Issues to Watch in 2015: Expanding Health Care Coverage to Undocumented Immigrants in California

More than 2 million undocumented immigrants live in California. They make significant contributions to our state, comprising nearly one-tenth of the workforce and paying well over $2 billion in state and local taxes each year. But when it comes to health care, these Californians face a substantial hurdle: federal law prevents them from accessing coverage under the Affordable Care Act (ACA), either through Medicaid (Medi-Cal in California) or through the new health insurance marketplace set up under the ACA (Covered California). While undocumented residents may get health care coverage through an employer, most do not. Those who lack coverage may have no regular source of health care and may face huge out-of-pocket costs for any care they do receive.

Expanding health care coverage to undocumented immigrants in California will be a key policy issue in 2015. This post highlights four key facets of the state and federal policy landscape that will help determine whether California makes significant progress toward achieving this goal in the near future. These are: (1) state Senator Ricardo Lara’s Senate Bill 4, (2) President Obama’s recent executive actions on immigration, (3) California’s current policy regarding Medi-Cal coverage for undocumented immigrants, and (4) the anticipated renewal of California’s “Section 1115” Medicaid waiver, the current version of which expires in late 2015.

Senate Bill 4: A Framework for Expanding Health Care Coverage to California’s Undocumented Residents

Last year, Democratic state Senator Ricardo Lara introduced SB 1005, starting a conversation about expanding health care coverage to all of the state’s undocumented residents. While that initial effort stalled, Senator Lara’s new bill — SB 4 — will rekindle the debate in 2015. SB 4 is intended to provide health care coverage to undocumented residents by allowing those with low incomes to enroll in Medi-Cal and those with somewhat higher incomes to buy coverage — with state financial assistance — through a new, state-run health insurance marketplace that would mirror Covered California.

SB 4 would advance a worthy policy goal. But by expanding the state’s role in providing health care coverage to undocumented immigrants, this legislation would also result in new state costs. These costs will be estimated and scrutinized as part of the legislative hearing process that will get under way in early 2015. Senator Lara has been working to identify revenues that could offset some or all of the new state costs, thereby minimizing the impact of this policy change on the state budget.

President Obama’s Recent Executive Actions on Immigration

Senator Lara introduced SB 4 in the wake of a significant change in federal policy regarding undocumented immigrants. In November, President Obama announced a new federal policy allowing several million undocumented immigrants to apply to temporarily remain in the US — and work legally — without fear of deportation. The President’s order will primarily benefit an estimated 4 million parents who have lived in the US for more than five years and whose children are US citizens or lawful permanent residents. In addition, a few hundred thousand undocumented immigrants who came to the US as children will benefit from the expansion of the Deferred Action for Childhood Arrivals (DACA) program, which the President created in 2012.

In short, due to the President’s recent actions, well over 4 million people throughout the US will soon be able to apply to the federal government for “deferred action.” Those who qualify would be considered lawfully present in the US for a three-year period. It’s not known how many undocumented immigrants living in California will be eligible to apply for deferred action. The number could be substantial, possibly in the range of 1 million. However, it’s unlikely that all of the immigrants who are eligible to apply would do so, or that all of those who do apply would in fact be granted deferred action status.

The President’s Actions Provide a Pathway to State-Funded Medi-Cal Coverage for Some Undocumented Immigrants

The President’s recent actions on immigration — combined with the state’s current policy on Medi-Cal coverage for undocumented immigrants — will help to move California closer to the goal of providing affordable health care coverage to undocumented residents.

Here’s how:

California allows certain undocumented immigrants — including those who qualify for deferred action under federal immigration rules — to sign up for Medi-Cal so long as they otherwise meet the program’s income eligibility guidelines. For adults, this means their income can’t be higher than 138 percent of the federal poverty line (just over $16,000 per year for an individual). Because of this state policy, low-income residents who qualify for deferred action under the President’s original DACA program – the one created back in 2012 — are already eligible for Medi-Cal. By extension, low-income Californians who qualify for work permits and temporary relief from deportation under the President’s new initiatives should also be eligible for Medi-Cal. In other words, even if SB 4 never becomes law, a large number of undocumented immigrants — those who qualify for deferred action under the new federal rules — could soon begin enrolling in Medi-Cal based solely on current state policy.

Yet, while California’s policy is unambiguous, it’s not clear how state policymakers will respond in the wake of the President’s actions. A top aide to Governor Brown recently said that the Governor is evaluating the impact of the new federal immigration rules. This same aide noted that expanding Medi-Cal coverage to undocumented residents who qualify for deferred action under these new federal policies would “cost money.” This is true. In fact, California pays the full cost of Medi-Cal coverage for such immigrants because federal dollars can’t be used for this purpose. Federal Medicaid funds may be used only to provide emergency and pregnancy-related services (i.e., limited and episodic care) to this population.

Clearly, California has a compelling fiscal incentive for encouraging the federal government to rethink its restrictive approach to funding health care for undocumented immigrants. A favorable outcome — from the state’s perspective — would reduce California’s costs for expanding health care coverage to undocumented residents as well as help to move the state closer to achieving the coverage goals envisioned in SB 4.

State Officials Should Explore Whether Federal Funds Could Be Used to Cover a Larger Number of Undocumented Immigrants Under a “Section 1115” Waiver

The impending expiration — in October 2015 — of California’s Section 1115 Medicaid waiver provides an opportunity for state officials to engage their federal counterparts on the issue of health care coverage for undocumented immigrants. (Section 1115 waivers allow states, with federal permission and for a limited time, to “test new approaches in Medicaid that differ from federal program rules.”) The Governor wants a new waiver and plans to submit a formal proposal to the Obama Administration in early 2015, kicking off what’s likely to be several months of negotiations. State officials have floated a number of ideas for the waiver that focus largely on changing how health care services are delivered and paid for through Medi-Cal, with the goals of improving health outcomes and controlling costs.

So far, undocumented immigrants don’t figure into the state’s Section 1115 waiver ideas. But they should. After all, what could be more critical to transforming how health care is delivered and funded than rethinking the fragmented and incomplete “system” through which undocumented immigrants currently access health care services in California? As noted above, the federal government already shares — with the state — the cost of providing limited and episodic health care to some undocumented residents through Medi-Cal, including services delivered in costly emergency rooms. Without a doubt, these federal dollars could be used more efficiently and effectively if they instead supported coordinated care that emphasized prevention and the appropriate management of chronic health conditions.

This is where the Section 1115 waiver comes in. In theory, current federal policies that prevent federal dollars from being used to support health care coverage for undocumented immigrants could potentially be modified as part of a waiver agreement, at least for the duration of a new waiver (typically five years). If this occurred, California’s cost of providing Medi-Cal coverage to undocumented residents would drop substantially. This is because the federal government would begin sharing costs that the state would otherwise pay for on its own. (Under this scenario, federal costs for undocumented immigrants would not increase compared to current law. Instead, federal Medicaid dollars that support limited and episodic care for undocumented immigrants would be redirected to fund health care coverage.) Moreover, expanding health care coverage for undocumented immigrants with federal financial assistance would help move California closer to meeting Governor Brown’s goals for a new Section 1115 waiver: improving health outcomes and controlling costs.

Conclusion

Lawmakers and advocates will pursue multiple options in 2015 to advance — and pay for — a worthy goal: extending health care coverage to undocumented residents who work, pay taxes, and put down roots in the Golden State. In light of the President’s recent actions on immigration, the anticipated renewal of the state’s Section 1115 Medicaid waiver provides a key opportunity to help move California closer to creating a health care system that works for everyone.