California will contribute about $1.3 billion to its Medi-Cal expansion this year, a new expenditure that will further strain an already burdened health care budget.
This year marks the first time states that expanded Medicaid under the Affordable Care Act will have to pitch in to help fund their expansion of the program. Their share of the overall price tag compared with federal contributions is small – 5 percent of the cost to cover newly eligible enrollees – but that still equates to real money in the Golden State.
That’s because the expansion of Medi-Cal, California’s version of the federal Medicaid program for low-income residents, has added nearly 4 million additional enrollees, according to the state Department of Health Care Services (DHCS). Most other states don’t have that many enrollees in their entire Medicaid programs.
“It was expected, but it’s still money that has to come from somewhere,” said Stan Rosenstein, a health care consultant in Sacramento who ended his 31-year career at Medi-Cal in 2008 as the state Medicaid director. “It puts budget strain on the state.”
Gov. Jerry Brown unveiled his revised $183 billion state budget last week.
Rosenstein said California already struggles to pay for Medi-Cal without the additional burden. He noted the disagreement over Brown’s proposal to earmark about $1.2 billion in new tobacco tax revenue for general growth in Medi-Cal spending, saying it shows that “the state is having a difficult time finding sources of funds for Medi-Cal under the current situation.”
Consumer advocates and others, including the powerful California Medical Association, want the money directed toward specific needs, including higher rates for providers who accept Medi-Cal patients.
The tobacco tax money, generated by the passage last November of Proposition 56, wouldn’t even pay for the state’s share of the Medicaid expansion this year, according to the projected dollar figure provided by DHCS.
Under the Affordable Care Act, known as Obamacare, California expanded Medi-Cal eligibility to include childless adults and raised the qualifying income threshold to 138 percent of the federal poverty level, or about $16,640 for an individual.
Until this year, the federal government paid 100 percent for the newly eligible population. In contrast, it pays about half for most of the “traditional” Medicaid enrollees who qualified under the previous, narrower eligibility criteria.
The federal contribution for the newly eligible enrollees starts decreasing this year and continues to decline until 2020, when states will pick up 10 percent of costs.
That assumes Obamacare will remain the law of the land.
The U.S. House of Representatives passed an Obamacare repeal bill early this month on a narrow, party-line vote. That bill would phase out the Medicaid expansion starting in 2020 and dramatically alter the way Medicaid is funded, resulting in a major reduction in federal money for states.
Some significant changes are expected in the Senate, and many political observers think it is unlikely the House bill will survive in its current form.
In California, the potential loss of federal dollars caused by a rollback of the Medi-Cal expansion would be massive. The state Legislative Analyst’s Office estimated in February that the Golden State is slated to receive more than $17 billion from the federal government for the expansion in 2017-18.
If the House GOP plan were adopted, Medi-Cal expansion enrollees would likely fall off the rolls in large numbers after 2020 because of natural churn in and out of the program and a new provision that would require enrollees to renew their coverage every six months, twice as often as under current law.
As expansion enrollees drop, so would the more generous federal funding. Facing reduced federal support, the state may not be able to continue to allow people to enroll under the expanded eligibility criteria, said Deborah Kelch, executive director of Insure the Uninsured Project.
“It’s a lot for the state to absorb,” Kelch said. “It’s not going to be easy to make up that kind of revenue when you think of the total state budget.”
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.