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UC Study Finds Medi-Cal Expansion Would Have Minimal Cost to State while Greatly Expanding Coverage

The results of a new study from the UC Berkeley Labor Center and the UCLA Health Policy Center estimate that the Medi-Cal expansion to 138% of federal poverty through the Affordable Care Act (ACA) would be at minimal cost to the State of California. In addition, the expansion would extend eligibility for the program to more than 1.4 million Californians, and between 750,000 and 900,000 of this population are expected to enroll in coverage between 2014 and 2019. Additionally, between 240,000 and 510,000 Californians who are currently eligible for the program, but not enrolled, are expected to enroll by 2019. These individuals are not currently enrolled for a variety of reasons, including lack of awareness, difficulties with enrollment processes, or unwillingness.  The UC researchers expect these individuals to enroll largely as a result of the ACA’s requirement to purchase insurance, simplified eligibility and enrollment rules and processes, annual reenrollment processes that are more streamlined and automated, and enhanced statewide outreach and education efforts.

These sizable increases in eligibility and enrollment would largely be financed by the federal government. The costs of the newly eligible beneficiaries in the expansion would be fully federally financed from 2014 to 2016, with the federal share of spending for this group declining gradually to 90% by 2020 and remaining at that level thereafter. In fact, the study estimates that 85% or more of additional Medi-Cal spending between 2014 and 2019 would be federal. Between $2.1 and $3.5 billion in new federal funds are estimated to come to California in 2014, and that sum is expected to grow to between $3.4 and $4.5 billion in 2019.

The study also found that in the initial years of ACA implementation from 2014 forward, most of the new state Medi-Cal spending will occur regardless of whether or not the expansion takes place. These costs will mostly result from increased enrollment of those who are currently eligible because the State will be responsible for 50% of the costs of this population. New state General Fund spending for Medi-Cal will be between $188 and $453 million in 2014 and slightly higher in 2015-2016. That amount will rise to between $443 and $788 million in 2019, and this estimate includes the cost of both the newly eligible and the newly enrolled presently eligible individuals.

Significantly, new state Medi-Cal spending in the eligibility expansion scenario would be mostly offset by increased state tax revenue and savings from other state programs. These savings would be greatly reduced without the expansion. The large sums of new federal spending in California through an expanded program would generate tax revenue for the state General Fund, and the State could see considerable savings in other program areas, such as mental health and state prisons, as a consequence of extending health coverage to more of the uninsured. The projected amount of these savings would be sufficient to offset the $46 to $381 million in General Fund spending for the newly eligible beneficiaries through 2019.

The authors of the study also highlight the likelihood that the Medi-Cal expansion will have many substantial benefits for Californians and the California economy. Prior research has demonstrated that Medicaid coverage is associated with decreased mortality and increased use of preventive care, and health coverage generally is associated with improved educational outcomes and worker productivity. Moreover, the Medi-Cal expansion would make funding more stable for health care providers who care for the uninsured and low-income communities, and it would create jobs in the state.

 

To view the full report:  http://laborcenter.berkeley.edu/healthcare/medi-cal_expansion.shtml

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