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Holes Forming in Health Care Safety Net for California Children

Editor’s note: In response to feedback from the California Managed Risk Medical Insurance Board, which administers Healthy Families, several changes were made to this story after it was first published. The changes clarify some of the background concerning MRMIB regulations and expand on results of a study, “Stability and Churning in Medi-Cal and Healthy Families,” by the Child Policy Research Center.

Loopholes are developing in California’s safety net, and physicians and children’s health advocates are worried poor kids will be the first to start falling through.

The state agency that runs Healthy Families, the state’s low-cost subsidized health insurance program, has taken steps that could result in some children losing coverage, and Gov. Arnold Schwarzenegger (R) proposes requiring parents to prove kids’ eligibility for Medi-Cal every three months instead of once a year.

“Those changes, if they go through, will make it harder for probably the most vulnerable population in the state,” said Jay Lee — a family practice physician, assistant clinical professor at UC-Irvine and member of the California Academy of Family Physicians, which opposes the proposed changes to Medi-Cal.

Healthy Families, California’s version of the State Children’s Health Insurance Program, provides health coverage for residents whose incomes are too high to qualify for Medi-Cal but still inadequate to buy private health insurance coverage. The program covers about 830,000 children in families with incomes between 100% and 250% of the federal poverty level, about $21,200 to $53,000 for a family of four in 2008. Families pay a monthly premium of $4 to $15 per child with a maximum of $45 for all children in the family.

In general, Californians whose incomes do not exceed 100% of the poverty level qualify for Medi-Cal, California’s Medicaid program. Higher-income individuals qualify for the program in some circumstances.

Healthy Families Proposals

The state Managed Risk Medical Insurance Board, which administers Healthy Families, has taken steps toward changes critics say might interrupt or curtail coverage for kids.

The first change is the elimination of the Healthy Families-to-Medi-Cal “bridge,” which allowed children moving from Healthy Families to Medi-Cal to continue to receive Healthy Families benefits for two months while their Medi-Cal paperwork is processed.

Frequently, kids in this situation are part of a family experiencing some kind of financial hardship — loss of a job, house foreclosure, medical expenses.

The second change is to create a waiting list and “disenrollment” procedures for Healthy Families. By way of explaining the need for these changes, MRMIB documents say “there are no regulations in place that allow the board to ensure that expenditures do not exceed funding.”

Under this second change, if there’s not enough money to take on new kids, the program would put them on a waiting list. If there’s not enough money to take care of kids already in the program, the new rules would allow MRMIB to “disenroll” them. MRMIB approved this policy change in November 2007.

The authority to create a waiting list, previously in MRMIB regulations for many years, was deleted by the board. MRMIB wants to reinstate this authority to be in a position to comply with the law, which requires the board to manage the Healthy Families program within its available funds.

Setting the Stage

These proposals come at the same time Medi-Cal is threatened with federal and state funding cutbacks. President Bush proposes several cuts in the federal Medicaid program, and Schwarzenegger proposes reducing Medi-Cal reimbursements to California doctors and hospitals by 10%.

“The 10% cut is probably the thing on most people’s minds right now, but these other things will have an impact, too,” Lee said.

“These impending changes magnify the potential negative effect the proposed cuts might have. They’ll make an already difficult situation worse, whether the 10% cuts go through or not,” Lee said.

Medi-Cal beneficiaries are finding it increasingly difficult to find doctors to treat them. Many California physicians, who say low reimbursement rates make Medi-Cal a bad business decision, are not accepting new Medi-Cal beneficiaries, leaving the state or calling it quits altogether.

“If there hasn’t already been an exodus, there may be one soon,” Lee said.

Push From Above

The Healthy Families proposals came in response to policy decisions above and beyond MRMIB’s purview, and both changes were enacted before the state’s current budget shortfall prompted the governor to call for 10% cuts in Medi-Cal reimbursements.

The elimination of the bridge program was mandated by the California Legislature last year. The waiting list and disenrollment proposal arose last November after President Bush’s veto of legislation to expand SCHIP and the ensuing stalemate in Congress over the reauthorization of the program.

“Both of these pending regulations were before the (MRMIB) board and passed by the board before any of the state budget issues became apparent,” said MRMIB spokesman Ron Spingarn.

Opposition Mounts

Regardless of the motivation for the proposals, doctors groups are among those leading the opposition against the changes.

In a letter warning physicians to keep track of patients’ status, the California Medical Association wrote, “CMA is concerned that eliminating the bridge program while simultaneously cutting Medi-Cal rates by 10% will make it even more difficult for poor children to get the care they need.”

In a letter to MRMIB, the California Academy of Family Physicians stated that the organization “understands the need to create regulations to ensure that … expenditures do not exceed available funding. We have concerns, however, regarding the proposed regulations and their effect on continuity of care, particularly patients with serious and chronic conditions.”

The academy urged “a more rational approach to the elimination of services, such as prioritizing those children with more severe illnesses or chronic conditions. Children who require ongoing care (including those with severe diseases and chronic conditions) should be the last patients to have their coverage eliminated,” the academy wrote.

The academy also called for MRMIB to:

  • Notify disenrolled families in writing with lists of nearby low- or no-cost medical services;
  • Inform health care providers of patients’ disenrollment;
  • Clearly define “sufficient funds” and “insufficient funds”; and
  • Suggest alternative coverage plans to Healthy Families beneficiaries dropped from the program.

MRMIB might rule on the changes at its next meeting, May 21 in Sacramento.

New Ammunition for Critics

Critics of the proposed changes got new ammunition in a report released last week showing that health care costs rise after children experience a gap in their health coverage. The longer the gap, the higher the cost afterward, according to the report, “Stability and Churning in Medi-Cal and Healthy Families,” by the Child Policy Research Center. The report was funded by the California Endowment, a not-for-profit health foundation.

“The data clearly show that a more frequent renewal requirement would result in more children losing their health coverage, which causes lapses in health care that result in higher medical services costs once the child is re-enrolled,” said the report’s author, Gerry Fairbrother.

“This erodes any short-term savings to Medi-Cal,” Fairbrother added.

The report’s findings suggest overall costs to government and taxpayers would increase as a result of the proposed Healthy Families changes. The report’s findings indicate that any interruption or cutback in coverage for children has the effect of curtailing early, less costly treatment of illness and disease and ends up sending patients to critical care facilities that cost more.

Schwarzenegger’s proposal to require quarterly renewals for Medi-Cal eligibility was rejected last week by the Assembly Budget Subcommittee. The plan could resurface when the governor releases his revised budget proposal on May 14.

Taking the Long View

Robert Phillips, senior program officer for the California Endowment, urged policymakers — at MRMIB, in the Schwarzenegger administration and the Legislature — to take the long view.

“Ultimately, these are questions of policy goals,” Phillips said. “If the policy goal is to make sure children have health coverage and are taken care of, then the most important question when considering these new policies is, ‘Will it cause permanent harm to this program and to the kids now and in the future?'”

Citing difficulties in recouping losses after California’s Access for Infants and Mothers program encountered budget-driven policy changes, Phillips urged regulators to tread lightly and carefully when considering new rules.

“In MRMIB’s defense, I understand the pressure they feel from the fiduciary responsibility of running this program. It’s actually wise to begin to consider these things,” Phillips said.

Phillips said, “But that being said, I think there are two reasons to rethink what’s going on here: One, I think they’re maybe jumping out a little ahead of the issue, trying to establish policy before it’s needed. Two — once you create a permanent authority, it’s very difficult to go back.”

Related Topics

Health Care Costs Insight Insurance Medi-Cal