Health Care: Well Worth the Investment

In April, Governor Schwarzenegger sent an encouraging signal when he announced that he would direct his staff to begin implementing health care reform as required by the new federal law. Specifically, the Governor announced plans to pursue federal dollars in order to provide coverage to individuals with pre-existing conditions, as well as ensure private insurers follow new market rules, such as allowing children to stay on their parents’ policies until age 26.

These are important components of the Patient Protection and Affordable Care Act and will provide significant and immediate relief to Californians who need health coverage. But notably absent from the Governor’s remarks was any reference to the expansion of the Medi-Cal Program, which is one of the largest coverage components of the federal reform law. In order for California to draw down the maximum amount of federal funds available under health care reform, it is important for the Administration – both the current and incoming – to begin planning for the expansion of Medi-Cal.

Beginning in January 2014, Californians with incomes of less than 133 percent of the federal poverty line will be eligible for Medi-Cal. That expansion, combined with the additional requirement that US residents obtain and maintain health coverage, will expand eligibility for Medi-Cal by nearly 2 million Californians by 2019. By comparison, 7.1 million Californians are currently enrolled in Medi-Cal. The benefits to California are significant, as federal funds will pay for 100 percent of the cost of coverage for newly eligible adults for the first three years. Beginning in 2020, federal funds will pay 90 percent of program costs.

In total, we estimate that if California begins to aggressively enroll eligible Californians in Medi-Cal this year, it will cost the state $5.4 billion from 2010 through 2019, assuming current Medi-Cal provider reimbursement rates. While that may sound like a lot, it is less than 1 percent of anticipated state General Fund spending over the same period. In return, the state will receive an estimated $32.5 billion in federal funds. That means that for every additional dollar the state invests in coverage over the coming years, it will receive $6 from the federal government – a hefty return. The next governor should be embracing this opportunity given state officials’ frequent efforts to retrieve more federal funds for California.

Finally, the benefits to the state accrue beyond mere dollars and cents. More people with coverage, seeking preventive care, and tending to their chronic illnesses will help keep Californians healthy and productive – and that in itself is a worthy investment.

— Hanh Kim Quach

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