Governor Brown Releases Budget, Commits to Medicaid Expansion


Thursday, January 10, 2013


* Budget projects zero deficit, no health care cuts, for the first time in many years

* But no major restorations proposed in health & human services, even after years of tough cuts

* Medicaid expansion under ACA would expand coverage to 1.4 million Californians; and bring in $2-4 billion in federal funds into our health system.

* Counties asked to shoulder cost responsibility for Medicaid expansion of newly-eligible

* To start county negotiations, alternatives include realignment, or county-based expansion

* Advocates concerned about maintaining funds to “safety-net” providers needed after 2014

* Health and consumer advocates: Californiacan and should do more to seize the opportunities and federal funds available under health reform to improve our health system–including Medi-Cal outreach & enrollment, benefits, and provider rates.

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Today, Governor Jerry Brown endorsed California’s implementation of the Affordable Care Act, and made the historic commitment for the state to go ahead with the ACA’s Medi-Cal expansion to 1.4 million low-income Californians, bringing in $2-4 billion in federal funds into our health system

THE BUDGET: The Governor made that commitment as part of his release of his proposed 2013-14 budget. For the first time in many years, the budget did not have a projected deficit. Also for the first time in many years, the budget did not proposed multi-billion cuts to health care or other vital services.

NO RESTORATIONS: But at a time when our economy is still struggling, there were no proposed restorations to health and human services to provide help to California families and our economic recovery. Such health and human services took severe cuts in recent years. In just the past few budgets, California has lowered provider payments in Medi-Cal to some of the lowest rates in the nation, eliminated benefits like dental coverage for three million adults in Medi-Cal, and shut down whole programs like Healthy Families and Adult Day Health Care.

This budget continues with those cuts in place.

SPECIFIC HEALTH CHANGES: The budget explicitly proposes the following health policy changes:

* Continues the provider rate cuts approved in 2011, for a savings of $488.4 million; and implementing unspecified “efficiencies” in Medi-Cal managed care for a savings of $135 million.

* Extends the “hospital fee,” which currently sunsets in Dec 2013 for savings of $310 million; and reauthorizes the fee on Medicaid managed care plans (MCO) that expired last year, for a savings of $85.9 million in 2012-13 and $217.3 million in 2013-14.

* Delays the timeline for the Coordinated Care Initiative (CCI) changes adopted in 2012, so that the transition for seniors and people with disabilities into managed care goes from March 2013 to September 2013, with adjusted savings of $170.7 million in 2013-14 and $523.3 million in out years.

*Proposes open enrollment and “lock-in” for those in Medi-Cal for a savings of $1 million.

MEDICAID EXPANSION: But beyond health care specifics, the biggest news was the Medicaid expansion, which would would cover all legally residing Californians under 138% of the poverty level, or around $15,000 in annual income for an individual. The current Medi-Cal program covers children, parents, seniors, and people with disabilities, but not adults without kids, and it mostly doesn’t go over 100% of the poverty level.

Governor Brown has committed to the federal health reform and the historic expansion of Medicaid coverage to around a million Californians, and bringing in potentially over 4 billion in federal dollars into our health system, according to a University of California report released on Monday. California has led in implementing “Obamacare”—implementing key consumer protections early, being first to set up an Exchange where people can easily and affordably buy coverage, and implementing an early expansion of Medicaid to over a half-million Californians—the largest in the nation by a factor of over ten.

THE GOVERNOR’S COMMITMENT AS A “GOOD PARTNER”: Governor Brown stated at the press conference unveiling his budget

“We have a very complex challenge facing us with the Affordable Care Act.  We are going along with the program. We are going to implement the federal health care [law], but we will move cautiously…We will work with the counties, work with the legislature..”


We are committed to expanding Medi-Cal, we are committed to bringing more people into the health care system but there are big costs out there, big unknowns. So we will move carefully, but we will move with commitment. Because I believe that people do need decent healthcare. And I think what President Obama did was historic, it was heroic, and I will do everything I can to be a good partner to making sure his plan works.”

NEGOTIATING WITH COUNTIES: The Governor’s budget frames the Medicaid expansion in two ways:

* The budget acknowledges that several hundred thousand Californians will get coverage in 2014 and beyond who were already eligible for coverage, but will get enrolled because of the simplification of eligibility rules that make it easier to get on and stay on Medi-Cal and marketing of new coverage options at the state and federal level. Since these already-eligible are covered by the existing 50-50 formula of state-federal costs, the proposed budget allocates $350 million in state costs in 2013-14 for this part of the Medi-Cal coverage expansion.

* For the newly-eligible in Medi-Cal, the Governor seeks that the counties share in the responsibility (and the potential costs) of this expansion. While there are no such costs in the first three years, the ACA does ask states for a 5% of the cost of coverage in 2017, and 10% in 2020 and beyond–still a 9:1 match. As stated in the budget, the counties have historically provided (wildly varying) levels of care to the indigent and uninsured, and “implementing health reform will require an assessment of how much funding currently spent by counties should be redirected to pay for the shift in health care costs to the state.” The budget starts a negotiation with the counties by proposing two alternatives:

      * A state-based expansion would offer a “standardized, statewide benefit package comparable to to that available today in Medi-Cal,” with long-term care services separated under different eligibility rules. Under this proposal, the state would seek savings (in the hundreds of millions of dollars) by having counties accept responsibility of a similar-sized human service program, under a new round of realignment.
       * A county-based expansion would leave the responsibility for the “medically indigent adults” at the county level, and thus the expansion there to, using the current Low-Income Health Programs (LIHPs). LIHPs are currently in 51 of 58 counties (with two more possibly adding on shortly), with varying levels of eligibility and enrollment. All counties would need to start and scale up their LIHPs to eligibility and benefits standards under the ACA, and this proposal would need federal waivers.

As stated by Administration officials on Thursday, these proposals are meant to start negotiations with counties and other stakeholders. The main concern by counties and advocates is that there are the resources and funds left for public hospitals and other safety-net health providers that we still be needed. Even if California is successful in reducing the number of uninsured by two-thirds, they point out that California will still have several million uninsured, and all of us will need a safety-net that survives and thrives.

MORE WE CAN DO: While pleased with the announcement about the Medi-Cal expansion, consumer and health advocates argued California can and should go further, and make smart targeted investments in health care than more fully take advantage of the historic opportunities of the Affordable Care Act, bring in even more federal matching funds and improve our health system and economy. The legislature is like to investigate opportunities to invest in Medi-Cal outreach and enrollment, benefits (like Denti-Cal), and provider rates, which will yield huge benefits to our health system, and more federal matching funds than previously available.

The budget proposal sets the stage both for the budget discussion, but also a special session on health care, which is expected to be called by the end of the month.

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