Author: Lucien Wulsin

Better Understanding the Governor’s Medi-Cal Projected Budget for FY 2015-16 and 2016-17

The Medi-Cal budget for FY 2015-16 was estimated at $92 billion and the budget projected for 2016-17 is $85 billion or $7 billion less. The General Fund portion is estimated at $17.6 billion for 2015-16 and at $19 billion for FY 2016-17 or $1.4 billion more. The total reported budget does not include either local CPEs or the General Fund expenditures of other linked departments, such as Developmental Services and Social Services.

What are some of the big ticket items that we need to keep an eye on?

  1. Global Payment Program: $2.6 billion in FY 2015-16
  2. PRIME: $800 million annually
  3. Dental care augmentation in the waiver: $75 million annually
  4. Whole Person Care Pilots: $900 million in FY 2016-17
  5. Residential treatment under the waiver: $76 million in 2016-17
  6. Waiver savings from the federal match for designated state health programs: $37.5 million in General Fund annually
  7. Medicare Part B Premium Increases $205 million
  8. Capitated rate adjustment in 2016-17: $327 million
  9. Orkambi drug benefit for patients with cystic fibrosis: $39 million in FY 2016-17
  10. Managed care rates for the new ACA eligibles: $15 billion in 2015-16, declining by $2.6 billion in 2016-17
  11. Full scope coverage for undocumented children: $148 million in 2016-17
  12. Behavioral health treatments for children in regional centers: $102 million
  13. MCO tax: decline of $1.7 billion if not renewed
  14. Retroactive managed care rate adjustment: decline of $2.4 billion in 2016-17
  15. Funding for county administration of the ACA expansions: $170 million

Source: 2016-17 Department of Health Care Services: Governor’s Budget Highlights

ITUP Summary of the Governor’s Proposed State Budget for FY 2016-17

The Governor’s FY 2016-17 proposed state budget has been released. Notably, Governor Brown is proposing significant contributions into the State’s Rainy Day Fund and major payments against California’s existing debt. California is projected to run a $5 billion surplus this year, with a smaller $3 billion surplus next year.

This ITUP brief provides a brief overview of the current California economy and the budget appropriations proposed by the Governor.

Download the ITUP Summary of the Governor’s Proposed State Budget for FY 2016-17

Summary of the Terms and Conditions for California’s Section 1115 Waiver Renewal

California’s Section 1115 Waiver Renewal Terms and Conditions has six elements: managed care expansion; preventive dental care for children ($750 million); whole person care pilots ($1.5 billion); substance abuse treatments (Drug Medi-Cal); global budgets for public hospitals; and PRIME upgrades ($7.5 billion) in managed care readiness for county, UC, and district hospitals.  We highlight these six elements in the below summary.

Read the full summary: ITUP Summary of the Terms and Conditions for California’s Section 1115 Waiver Renewal

ITUP Summary of Health Components of the Governor’s Proposed State Budget for FY 2016-17

The Health and Human Services Agency proposed budget is $136 billion of which $34 billion is state General Fund.

Medi-Cal costs $85 billion; Developmental Services $6.4 billion; 1991-2 realignment $5.3 billion; 2011 realignment $4.9 billion, and IHSS (In Home Support Services) $10.4 billion. Medi-Cal’s General Fund costs are projected to grow 8% from $17.7 billion in the current year to $19.1 billion in the coming year.

The Medi-Cal caseload for 2016-17 is projected to be 13.5 million. It will have grown 8% in the current fiscal year and is expected to grow by 1.5% (62,000) persons in the coming year. Prior to the ACA, Medi-Cal was at 7.9 million enrollees. Covered California is projected to cover 1.5 million subscribers, for a total of 15 million Californians covered between the two programs.

California’s cost per Medi-Cal case is $6,108, ranking California 28th in the nation. Massachusetts has the highest cost per case at $11,091, and the national average is $6,502.

The costs of the “mandatory” expansion would be $4 billion, of which $1.8 billion is General Fund. The costs of the “optional” expansion would be $14.1 billion, of which $0.74 billion is General Fund, for 3.4 million new eligibles.

County indigent health savings for 2013-14 were $151 million less than expected and that amount will be rebated to the counties. County indigent health savings from the expansion are projected to be $742 million in 2015-16.

The budget includes $91 million ($32 million General Fund) for residential treatment services for substance use disorders.

The MCO tax of $1 billion is still in negotiations to make it “cost neutral” and would need approval by the state legislature. The revenues are linked to needed improvements in the IHSS (In Home Support Services) and Developmental Disabilities programs. It is also linked to the fiscal viability of Coordinated Care Initiative where the beneficiary opt-out rates are 69%.

The 2011 realignment is $7.5 billion, of which $1.2 billion is for the mental health account and $1.3 billion is for the behavioral health subaccount.

The full summary of the Governor’s budget proposal can be found at or


Payment and Delivery Systems Across California

As California’s health care landscape continues to evolve, one of the most significant areas where change can and is starting to occur is within the local health care delivery systems. There is a shift towards providing more integrated, better-coordinated care that emphasizes value, managed care, and better integrated health care systems. At the same time, some areas are experiencing health care workforce shortages, problems with subscriber access to primary and specialty care, and increased use of hospital emergency departments for services that are not emergencies.

ITUP conducted 11 regional workshops throughout California to learn and discuss first-hand the delivery system and payment reforms and challenges occurring in each region. This report is a summary of ITUP’s findings from these workgroups.

Download: Payment and Delivery System Reforms Across California

Open Enrollment: Lessons from the Field (UPDATED)

California has been one of the nation’s leaders in implementing the ACA. This paper looks at the enrollment successes and delivery systems performance reported in our regional workgroups in the San Diego, Orange, North Central, Bay Area, Central Coast and Central Valley counties. We look closely at what factors lead to great success in Medi-Cal and Covered California outreach and enrollment efforts, and also discuss ongoing challenges.

The paper has been updated with information collected from ITUP’s regional workgroups in the North Rural, Inland Empire and Los Angeles regions. We hope it will be useful to all our workgroup participants as we enter year three of Open Enrollment.

Download the updated report here: Open Enrollment: Lessons from the Field (Updated on January 4th)


Los Angeles County Enrollment Successes

ITUP has prepared a summary of enrollment successes in Los Angeles county. Here’s a brief overview:

  • Los Angeles reached 226% of anticipated enrollment for the first year’s open enrollment in Covered California
  • Community clinic visit compositions shifted dramatically:
    • Medi-Cal managed care patient visits increased by 57.6%
    • Medi-Cal fee for service patient visits increased by 6%
    • Privately insured visits (includes Covered California) increased by 3.8%
    • Uninsured patient visits fell by 28%.

The full summary can be read here: Los Angeles County Enrollment Successes

ITUP’s Summary of California Legislative Analyst’s Office Analysis of the 2016-17 Budget

The Legislative Analyst reports that California’s General Fund revenues for 2015-16 will exceed projections by $3.6 billion, which will in turn be deposited in the state’s Rainy Day fund under Proposition 2. The Analyst projects a surplus of $11.5 billion for fiscal year 2016-17, which would be deposited in the Fund for Economic Uncertainties and the Prop 2 Rainy Day fund as a buffer in the next economic downturn. The total reserves at the end of 2015-16 would be $7.8 billion and at the end of 2016-17 would be $11.5 billion.

The higher revenues in 2015-16 would be from higher income tax revenues partially offset by lower sales tax and corporate revenues than initially projected. Schools would see an increase of $739 million due to Prop 98, Medi-Cal spending would be $47 million less than budgeted, and CalWorks would be $90 million less than budgeted.

Unlike the recent past, Prop 98 school spending increases are being paid for mostly by the increases in property tax revenues generated by the run up in home values from recent home sales.

For 2016-17, General Fund revenues will grow by 5.9% (6.9 billion); the three largest taxes (income tax, sales tax, and corporate tax) will grow by 3%.

For 2016-17, General Fund spending will increase by 5.1% ($5.9 billion). General Fund spending on schools required by Prop 98 will be $770 million, and the increased state contributions to the State Teachers Retirement Fund will be $533 million. General Fund spending for Medi-Cal will grow by $2.5 billion or 14%. The largest contributor will be the $1 billion decline in revenues associated with the expiration of the MCO tax.

Overall, the LAO concludes the state is far better positioned to weather a future economic slowdown than it has been in many years.

Some details on the economy. personal incomes will grow by 6% and CPI (i.e. inflation) will grow by 2.5%. Unemployment rates will decline to 5.25%, and population growth will be 0.8%. Factors that could slow future economic growth: aging population, results of the 2016 elections, changes in monetary policy, slow downs in the growth of China, climate change and energy costs, slow downs in the Bay Area’s growth in incomes, and housing prices.

Job growth is highly variable by region. the Bay Area is at the top at close to 5%; Kern is at the bottom at -0.2%. Unemployment ranges from 3-4% in the Bay Area to over 8% in Fresno and Bakersfield.

The sales tax increase under Prop 30 will expire in 2016-17 while the increase in income tax rates for high income Californians will expire in 2018. The growth in taxes from the income tax and the sales tax will slow in 2016-17, but the revenues from the corporate income tax will grow. As a result the transfers into the Budget Stabilization Account (Rainy Day Fund) will slow.

School funding ($67.8 billion in 2015-16 budget). Prop 98 governs school funding with an interlocking set of tests that include the growth in school attendance, growth in personal incomes, the growth in local property taxes, and the growth in state General Fund revenues. The growth in school attendance is negative (13,000 less in 2014-15 and 21,000 less in 2015-16); the growth in state General Fund revenues is slowed by both the expiration of Prop 30 and the stock market. So the minimum guarantee of state General Funds allocated for schools will grow by only 1.7% annually over the next four years. Local property taxes have increased (about 6%) due to rising property values and the amount dedicated to schools has also increased due to the dissolution of local redevelopment authorities. Overall, there will be an increase of $3.5 billion (5.1%) in 2016-17 available for schools that will be divided between one-time needs and ongoing needs. Over the next four years, Prop 98 guarantees for school spending will grow by 2.9%, of which 5.6% annually will be from local property taxes and 1.7% from the state General Fund.

Health and Human Services ($31.7 billion State General Fund in 2015-16 Budget). HHS includes programs such as Medi-Cal, IHSS ($2.8 billion), DDS ($3.5 billion), TANF (CalWorks), Child Care, and SSI ($2.8 billion) among others. General Fund spending will increase from $31.7 billion in 2015-16, to $33.8 billion in 2016-17, and to $38.2 billion in 2019-20 – increases of 5% annually. Among these programs, General Fund spending on CalWorks will decline by 32% (from $588 million to $127 million), SSI will grow on average by 1.3% annually, and Medi-Cal by 7.6% annually. Enrollment in many programs is expected to decline as the job market continues to improve and minimum wages increase.

Medi-Cal. General Fund spending will grow by 14% to $20.5 billion in 2016-17. The prime contributor is the expiration of the MCO tax ($1.1 billion). Other contributors are health care inflation, the expiration of the CHIP match for children and the initiation of the state match for those newly eligible under the ACA. Enrollment growth, which has reached 12.6 million, will start to decline as counties complete redeterminations, and more people are employed and have job-based coverage. LAO projects that family enrollment will decline by 3.5% (260,000) in 2016-17 due to redeterminations and by another 50,000 in 2017-18. It expects coverage of the newly eligible (optional expansion) will peak at 3 million in 2016-17 and then decline due to redeterminations. LAO projects that capitation rates will grow by 1.5% in 2016-17, and by 4% in 2017-18. LAO also notes that plans were overpaid for the new eligibles as utilization rates were much lower than projected and these rates are being decreased. The state General Fund cost of the match for the newly eligible will be $500 million in 2016-17 growing to $1.5 billion in 2019-20. The enhanced CHIP match of 88% is expected to expire in 2017 and would add state General Fund costs of $600 million annually beginning in September 2017.


This summary can be downloaded here.



Impressions from the Covered California Bus Tour — the Central Valley and Central Coast

The first stop was the Fresno Call Center, one of the three California call centers, where about 450 people work during the Open Enrollment. They handle about 14,000 calls a day from all over the state; they peak at over 20,000 calls. Five of the staff travelled on the bus with us – incredibly knowledgeable, hard working and compassionate individuals with great phone voices.

Fresno Call Center

Fresno stop

Fresno Call Center

Fresno Call Center


Next stop was Salinas where Pete Delgado, the CEO of the Salinas Valley Memorial Hospital hosted us. The hospital had just opened a rural health center in the underserved community of

Salinas Valley Memorial Hospital

Salinas Valley Memorial Hospital

Gonzalez and affiliated with a local multi-specialty physicians group to better serve the newly insured in their region. Their uncompensated care to the uninsured has dropped sharply and their

care to the newly insured has increased dramatically due to the ACA. At Salinas Valley Memorial Hospital, several thousand Covered California members have received care, including:

  • 2,574 incidents of general outpatient care.
  • 893 treatments for broken bones and trauma.
  • 141 incidents of care for pneumonia, heart attacks, strokes and kidney infections.
  • 138 incidents of maternal health and childbirth.
  • 51 incidents of pediatric care (including in neonatal intensive care units).
  • 29 incidents of gastrointestinal and urological surgeries.



David, a new subscriber, was able to enroll his family in coverage costing less than $300 a month – a huge savings from the $1500 a month he was paying before getting coverage under the Affordable Care Act.


David new subscriber

David, new subscriber

Next stop was a Community Health Center, Salud Para la Gente in Watsonville, where local enrollment in the Affordable Care Act had reduced the uninsured rate in the local clinic from over 30% to 9%. The clinic was being expanded to meet the medical needs of the local community; and local high school students were getting important training and exposure through the clinic for future jobs in providing health care for their community.


Watsonville stop

Watsonville stop

Salud Para la Gente in Watsonville

Community Health Center, Salud Para la Gente in Watsonville

My final stop on the day’s tour was the PHP Insurance agency in San Jose where enthusiastic young health insurance agents were serving the Vietnamese and Chinese communities in the Silicon Valley. The young agents sometimes stay in the office ‘til well after midnight processing the unprecedented numbers of new applicants now eligible for coverage under the ACA. I asked one young agent “why so many of their clients had no health coverage” and learned that they had temp jobs with no health benefits in local assembly plants.

San Jose stop at PHP

San Jose stop at PHP


PHP Insurance agency in San Jose

PHP Insurance agency in San Jose


Today’s Challenges in Trying To Get to Health Information Transparency For Patients

ITUP’s report, Today’s Challenges in Trying To Get to Health Information Transparency For Patients, takes a close look at the challenges patients face in trying to get information on the costs and outcomes of their medical procedures. Legislatures, public programs, and the private insurance market have all taken steps to improve transparency in the health care market. However, there is still much more that needs to be done in order to truly know the cost of care and its value based on quality outcomes. This paper examines the uses and goals of transparency, what current requirements exists for transparency at the state and national levels, how private insurers have responded to the call for greater transparency, the challenges that lie ahead, and what needs to occur before true cost and quality transparency for patients can be achieved in the healthcare system.

ITUP’s report, Today’s Challenges in Trying To Get to Health Information Transparency For Patients, can be downloaded for free here.