State Medicaid Agency Finds Staggering Losses for California Under U.S. Senate Bill

June 29, 2017

On June 28, 2017, the California Department of Health Care Services (DHCS) released its analysis of the impacts for California’s Medicaid program, Medi-Cal, from the Senate Better Care Reconciliation Act (BCRA) now pending in the U.S. Senate. (See ITUP summary of the BCRA here.)

DHCS concludes that over the seven-year period 2020-2027, BCRA shifts $92.4 billion in costs from the federal government to California. To emphasize the gravity of this shift, the entire 2017-2018 state budget includes a total of $35 billion state general fund for all Health and Human Services Agency programs, including Medi-Cal.

This level of additional state costs will necessitate significant cuts in Medi-Cal, even if the state could identify additional revenues and savings to offset some portion of the federal reductions. The Republican proposed Medicaid cuts will require California to analyze and re-evaluate every element of Medi-Cal expenditures, not just the enrollment expansions made possible by the ACA. There is no doubt that California will be faced with potentially significant increases in the number of uninsured in the state.

The loss of federal funds for the state results from the BCRA phase-out of enhanced federal funding for the Medicaid adult expansion and the transition to a per capita cap funding model for Medicaid. The proposed per capita cap replaces the current federal Medicaid match of state expenditures (generally 50 percent for California) with a fixed, per person allocation formula and an annual adjustment factor.

DHCS projects a significant funding gap from the transition to the per capita cap and the switch from the Medical Consumer Price Index (CPI) to the general CPI starting in 2025, an indicator that will not keep pace with medical cost increases. DHCS estimates that, in 2027, the funding gap will be $11.3 billion because of the different adjustor. Cumulatively from 2020 – 2027, California will need to address a Medi-Cal funding gap of $37.3 billion created by implementation of the per capita.

According to CBO’s  long-term analysis released June 29, 2017, the funding gap from the per capita cap will eventually result in states receiving 26 percent less in federal Medicaid support when compared to the current law. CBO estimates that this funding gap grows to 35 percent by 2036.

California currently covers 3.8 million childless adults through the ACA Medicaid adult expansion. The BCRA elimination of enhanced federal funding for these recipients means that to maintain their coverage California would need to spend five times as much as under current law. In 2027, California would need to identify $12.6 billion additional state general fund to maintain coverage for these adults. Cumulatively from 2020 – 2027, DHCS found that the funding gap will be $51.9 billion general fund.

The magnitude of the state funding gap created by the BCRA threatens every part of the Medi-Cal program – provider payments, eligibility and benefits. Moreover, the Senate bill, and the House bill that preceded it, threaten California’s hard-fought progress in reducing the ranks of the uninsured and improving the health of Californians. See just released ITUP Fact Sheet on year-to-year BCRA impacts on the number of uninsured here.