Obamacare could provide California big financial safety net

March 9, 2013

By Katy Grimes

SACRAMENTO — Californa’s desire to be the first state to do everything has never been more evident now that Obamacare has been signed into law.

And California lawmakers haven’t let any grass grow under their feet since passage of the Affordable Care Act in 2010. In January, Gov. Jerry Brown issued a proclamation to convene an extraordinary session of the Legislature to continue the work of implementing the federal Patient Protection and Affordable Care Act.

Obamacare cheat sheet

Under the Patient Protection and Affordable Care Act, also known as federal health care reform, or Obamacare, the state has the option to expand its Medi-Cal Program to cover over one million low–income adults who are currently ineligible.

Unlike some states, which have refused to implement the Obamacare health exchanges, California has embraced the federal health care plan and already began the process of implementation.

This means beginning January 1, 2014, the federal government will pay all of the costs associated with the Medi-Cal expansion, and do this for three years. Beginning January 1, 2017, the federal government will begin to decrease its portion, over a three–year period, until California pays for 10 percent of the expansion and the federal government pays the remaining 90 percent.

That 10 percent portion of the cost could run as much as $1.4 billion annually, according to the Legislative Analyst’s Office.

Currently the counties have the fiscal and programmatic responsibility for the care for the low–income adult population that would be covered by the expansion. The LAO says a statewide program could greatly alleviate the cost to the counties, although the Department of Finance would likely make downward adjustments to counties’ overall realignment payments.

Latest bill

In January, Sen. Ed Hernandez, D–West Covina, Chairman of the Senate Health Committee, introduced two pieces of legislation to comply with the federal Affordable Care Act, which requires the expansion of Medi-Cal coverage. In California this means 1.6 million previously ineligible Californians will be covered. Thursday, the Senate passed SB X1 1, the first of the two pieces of legislation. “This will expand services for the vulnerable population,” Hernandez explained to colleagues in the Senate during debate.

However, Senate Republicans are far more concerned about the economic impacts to the state should the federal government fail to make good on funding.

“This is an attempt to implement Obamacare in California,” said Sen. Jim Nielsen, R-Gerber. “It is not worthy of support today. It is a work in progress, and not ready yet,” Nielsen said of SB X1 1. “It takes California beyond what the federal government requires.”

Nielsen warned that California needs to be very careful with the controls of who is covered under the expanded Medi-Cal coverage. “There needs to be some very hard means testing,” said Nielsen.

Nielsen is concerned for very good reason.

SB X1 1 would usher in the expansion of the state’s Medi-Cal coverage allowed under the Affordable Care Act to low-income adults currently ineligible. This includes those with incomes at or below 133 percent of the federal poverty level, or $14,856 in 2012. This will result in more than 1.6 million new Medi-Cal eligible Californians.

“I have concern for the fiscal impact on the State of California and our treasury,” Sen. Ted Gaines, R-Roseville, also said during Senate debate.

While Obamacare requires mandatory expansion of Medicaid in every state, California is going beyond federal law and implementing Medi-Cal, California’s version of federal Medicaid, to a previously ineligible group – childless, able-bodied adults under 65.

While the Affordable Care Act also required this when it was passed, the U.S. Supreme Court, in its ruling on Obamacare, ruled that this is an option for states.

But California is going to enact this option by changing the income calculation of these childless, able-bodied adults, allowing them to become eligible. The Medi-Cal income calculation used to include an asset test. The California Legislature passed a bill last year removing any asset test.

Eligibility changes

SB X1 1 would also establish a defined health benefits package for enrollees, including the essential health benefits contained in the Affordable Care Act, and enacted into law in California as part of a bill authored by Senator Hernandez last year.  SB X1 1 also includes provisions simplifying the eligibility, enrollment and renewal process for Medi-Cal.

Be wary of the word “simplification.”

This “simplification” of eligibility is complex and wrought with issues. Currently, self-attestation is not allowed. Federal law prohibits citizenship status, and states have flexibility to utilize self-attestation information. Hernandez’s bills require the use of self-attestation – meaning Medi-Cal applicants and renewals won’t have to prove income or even residency, at least on the front end.

Some in the state say this will instead be verified on the back end, but benefits may already be used and paid by the state before verification is even started. There is no doubt this is a program integrity issue.

Design-as-you-go

California is clearly using a design-as-you-go process for adding the 1.6 million additional recipients to Medi-Cal.

Currently, Medi–Cal provides health care services to over eight million qualified low–income persons—including families with children, pregnant women, seniors, and persons with disabilities.

The LAO estimates this expansion “would likely reduce the total amount of uncompensated health care provided in California. In addition to the significant fiscal effects on counties, many health care providers — including private hospitals, clinics and physicians — often provide care for which they receive no direct reimbursement.”

Gov. Jerry Brown

The Governor supports the Medi-Cal expansion in California. However, and to his credit, Brown has offered amendments to the current legislation allowing for “tie-back” language. In case the federal government is unable to pay its portion of Medi-Cal, Brown wants to make sure California is not tied to the mandatory programs. This has some Democrats bristling, but it appears the governor is adamant about having this option available for future administrations.

It’s a “heads I win, tails you lose” case.