Viewpoints

Why California has most to lose in Obamacare repeal

Victor and Gabriela Gonzalez and their four boys pose in their Woodland home in April. One son, Felix, was covered under a Medi-Cal expansion on May 15.
Victor and Gabriela Gonzalez and their four boys pose in their Woodland home in April. One son, Felix, was covered under a Medi-Cal expansion on May 15. Sacramento Bee file

California probably gained more than any other state from the Affordable Care Act, the federal health reform better known as Obamacare. Now, with the program facing an almost certain demise, the state and its low-income residents have the most to lose.

President-elect Donald Trump and his Republican allies in Congress have pledged to repeal Obamacare, then replace it with something better. No one knows exactly what that will mean. But we do have some clues.

House Speaker Paul Ryan and other Republicans outlined their proposals in a detailed document before the election. For more than 1 million Californians who are getting subsidies to buy private insurance under Obamacare, there will be changes, but even under Ryan’s plan, many of them would still get tax credits to help them buy coverage.

The biggest losers would be the 3.5 million working poor and childless adults who gained access to health care through Medi-Cal, which now serves more than 13 million Californians, more than a third of the state’s population.

The Medi-Cal expansion was funded almost entirely by federal taxpayers. For the first three years, the feds paid 100 percent of the cost. The federal share was scheduled to decline, over the next three years, to 90 percent of the cost, but that would still have been far higher than the 50 percent share that federal taxpayers contributed to Medi-Cal before Obamacare.

Under the Republicans’ plan, that extra funding would disappear, making it very difficult for California to maintain coverage for those people. Ryan’s proposal would offer states two options – a per-person grant or a block grant with very few strings attached.

The per-person grants would be based on spending in 2016, adjusted each year to reflect increases in the cost of living. Since health care costs almost always increase faster than general prices, that means the value of federal aid would decline each year.

Ryan’s plan also says that the increased federal aid under Obamacare for those made newly eligible would decrease over time, eventually returning to the same federal share the state gets for the rest of its Medicaid recipients. For California, that would mean a reduction of about $8 billion a year.

The other alternative – a block grant – would probably be even worse for California.

This grant would be based on a point in time and adjusted for inflation, but not for need. So if more people lost their jobs and needed public assistance – which typically happens during a recession – the federal taxpayers’ share would not increase. And the block grant would shrink over time under a federal edict that the people who were made newly eligible by Obamacare are “transitioned” off Medi-Cal.

Politically, Ryan’s approach would be a savvy one for congressional Republicans and Trump. They could claim credit for giving the states more control over the program and more flexibility, while distancing themselves from the unpopular consequences – reduced health coverage or higher state taxes.

In California alone, nearly 4 million people would be at risk of losing their health insurance, but the erosion in coverage would play out over several years and likely not even begin until around 2020. By then the vote that set the whole thing in motion would be in the distant past.

Brilliant.

Daniel Weintraub is editor of the California Health Report. He can be contacted at Daniel.weintraub@calhealthreport.org.

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