Cost of Insuring the Undocumented: $700 Million?

May 21, 2014

The Senate Appropriations Committee held a hearing earlier this week on SB 1005, State Senator Ricardo Lara’s “Health for All” bill that would provide full scope Medi-Cal to the undocumented and create a shadow Exchange with premium assistance provided by the State. Estimates of the cost of the bill to the State were presented and the proposal was passed 7-0 and referred to the Suspense File.

While numerous questions remain about the costs of the proposal, the best estimate is $700 million per year or more. Medi-Cal coverage for the undocumented would cost between $500 and $900 annually, assuming relatively low enrollment and low per member per month costs, and a benefit structure that essentially wraps around emergency Medi-Cal, half of which is paid for by federal dollars. Subsidies that would go to undocumented individuals with incomes over 138% of the federal poverty level would total between $200 and $400 million, with only 20 to 40% of those eligible enrolling. It would cost an additional $20 to $40 million to administer the shadow Exchange.

Some of the costs of the proposal would be offset by savings and increased revenues, including $85 to $110 million in taxes on managed care plans and unknown savings under realignment, alleviating the counties’ obligation to care for the indigent.

After the Committee’s meeting, the UC Berkeley Labor Center released their own estimates of the cost of providing full-scope Medi-Cal to the undocumented: $353 to $369 million in net increases in 2015 and $424 to $436 million in 2019. Enrollment in the new Medi-Cal eligibility category would be 690,000 to 730,000 individuals initially, growing to up to 790,000 in 2019, about half of who would be eligible. The estimated health realignment savings range from $224 to $270 million. The Labor Center argues that the most expensive services (hospitalization, pregnancy, emergency room visits) are already covered under restricted scope Medi-Cal, but expanding the scope of coverage would improve health outcomes and cost effectiveness.

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A hearing on the bill is set for Friday.