Governor's Proposed Health Cuts Would Increase Ranks of Uninsured

Published on May 12, 2008 - 8:21:39 AM

By: California Budget Project

The Governor's Proposed 2008-09 Budget includes sharp reductions to state-funded health coverage programs that provide access to needed health services to more than 7 million Californians. The proposals are designed to decrease the number of Californians covered by Medi-Cal and Healthy Families, reduce access to services for those who keep their coverage, and increase the amounts families must pay. Altogether, the proposals would increase the number of uninsured Californians by more than half a million when fully implemented. The proposals would result in state savings of $1.1 billion, but also would cause California to forgo $1.2 billion in federal matching dollars that could help the state weather the current economic downturn.

Medi-Cal and Healthy Families: An Overview

Medi-Cal is California's version of Medicaid, a federal-state health insurance program for low-income individuals who cannot afford or who do not have access to private coverage. Medi-Cal provides health care services to 6.6 million low-income children, parents, seniors, and people with disabilities. Medi-Cal insures about one out of three children in California, covers the majority of people living with AIDS, and pays for 46 percent of all births in California. Medi-Cal also pays for two-thirds of all nursing home care, fi lls in gaps in Medicare coverage for low-income people who are elderly and people with disabilities, and is an important source of funding for public hospitals and other safety net providers. The state and federal governments each pay 50 percent of most Medi-Cal costs. Healthy Families provides comprehensive health coverage to children whose family incomes are somewhat above the maximum level for Medi-Cal. Healthy Families covers more than 850,000 children who have family incomes at or below 250 percent of the poverty line – $44,000 for a family of three in 2008 – are not eligible for Medi-Cal, and meet other requirements. Children enrolled in Healthy Families receive coverage through participating health, dental, and vision plans. The Managed Risk Medical Insurance Board (MRMIB) administers Healthy Families, which is jointly funded by the state and federal State Children's Health Insurance Program (SCHIP) dollars, with the federal government paying about two-thirds of the program's costs. Families with children enrolled in the program also pay monthly premiums of $4 to $15 per child, up to a maximum of $45 per family. In addition, families are responsible for copayments for many services, up to a maximum of $250 per year.

The Governor Would Shift Healthy Families Program Costs to Families

The Governor proposes a number of policy changes that could result in more than 50,000 children losing Healthy Families coverage, reduce access to needed health care services for children who are enrolled, and shift costs to families at a time when many families can least afford it due to the economic downturn. The proposed reductions would result in estimated state savings of $41.9 million, but California would lose an additional $76.1 million in federal funds – nearly twice the state savings.

- The Governor would require families to pay more for Healthy Families coverage. The maximum family premium contribution would increase from $27 per month to $48 per month – or from $324 to $576 annually (77.8 percent) – for families with incomes between 151 percent and 200 percent of the poverty line (Figure 1). The maximum family premium contribution would increase from $45 to $57 per month – or from $540 to $684 annually (26.7 percent) – for families with incomes between 201 percent and 250 percent of the poverty line.

Research suggests that more than 50,000 children could lose coverage because of families' higher costs. Experience from other states suggests that up to 10 percent of children affected by the higher premiums could lose coverage, although the Administration's estimated savings do not refl ect a drop in coverage.3 If the higher costs affected 600,000 children covered by Healthy Families in 2008-09 – those with family incomes above 150 percent of the poverty line – and 10 percent of them lost coverage, approximately 60,000 children would lose coverage as a result of the Governor's proposal.4 MRMIB staff has indicated that the Governor's proposal could result in an even higher share of children losing coverage.

Higher premium contributions also would shift more of the cost of coverage to families. The Administration estimates the proposal would shift $31.3 million in health care costs from the state and federal governments to families. The state would save $11.1 million, but also would lose $20.2 million in federal matching funds. Families with children in Healthy Families who already struggle to make ends meet due to their low incomes and the lagging economy would have to work harder to meet their basic needs, such as by reducing spending on food and housing.

- The Governor proposes to increase copayments. The Governor would increase copayments from $5 to $7.50 for nonpreventive services for families with incomes above 150 percent of the poverty line. Services that are deemed "preventive" – such as well-child visits, immunizations, and chronic care treatment – would be excluded. However, nonpreventive visits include many services – such as prescriptions, eye exams, and doctor visits to treat illnesses – that are necessary to maintain good health.

Higher copayments would deter families from seeking needed medical care for their children. The Administration estimates that families will use 1.25 percent fewer health care services. However, research from other states suggests a steeper decline. For example, when Utah increased copayments from $2 to $3 in its Medicaid program in 2003, the number of doctor visits per person enrolled declined by more than 10 percent.

Research suggests that families respond to higher health costs by cutting back both on effective and less effective medical care.7 Families are likely to cut back on both types of care because they are unable to determine which care is appropriate. As a result, many families likely will forgo medically necessary doctor visits and prescriptions due to the increased cost.

- The Governor proposes to reduce payments to managed care plans. The Governor would reduce the rates paid to health, dental, and vision plans that provide coverage through Healthy Families by 5 percent, which could make it harder for families to fi nd providers that accept Healthy Families coverage and potentially could leave families in some counties without access to Healthy Families providers.

Currently MRMIB contracts with 23 health plans to provide coverage in different parts of the state. In most counties, families can choose from more than one health plan, but in seven counties only one plan participates in Healthy Families. Lower rates could mean that some plans would no longer participate in the program – as suggested in public hearings by MRMIB – giving families less choice and potentially requiring them to change providers. If the health plan in counties with only one plan no longer participates, either MRMIB would have to fi nd another plan or access could be eliminated entirely in that county. In addition, lower rates could lead plans to restrict the providers with whom they contract in order to reduce their costs, further reducing access.

Full report: California Budget Project

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