Medi-Cal, the ACA, and the Fiscal Cliff…

In an interview Thursday, Governor Jerry Brown talked about the implementation of the Affordable Care Act, the Medicaid expansion, and

In an AP article by Juliet Williams, the Governor seems to imply, inaccurately, that the cost of the Medicaid expansion in Obamacare was $4 billion/year to the state.

In fact, $4 billion is roughly the total amount that the Medicaid expansion would cost state and federal governments–but the federal share of that is over 95%. In other words, health reform and the Medicaid expansion won’t cost California $4 billion–it provides the opportunity for California to bring in $4 billion in federal funds, into our struggling health care system and economy.

The cost to the state (even if you include costs of Californians currently eligible for coverage already) is around 5% of that amount. There is widespread agreement on the range: According the independent Legislative Analyst’s Office (LAO) and other studies, the actual potential costs (not included savings offsets, and including the costs of Californians already eligible) is in the low hundreds of millions of dollars a year.

The Governor seemed actually be talking about not the Affordable Care Act at all, but the federal budget negotiations in Washington, DC, and the threat that a final deal might shift some costs to states, through the Medicaid program. A revised version of the AP article and another article by Anthony York at the Los Angeles Times indicates this was the Governor’s actual concern.

But such cuts and cost-shifts are highly unlikely, for multiple reasons:
* There are *no* cuts to Medicaid in the sequestration cuts that are set to trigger in Janaury 2012 if there is no deal. Medicaid would be fullly protected.
* The Obama Administration has prioritized Medicaid to be protected in negotiations–partially because they want to give security to states who are considering taking up the Medicaid expansion under the Affordable Care Act. The Obama Administration has even explicitly disavowed Medicaid cut proposals made in previous years, especially those that would shift cost to states. In another interview, the Governor raised the possibility of the federal government reducing
* One of the compromise proposals discussed in recent weeks included $400 billion in “health” savings over 10 years. But it is widely understood that such effort at savings would focus on the much-better funded Medicare program, or on program savings like prescription drug purchasing, for which there is little or no implication to the state budget.
* While there is always appropriate concern that any federal budget agreement that includes Medicaid cuts simply pass costs onto states, we have seen no Medicaid cut proposals to date, and certainly not something at the magnitude suggested by Governor Brown.
* This has little to do with the Affordable Care Act and its implementation–these debates around Medicaid and Medicare funding would be going on regardless if the ACA existed or not.
* There’s no reason that the budget negotiations in Washington should impede or delay the urgent work in California to get ready for health reform, so we can maximize the benefit for California families.

The upshot is that the Governor’s comments have nothing to do with the actual cost–or overwhelming cost-benefit care–of moving forward quickly with implementation health reform or the Medi-Cal expansion.

Some background on Medicaid:
* Medicaid (called Medi-Cal in California) now covers 7.7 million Californians, largely children, parents, seniors and people with disabilities under the poverty level.
* Currently, the state pays 50% of the cost of Medi-Cal coverage, and gets a 1:1 match in federal funds.

* The Affordable Care Act requires states to expand coverage to all residents (excluding undocumented immigrants) up to around 133% of the poverty level. The majority of these are adults without children at home.
* The newly eligible will be funded by the federal government for 100% of the costs in the first three years (2014-2016), 95% in 2017, and ultimately 90% in 2020 and beyond–still an generous 9:1 match.

* Most of any “costs” attributed to the expansion are mostly the “eligible but unenrolled” children and parents who may newly enroll, who the state will still have to pay 50% for. These costs should really not be considered new spending–they can go a sign up tomorrow under current rules. There are estimates that some (but not all) of this group will enroll in 2014 with the marketing and mandates associated with the Affordable Care Act–but that is largely unrelated to the decision of whether the Medi-Cal program is expanded, or not.
* The LAO has estimated such costs–including enrolling those already eligible–as low hundreds of millions of dollars. Other estimates confirm this.

* There are no other costs associated with Obamacare. All subsidies provided in the new Exchange, Covered California, are 100% federally financed, now and into the future. Even the administration of the Exchange is entirely federally funded through grants–a pending proposal would provide $700 million in start-up funds through 2014, and then the Exchange would be self-suffcient afterwards. The state law prohibits the Exchange from ever using state general funds dollars.
* There is significant addition funding that has come from the Affordable Care Act to the states. California has received hundreds of millions of dollars in grants for public health efforts, community clinics, workforce development, rate review, consumer assistance, funding care for people with pre-existing conditions, and more.
* The ACA provides additional opportunities to maximize even more federal dollars, if California makes strategic investments. For example, restoring adult dental in Medi-Cal is not required, but would get the 1:1 match for existing eligible, and be 100% federally financed for newly-eligible recipients.
* These ACA expansions may yield savings to California that has yet to be fully quantified, for existing state programs and county services, and in other areas, such as corrections.

In short, the Medicaid expansion is a boon, not a burden, to the state of California. The state should take quick action to be ready for reform in early 2013, so Californians can start signing up in 9 short months in October 2013. We must work to maximize the benefit for Californians, and bring in as much federal dollars into our health system and economy.

Health Access California promotes quality, affordable health care for all Californians.