Like ships passing in the night, the Trump administration and the government of California are cruising in opposite directions on health-care spending.
In November, the Trump administration proposed a new regulation that would change the rules for financing the state’s share of costs for Medi-Cal, the safety-net health insurance program that now covers 13 million people, about a third of the state population.
The new regulation could potentially cost California $25 billion annually in lost federal health-care funding, according to the state Department of Finance.
The issue is whether California can pay for Medi-Cal services with revenue from taxes and fees — such as the tobacco tax, managed-care organization tax and hospital quality assurance fee — in order to draw down more federal matching dollars.
The combined taxes haul in about $9 billion annually for the state to spend on health services covered by Medi-Cal.
The extra matching funds from the federal government have fueled the expansion of Medi-Cal services and the number of people covered by it.
In January, California’s state Medicaid director sent a blistering letter to the Trump administration contending that the proposed Medicaid Fiscal Responsibility Regulation “would have devastating impacts to state programs and budgets” and “impose a multitude of new reporting requirements that are overly burdensome and duplicative.”
The federal government has already disallowed the state’s Managed Care Organization tax, which will cost the state over $1 billion in the fiscal year that begins July 1, 2021, and nearly $2 billion the following year.
At the same time, the Newsom administration is increasing health insurance spending.
On Jan. 1, the state’s new requirement for individuals to have health insurance or pay a steep penalty took effect, accompanied by a new entitlement of state health insurance subsidies.
The state program pays subsidies to individuals and families who earn up to 600 percent of the federal poverty level, too much to qualify for federal subsidies.
For 2020, individuals with one person in their household can earn up to $74,940. Families of six can earn up to $207,540. Monthly premium subsidies can total more than $1,000.
How much will this cost California taxpayers? It’s never clear how much an entitlement will cost, because once people find out they’re entitled to it, more people sign up.
Covered California has spent millions of dollars on advertising and outreach to inform uninsured residents about the mandate and the subsidies.
This year, Covered California sign-ups increased 41% over last year’s figures (which were lower due to the repeal of the federal penalty).
Covered California now says it wants to win over an estimated 280,000 Californians who are likely eligible for the new state subsidies but have opted to keep their “off-exchange” policies.
The state government, about to be cut off from an enhanced flow of federal health-care dollars, is spending money to persuade people who haven’t asked for subsidies that they should sign up for subsidies.
It’s fine to want to help people, but this is irresponsible over-spending that risks devastating the state budget during an economic downturn. The Legislature should put some boundaries in place to protect taxpayers.
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February 28, 2020 at 10:00PM
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California sells its citizens on health care - The Daily Breeze
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