

Next week, California’s new online marketplace for affordable health coverage will open for business — a major milestone in the implementation of health care reform. Starting on October 1, Californians who lack affordable health coverage can access soon-to-be-expanded Medi-Cal coverage or purchase private health insurance — possibly with federal financial assistance — through Covered California, the health exchange that state policymakers created to help implement federal health care reform. Californians can apply for coverage in several ways, including online, by phone, and by mail, and can submit applications — which are available in multiple languages — directly to Covered California or to county human services offices. Both the Medi-Cal expansion — which will extend eligibility to more than 1 million low-income adults — and the private health coverage available through Covered California take effect on January 1, 2014. (For helpful summaries of how health care reform will work in California, see this recent Sacramento Bee article and Covered California’s list of frequently asked questions.)

Through Covered California, consumers for the first time will be able to make apples-to-apples comparisons of their health coverage options, a change that should help people make more informed choices. Moreover, while Californians will be able to purchase coverage outside of the exchange, Covered California is the only place where residents with incomes up to 400 percent of the federal poverty line — currently $45,960 for an individual — can use federal subsidies to lower the cost of the coverage that they buy.

These new coverage options can’t come soon enough for many Californians. In 2012, more than one-fifth of residents lacked health care coverage in 10 of the 40 California counties for which data are available, according to the US Census Bureau. These 10 counties, which include Los Angeles, Riverside, and Fresno, are home to more than two in five Californians.

It’s important to bear in mind that health care reform won’t reach all Californians. In particular, undocumented immigrants are prohibited from purchasing coverage through Covered California and will remain ineligible for Medi-Cal. A recent report from the UCLA Center for Health Policy Research notes that “despite being in working families, most undocumented immigrants are not covered by health insurance and face significant access-to-care barriers.” This is a key reason why we’ve consistently highlighted the need to maintain a strong county health care safety net to assist Californians who fall through the cracks.

Still, full implementation of health care reform this coming January will significantly improve the lives of millions of Californians — US citizens and legal immigrants alike — who currently lack access to affordable coverage and live daily with the prospect of being one medical diagnosis away from financial ruin.

— Scott Graves

State Implements Deep Cut to Medi-Cal Provider Payments

Two years ago, facing a substantial budget shortfall, state policymakers agreed to cut — by 10 percent — payments for doctors, dentists, and other providers who participate in Medi-Cal, California’s Medicaid program. Lawsuits filed by health care provider associations put this reduction on hold, but the state recently has won key federal court decisions. As a result, the Brown Administration began implementing the 10 percent cut earlier this month, starting with payments to dentists and medical transportation providers.

Incredibly, this reduction will apply not only going forward, but also retroactively to June 1, 2011, which means that providers will have to gradually pay back part of the payments they’ve received over the past couple of years. The retroactive portion of the cut is not yet in place, and the state’s recent guidance does not indicate how it will be implemented. However, earlier this year, the Administration suggested that the state would retroactively recoup payments from providers by temporarily imposing an additional 5 percent cut, for a total reduction of 15 percent. This additional 5 percent cut would remain in effect until the full amount owed retroactively is repaid.

In a classic case of bad timing, this cut is taking effect as California prepares for a major expansion of Medi-Cal — the cornerstone of the state’s full-speed-ahead implementation of federal health care reform. Enrollment in Medi-Cal, which already exceeds 8 million, will increase significantly beginning in 2014 as more low-income Californians become eligible for coverage. California’s payments to Medi-Cal providers are already exceptionally low, and the rate cut adds to concerns about whether enough providers will be willing to accept the newly covered Californians. Efforts to fully repeal the cut failed in the Legislature this year. However, lawmakers did pass Senate Bill 239, which — if signed by the Governor as expected — would repeal the rate cut for certain nursing facilities effective October 1. (These facilities would still be subject to the retroactive reduction.)

Health provider associations have at least one more legal avenue: an appeal to the US Supreme Court. An appeal has been filed, although it will likely be months before the Court decides whether to take the case and, even if it does (a long shot), a ruling would not be handed down until 2014.

In the meantime, the rate reduction will move ahead. State policymakers should revisit this issue as part of next year’s budget debate and decide whether a deep cut to the state’s main health care program for low-income families — a cut made during the dark days of a budget crisis — is really the best way forward for California. Repealing this reduction is a sensible step that would both create greater fiscal certainty for providers and represent a critical state investment in the success of health care reform.

— Scott Graves

CBP Participates in Webinar Looking at the Medi-Cal Expansion

Yesterday, the CBP participated in a webinar looking at the pending expansion of the Medi-Cal Program — a cornerstone of federal health care reform — and what that change may mean for philanthropy and nonprofits. The webinar was sponsored by the California Association of Nonprofits and a consortium of California grantmakers called California Philanthropy. The webinar also featured Peter Long, president and chief executive officer of the Blue Shield of California Foundation, and Ellen Wu, executive director of the California Pan-Ethnic Health Network and a CBP board member.

The CBP’s presentation reviewed key changes to Medi-Cal that will be implemented in 2014 as a result of recent state legislation. We also highlighted two issues that could hinder low-income Californians’ access to health care services in the years to come: a pending cut to Medi-Cal provider payments (approved in 2011 but not yet implemented) and a major shift of health care dollars from counties to the state, a change that was included in this year’s state budget agreement.

— Scott Graves

Medi-Cal Expansion by the Numbers

Medi-Cal — the state’s Medicaid Program — provides health coverage to more than 8 million low-income Californians. This number is expected to climb sharply beginning this coming January due to a major program expansion adopted by state policymakers as part of the 2013-14 budget agreement. As authorized by federal health care reform, California will extend Medi-Cal coverage to more than 1 million parents and childless adults who are currently excluded from the program and whose incomes do not exceed 138 percent of the federal poverty line ($15,856 for an individual in 2013). The budget agreement also redirects — to the state — much of the funding that counties now use to provide health care to low-income, uninsured (“medically indigent”) residents. (Governor Brown insisted on linking this fund shift to the Medi-Cal expansion.)

We’ll be updating our Medi-Cal chartbook to reflect the framework of the expansion as agreed to by lawmakers and the Governor. For now, here are some numbers that help to put the Medi-Cal expansion into perspective:

• 1/1/14 — the date that the Medi-Cal expansion is scheduled to begin.

• 1.4 million — the number of Californians estimated to be newly eligible for Medi-Cal in 2014 under the expansion.

• 635,000 — the number of newly eligible Californians expected to enroll in Medi-Cal during the first six months of 2014, according to recent state estimates. This figure includes 490,000 Californians who will transfer from the temporary Low Income Health Program (LIHP) on January 1, 2014. LIHP — which was created as a “bridge” to health care reform and expires at the end of 2013 — uses federal and county dollars to serve low-income adults who do not qualify for Medi-Cal under current rules. The vast majority of Californians enrolled in LIHP will be eligible for Medi-Cal in 2014, while the remainder will be eligible for coverage through Covered California, the state’s new health insurance exchange. The state’s estimate of the number of LIHP enrollees who will shift to Medi-Cal appears to be low. For example, in April 2013 LIHP enrolled about 575,000 Californians who will qualify for Medi-Cal under the expansion, or over 80,000 more people than the state estimates will move from LIHP to Medi-Cal. Moreover, LIHP enrollment could increase in the coming months to the extent that counties boost their outreach efforts. Therefore, the number of Californians who enroll in Medi-Cal under the expansion during the first half of 2014 could substantially exceed the state’s total estimate of 635,000.

• 100% — the share of Medi-Cal expansion costs covered by the federal government from 2014 through 2016. The federal share will gradually phase down to a still-high 90% by 2020.

• $1.5 billion — the amount of federal funding that California is expected to receive in 2013-14 to pay for the expansion. Federal funding is projected to increase substantially in later years. Using “moderate-cost assumptions,” the Legislative Analyst’s Office projects that California will receive $3.5 billion in federal funding for the expansion in 2014-15, rising to $6.2 billion by 2022-23.

• 3 to 4 million — the number of Californians estimated to lack health care coverage by 2019, even with full implementation of federal health care reform. This group is expected to include 1 million undocumented immigrants.

• $3.8 billion — the total amount of funding that is projected to be shifted from counties to the state over the next four years under the budget agreement ($0.3 billion in 2013-14, $0.9 billion in 2014-15, and $1.3 billion in each of 2015-16 and 2016-17). Counties use these dollars — which they receive as part of the 1991 state-to-county realignment of services — to provide health care to medically indigent residents. The budget deal assumes that counties will no longer need all of their 1991 realignment health care dollars as many medically indigent adults newly enroll in Medi-Cal under the expansion. The funds redirected to the state will be used to pay for CalWORKs grant costs that would otherwise be funded with General Fund dollars, and thus will generate substantial ongoing state savings. At this point, it’s not clear whether the amount of funding that remains with counties will be sufficient to provide health care for the millions of Californians who are projected to lack health coverage even after full implementation of health care reform.

— Scott Graves

Expanding Medi-Cal While Protecting Counties’ Health Care Safety Net

Expanding Medicaid to parents and childless adults who are currently excluded — a change that could extend health coverage to hundreds of thousands of low-income Californians next year — is a cornerstone of federal health care reform. While there is broad agreement among policymakers that California should adopt this expansion of its Medi-Cal Program, there has been considerable debate over how the expansion should occur, as we explained in our recent Medi-Cal chartbook. Governor Brown settled one point of contention last week when he endorsed, in his May Revision, a state-led expansion of Medi-Cal, dropping his January proposal that left open the possibility of counties taking the lead.

At the same time, however, the Governor’s May Revision maintained his proposal to link the Medi-Cal expansion to a major “realignment” of fiscal and programmatic responsibilities for human services programs from the state to the counties. Under this proposal, additional county costs for three programs — CalWORKs, CalWORKs child care, and CalFresh — would be funded by redirecting to those programs most of the state dollars that counties currently use to provide health care to low-income, uninsured (“medically indigent”) residents. The Governor assumes that counties will no longer need these dollars as many medically indigent adults newly enroll in Medi-Cal under the expansion. The Governor therefore proposes to use these county “savings” — which would be determined based on a formula negotiated with lawmakers and counties — to reduce the state’s General Fund costs for human services programs dollar-for-dollar. Using the Administration’s version of the formula, the May Revision estimates that $300 million would be redirected from counties’ health care infrastructure in 2013-14, followed by shifts of $900 million in 2014-15 and $1.3 billion in 2015-16 — a total of $2.5 billion over three years.

From our vantage point, the Governor’s proposal raises three major concerns:

• The Governor has not provided a policy rationale for pursuing a new state-to-county realignment. State policymakers periodically transfer responsibility for public services from the state to the counties, and vice versa, in an effort to improve service delivery and outcomes and align fiscal incentives with program responsibility. However, the Governor has not offered a clear policy justification for pursuing a new realignment that encompasses CalWORKs, child care, and CalFresh. The Administration has provided few details about the realignment concept, and evaluating the benefits and costs of the proposal (for both low-income families and counties) would require considerable time — time that lawmakers don’t have given that they must work out the details of the Medi-Cal expansion within the next two to three weeks. Also, the Governor’s proposal adds unnecessary complexity to the already-challenging decision of how to implement the Medi-Cal expansion, as the Legislative Analyst’s Office (LAO) has pointed out.

• The Governor’s proposal would shift too much funding — too quickly — from county health care services. The Governor proposes to redirect $300 million from counties concurrent with the Medi-Cal expansion in 2014, with the annual amount shifted escalating to more than $1 billion within a couple of years. This rapid increase is attributable to both the structure of the formula (as proposed by the Administration) and the fact that all of the county “savings” would accrue to the state’s benefit, with no savings set aside for counties to reinvest in local health care services and infrastructure. The California State Association of Counties argues that “redirecting this money now will force counties to cut critical public health and safety net services and will reduce funding available to care for the remaining uninsured.” This is why we’ve suggested that policymakers take a “wait and see” approach regarding the appropriate level of state funding for indigent health care services. It’s unclear how the Medi-Cal expansion will affect the use and the cost of the county health care safety net in the coming years. As this picture comes into focus, lawmakers — armed with better information — can consider whether and how to shift any county savings that result from health care reform. In the meantime, policymakers could consider adopting the framework proposed by Health Access, under which the state would encourage counties to repurpose their Low Income Health Programs to serve the many Californians — an estimated 3 to 4 million — who are expected to remain uninsured even after health care reform is fully implemented.

• The size of the proposed fund shift does not square with the Administration’s assertion that these dollars are needed to offset new state costs for Medi-Cal. The Administration’s primary justification for shifting dollars from county health care services is that the state “cannot afford” to both increase its spending on Medi-Cal and continue the current level of funding for county indigent health care. This argument has struck many advocates as curious because the federal government will fund the entire cost of the Medi-Cal expansion through 2016, at which point the state’s share of costs will increase to 5 percent in 2017 and gradually rise to a maximum of 10 percent in 2020. However, the Administration also argues that the state will have new costs for currently eligible Californians who are expected to newly enroll in Medi-Cal starting next year as a result of various eligibility simplifications now required by federal law. Yet the cost of these new enrollees is expected to be relatively small over the next few years. Using “moderate-cost assumptions,” the LAO estimates that the state’s cost for this already-eligible group will be roughly $100 million in 2013-14, rising to about $360 million in 2015-16. (The Administration has released larger estimates, but the LAO suggests those projections are “likely too high.”) In short, if the purpose of redirecting dollars from county health care services is simply to offset state Medi-Cal costs that are attributable to health care reform, then any amounts shifted would have to be significantly below the Governor’s proposed $2.5 billion over three years — and no higher than $100 million in the first year alone.

The federal government’s commitment to initially fund 100 percent of the cost of the Medi-Cal expansion gives California a historic opportunity to extend health coverage to hundreds of thousands of low-income adults while also ensuring that the county health care safety net remains strong for the millions of Californians who will continue to rely on it in the years to come. California is not faced with an either/or proposition; we can do both.

— Scott Graves