Medi-Cal and the Governor’s Proposed 2015-16 Budget: The State’s Net Cost for Californians Who Enroll in Medi-Cal Due to Health Care Reform = $0

Anyone who’s ever bought a car knows the “sticker price” doesn’t tell the whole story. As it turns out, this same notion applies to the state’s costs for Medi-Cal, California’s Medicaid program and a key source of health care coverage for millions of low-income Californians.

As we noted last month, the Governor’s proposed budget highlights the state’s sticker price for providing services to low-income Californians who enroll in Medi-Cal due to the implementation of federal health care reform. State analysts project that California will spend a bit more than $2 billion over two fiscal years — 2014-15 and 2015-16, which begins July 1 — to support health care services for Californians who have signed up for Medi-Cal due to changes associated with the federal Patient Protection and Affordable Care Act (ACA).

There are a couple of ways to think about this $2 billion sticker price, both of which are highlighted in the following chart.

First, the state’s two-year, $2 billion cost for ACA-related enrollment in Medi-Cal pales in comparison to the federal government’s contribution over the same two-year period: $32 billion. These federal dollars — which are just a portion of total federal funding for Medi-Cal — flow to doctors, clinics, and other health care providers in communities throughout the state, boosting local economies and supporting vital health care services for millions of low-income Californians.

Second, once you factor in offsetting savings, California will actually have no cost for new Medi-Cal enrollees and in fact will see a net cost reduction of about $200 million in 2014-15 and 2015-16 combined. Specifically, the roughly $2 billion in new state costs identified by the Administration will be reduced by more than $2.2 billion as a result of two policy changes that lawmakers and Governor Brown adopted in 2013. (Previously, we couldn’t calculate this total savings amount because some of the data weren’t yet available.)

This net decrease in state costs — despite rising Medi-Cal enrollment under the ACA — is due to two factors:

• A shift — back to the state — of certain dollars previously provided to counties for indigent health care, resulting in projected General Fund savings of $1.4 billion over two years.

• The use of some proceeds from a tax on Medi-Cal managed care plans to offset state spending, resulting in ACA-related General Fund savings of more than $800 million over two years.

In short, these two policies — which are described in more detail in our previous blog post — result in state savings that exceed California’s cost for Medi-Cal enrollees who have signed up due to health care reform.

So, the next time you hear that health care reform has dramatically driven up state spending for Medi-Cal, follow the same rules that apply on the used-car lot: ignore the sticker price and focus instead on the actual rock-bottom cost.

— Scott Graves

Medi-Cal in the Governor’s Proposed 2014-15 Budget: Health Care Reform Boosts Enrollment and Federal Funding

Medi-Cal — the Medicaid Program in our state — provides health care coverage for millions of low-income Californians, primarily children, youth, and women. Last year, state policymakers approved expanding Medi-Cal — as authorized by federal health care reform — to extend coverage to more than 1 million low-income adults who had not previously been eligible for the program and made other changes intended to increase enrollment.

A new CBP analysis — the latest in a series of briefs on key components of Governor Brown’s proposed 2014-15 budget — looks at the Medi-Cal Program. This brief shows that 1.5 million Californians are projected to enroll in the program due to implementation of health care reform, bringing total Medi-Cal enrollment to slightly more than 10 million. This boost in enrollment is projected to increase federal funding for Medi-Cal by more than $10 billion through June 2015.

At the same time, however, the Governor’s proposed budget largely maintains a 10 percent cut to Medi-Cal payments for doctors, dentists, and other providers, which could hinder enrollees’ access to care.

This CBP brief on Medi-Cal in the Governor’s budget proposal can be found — along with the full series of briefs, which covers education, human services, corrections, and other topics —  on our website.

— Steven Bliss

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