How Medi-Cal’s Fiscal Balancing Act Could Soon Become More Challenging

Many Californians know that Medi-Cal is our state’s health coverage program for residents with low incomes, including children, people with disabilities, and workers who may not get affordable health insurance through their jobs.

What many Californians don’t realize — call it Medi-Cal’s best-kept secret — is that even with the program’s rising enrollment and costs in recent years, Medi-Cal’s financial impact on our state’s General Fund (the account that receives most state tax revenues) has been relatively small. This matters because General Fund dollars support an array of vital services in addition to Medi-Cal, many of which — such as income supports and subsidized childcare for low-income working families — also promote Californians’ health and well-being. If Medi-Cal had claimed a larger share of General Fund revenues over the past decade, fewer state dollars would have been available to support other critical public supports and services.

This article first looks at how our state has expanded Medi-Cal to meet the health care needs of one in three Californians while minimizing the program’s impact on the General Fund. It then highlights key Medi-Cal financing issues on the horizon that could hamper state policymakers’ efforts to continue balancing Medi-Cal’s funding needs with those of other important public services. This article is adapted from a presentation I gave at the February 25 Medi-Cal Explained briefing hosted by the California Health Care Foundation.

As Medi-Cal Enrollment Doubled, State General Fund Support Rose Modestly

Medi-Cal, California’s Medicaid program, has seen enrollment and expenditures grow substantially since 2007–08 (PDF), the last fiscal year before the Great Recession sent California’s economy and state budget into a tailspin. Enrollment for the current fiscal year (2018–19) is expected to be 13.2 million, about double the 2007–08 level. Total Medi-Cal spending is anticipated to reach $98.5 billion, roughly $53 billion (114%) higher than in 2007–08. (All 2007–08 expenditures are adjusted for inflation.)

State General Fund dollars accounted for only $3 billion of this $53 billion increase in Medi-Cal spending between 2007–08 and 2018–19. This relatively small jump in General Fund support for Medi-Cal is remarkable in light of periodic concerns that the program is putting the squeeze on California’s General Fund budget. Instead, Medi-Cal’s spending growth has largely been supported with non-General Fund sources of revenue. Specifically, the remainder of the $53 billion spending increase between 2007–08 and 2018–19 — around $50 billion — came from federal funds ($35.3 billion) and other non-federal funds, such as state taxes paid by managed care organizations (MCOs) and fees paid by hospitals ($14.2 billion). Since 2007–08, federal funding for Medi-Cal has increased by 129%, while other non-federal funds have grown by more than 1,600%.

The substantial increase in non-General Fund support for Medi-Cal has been driven by several factors, including:

  • More generous federal cost-sharing. California and the federal government equally split the cost of services for most Medi-Cal enrollees. However, the Affordable Care Act (ACA) included more generous federal cost-sharing for certain beneficiaries. The federal government pays 93% of the cost for the Medi-Cal expansion population, which consists of low-income non-elderly adults who became newly eligible in 2014. In addition, federal dollars fund 88% of the cost for children who are enrolled in Medi-Cal as part of the Children’s Health Insurance Program (CHIP). Like a see-saw, higher federal cost-sharing leads to lower state cost-sharing, freeing up state General Fund dollars.
  • Creative financing. California has tapped into alternative in-state financing sources to support Medi-Cal, including local matching funds (such as from counties and public hospital systems), provider fees, and a tax on MCOs. These alternative sources of financing allow California to draw down more federal funding for Medi-Cal while minimizing the impact on the General Fund.
  • The 2016 state tobacco tax increase. Proposition 56 raised the state’s excise tax on cigarettes by $2 per pack and triggered an equivalent increase in the state tax on other tobacco products. Medi-Cal’s share of these revenues — roughly $1 billion per year — is primarily used to boost payments to doctors and other Medi-Cal providers, relieving the need for the General Fund to support such rate increases.

What about General Fund support for Medi-Cal as a percentage of the total General Fund budget? Medi-Cal’s share of the General Fund has increased by just seven-tenths of a percentage point over the past decade — from 13.63% in 2007–08 to an estimated 14.35% in 2018–19. Yes, Medi-Cal receives a slightly larger slice of the General Fund “pie” than it did 2007–08. But this increase has been modest given the substantial benefit experienced by millions of Californians newly covered by the program. As a result, more state dollars have been available for other public services and systems than if General Fund support for Medi-Cal had risen at a much faster pace.

Medi-Cal’s Big Financing Issues Create Uncertainty for Medi-Cal and the General Fund

Over the past decade, state policymakers have deftly balanced the needs of a growing Medi-Cal program with those of other public services and systems. However, Medi-Cal faces a number of near-term financing issues that could make this balancing act more challenging in the coming years. These financing issues include:

  • Reductions in federal cost-sharing. The federal government is scheduled to reduce its share of costs for CHIP-funded children as well as for adults enrolled in Medi-Cal starting in 2014 under the ACA. The state’s share of CHIP costs will increase in two steps, rising from 12% to 23.5% on October 1, 2019, and then to 35% on October 1, 2020. For the expansion population, the state’s share of cost will rise from 7% to 10% on January 1, 2020, where it will remain unless revised by Congress. Upon full implementation, these changes will increase annual state General Fund spending on Medi-Cal by more than $1 billion compared to 2018–19, according to estimates from the state’s nonpartisan Legislative Analyst’s Office (LAO).
  • The pending expiration of the MCO tax. California’s MCO tax expires on June 30, and Governor Gavin Newsom is not proposing to extend it. If the MCO tax expires, California would forgo a net annual General Fund benefit of $1.5 billion, based on the current structure of the MCO tax package. These dollars could help to pay for a number of state policy advances, including efforts to move California closer to universal health coverage. The governor “has not laid out a convincing rationale” for declining to seek an extension of the MCO tax, according to the LAO. If the tax were allowed to expire, annual state General Fund costs for Medi-Cal would ultimately increase by well over $1 billion but without any additional benefit to the Medi-Cal program. Instead, state General Fund dollars would simply replace lost MCO tax revenues in order to keep the program whole.
  • The pending expiration of two major federal waivers. California’s current Section 1915(b) waiver expires on July 1, 2020. Under this waiver, counties are allowed to deviate from standard Medicaid rules and provide or arrange for a broad array of “specialty mental health services” for eligible Medi-Cal beneficiaries. In addition, California’s Section 1115 Medi-Cal 2020 waiver expires at the end of 2020. Under this waiver, the federal government is providing the state with billions of dollars to help improve access to care as well as to transform how care is delivered. Will the Trump administration agree to renew these waivers without significantly reducing federal funding or imposing new requirements that California would find objectionable? Time will tell.
  • The next recession. Medi-Cal could face spending cuts when the next recession comes and policymakers seek ways to close budget shortfalls. Fortunately, California has been building up its reserves. The state expects to have more than $15 billion in its constitutional reserve, the Budget Stabilization Account, by the end of 2019–20. In addition, Governor Newsom wants to add $700 million to the state’s new Safety Net Reserve for Medi-Cal and CalWORKs. (The balance now is $200 million.) These reserves will reduce the need for state budget cuts during the next downturn, although Medi-Cal would not be guaranteed a specific share of the funds. State reserves will be crucial to shoring up Medi-Cal’s budget because the federal government may do little to help states pay for their rising Medicaid costs when the next recession arrives.

One of the biggest challenges — and opportunities — that California lawmakers and the governor face each year is allocating the state’s limited General Fund revenues among many vital priorities. The financing issues that Medi-Cal is facing — and how these issues are resolved — will help to determine whether policymakers can continue improving the Medi-Cal program while also ensuring that other vital public services are adequately funded.




Abortion debate surfaces in California governor’s race

Abortion debate surfaces in California governor’s race

The nation’s divide over abortion rights is expected to be a telltale flashpoint between the two candidates for California governor who embrace starkly different views on the issue, even though protections for legal access to abortion have been cemented into state law for decades.

Staunchly anti-abortion and endorsed by organizations opposed to abortion, Republican John Cox argued in 2006 that cases of rape and incest should be no exception to a ban on abortion. Democrat Gavin Newsom wants to increase funding and accessibility for abortion and family planning and is strongly backed by Planned Parenthood, a frequent target of the Republican-led Congress and the Trump administration.

“I think anybody who has a rape and incest exception to abortion really hasn’t thought it through. Killing the baby is not going to absolve the crime of rape,” Cox said at the Conservative Political Action Conference in Washington 12 years before he finished in second place in the California primary.

Cox made the comment shortly before announcing an unsuccessful campaign for president. He also said he was “100% and proudly pro-life and I offer no apologies for it.”

With President Trump’s pending appointment to the U.S. Supreme Court rekindling the nation’s longstanding political clash over the issue, advocates on both sides foresee the court shifting to the right and a possible overturning of Roe vs. Wade, the landmark 1973 decision that guaranteed a nationwide right to abortion. Though just speculation ahead of having an actual nominee and confirmation hearings, a change in abortion rights probably would be tossed back into the mire of state politics.

“Depending on who Trump nominates, this issue starts to become an advantage to Democrats,” said Chapman University political scientist Lori Cox Han. “For John Cox, there’s really not any advantage at all.”
Though Cox in 2017 trumpeted his endorsement by the California Pro-Life Council and made his opposition to abortion clear, the issue has not been a major focal point of his campaign for governor. Instead, Cox has portrayed himself more as the conservative antidote to the policies of California Democrats that he says have wrought record poverty and homelessness and unaffordable housing and saddled residents with high taxes, including the recent increase in gas taxes.
It’s unlikely that Newsom or his supporters will let Cox’s past statements on abortion go unmentioned.
Cox has cited his Catholicism and also said his views on abortion were shaped after learning that his father “took advantage” of his mother before marrying her. The couple later divorced.
“She didn’t have the choice of an abortion because it wasn’t legal. If it had been, it might have been an easy decision to terminate me,” Cox wrote in “Politics, Inc.,” a political position paper that was published in 2006. “She didn’t, thank God, and so was born my absolute opposition to abortion on demand.”
Cox, a wealthy businessman from Rancho Santa Fe, also is a strong opponent of the death penalty.
“His personal positions on the death penalty and abortion are well known, but as Governor, he would abide by the law,” Cox campaign spokesman Matt Shupe said in an emailed statement to The Times.
Amy Everitt, director for NARAL Pro-Choice California, said the differences between the two candidates for governor who will be on the November ballot have never been more clear.
“John Cox, who’s never held elected office, has been consistent in one way, and that is as an anti-choice leader,” she said. “His values lie far outside mainstream California values.”
She said the group considers Newsom as someone who has been a strong supporter of abortion rights throughout his political career.
California’s lieutenant governor, formerly the mayor of San Francisco, boasted during the gubernatorial primary campaign about his efforts to raise money for Planned Parenthood to increase access to abortion and other healthcare services for women.

Newsom also has called for the state to increase Medi-Cal reimbursement rates to healthcare providers, including Planned Parenthood, and to provide a permanent $100-million allocation for reproductive healthcare from the money raised by Proposition 56, the tobacco tax increase approved by voters in 2016.

Newsom said California’s next governor needs to be a leader in defending abortion rights throughout the country.
“There’s a deliberative effort to roll back reproductive rights in the country, to attack women, to demean women,” Newsom said during a candidate forum sponsored by NARAL Pro-Choice California in January.
“You need leaders to step into that debate. You need to call it out. You need to explain it. You need to expose it.”
Organizers said Cox was invited to the NARAL event, but that he did not respond. It ultimately featured only Democratic candidates.
California first legalized abortion in 1967, years before the Roe vs. Wade decision, and those protections have since been expanded and solidified through legislative statute and rulings by the California Supreme Court. Those protections include the right for funding for abortions provided to women covered by the Medi-Cal program and the right of minors to obtain an abortion without parental consent.
Still, a California governor who opposes abortion possesses enough executive authority to, at the very least, disrupt access, said Susan Berke Fogel, director of the reproductive health and justice programs at the National Health Law Program in Los Angeles. The governor could appoint an anti-abortion director to the California Health and Human Services Agency and cut funding for state programs that help pay for abortions and provide access to birth control, she said.
The governor also appoints judges, including to the state Supreme Court, and could attempt to reshape the judiciary and subsequent legal decisions regarding abortion rights in California.

Decades ago, Republican Gov. George Deukmejian made several cuts to the state’s family-planning programs. Fogel doubts a similar move would survive a legal challenge, but that wouldn’t stop an activist anti-abortion governor from trying, and “it would be disruptive,” Fogel said.

Unlike the U.S. Constitution, California’s Constitution includes a clear-cut right to privacy, a legal foundation protecting a woman’s right to choose to have a child or a legal abortion.

Wynette Sills, director of the anti-abortion organization Californians for Life, agrees with Fogel that even if Roe vs. Wade was overturned, abortion would still be legal in the state.
Still, electing Cox to be the next governor would help prevent the Legislature from making abortion even more prevalent in California. Cox, for example, could use his veto power to reject Senate Bill 320, pending legislation that would require health clinics on University of California and California State University campuses to provide drugs prescribed for medication abortion by 2022.

“Reasonable citizens of California will agree that our state Legislature is to the far extreme in promoting abortion,” Sills said. “We are seeking a reasonable and critical balance to the aggressive abortion actions we’re seeing at the Capitol, and John Cox would provide that balance.”

Most Californians consider abortion to be a settled issue in the state, Han said. For years, they have rejected every attempt to chip away as those protections, including voting against statewide initiatives to require greater parental consent for minors seeking abortions.

A 2017 poll by the Public Policy Institute of California found that more than 70% of Californians believe government should not interfere with a woman’s access to abortion, compared with the 27% who wanted the government to pass more restrictions. That view was held across the political spectrum, including by a majority of Republicans, and the overall findings were consistent in surveys going back to 2000.


Universal health care is doable for far less cost – but at a political price

Image result for Universal health care is doable for far less cost – but at a political price

When the Legislature reconvenes and the campaigns for governor heat up next year, Californians will be hearing a lot – and a lot of hot air – about universal health care.

Making California the first state to guarantee health care for every resident has become a touchstone issue – and a divisive one – for the state’s dominant Democrats.

The state Assembly will take up – or possibly ignore – a universal health care bill that the Senate passed this year.


Assembly Speaker Anthony Rendon applied brakes to Senate Bill 562 in June, saying it “was sent to the Assembly woefully incomplete and has “potentially fatal flaws…including the fact it does not address many serious issues, such as financing, delivery of care (and) cost controls.”

That stance generated a torrent of personal invective from the measure’s advocates in the Democratic Party’s left – or Berniecrat – wing, driven by the California Nurses Association.

There’s a similar divide among the Democratic candidates for governor, with Lt. Gov. Gavin Newsom the most insistent advocate of expanding coverage.

Like Rendon, Newsom’s chief rivals, former Los Angeles Mayor Antonio Villaraigosa and Treasurer John Chiang, endorse universal health care in principle, but are leery about how it would be financed.

A Senate Appropriations Committee analysis pegs costs of universal coverage at $400 billion a year, but suggests that half could be covered by redirection of existing federal, state and local government health care spending.

It added that “about $200 billion in additional taxes would be needed to pay for the remainder,” but also noted that half or more of that burden could be offset by eliminating direct health care costs now borne by consumers and their employers.

To put that in perspective, even $100 billion in new taxes would be the equivalent of a one-third increase in the $300 billion a year now levied by state and local governments.

In theory – one advanced by advocates – the two-thirds “supermajorities” in the Legislature and the governor could levy new taxes of that magnitude.

In practice, however, even if the supermajorities survive the recent spate of sexual harassment resignations and next year’s elections, there’s virtually no chance of such a vote.

Rendon knows that passing universal health care without a system of paying for it would invite scorn from the media and the public, but passing it with immense new taxes would put some of his Democratic members in political jeopardy.

If, however, Democrats are serious about having universal health care insurance there’s another, perhaps easier, way to do it.

A new report from the federal government’s Centers for Disease Control says that with the advent of Obamacare, which expands the Medi-Cal program serving the poor and offers subsidies for others, California’s medically uninsured population has dropped from 17 percent in 2013 to 6.8 percent in 2017.

That means that there are about 2.7 million Californians still lacking some form of medical coverage, although many, if not most, receive rudimentary, albeit uncompensated, care in charity clinics and hospital emergency rooms.

As many as half of them would be eligible for government-paid or -subsidized care, and covering them is potentially doable under existing programs, according to Covered California, the state’s Obamacare implementation agency.

The remainder, mostly, are maybe a million-plus undocumented immigrant adults who are, by law, ineligible.

It’s not necessary for the state to seize control of California’s entire medical care system if the real bottom line goal is covering those undocumented immigrants. It could be done for about $10 billion a year, which is a lot less than $100 billion.

However, advocates would have to publicly acknowledge that covering them is what this conflict is all about and take whatever political heat it generates.

It’s a test of whether universal coverage is a real goal, or merely political symbolism.

California healthcare advocates rally against Trump

California Secretary of State Alex Padilla the Democratic National Convention in Philadelphia on Wednesday, July 27, 2016.

They backed Obamacare, and they’re not letting it go without a fight.

The federal healthcare overhaul could be one of the first casualties of President-Elect Donald Trump, who has joined the Republicans controlling Congress in vowing to dismantle the law. Since winning the presidency Trump has softened his stance somewhat, speaking favorably about popular provisions that prohibit insurers from turning away people with pre-existing conditions and allow people to stay on their parents’ plans until they turn 26.

Still, Trump’s election has California healthcare advocates on high alert, not to mention the state’s new U.S. senator. California could forfeit billions of federal dollars that support Medi-Cal, the insurance program for poor Californians, and subsidize private insurance purchases. They’re worried about the fate of Medicare, a program that Speaker Paul Ryan, R-Wisconsin, said has “serious problems because of Obamacare” and is “going broke.”

 A rally today in Los Angeles offers the latest example of a policy rift between California and Washington, D.C., with elected officials joining healthcare workers and patients for an event billed as a push to “protect our health care.” Among the expected speakers are Senate Health Committee chair Ed Hernandez, D-West Covina, Los Angeles County Health Agency Director Mitch Katz, and California Secretary of State Alex Padilla, whose public denunciations of Trump have become a recurring feature.

BY THE NUMBERS: 13.6 million is the number of Californians enrolled in Medi-Cal as of June 2016, the most recent data available, a net increase of about 800,000 from a year earlier and about double Medi-Cal enrollment a decade ago. The total includes almost 3.4 million people who became eligible for Medi-Cal under the state’s optional Obamacare expansion. The Legislative Analyst’s Office last week reported that Medi-Cal caseload should grow by about 100,000 annually through mid-2021 among families, children and people covered by ACA expansion. Enrollment among senior citizens and people with disabilities will grow by an estimated 50,000.

Kickbacks, Bribes, and the Horrifying Truth Behind California’s Largest Medical Fraud Scandal

L to R: Michael Drobot, Tom Calderon, and Ron Calderon

Long Beach hospital owner Michael Drobot spent decades bilking the state of millions for unnecessary surgeries with allegedly bogus hardware, and plenty of doctors went along with him – See more at: