CA Budget Can Benefit from Health Care Reform—and Vice Versa

CA Budget Can Benefit from Health Care Reform—and Vice Versa

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California has made significant progress in implementing health care reform. However, Governor Brown’s proposed deep cuts to such public health programs as Medi-Cal and Healthy Families would set us back hugely.

The budget proposal includes funds for 17 additional staff people to help implement federal health care reform, a critical priority for the future of the state’s entire health care system. But new reforms must build on the strong foundation of Medi-Cal and Healthy Families. If the proposals to slash current programs are adopted, the state would be in a weaker position to expand health coverage.

Federal health care reform builds on the state’s existing health system infrastructure. In 2014, the reform law expands Medi-Cal to include all citizens up to 133 percent of the federal poverty level. This expansion is completely federally funded for the first three years, and after that the state will contribute no more than 10 percent of the funds.

In 2015, federal funding for the Healthy Families Program would increase from a 65 percent match rate to a whopping 88 percent match rate. In other words, the federal government could help California provide better opportunities for health to our citizens, and pick up more of the tab as well.

In fact, a recent study shows that reduced employer spending on health insurance would lead to $4.8 billion in higher employee wages for Californians (“Projecting the Impact of the Affordable Care Act on California,” Health Affairs, Long & Gruber). This is just one of the ways that health care reform can boost the state budget through increased revenues.

It’s also clear that state budget decisions can either hurt or help California’s health care reform implementation efforts. The Governor’s proposals released on Monday would significantly cut Medi-Cal and Healthy Families – for example, increasing premiums for children enrolled in Healthy Families by over 80 percent, and cutting reimbursements for doctors in Medi-Cal by 10 percent. These cuts would weaken the underlying programs and make it more difficult to enroll new Californians.

Several years of similar budget cuts to Medi-Cal and Healthy Families have taken their toll. There are 43,000 fewer children enrolled in Healthy Families now than in July 2009 – and this during a recession when one would expect enrollment to increase due to parental job loss. Overall, nearly two-thirds of California’s uninsured children are already eligible for public programs but not yet enrolled. Continuing to cut Medi-Cal and Healthy Families will only make it harder for the state to find and enroll children in newly expanded and reformed programs.

In addition, some of the proposals would create an unfair situation where the state would help provide benefits for moderate-income children through the health benefit exchange that their lower-income counterparts do not have. For example, vision benefits would be eliminated for children in Healthy Families, but are included in the new Health Benefit Exchange for children from higher income families.

Improvements to the private health care market – such as reviewing health plan rates, prohibiting health plans from denying coverage to children due to pre-existing conditions and providing new coverage options for young adults – continue to move the state forward on health care reform implementation. But we could be doing so much more! The existing public programs are the building blocks for robust implementation of health care reform, and the key to bringing in substantial federal funds to help the state budget.

Kelly Hardy is director of health policy for Children Now. She has been selected as a 2011 Woodhull Fellow.