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

February 6, 2015

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.

2-6-15 Medi-Cal and Federal Funds

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

March 21, 2014

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

September 27, 2013

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

September 24, 2013

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

Medi-Cal Expansion: Full Steam Ahead or on the Slow Track?

April 3, 2013

Medi-Cal – our state’s Medicaid Program – provides health coverage to well over 7 million low-income Californians, primarily children, youth, and women. The program soon will cover hundreds of thousands of additional residents as part of an expansion authorized by federal health care reform. Under the expansion, California will extend Medi-Cal coverage to parents and childless adults who are currently excluded from the program and whose incomes do not exceed 138 percent of the federal poverty line (see chart). But is California on track to expand Medi-Cal by January 1, 2014? That’s the date when the federal government will begin paying the full cost of the expansion for the first three years, phasing down to a still-high 90 percent of the cost by 2020. With less than nine months to go, and much work left to do, there is considerable concern that the state isn’t moving quickly enough to ensure a timely expansion of Medi-Cal.

We take an in-depth look at the Medi-Cal expansion – and the debate surrounding it – in a new CBP report released yesterday: Expanding Horizons: Key Facts About the Medi-Cal Program as California Implements Health Care Reform. In addition to providing a comprehensive overview of the program, our report highlights significant differences of opinion that have emerged regarding the Medi-Cal expansion. For instance, identical bills moving through the Assembly and Senate (AB X1 1 and SB X1 1) envision a state-led expansion, an approach endorsed by the nonpartisan Legislative Analyst’s Office (LAO). In contrast, Governor Brown has suggested that either the state or the counties could lead the expansion, a position the Governor has maintained since January despite major concerns that counties, health advocates, and the LAO have raised about the county-led option.

Another point of contention is the Governor’s decision to link the Medi-Cal expansion to his proposal to “capture,” for the state’s benefit, some of the state dollars that counties now use to provide health care to low-income, uninsured (“medically indigent”) Californians – many of whom would enroll in Medi-Cal under the expansion. The Governor’s proposal has generated concern among county officials and health advocates, who worry that the state may shift too much funding, too soon, from a county health care safety net that is sorely in need of new investments and will remain in high demand even after health care reform is fully implemented.

Our report concludes that policymakers should move quickly to put in place the changes needed to ensure a successful, state-led expansion of Medi-Cal by January 1, 2014. Starting the expansion after that date would leave federal dollars on the table and delay coverage for hundreds of thousands of low-income Californians. We also suggest that policymakers consider taking a “wait and see” approach as to the appropriate level of state funding for county indigent health care services. At the moment, it’s unclear how the Medi-Cal expansion will affect the use and the cost of the county health care safety net. This picture will come into focus over the next few years, at which point lawmakers – armed with better information – could revisit the Governor’s proposal to shift county indigent health care dollars to the state.

Finally, we note that California’s improving fiscal situation provides an opportunity for policymakers to reconsider reductions made to Medi-Cal in recent years, some of which are highlighted in our report. This includes the deep cut to provider payments that has been subject to legal challenges, but which could go into effect this year if upheld by the federal courts – on the eve of the Medi-Cal expansion.

— Scott Graves