Realignment Redistribution Formulas

February 21, 2013

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One of the great questions at the ITUP conference that went unanswered is “what formula could/should/might be used by the state and the counties in re-allocating the county health realignment savings from coverage expansion?”

Health realignment pays for indigent health and public health. As the state implements the ACA, much but not all of county indigent health spending will shift from the counties to the state Medi-Cal program and the Exchange, now Covered California.[i] This will vary widely by county as the county eligibility requirements for their county indigent programs vary widely.[ii]

The state asserts that the funds are needed to shore up the Medi-Cal program for the up to 3 million new eligibles.[iii] The counties assert that the funds are needed to pay for care to the 3-4 million residually uninsured and that the state will receive 100% FFP for care to the MIAs, eventually declining to a 90/10 match in 2020.[iv]

How much do counties currently spend? We have had no good reliable comparable data since 2006, and even that data was not terribly accurate at the individual county level. In 2006, counties spent about $2 billion on care to the uninsured; they provided care to about 1.2 million uninsured county residents.[v] It is unclear how many of these residents will be eligible to participate and how many will actually participate in the ACA’s coverage expansions.[vi]

Under the 2010 Bridge to Reform waiver, counties were afforded the opportunity to access a federal 50/50 match for their spending on care to the indigent uninsured with incomes less than 200% of FPL who would become Medi-Cal eligible.[vii] The county LIHP programs determine eligibility consistent with Medicaid rules.[viii] All LIHP eligibles should become ACA eligible. All LIHP services should be ACA eligible.

Some counties fully embraced the LIHP opportunity to expand.[ix] Other counties responded not at all.[x] Some counties responded cautiously.[xi]

Potential formulas

These are my thoughts for what they are worth.

  1. We should not simply reallocate a designated percentage of realignment. First, realignment funds are not equitably distributed among the counties.[xii] By that I mean realignment is based on 1979 and 1982 formulas that are now thirty years out of date and were not equitable to begin with.[xiii] As a result realignment funds per uninsured county resident differ by a factor of more than 3/1.[xiv] Second, counties have had radically different spending priorities; some valued county indigent health; others did not. Spending on county indigent health per uninsured county resident varies widely. Some counties reported spending 12%, 22% and 27% of their county health funds on care to the county indigent while others reported spending 140%, 133% and 130% of their revenues on care to the county indigent.[xv]
  2. We should not simply reallocate the current county CPE match for the LIHPs.[xvi] While it would be relatively easy to do, this would penalize the pioneers and early adopters and it would reward those counties who were least willing to expand their programs.[xvii]
  3. California could build a new public health realignment program that allocates an equal amount per county resident for public health services. This assures that all Californians will have comparable funding for public health.
  4. California could separately contract with those counties who wish to operate an indigent program for the residually uninsured. Provider counties might choose to contract. Payor counties may choose not to contract, and providers in the “payor” counties could conceivably form an organized entity to contract with the state for care to the residually uninsured. The contract could have transparency and performance requirements and comparable collection of data that would allow for continuous county level improvements. This could be phased in over the next two years as most county indigents shift from county health into Medi-Cal and the Exchange.


[i] Wulsin, California’s Uninsured: Programs, Funding and Policy Options (ITUP, 1998) at and Tuttle and Wulsin, California’s Safety Net and the Need to Improve Local Collaboration in Care to the Uninsured (ITUP, October 2008) at

[ii] Some counties set eligibility lower than 65% of the federal poverty level and others set it as high as 500% of FPL. Some counties cover the undocumented, some cover only for genuine emegencies, like Medi-cal and others cover the undocumented not at all. Blue Sky Consulting, California County Indigent Care Profiles 2009 (California HealthCare Foundation, 2009) at

[iii] Lucia, Laurel, Jacobs, Ken, et al, Medi-Cal Expansion under the Affordable Care Act: Significant Increase in Coverage with Minimal Cost to the State (UC Berkeley Labor Center, January 2013) at We have no doubt about the need to better finance Medi-Cal. See Wulsin, Medi-Cal Transformation (ITUP, March 2012) at

[iv] Lucia, Laurel et al, After Millions of Californians Gain Coverage Under the Affordable Care Act, Who will Remain Uninsured? (UC Berkeley Center for Labor Research and UCLA Center for Health Policy Research, September 2012) at There is little doubt that facilities in provider counties will see significant numbers of the uninsured. However, it is unclear to what if any degree payor counties will be paying for significant care to the residually uninsured as we will discuss further.

[v] ITUP, California’s Safety Net and the Need to Improve Local Collaboration in Care to the Uninsured. The county data reporting on care and spending for the county indigent ceased in 2006.

[vi] Payor counties typically require citizenship or legal permanent residency to qualify for the county health programs. In a payor county, nearly all the county indigent will be eligible to enroll. We should expect all their program eligibles to enroll in Medi-Cal and the Exchange. Due to the nature of the Medi-Cal program, individuals with incomes less than 138% of FPL can enroll at any time and qualify for up to 3 months retroactive coverage. During the course of the year, some of the residually uninsured with incomes above 138% of FPL may not be eligible to enroll in the Exchange due to their failure to enroll during the open enrollment period; however they will be eligible for the Medi-Cal medically needy share of cost program to pay for the most costly services. Payor counties will have minimal to no exposure for the costs of care to the residually uninsured. However private hospitals and community clinics and private physicians will have substantial exposure and strong incentives to assist individuals to enroll in Medi-Cal and the Exchange.


Provider counties treat all their patients regardless of insurance status or immigration status. They typically set income thresholds to establish their patients’ ability to pay, not to exclude them from care. Most of their low income uninsured patients will qualify for either full scope or limited scope Medi-Cal. Their higher income uninsured patients will qualify for the Exchange or for Medi-Cal medically needy share of cost. There is no payor source for their care to the undocumented other than for genuine emergencies. Provider counties also face potential reductions in federal DSH funds in 2017 and the federal §1115 waiver expires in 2015 that help pay for their care to the uninsured.

[vii] Wulsin, Summary of §1115 Waiver (ITUP, January 2012) at and Wulsin, California’s Implementation of the §1115 Waiver (ITUP, January 2012) at

[viii] Ibid.

[ix] California’s Implementation of the §1115 Waiver (ITUP, January 2012)

[x] Several Central Valley and Central Coast counties did not implement the waiver. California’s Implementation of the §1115 Waiver (ITUP, January 2012)

[xi] San Francisco, for example, which led the way in implementing the 2005 waiver was quite cautious in implementing the 2010 waiver. California’s Implementation of the §1115 Waiver (ITUP, January 2012)

[xii] California’s Safety Net and the Need to Improve Local Collaboration in Care to the Uninsured (ITUP, October 2008)

[xiii] Ibid.

[xiv] Ibid.

[xv] Ibid.

[xvi] California’s Implementation of the §1115 Waiver. Los Angeles accounts for over 40% of over all enrollment, the small CMSP counties for 10%, Alameda for 9% and Orange for 8%. California Department of Health Care Services, LIHP November 2012 Monthly Enrollment at

[xvii] See n. 9 through 11.