Even though it was only a small mention in today’s budget forum, I feel the need to disagree and clarify a comment about health reform made by the former and future Finance Director Ana Matosantos. Slide 9 of her budget presentation flags “threats and future pressures,” and includes federal health reform on the list, alongside pensions, a deficit on unemployment insurance, and budgetary borrowing. In her verbal presentations, she correctly stated that there aren’t any costs in the next several years.
Two comments: the $3.5 billion stated cost of health reform is a *very* high estimate–and that’s only after 2020-21. In the current year, health reform is actually providing hundreds of millions of dollars in state savings, in both the current year, budget year, and on. The new Medicaid waiver, which takes advantage of new opportunities under the new federal law, brings in a couple of billion of dollars a year for the next year years, and a portion of that helps our state budget situation. So any calculation of health reforms “costs” should include how it provides savings–not to mention benefits, such as more Californians covered, etc.
Those costs do not start this year, next year, or for a while. The state’s Medi-Cal program doesn’t get expanded until 2014, and 100% of the cost of the newly eligible population is federally funded for three years, until 2017. Only in 2017-18 does the state need to contribute, scaling up to 10% of the cost in 2020–and even then, the federal government picks up 90% of the cost.
As for the cost in 2020, the number is high, and assumes a significant Medicaid provider rate increase. While such an increase is highly desired given our very low rates currently in place, it’s not something required by the new federal law. California may want to revisit its rate structure, but that’s a longstanding issue only partially related to the federal law.
Beyond the grant opportunities in the health law, and the funds we secured through the Medicaid waiver, we should see the Affordable Care Act as an opportunity to maximize federal funds–as a benefit, not a burden.