Health & Human Services – Page 13 – Public Policy Institute of California

Focus on Medi-Cal Funding

The legislature is currently in a special session to address Medi-Cal financing issues. The governor called the session to deal with his proposal to restructure the tax on managed care organizations—which currently generates about $1 billion in federal funding for Medi-Cal—so that it meets federal guidelines. In addition to complying with federal requirements, the governor’s proposed changes to the managed care tax will also provide revenue to increase payment rates for providers of services to the developmentally disabled and undo cuts to the In-Home Supportive Services (IHSS) program. In the absence of these changes, the state could face a $1.3 billion shortfall in Medi-Cal financing.

Regardless of the outcome of this special session, the state faces the challenge of establishing a stable and sustainable state funding base for Medi-Cal, which now covers nearly one-third of the state population. Since Medi-Cal expanded under the Affordable Care Act (ACA) less than two years ago, enrollment has increased by nearly 40 percent, and about 12 million Californians are now covered. Nearly all new enrollees are in Medi-Cal managed care, which has also grown considerably over the past few years. The federal government is providing most of the financing for Medi-Cal expansion, but there is uncertainty about state costs in future years.

Enrollment growth has increased the total costs of the program, which are expected to be more than $90 billion in the 2015–16 budget year—an increase of nearly 50 percent from the 2013–14 fiscal year, which included the first six months of the ACA’s Medi-Cal expansion. More than two-thirds of this increase has been funded by the federal government, which pays 100 percent of the costs of those who became newly eligible for Medi-Cal during the first three years of the ACA.

But the state will assume responsibility for 5 percent of costs for the newly eligible in 2017, and this share will gradually increase to 10 percent in 2020 and thereafter. Based on cost estimates for the newly eligible from the current state budget, this amounts to an additional $700M in 2017 and $1.4B in 2020. And this estimate doesn’t account for any increases in health care costs.

While state General Fund spending for Medi-Cal has grown relatively modestly since the ACA expansion, there are additional sources of uncertainty about future state costs for Medi-Cal, including (but probably not limited to):

Pressure to increase Medi-Cal provider rates, which are among the lowest in the country.
The legal status of President Obama’s executive order allowing many undocumented immigrants to get health coverage and the number of immigrants who could become eligible for full Medi-Cal benefits—which would be financed entirely by the state.
The effect of changes to state financing for county indigent care (under AB 85), which is expected to offset some of the state costs of the Medi-Cal expansion.
Ongoing negotiations with the federal government over the renewal of California’s 1115 Medicaid waiver. These waivers are designed to give states more flexibility to expand and improve their Medicaid programs. Over the past five years, California’s waiver brought in about $10 billion in federal funding to support Medi-Cal and the state public hospital system.
Planned reductions in federal funding from the Disproportionate Share Hospital (DSH) program, which provides additional funds for California hospitals that serve large shares of uninsured and publicly insured Californians. The lion’s share of DSH funds in California go to public hospital systems—an important source of specialty and inpatient care for Medi-Cal beneficiaries.
Required expansions to behavioral health benefits, including mental health treatment and substance use disorder services.
The high cost of new drugs—most notably for the treatment of Hepatitis C. Nationally, prevalence rates of Hepatitis C are higher among low-income men, who are among those most affected by ACA changes in Medi-Cal eligibility.

Long a complex issue, Medi-Cal financing has been complicated even more in recent years by the ACA, which affects all aspects of California’s evolving health care delivery system. But it will be important for the state to meet the challenge of developing a sustainable funding plan for this program, which provides for comprehensive health services for nearly a third of state’s population.

Sources: Medi-Cal enrollment totals are from the Department of Health Care Services, Research and Analytic Studies Division, Medical Certified Eligibles, Summary Pivot Table, Most Recent 24 months, May 2015. Medi-Cal funding sources are from the Medi-Cal Local Assistance Estimates, May 2014 and May 2015.

Testimony: Measuring Poverty

The Assembly Human Services Committee held a hearing on Tuesday, July 14, to consider a joint resolution regarding official poverty measurement tools. PPIC research fellow Sarah Bohn provided background on official poverty statistics and explained how different measurement tools affect our understanding of poverty in California. Here are her prepared remarks.

My name is Sarah Bohn, I am a research fellow at the Public Policy Institute of California. PPIC is a nonpartisan, independent research institute and as such does not take positions on bills before the legislature. I am here today to inform the committee on facts related to Assembly Joint Resolution 22 (AJR 22). As some of you know, PPIC, in collaboration with the Stanford Center on Poverty and Inequality, has been deeply involved in research on alternative poverty measurement for the past three years. I will provide background on the shortcomings of official poverty statistics and offer an updated view of poverty measurement—and poverty in California.

According to official statistics, poverty is significantly higher (50% higher) than it was 50 years ago, when the War on Poverty began. As we shall see, this finding should be taken with a big grain of salt. Poverty status, as you know, is based on how family income compares to the “federal poverty line.” This was developed in the early 1960s as the first working definition of poverty in the U.S. It is based on family budgets of that time, when a typical family spent one-third of its income on food. So the threshold was (to simplify a bit) three times the cost of food a family would need to meet basic needs. While this was a novel use of the facts and information available then and was hugely important in creating a standard metric to inform policy, it’s hard to apply the same metric to modern families and derive a clear understanding of how families—and policy—are doing. There are two main reasons for this: (1) the cost of living and family budgets have shifted considerably, with families spending more on housing, work expenses (like commuting and child care), and medical care and less on food overall (2) several government programs have changed and expanded, but are not counted in family income data in the official poverty measure. For these reasons, official poverty statistics are hard to interpret; they essentially compare a part of family resources to an outdated benchmark.

Two current measures—the Census Bureau’s “Supplemental Poverty Measure” and the PPIC-Stanford “California Poverty Measure” (which uses a similar methodology)—update and realign the basic poverty concept that is now more than 50 years old. There is quite a lot of momentum and agreement around the benefits of these “supplemental” measures. In summary, the methodology aims to improve on official poverty measurement in the following ways. First, both measures use detailed data on what families actually spend to meet basic needs, rather than relying on a 1960s-era approximation. Second, these metrics allow for the cost of living to vary (conservatively), depending on where one lives. Third, they make use of a comprehensive estimate of resources families have on hand, which includes cash income, program benefits, taxes paid or credited, net of medical and work expenses.

The Supplemental and California Poverty Measures provide new insights to poverty. I’ll highlight a couple that are especially related to the impact of policy. First, I’ll return to the effects of the War on Poverty. Using supplemental measures, researchers find a clear downward trend in poverty—specifically, that government programs reduced poverty by 15 percentage points since the mid-1960s. These are facts that cannot be uncovered by official poverty data, which, you may recall, suggests that poverty rates rose 50 percent despite policy efforts. Second, poverty in California today would be much higher were it not for the safety net. Without major programs like CalWORKs, CalFresh, the federal Earned Income Tax Credit, and housing subsidies (among others) nearly 40 percent of children in California would be poor—or 30 percent of state residents overall.

It’s possible that the safety net in California could have an even longer reach than it already does. For one, increasing program participation among eligible families could reduce poverty. Also, because many poverty programs are not scaled to cost of living, their ability to materially affect families in poverty varies substantially across the state. In high-cost areas, safety net benefits reduce poverty by about 30 percent, but they reduce it by 50 percent in the Central Valley and far north. Poor families in coastal (and the most populous) parts of the state face costs $7,000 to $12,000 higher than the federal poverty line accounts for. Although we find that poor families in high cost areas are more likely to be working—and earning more—than their counterparts elsewhere, their earnings are not enough to boost them above the more realistic cost-adjusted supplemental poverty threshold. But their slightly higher earnings (which are still low by California standards) make them less likely to qualify for some safety net programs.

These examples scratch the surface of what is possible using the tools of improved measures like the Supplemental and California Poverty Measure. We also hope to use our research to assess how proposed changes to programs could move families out of poverty. But beyond these efforts, I would argue that simply tracking poverty in and across California and the U.S.—using truly comprehensive and accurate metrics—should be a regular contribution to the policymaking process. For those of us at PPIC and for other researchers involved in poverty research across the country, including those at the Census Bureau, alternative measures of poverty are still in their early phases, and, as such, rely on policymaker awareness and on funding to continue to produce. Thank you for your interest in the topic and your time today.

High Poverty Rate Persists

Although the state’s economy has rebounded, the latest poverty statistics suggest there’s been little improvement in the share of Californians struggling to make ends meet.

More than 1 in 5 Californians—or 8.1 million people—were living in poverty in 2012, the most recent year for which we have data. This is according to the California Poverty Measure, a comprehensive metric developed by PPIC and the Stanford Center on Poverty and Inequality. This share is about the same as it was in 2011. Rates were highest among children, with about 1 in 4, or 2.3 million, living in poverty—virtually unchanged from 2011.

Why? Although California’s overall economy is growing, not all have shared equally in the recovery. The reasons for this are both specific to this economic recovery and true more generally of economic upturns. The unemployment rate remains higher than it has been since 2004 and a high share of workers—by historical standards—have given up looking for work or are underemployed (working part time when they would prefer full time, for example). As is typical of past patterns of recession and recovery, high-income families tend to rebound most quickly, followed by middle-income and finally low- income families. This means that improvements in poverty metrics tend to lag behind other indicators of how the economy is faring.

The good news is that the social safety net—programs like CalFresh and the federal Earned Income Tax Credit—helped many families through the recession and still plays an important role in keeping families out of poverty. Without it, more families—including 1.3 million children—would be poor. We estimated that without these and other safety net programs, poverty would be roughly a third higher in the state as a whole. This cushioning effect of the safety net decreases swings in poverty, meaning that a slowly changing poverty rate is partly an indication that the safety net is working.

Video: Mark Baldassare & John Myers Discuss the PPIC Survey

For the first time since the start of the PPIC Statewide Survey, Californians ranked the drought as the most important issue facing the state. And that was not the only “first” for this survey. PPIC presented it in Sacramento Thursday in a new format. Mark Baldassare—PPIC’s president, CEO, and survey director—was interviewed onstage about the findings by John Myers, senior editor of KQED’s California politics and government desk.

In addition to the drought, Baldassare and Myers covered a long list of topics that were raised in the survey, including taxes, vaccinations, marijuana, University of California tuition, distrust in government, and voter turnout. Myers also raised a theme he explored in his report on the survey for KQED: Despite an improving economy and Californians’ support for the governor’s ideas about the budget, their outlook on the direction of the state remains gloomy.

A California Earned Income Tax Credit

Governor Brown has proposed a state Earned Income Tax Credit (EITC) for low-income families, similar to the federal tax credit. This adds to the mix of strategies policymakers are considering to address the state’s poverty rate, which is the highest in the nation when cost of living is accounted for. The governor’s proposal is aimed at workers who have earnings well below poverty. For example, a parent of two children would be eligible if she filed a tax return and earned no more than $13,870—equivalent to the annual pay for about 30 hours a week at a minimum-wage job. Because it depends on earnings and the number of dependents, the credit would vary widely. The maximum credit of $3,121 would go to families with three or more children and earnings below $7,000 per year, but the governor’s proposal estimates the average credit to be $460. About a quarter of the 3.1 million California filers who can claim the federal EITC would also be eligible for the proposed state EITC.

While a state EITC would increase the cash resources of millions of Californians, the resources families need to make ends meet are substantial. A family of four needs about $29,000 a year to stay above poverty, according to our California Poverty Measure (CPM), a comprehensive yardstick of poverty that accounts for regional variation in the cost of living and the impact of social programs.

How would the proposed EITC affect Californians? Using CPM research, we estimate that the proposed credit would:

Move 70,000 Californians, including 31,000 children, above the CPM poverty line.
Help about 1.28 million Californians experience less severe poverty.
Benefit 1.83 million Californians who already live above the CPM poverty line. (Many of those with low earnings are nonetheless above the poverty line because they receive benefits such as food stamps and/or live and share resources with other family members.)

The governor’s state EITC proposal focuses on augmenting low wages—an acknowledgment of the importance of earnings even for families in poverty. Research has shown that the federal EITC encourages work, and a state credit promises to do the same.

Health Insurance for the Undocumented

California continues to have at least 3 million uninsured residents, even after the coverage gains from the Affordable Care Act (ACA). Estimates suggest that between 1 million and 1.5 million of them are undocumented immigrants who are not eligible for federally subsidized coverage.

But there may be two opportunities for California’s undocumented population to gain access to coverage – depending on the legislature, governor, and courts. We estimate that as many as half of the state’s undocumented immigrants have incomes that are low enough to qualify for Medi-Cal coverage—with some variation across regions. To qualify for Medi-Cal, household income must be below 138% of the federal poverty level (about $16,000 for a single person or about $28,000 for a family of 3). Those with higher incomes may gain access to insurance through a state exchange.

First, the governor’s recently released proposal for the state budget includes funding to provide full Medi-Cal coverage to low-income undocumented immigrants who register for the federal Deferred Action for Parental Accountability (DAPA) program, which offers protected status to undocumented immigrants who have resided continuously in the U.S. for the past five years and are parents of children who are either U.S. citizens or legal permanent residents. This proposal is dependent on DAPA surviving current legal challenges.

Second, the Senate Appropriations Committee has approved state legislation that proposes to expand insurance coverage options to undocumented immigrants not eligible for DAPA. The bill (SB 4) would extend Medi-Cal to low-income undocumented immigrants under age 19. The number of adults who are eligible would depend on the state budget. The bill also includes provisions to allow those with higher incomes to purchase coverage through a state-based insurance exchange.

How many undocumented immigrants might be affected by these actions? Estimating the number is not straightforward. To help in the policy and planning process, we have recently updated our county estimates of undocumented immigrants for 2013 using zip code level tax records (filed with Individual Taxpayer Identification Numbers, or ITINs) and the analytic methods we have used in past work. We extend our earlier analysis to estimate how many undocumented immigrants might be eligible for insurance coverage based on family income for the pricing regions used by Covered California. To do this, we rely on information available from tax filings—we estimate income levels from adjusted gross income groupings and family size from tax filing status and the use of the federal child tax credit. PPIC expects to publish more results based on these analyses in the near future.

Statewide, our preliminary estimates indicate that just over half of undocumented immigrants (51%) are likely to be under the 138% poverty threshold used for Medi-Cal income eligibility. This share varies widely across regions. Nearly 60% in Los Angeles County and the Central Valley have incomes below the 138% threshold. Most Bay Area counties have lower shares below this threshold—from 36% in Santa Clara County to 44% in Contra Costa County. These findings are generally consistent with other work that uses different methods to profile California’s undocumented immigrants (MPI (2014), Marcelli and Pastor (2014), Warren (2015)).

We also estimate shares, by region, of undocumented immigrants that fall between 138% and 400% of the federal poverty level, the income range used by Covered California for its current enrollees to receive premium subsidies. Across most regions, between 40% and 60% of the undocumented population falls within this range, potentially making them eligible to purchase coverage through a state insurance marketplace.

Finally, about 85,000 undocumented have incomes above 400% of the federal poverty level – with most residing either in Bay Area counties or the coastal Southern California counties of Orange and San Diego.

Regional differences in health plans, provider capacity, and insurance costs make information on the size and distribution of the state’s undocumented population by income level crucial to planning effectively for coverage expansions. We expect to contribute regularly to the discussion as these planning efforts unfold.

Table source: Author’s analysis of tax data.
Table note: Counts are rounded to the nearest 500 and may not add to the statewide total as a result. Regions correspond to the insurance pricing regions used by Covered California, with one exception. Region 15 in the table includes all of Los Angeles County.

Half a Million New Enrollees in Covered California

The 2015 enrollment period for Covered California is wrapping up, and the state appears to have exceeded its forecast of 500,000 new enrollees. According to the most recent available data, more than 495,000 people signed up for private plans through the exchange during open enrollment, and another 93,000 signed up during a special enrollment period from February to April 30. Among those who enrolled before February 22, approximately 88 percent were eligible for federal subsidies to help pay for premiums. In addition, more than 780,000 people enrolled in Medi-Cal, bringing total Medi-Cal enrollment to slightly more than 12 million.

In addition to working to increase total enrollment, the state prioritized outreach to the Latino and under-35 populations during the second open enrollment period. Among subsidized enrollees, the share that are Latino rose from 31 percent to 37 percent, and the share that are under 35 rose from 29 percent to 34 percent.

Peter Lee, Covered California’s executive director, had announced the special enrollment period for uninsured Californians who were surprised to learn that there’s a tax penalty for remaining uninsured. Residents who didn’t have health coverage in 2014 owed $95, or 1 percent of their income (whichever is higher). Those who are uninsured in 2015 face a higher penalty: $325, or 2 percent of income.

The special enrollment period resulted from a discussion about the misalignment of the Covered California enrollment period and the April 15 deadline for filing taxes. Many Californians were unaware of the tax penalty for being uninsured in 2014 until after the February open enrollment deadline. This year’s special enrollment period allowed people who were still unaware of the tax penalty to avoid paying it in 2015—more than 33,000 of those who signed up during this period indicated that they were unaware of the tax penalty.

Even though the 2015 open enrollment period is over, there are pathways for some individuals to obtain healthcare through Covered California or Medi-Cal. For example, individuals may sign up for or change private plans within 60 days of a “life-changing event” such as getting married or having a baby. And Californians who are eligible for Medi-Cal can enroll year-round.

Looking forward, the state will continue to face the challenge of ensuring access to providers for Medi-Cal recipients. California’s reimbursement rate for providers is among the lowest in the nation, leading many doctors to turn away Medi-Cal patients. Several bills have been proposed in the state assembly and senate to raise these rates. AB 366, which would prohibit the application of existing reductions to reimbursement rates, has moved into appropriations after unanimously passing the health committee. We’ll be tracking its progress throughout the term.

Video: PPIC Statewide Survey Briefing

As discussions continue in Sacramento about drought relief, funding for higher education and transportation projects, and an extension of Proposition 30 tax increases, PPIC surveyed public opinion on these and many other topics. At a briefing last week in the capital, PPIC researcher Jui Shrestha provided the survey findings. Among the key points:

Two-thirds of Californians say the regional water supply is a big problem, and two-thirds say people in their part of the state are not doing enough to respond to the drought.
While most adults say that spending money on the maintenance of California roads, highways, and bridges is very important, there is little support for increasing the gasoline tax or vehicle registration fees to do so.
Half of Californians favor extending the Proposition 30 tax increases, and about a third favor making them permanent.

Video: Briefing Focuses on Health and Nutrition Safety Net for Children

More than half of all California children participate in at least one health or nutrition program designed to help low-income residents, according to a newly released PPIC report. At a briefing in Sacramento on Friday, PPIC research fellow Laurel Beck described the report, Enrollment in Health and Nutrition Safety Programs among California’s Children, that she co-wrote with PPIC senior fellow Caroline Danielson and research associate Shannon McConville.

Beck said that increased resources to administer assistance programs had raised enrollment in the programs—Medi-Cal, CalFresh, free and reduced-price school lunches, and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). As of 2012, nearly all low-income children up to age four were enrolled in at least one of these programs. But the researchers found significant variation across programs and counties. They concluded that better coordination could further the state’s goal of full enrollment of eligible children.

Video: January PPIC Statewide Survey Briefing

State residents are feeling more optimistic than they have in years—about California’s elected leaders, the direction of the state, and their own economic futures. Dean Bonner, associate survey director, presented these and other key findings at a briefing last week in Sacramento. In addition to asking about government and fiscal issues, the January survey gauged opinions on four important issues being debated at the state and federal level. Among the findings:

Crime, police, and race relations. A solid majority of Californians say the police are doing either an excellent job or good job controlling crime in their communities. But blacks are much less likely than others to hold this view.

Water and drought. A majority of Californians say the supply of water is a big problem in their region, and most say the state and local governments are not doing enough to respond to the current drought.

Health care reform. A record-high 51 percent of Californians have a generally favorable view of the 2010 health care reform law, while 41 percent have an unfavorable view.

Immigration reform. A solid majority of residents support President Obama’s executive action to shield as many as 4 million immigrants from deportation, while about a third are opposed.