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.

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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


CBP Participates in Webinar Looking at the Medi-Cal Expansion

July 26, 2013

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

July 11, 2013

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.
  • $3.8 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

May 24, 2013

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


What We Were Watching for in the May Revision — and How It Looks Thus Far

May 20, 2013

Last week, in the run-up to Governor Brown’s May Revision, we blogged about the five things we were looking for in his revised 2013-14 budget and the ensuing budget debate. Here we reflect back on what were looking for — and provide a brief take on what we’ve seen. Our initial analysis of the May Revision — published the day after the Governor released his revised budget — provides a fuller discussion of the major changes and important new proposals. In the coming days and weeks, we’ll provide continued analysis and commentary here at California Budget Bites.

1. Education Finance Reform

We were watching for: potential changes to the mix of Local Control Funding Formula (LCFF) grants as well as any new accountability provisions. Under the Governor’s proposal to restructure school finance in California – a topic the CBP recently examined in its chartbook on the LCFF — each school district would receive a base grant per student and, in addition, a supplemental grant based on the unduplicated number of English learners or students from low-income families and a concentration grant for the share of these students above 50 percent of district enrollment. We were watching for preservation of the additional dollars allocated for disadvantaged students and stronger accountability provisions that would ensure that districts are using the LCFF dollars to directly benefit the students for whom they are intended.

The May Revision: preserves the LCFF formula proposed in January, including the concentration grants. The May Revision also strengthens LCFF accountability provisions by clarifying that supplemental and concentration grants are provided “primarily for the benefit” of students for whom they are intended. Further, the May Revision requires school districts, upon full implementation of the LCFF, to report how they plan to spend supplemental grant dollars in proportion to the number of disadvantaged students at each school site.

2. Medi-Cal Expansion

We were watching for: a call for a state-led expansion that leaves existing funding with counties, for now. As part of federal health care reform, the Governor has called for expanding Medi-Cal  to cover low-income adults who currently are not eligible — a topic addressed in our recent Medi-Cal chartbook. In January, the Governor presented two approaches to expansion — a county-based approach and a state-led approach — while also linking the expansion to his proposal to “realign” some human services programs to counties. Under the Governor’s plan, counties’ new costs would be funded with 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. We were watching for a commitment to a state-led expansion of Medi-Cal that allows counties to retain any savings they realize and put it toward providing local health services for the remaining uninsured, at least until the impact of health care reform on both the state and the counties is better understood.

The May Revision: endorses a state-led expansion of Medi-Cal where newly eligible Californians would enroll in Medi-Cal and receive the same benefits available to other Medi-Cal enrollees. However, the May Revision also maintains — and provides new details about — the Governor’s proposal to shift costs for certain human services programs to counties. The Governor now proposes that counties “assume greater financial responsibility” for CalWORKs, CalWORKs child care, and CalFresh administration. Counties would cover these costs with dollars shifted from their health care safety nets, thereby generating state savings that the Administration estimates would exceed $1 billion per year by 2015-16.

3. State Revenue Projections

We were watching for: revised economic and revenue forecasts and the implications for state spending. Through April 2013, state revenue for the current (2012-13) fiscal year was running ahead of the Governor’s January projections by $4.6 billion, prompting speculation that the May Revision would feature revenue forecasts for 2013-14 much higher than had been expected in January. We were watching for revised economic and revenue forecasts and the implications of those revisions for the Proposition 98 minimum school funding guarantee.

The May Revision: presents somewhat weakened economic and revenue forecasts. The Administration reported that higher-than-anticipated revenues for the current year (2012-13) are spread over several fiscal years and that “the influx is expected to be short-lived.” The May Revision projects additional revenue collections in the current fiscal year ($2.8 billion higher than assumed in January), derived from taxpayers shifting revenue from 2013 to 2012 in response to federal tax changes, followed by a slight decrease in revenue in 2013-14 ($1.3 billion lower than assumed in January). The assumed Proposition 98 minimum funding level follows a similar pattern, increasing in 2012-13 and decreasing slightly in 2013-14. The May Revision also adjusts the state’s short-term economic outlook downward due to federal actions, including federal tax changes and sequester cuts, and weaker global economic growth. However, the Legislative Analyst’s Office argues that the Administration’s economic and revenue forecast “seems too pessimistic” and projects that revenues will come in more than $3 billion higher – over the three-year period from 2011-12 to 2013-14 – than the Governor assumes.

4. Pay-Down of California’s Budgetary Debt

We were watching for: any changes to the Governor’s proposed pay-down of budgetary debt. The Governor’s January proposal called for paying down $4.2 billion in budgetary debt as part of a plan to reduce this debt from $35 billion in 2010-11 to less than $5 billion by 2016-17. We were watching for any increases to the proposed pay-down as a result of higher-than-anticipated revenues or possibly a more gradual repayment schedule in order to free up dollars for other spending priorities.

The May Revision: maintains the Governor’s general plan for paying down budgetary debt to less than $5 billion by 2016-17. The adjustments to the state’s revenue forecast noted earlier alter the repayment schedule, but do not change the multiyear objective. The May Revision also maintains the Administration’s planned $1 billion contribution to the state’s Special Fund for Economic Uncertainties.

5. Enterprise Zone Reform

We were watching for: any changes to proposals to restructure the Enterprise Zone (EZ) Program. The Governor’s January proposal included a set of regulatory changes to the state’s EZ Program, which provides tax credits intended to encourage businesses to locate in economically distressed areas. While the intent of the program is to promote business development and job creation in targeted areas, research shows that the program fails to achieve its goals while placing an increasing strain on the state budget — with the cost projected to rise to $1 billion by 2015-16. We were watching for proposals to more aggressively restructure the program to better target job creation and business development, boost accountability and evaluation of program effectiveness, and reduce the costs to the state.

The May Revision: significantly alters the Governor’s proposal to restructure the EZ Program. The new proposal narrows the EZ hiring tax credit to specific areas with high unemployment and poverty rates, and limits availability to hiring of three targeted groups of individuals (as opposed to 10 groups currently). The May Revision also expands the EZ sales tax credit for manufacturing and biotech equipment purchases to be a statewide — rather than a zone-specific — incentive, in an effort to discourage within-state competition for jobs. The May Revision also creates a new business recruitment and retention fund, administered by the Governor’s Office, for use in negotiating business tax credits in exchange for investments and employment expansion in California. Early reviews of these newly proposed reforms – which as a whole the Administration projects to be revenue-neutral — suggest that the tax-credit changes would largely eliminate the EZ Program in its current form.

*  *  *

Beyond the five budget issues detailed in our May Revision preview and discussed above, there were other notable components of the Governor’s revised budget proposal. The Governor essentially put on hold for two years his complete restructuring of adult education, during which time the Governor proposes to transition to a new regional partnership system. The May Revision also leaves many previous cuts to health and human services unchanged, though it does include a new funding allocation ($48 million) for CalWORKs “early engagement” strategies to better address client needs during the shortened 24-month time window imposed in 2012-13. All of these proposals are discussed in the initial May Revision analysis we issued last week.

The initial analysis we released last week also highlights some of the key choices that policymakers could face during the coming weeks as they move toward enacting a 2013-14 budget, which would take effect on July 1. California Budget Bites will provide continued analysis and commentary on the issues shaping the budget debate and what the latest policy proposals mean for low- and middle-income Californians and for the future of our state.

— Chris Hoene