On January 10, 2018, California Governor Jerry Brown released his 2018-19 proposed State Budget, which includes $131.7 billion in general fund spending and continues California’s commitments to implementing and improving upon the Affordable Care Act. Health advocates are urging the Governor and the Legislature to continue support for Medi-Cal and make investments to cover the remaining uninsured, make key restorations and investments in the program, while taking new steps toward universal care.
The Governor’s budget proposal approaches funding for health care programs “with caution,” as the Governor reflected in his press conference on uncertainty about a potential recession, and whether Congress will fulfill the federal government’s commitments to Californians on healthcare.
Although the non-partisan Legislative Analyst’s Office (LAO) projects a $7.5 billion surplus by the summer of 2019[i], the Governor urges prudence on spending the surplus because of potential federal changes, including uncertainty surrounding funding for Medicaid and Medicare and the reauthorization of the Children’s Health Insurance Program. The Governor’s Budget proposal puts most of the surplus into the Rainy Day Fund by putting $3.5 billion more than required by law, which brings the fund to 100 percent of its constitutional target to “buffer against uncertainty and protect against future cuts.”
Federal Proposals Put Health and Human Services at Risk
The biggest question about the state budget is the risk posed by federal proposal to cut and cap Medicaid and other health programs. The recently-passed Republican tax bill provides massive tax cuts for corporations and wealthy households, while blowing open a $1.5 trillion hole in the deficit. According to the GOP Congress’ budget resolution passed in 2017, it will be paid for by cutting vital services for low-income Americans,[ii] proposing $1.8 trillion in cuts to Medicaid. Such a cut would force catastrophic cuts to Medi-Cal, California’s Medicaid program that provides health insurance for 13.5 million low-income Californians.
The broader social safety net is also at risk, with federal income security programs such as Supplemental Nutrition Assistance Program (SNAP or CalFresh in California), Supplemental Security Income (SSI), and CalWORKS facing $2.3 trillion in cuts.[iii] Because federal funds make up more than a third of the state budget, deep cuts in such federal funding for health and human services programs would go beyond just those programs, not just imperiling Californians’ health and economic security, but education and other budget priorities as well. Within health care, Legislators and the Governor would be faced with limiting eligibility or cutting benefits if these proposed federal cuts go through.
While we must continue to be vigilant and fight against federal cuts to health programs, California must continue with Affordable Care Act (ACA) implementation and finish the job of covering all Californians.
What’s Included in the Proposed Budget:
- The Governor’s projects a $101.5 billion overall Medi-Cal program, including $21.6 billion in Medi-Cal General Fund spending, an 11 percent increase from the 2017 Budget Act. Medi-Cal is projected to cover 13.5 million Californians in 2018-2019. Medi-Cal spending growth covers higher health care costs, increased enrollment, and coverage of full adult dental benefits, which was restored in the 2017 Budget Act after years of advocacy. The budget also includes $22.9 billion ($1.6 B General Fund) to fund the state’s portion of the Medi-Cal expansion under the Affordable Care Act, which has brought coverage gains to previously ineligible, non-elderly adults with incomes under 138% of the Federal Poverty Level.
- Children’s Health Insurance Program (CHIP) reauthorization: About 2 million California kids in Medi-Cal benefit from CHIP funds. Because Congress has not reauthorized CHIP, which expired September 30, the state may receive a lower federal share for children now covered by CHIP (50 percent instead of 65 or 88 percent) if Congress doesn’t reauthorize the program. If not reauthorized, the state will need to come up with hundreds of millions of dollars to fund coverage for these children–and likely have to cut in other areas as a result. The Governor’s budget proposal assumes Congress will reauthorize the CHIP with a 65 percent federal share as of January 1, 2018. The Governor notes that without federal funding beyond March 2018, coverage for over 32,000 pregnant women and children are not protected by maintenance of effort (MOE) provisions of the ACA, under which California has committed to fund the CHIP program through September 2019.
- Proposition 56: Proposition 56, the tobacco tax initiative passed by California voters in 2016, dedicates most of the new revenue generated by the tobacco tax to Medi-Cal. Health Access was one of the organizational supporters of Proposition 56, helped draft the initiative, and actively campaigned for the measure. Health Access supported Prop. 56 monies to ensure access to care, with several state audits and studies highlighting access challenges in Medi-Cal.[iv] Last year, the budget used $546 million from Proposition 56 dollars to increase Medi-Cal provider rates for physicians, dental providers, women’s health, intermediate care facilities for the developmentally disabled, and HIV/AIDS care. The Department of Health Care Services has directed the supplemental payments for physician services to certain procedures, including new patient visits, and psychiatric evaluations and medical services. Dental providers are receiving supplemental payments for restorative, endodontic, and diagnostic services, among others. The Governor’s budget proposes to increase supplemental payments for physicians and dental providers by $232.8 million, for a total of $649.9 million. Of this increased amount, $163 million is allocated for physician payments and $70 million is for dental payments. Health Access looks forward to working with the Legislature and the Administration to ensure that higher provider rates actually results in increased access to care for Medi-Cal beneficiaries.
Beyond what is in the Governor’s budget, what’s especially notable is what isn’t included in the budget: additional expansions to get near universal coverage in California; restorations of key Medi-Cal benefits, and more.
- Take Further Steps to Universal Coverage. California should continue make key restorations and investments in Medi-Cal and take steps toward universal coverage. Thanks to our robust implementation of the ACA, California’s uninsured rate has dropped to an all-time low of 7 percent – about 2.5 million to 2.8 million Californians remain uninsured. About half of the remaining insured in California are undocumented, many of them low-income Californians.
- Expanding Medi-Cal Regardless of Immigration Status: The budget should include investments that assure every Californian has quality, affordable coverage, regardless of immigration status.
- Improve Affordability: Over 1.5 million Californians get coverage through Covered California, and 90% of them receive federal financial assistance to help them afford their premiums. Some consumers still face challenges affording health coverage, particularly those over age 50 who live in higher cost regions. Consumers who earn more than 400% FPL do not qualify for any federal subsidies, making it difficult for them to afford coverage. The Legislature and Governor should invest resources in making coverage more affordable for those who struggle with getting and keeping health coverage.
- Equalize the income limits for the Medi-Cal Aged and Disabled (A&D) program to align with the rest of Medi-Cal: The income limit of the A&D program is equivalent to 123% of the federal poverty level, lower than the 138% FPL limit for Medi-Cal. As a result, nearly 60,000 Californians face high Medi-Cal share of costs that are unaffordable to them. The Legislature and Governor should equalize income limits for the A&D program so low-income seniors and people with disabilities get the Medi-Cal coverage they are entitled to.
- Restore Remaining Medi-Cal Benefits: The state eliminated a number of non-federally mandated Medi-Cal benefits during the Great Recession. In recent years, full adult dental, acupuncture, and optical (in 2020) have been restored. The Legislature should finish the job by restoring audiology, chiropractic, incontinence creams and washes, podiatry, and speech therapy. Covering these benefits in Medi-Cal will lead to better care, reduce health complications and increase cost-savings to the state. For example, in 2016, it was projected that the inclusion of podiatric medical services in Medicaid can reduce amputations by 10%, helping improve patient care and reduce costs to the state.[v]
As the state budget process moves forward, Health Access will fight to protect funding for critical programs both at the federal and state level. We will continue urging California’s Congressional delegation to oppose the proposed massive federal cuts to Medicaid and Medicare. In Sacramento, we will work with the Legislature and the Governor to make critical investments to cover our remaining uninsured and improve affordability for low and middle income Californians.
[iv] Janet Coffman, Physician Participation in Medi-Cal: Is Supply Meeting Demand? (October 2016) Available at: http://www.chcf.org/publications/2016/10/physician-participation-medical