Repeal & Replace Watch

California Estimates It Ultimately Would Lose $24B Annually Under GOP Health Plan

California would lose $24.3 billion annually in federal funding by 2027 for low-income health coverage under the current Republican plan to replace the Affordable Care Act, according to a state analysis released Wednesday.

The bill, up for a vote in the House on Thursday, represents a “massive and significant fiscal shift” from the federal to state governments by setting caps on Medicaid spending, reducing the amount of money available for new enrollees and eliminating other funding for hospitals and Planned Parenthood, the analysis said.

“It’s really devastating,” said Mari Cantwell, state Medicaid director with the California Department of Health Care Services, who co-wrote the analysis. “It raises some serious questions about whether we can continue to operate the program the way we do today.”

Her boss, department director Jennifer Kent, went further:  “It’s challenging to see how it would not … jeopardize the entire program.”

The analysis, based on internal cost, utilization and enrollment data, was done by the health care services department and the Department of Finance and was shared with California’s congressional delegation.

In 2020 alone, the analysis estimated, the state would lose $6 billion; by 2027, the annual loss would reach $24.3 billion.

Kent said that when faced with shortfalls in the past, the state has made cuts to optional benefits such as adult dental care. The state also could set lower provider rates, or restrict who is eligible. “These are all decisions that California and other states would have to grapple with in the future if this were to be adopted as it is proposed today,” she said.

The impact would vary, of course, depending on the state’s fiscal health.

The Republican bill, called the American Health Care Act, would dramatically change funding for the Medicaid program, known as Medi-Cal in California. Since its inception, Medicaid funding to states has been open-ended, based on need. Under the new bill, federal money would be capped either through block grants or fixed per-capita amounts.

The Affordable Care Act allowed states to expand their Medicaid programs in 2014 to low-income childless adults, and the federal government is paying nearly all the costs for those new beneficiaries. The new bill would scale the expansion back.

Sally Pipes, president of the San Francisco-based Pacific Research Institute, said the expansion of Medicaid was too costly and should have never been included in the ACA. “These programs are not sustainable, unless you are going to tremendously increase taxes on the middle class,” she said.

Pipes said Medicaid funding should be converted from entitlements into block grants and states should be left to decide how to structure their programs. “More and more people are thinking they are entitled to this and entitled to that and these programs are expensive and not efficient,” she said.

The cuts to Medi-Cal and the restructuring of the program will be better for the California economy, Pipes said.

Meanwhile, Gov. Jerry Brown, who was attending an anniversary celebration for the Affordable Care Act in Washington, D.C., had sharp words Wednesday for President Donald Trump and what he called his “fake health care bill.”

“In California, we’re not talking about a few thousand – we’re talking about millions of real people getting hurt – getting diseases that will not be cured – having heart attacks, not being able to go to a hospital or get a doctor,” the governor said in his prepared remarks.

California was among the most aggressive states in the nation in implementing the Affordable Care Act, and the majority of new enrollees came through Medi-Cal.

Medi-Cal now provides coverage to 13.5 million low-income residents, about half of California’s children and a third of the adults. About 3.7 million of those people became newly eligible for the publicly funded health coverage through the Medcaid expansion. That helped reduce the state’s uninsurance rate from 17 percent in 2013 to about 7 percent in 2016, according to the UC Berkeley Labor Center for Education and Research.

The Medicaid program is funded jointly by California and the federal government and provides health, dental, mental health, long-term care and other services.

The bill could put hospitals, clinics and other providers in a tenuous financial position by forcing them to live within the cost limits while at the same time seeing more uninsured patients, the analysis said.

The California Hospital Association did its own analysis and concluded that at least three million people would lose coverage under the GOP plan, and hospitals could see their bad debt and charity care increase by $3 billion per year.

“As more people lose coverage, they are still going to have health issues, and the hospital is the only place in the health care system required under federal law to provide care,” said Jan Emerson-Shea, vice president of external affairs for the association.

Health officials estimated that Medi-Cal costs would exceed per-capita caps by nearly $680 million in 2020, with the gap growing to $5.28 billion by 2027. That spending limit could have a “devastating and chilling effect” on any increases in provider payments or plan rates, according to the analysis.

The state also expects an additional $3.3 billion in costs in 2020, growing to $13 billion by 2027, because of a change that reduces federal funds for new enrollees and for people who have a break in coverage. The bill would require certain beneficiaries to renew coverage every six months rather than once a year, which state officials say will cause many to lose their coverage.

According to the analysis, the state would face additional losses from other federal cuts, including to a program that pays for in-home care for elderly and disabled residents. In addition, the proposed freeze on federal funding to organizations that provide abortions would make the state responsible for $400 million in payments to Planned Parenthood, which serves more than 600,000 people in Medi-Cal and a state family planning program.

A new study by UC Berkeley’s Labor Center released Wednesday also warned of dramatic cuts in federal Medi-Cal funding that would threaten coverage for low-income adults. The center estimated that the state would have to increase spending by $10 billion each year to maintain coverage for those who became eligible for coverage under the Affordable Care Act. Without that funding, the researchers wrote, 3.7 million people could lose coverage by 2027.

Ken Jacobs, chair of the center, said the Republican plan would also result in job losses because of reduced federal funding. Jacobs said both the center’s and the state’s calculations point to a significant financial impact on California if the GOP bill becomes law.

“It’s hard to see where else in the state budget this could be pulled from,” he said. “This would be a very big hit on the budget, the health system and the economy of California. … And the implications for people’s health are serious.”

 

 

This story was updated.

This story was produced by Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.

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