California dodged the Trumpcare bullet – but still faces higher costs

California dodged a multibillion-dollar fiscal bullet last week when Congress stalled an overhaul of the Affordable Care Act – but perhaps just temporarily.

State officials had estimated California would lose billions under the proposed American Health Care Act that would cap federal spending on Medi-Cal, the state’s health care system for the poor.

With the feds covering most costs, Medi-Cal’s enrollment has ballooned from 7.6 million to more than 14 million in the last five years, or more than a third of the state’s 39 million residents. The Republican alternative would have cost the budget up to $24.3 billion a year by 2027.

That said, the future of Medi-Cal remains very dicey because we still don’t know what administrative changes President Donald Trump might make in the Medicaid system (which, in part, funds Medi-Cal), short of congressional action. And even if nothing changes in the federal-state relationship, costs to California taxpayers will rise.

For one thing, the federal share of covering “optionals” brought into Medi-Cal by loosening income requirements will decline from an initial 100 percent down to 95 percent this year and 90 percent by 2020.

For another, Medi-Cal rolls are expected to continue growing. A Department of Health Services analysis of the stalled Republican plan projects that “expansion enrollees” will climb to 3.9 million by 2020 and 4.8 million by 2027. By then, total enrollment would be well over 15 million people.

Finally, medical costs generally will increase – and at some point force the state to raise its long-frozen payment rates for medical providers. Gov. Jerry Brown’s 2017-18 budget diverts revenues from a new voter-approved cigarette tax into covering the additional enrollees rather than a provider rate increase its sponsors envisioned.

State Medi-Cal spending has more than doubled in the last decade to $36 billion, second only to K-12 education as a share of the budget, and its rapid growth has adversely affected other budget demands, particularly higher education.

Meanwhile, federal Medi-Cal spending has more than tripled to $67 billion and total costs, just over $100 billion a year now, are expected to swell to more than $150 billion by 2027.

The continued escalation of Medi-Cal costs is not likely to affect Gov. Jerry Brown’s hopes of leaving the budget in the black when he departs in 2019, but it will be a headache for his successor, even if Congress and the Trump administration don’t cap federal Medicaid support.

The leading candidate for governor, Lt. Gov. Gavin Newsom, has endorsed the state’s adopting some form of universal health care coverage, but Brown, who understands the daunting economics of medicine, is skeptical.

“Where do you get the extra money?” Brown asked in a chat with reporters following his trip to Washington last week. “This is called ‘the unknown by means of the more unknown,’ ” he added. “In other words, you take a problem, and say ‘I am going to solve it by something that’s … a bigger problem,’ which makes no sense.”

 

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This story was originally published March 29, 2017 at 10:04 AM with the headline "California dodged the Trumpcare bullet – but still faces higher costs."