WHAT HAVE WE GOT TO LOSE?
In California, we are more threatened than most states by TrumpCare. At the best, President will follow through on his promises and all Californians, (indeed all Americans but the undocumented) will have excellent coverage and lower out of pocket payments for their health care. At the worst, he will follow through on his promises and close to 16 million Californians will lose their coverage. The state of California will lose at least $20 billion annually in federal assistance for its health care programs to low, moderate and middle income Californians if the Affordable Care Act is repealed.
Uninsured rates in California during the Great Recession were about 20%. Due to the Obama economic and jobs recovery and California’s implementation of the Affordable Care Act, we are now about 8.5% uninsured. From 2013 just prior to the full implementation of the Affordable Care Act to 2016, California’s uninsured rate fell from 17.2% to 8.6%, and it has continued to decline. The remaining uninsured are about half undocumented and the remainder are Medi-Cal or Covered California eligible, but not yet enrolled.
Most of the Republican proposals would repeal the ACA’s coverage expansions that made this signal progress possible.
Medi-Cal enrollment grew from 7.8 million in 2013 to about 14.2 million in this year’s proposed Governor’s budget – that is more than one in every three Californians. Those Medi-Cal eligible include low-income children, pregnant women, parents, MIAs, aged, disabled, and the undocumented (for emergency services only). Enrollment is projected to grow less than 2% in the coming year.
In 2017-18, the Governor’s budget projects $105 billion in spending of which $19 billion is from the state General Fund. Most spending -- 2/3rds is for the aged and disabled who account for about 1/4th of program eligibles. Spending is projected to grow less than 5% in the coming year.
Medi-Cal pays for most births in the state (about 50%), for most children (about 50%), and for most nursing home residents (about 70%).
Medi-Cal accounts for at least 1/3rd of hospital revenues and by far the greatest part of nursing home revenues and community clinic revenues. In some hospitals, Medi-Cal accounts for 70% of their patient revenues.
The new Affordable Care Act eligibility category, sometimes referred to a medically indigent adults (MIAs), is projected to account for 4.2 million eligibles in 2017-18 and about $19 billion in spending of which $1.6 billion is state General Fund. The federal match for the MIAs is gradually declining from 100% in 2016 to 95%, 93%, and eventually 90% FFP in 2020.
Most of the Republican proposals would eliminate this expansion category, and some would block grant the entire program to the states in which case 14.2 million Californians would lose their entitlement to coverage.
Covered California (also known as the Exchange) is a state purchasing pool for the individual and small business markets. About 1.4 million will be enrolled in 2017-18. The federal government pays for tax credits to individuals with incomes less than 400% of the federal poverty level – as a result 90% of Covered California enrollees get premium assistance to help pay their premiums and 50+% get cost sharing reductions to help pay their copayments, deductibles and co-insurance. The federal government pays $5 billion in tax credits for premium assistance and cost sharing reductions for Covered California enrollees. These refundable tax credits are adjusted by age, income and geography so that those with the lowest incomes in the highest cost ages and geographies get the most help.
Most Republican proposals would eliminate Covered California and its refundable tax credits; as a result over 1.2 million Californians would lose federal assistance in paying their premiums, copays and deductibles and likely lose their coverage and access to health care.
Immigrants. We are a nation of immigrants, and California particularly so. Under federal law, undocumented immigrants and new legal permanent resident immigrants are eligible for a federal Medicaid match only for “emergency or limited scope” services. All legal permanent residents are eligible for the ten essential health benefits in the Exchanges and the tax credits to help pay for them, but the undocumented are not eligible to participate in Exchanges, even if they pay 100% of the cost.
Under California law, all legal permanent residents who are low or moderate or middle income and uninsured can qualify for full scope Medi-Cal or for Covered California depending on their income level. “Dreamers” are present under “color of law” due to the Presidential order establishing their status and thus eligible as well.
Undocumented children and adults if low income can qualify for emergency Medi-Cal, but they are not eligible for Covered California. Under state law, undocumented kids can be eligible for full scope Medi-Cal; 185,000 participate at a General Fund cost of $280 million.
At a minimum, the Trump administration will be seeking to reduce immigrant’s lawful participation in public programs via two concepts: sponsor deeming and public charge. Sponsor deeming means that an immigrants’ sponsor is deemed responsible for the immigrant’s health care coverage and a public charge would be used to bar an immigrant’s ability to adjust status for example from legal immigrant to citizen. It may seek more restrictions, including reporting receipt of public health benefits to the Department of Homeland Security and large increases in deportations.
Behavioral health is one of the ten essential health benefits that must be covered under the ACA. It must be covered by employer plans, by individual insurers, and by Medicaid plans.
Mental health in the Medi-Cal program is covered in three different ways: mild to moderate is covered by the Medi-Cal managed care health plans; severe and chronic is covered through county mental health agencies. Substance abuse treatments are covered through the county substance abuse agency. Whole person care pilots under the 2015 waiver are designed to integrate behavioral health care services and reduce chronic homelessness due to behavioral illnesses.
Most Republican proposals would repeal the expanded coverage of behavioral health services under the ACA. This would return increased financing responsibilities to California’s county mental health agencies, but with no funding.
County health encompasses indigent health for the uninsured, public health for the entire community and behavioral health for Medi-Cal and the uninsured. All have benefited greatly from the ACA’s coverage and benefit expansions. The state has reduced funding for county health to reflect the ACA’s coverage expansion and shifted the realignment funds to social services.
Most of the Republican proposals would repeal the increased coverage and increased services. If repeal of the ACA is passed, the state would need to allocate vastly increased funding for county indigent, public health and behavioral health.
Community clinics are a vast network of over 600 non-profits throughout urban and rural California. In rural communities like Humboldt and Del Norte, they are the bulwark of primary care and some specialty care to the entire community. In large urban communities like San Diego, they are the bulwark of care for Medi-Cal and remaining uninsured patients. The ACA has increased their funding to expand services in medically underserved areas and reduced their burdens of uncompensated care to the uninsured. They are nearly completely dependent on Medi-Cal for their patient revenues. The ACA’s funding augmentation for clinic expansion expires in 2017, leaving clinics facing a financial “FQHC” cliff.
The Republican proposals would reduce clinics’ ACA and Medicaid revenues, creating imminent financial crises for those who have expanded their clinics to meet community needs. A huge and unprecedented local philanthropic contribution would be needed to keep the clinics’ doors open when and if their federal funds collapse.
Public hospitals and county clinics care for the Medi-Cal and remaining uninsured in a large number of the more populous California counties; however most California counties no longer have any public facilities. In counties like Tulare and Santa Barbara there are public clinics, but no county hospitals. In counties like San Francisco and Los Angeles, the counties operate county hospitals and county clinics. In counties, like Kern and San Bernardino, the county hospital is quite strong, but the county clinic system is less well developed, and in Kern it is supplemented by a strong community clinic delivery system. Large counties like Orange and San Diego lack public facilities, but do have University of California hospitals that provide care to the Medi-Cal and remaining uninsured populations.
Public hospitals and clinics are heavily dependent on Medi-Cal and have benefitted greatly from the expansion, which has cut their uninsured populations substantially; revenues have exceed projections leading to investments in expanded and updated facilities. The state has in turn cut their health realignment funds and the federal government is scheduled to cut their DSH funds in half (the DSH cliff) in the next two years, reflecting their reductions in uninsured patients.
Public hospitals are also shifting their delivery systems to reflect improved outpatient care access and stronger managed care performance with the assistance of the Global Payment Program and PRIME components of the 2015 Medicaid §1115 waiver. This will allow them to better compete in the Medi-Cal managed care markets and serve their remaining uninsured patients. These waiver elements expire in 2020.
The Republican proposals would eliminate funding for public hospital patients newly covered through the ACA. The DSH cliff is imminent and the waiver expiration is coming up in 2020; there is as yet no Republican position on the DSH cliff or waiver renewals or replacements. Public hospital finances are threatened on multiple fronts. Major financial infusions from cash strapped local counties may be required to sustain public hospitals and clinics.
Managed care plans in Medi-Cal serve a mixed population of: families and kids, MIAs, pregnant women as well as some of the aged and disabled. Enrollment and responsibilities to manage care for more complex and costly cases have been steadily growing.
There are three types of Medi-Cal managed care: two plan (typically a county developed plan linked to the county hospital system competes with a commercial plan), COHS (a single county developed plan), and Geographic Managed Care (a number of competing commercial plans). The state pilot program to offer voluntary managed care for dual eligibles (Medicare and Medi-Cal) is being discontinued this year as it has not proven cost effective for the state.
Medi-Cal managed care plans have generally been profitable due in large measure to their successes in managing the costs and care of the newly eligible MIA population. The loss of their coverage and the changing case mix that would result would likely cause financial stress to those plans that choose to remain in this market.
Most of the Republican proposals would eliminate funding for the plans’ MIA subscribers newly covered through the ACA. The Medicaid block grant unless very generously funded immediately and in the future would also put the plans at increased financial risk. Their finances are threatened on both fronts. The county developed plans would face big challenges diversifying into other markets while the commercial plans could simply walk away from this market.
Individual market enrolls flex workers (part time and seasonal, contractors and employees), the self employed, low wage small business employees, and high-risk patients who are guaranteed issue with no pre-existing condition exclusions. It has a mix of subscribers who qualify for premium assistance and in some cases for cost sharing assistance through Covered California. Other higher income individuals with no federal financial assistance typically purchase their coverage outside the Exchange.
Most major California health plans participate and compete on price in the Covered California market. Most large out of state plans like United, Aetna and Cigna do not participate and have rarely done so effectively in the past because they lack competitively priced networks. Only some of the small rural counties lack adequate choice and competition; they simply do not have adequate provider networks to sustain competitive markets.
All Republican plans eliminate the individual mandate and eliminate the income adjusted tax credits; most eliminate the Exchanges as well. This would wreck the individual market and thus many Republican proposals offer alternatives. Some would create state high-risk pools for those individuals with pre-existing condition exclusions who would now be excluded from coverage. Some would create new flat tax credits adjusted for subscribers’ age, but not for their income; these would help higher income afford better coverage, but at the cost of badly hurting low and moderate income individuals. Some would create lockouts and additional financial penalties for any subscribers who fail to maintain continuous coverage. Many would eliminate the underwriting reforms and minimum loss ratios, and all would eliminate the ten essential health benefits. Most would allow plans to sell across state lines without complying with state insurance rules and regulations in the individual purchaser’s state of residence.
The mid sized and large employer markets are required to offer coverage and pay for at least 60% of the cost of the lowest cost bronze plan covering the 10 essential health benefits. Most but not all mid sized and large employers met or exceeded this threshold prior to the passage of the ACA.
Health benefits are purchased with pre-tax dollars, which subsidize about 1/3rd of the premium. The ACA imposed but has not yet implemented a “Cadillac benefits tax” on plans that exceeded a certain cost threshold.
All Republican proposals would repeal the employer mandate. There might be some backsliding in terms of employer’s offer and covered services. Some would retain and revise the Cadillac benefits tax. Some would add refundable tax credits to improve affordability for employers and employees.
Medicare was expanded and reformed by the Affordable Care Act to extend its financial viability by another decade and to close the donut hole for senior’s prescription drug coverage.
It is unclear how the Republican proposals will deal with the Medicare reforms in the ACA. Some would preserve the reductions in spending and eliminate the coverage expansions.
Republican plans are not yet solidified and the Trump Administration has not yet weighed in with their preferred solution. President Trump has spoken of his commitment to cover all Americans and reduce the size of deductibles and reduce the costs of health care, beginning with over-priced prescription drugs.
Repeal of Obamacare is agreed to by nearly all Republicans. Repeal and replace is agreed to by almost all Republicans, but there is wide disagreement on what to replace it with.
Repeal without replacement means 20 to 25 million Americans lose their coverage, the federal budget deficit is increased and the individual market is in unimaginable chaos. Enormous political repercussions are sure to follow as only a small percentage of Americans favor repeal without replacement. Terrible damage would occur throughout the Trump supporting rust belt states that have expanded their Medicaid programs to their states’ low-income residents.
Medicaid block grant is also agreed to by many Republicans. It would shift federal Medicaid funds and responsibility to state governments and limit the financial exposure of the federal government for future cost increases. It assumes that states can be more cost efficient and effective in covering their residents without any rules from the federal government.
Medicaid was established in conjunction with Medicare as part of the Great Society in 1965. This would eliminate a federal entitlement for 72 million Americans ranging from infants to elderly nursing home residents. It would likely be opposed by hospitals, doctors, clinics, patients, nursing homes and Medicaid participating health plans. Not all Republican Governors support this approach as it puts them on the hot seat to cut eligibility and services to their state’s residents during hard economic times.
Medicare vouchers and age eligibility extended to 67. House Republicans have proposed to over time move the Medicare program from a public fee for service program to vouchers which seniors and the disabled would then use to buy private insurance, possibly through Exchanges. Likewise they propose to increase the age to qualify for the Medicare program from 65 to 67, arguing that people are living longer and working longer before retirement. During his campaign, President Trump promised no cutbacks to Medicare, Social Security or Medicaid. It will be interesting to see how his campaign statements are reconciled with the policy preferences of House Republicans.
Reconciliation – partial repeal. The Affordable Care Act was passed with 60 votes in the Senate, the amount required to overcome a Republican filibuster. Republicans believe they can repeal the financial aspects of the Affordable Care Act with 51 votes. This would repeal all of the following: Tax credits for the Exchanges, Medicaid expansion, Individual and employer mandates and the taxes. If they are correct in their assessment, they could also repeal the taxes that support Medicare and Social Security with a 51-vote filibuster proof majority.
Replace. There is as yet no agreement on the replacement program; however it will take 60 votes – i.e. all the Republican Senators and eight Democrats. There are a number of provisions of the ACA that cannot be repealed with 51 votes but will instead require 60 votes: such as guaranteed issue, no pre-existing condition exclusions, 3/1 rate bands on age rating, no gender rating, the 10 essential health benefits and the medical loss ratios. In addition, they may be able to defund the refundable tax credits with 51 votes, but it will require 60 votes to eliminate the Exchanges for individuals and small employers.
What’s in the discussion for a replacement package?
Flat or age adjusted refundable tax credits would replace the current credits that are income adjusted as well as geographically adjusted, which has meant low and moderate income individuals in high priced health insurance markets get extra help with affordability. This policy would be helpful to middle and higher income individuals and disastrous for low, moderate and middle-income individuals and even more so in regions with high health premiums.
Health savings accounts would allow individuals to put aside income into a health savings account tax free to pay for their health care costs. These are typically paired with high deductible or catastrophic coverage. This policy could prove beneficial for healthy individuals in high income tax brackets and disastrous for low, moderate and middle-income individuals with chronic health needs who lack the readily disposable income to pay for daily health needs.
Limited benefit packages would exclude some of the ten essential health benefits in order to reduce the costs of coverage. It’s unclear what would be eliminated: prescription drugs, mental health, prevention, maternity or child health prevention services are some possibilities. Most of the benefit reductions under discussion would hurt the chronically and acutely ill, women and children.
5/1 age rate bands refers to the premium differential between the youngest and oldest adults. The Affordable Care Act established a 3/1 age rate band, such that the premiums for a 64 year old are no more than three times as much as an eighteen year old. Moving to 5/1 would increase premiums quite dramatically for adults 50 and up – a key component of President Trump’s electoral base. In California prior to the ACA, there was no rate band for age; premiums for Blue Cross and Blue Shield were typically 4.5/1 while Kaiser was about 3/1.
Penalties for less than continuous coverage refers to a set of ideas to induce subscribers to enroll and stay enrolled, these would replace the tax penalty of the individual mandate and could be quite costly to individuals impacted. One idea is a lock out; individuals who do not maintain continuous coverage would be locked out of the individual market for 18 to 24 months. Another idea is a penalty under which individuals who do not maintain continuous coverage would pay much higher premiums when they seek to enroll or re-enroll in the individual market. Typically there is an annual open enrollment period of 30 days and special enrollment periods when for example an individual who loses employment-based coverage could enroll. This policy would pose serious difficulty for individuals and families living paycheck to paycheck.
High-risk pools operated by states could replace guaranteed issue regardless of pre-existing condition exclusion. In a high-risk pool, subscribers pay more, have a more limited set of benefits and restricted choice of plans and providers, and taxpayers subsidize the plans for the difference between the plan costs and the subscriber premiums. There may be waiting lists until and unless state funds are available. California had a high-risk pool, MRMIP, which reached about 6,000 of the estimated 200,000 medically uninsurable. This policy would be quite expensive for state taxpayers and could be very harmful to those with pre-existing conditions by segregating their care and coverage in these pools.
Repeal of state regulatory authority (also referred to as “across state lines”) allows an insurer licensed in any state to sell their policies in all 50 states, but subject only to the rules, regulation and enforcement in the state of the insurer’s domicile. This means a Wyoming licensed insurer could sell to California individuals, and the policy and its enforcement would be governed under Wyoming state law and Wyoming state regulators.
Medicaid block grants refer to a shift in funding and responsibility for the Medicaid program from the federal government to the states. In general, federal Medicaid law sets maximums and minimums and states are free to set their policies between the maximums and the minimums. States must pay a match and the federal government matches the state contribution. In California, that is typically a 1/1 match. Covered individuals are entitled to coverage, so a state could not set up a waiting list for coverage or exclude individuals or services below the federal minimums.
Block grant issues
One key question is the Grant Amount. Is it each state’s current federal Medicaid spending? Or is it a nationwide per capita amount per poor person? California is currently about mid range because we cover a lot of individuals but our per capita costs are quite low. California and over 30 other states have covered the MIAs, the optional federal Medicaid category for low wage working men and women who lack job-based coverage. Are those funds included or excluded?
Federal entitlement means that individuals are entitled to coverage and an aggrieved subscriber or provider or plan can sue the state or federal government in court for a violation of the federal rules governing the program. This would be repealed by the block grant.
Countercyclical financing in recessions means that when more people lose their jobs during recessions, Medicaid enrollment and spending typically increase; however states can face difficulties paying for the state match during severe recessions. The Obama Administration and Congress stepped up with an increased federal match during the Great Recession. This feature would disappear in a block grant.
Growth rates in the block grant are key. Under the current policy, the growth in federal funding follows a state’s spending decisions. A block grant would curtail the growth in federal spending at the Consumer Price Index or lower. This put the state at risk for the growth in medical costs.
Eligibility for Medicaid is divided between “mandatory” and “optional”. The mandatory categories are the aged and disabled on SSI, low income kids and pregnant women and families receiving TANF (Temporary Assistance to Needy Families). The optional categories include most nursing home residents and most working parents and individuals. Most Medi-Cal patients are in the optional categories. The block grant would eliminate mandatory and optional eligibility categories and leave this to the states. States may also set their own income and asset tests. The ACA set a new floor (138% of FPL or roughly $16,000 for an individual). The Supreme Court ruled this was optional with each state. California and over 30 other states have taken this option; repeal and replace will likely seek to eliminate this option. The block grant would repeal all eligibility requirements.
Services under Medicaid are divided between mandatory and optional as well. For example, hospitals, child preventive services and doctors are mandatory services while prescription drugs, adult dental care and most nursing home are optional services. California like most states covers both mandatory and optional services. The block grant would repeal all the service requirements.
Payment rates must be sufficient to assure that subscribers have access to services comparable to the general population. The state of California has been repeatedly sued by doctors and dentists for its low payment rates. The block grant would repeal this protection.
DSH and FQHC are special payment rules for community clinics and hospitals that care for large numbers of uninsured and Medi-Cal patients. These would be repealed by the block grant.
Out of pocket rules limit patients’ copayments, and co-insurance to amounts that a poor person can afford. These would be repealed by the block grant.
Freedom of choice rules assure that patients can choose their own doctor, dentist, hospital and pharmacy. These would be repealed by the block grant.
Managed care rules assure that HMO’s deliver the covered services for which they have contracted. California requires nearly all Medi-Cal subscribers to enroll in managed care plans. The federal rules governing HMOs would be repealed by the block grant
Match refers to the rules governing state and local matches, hospital and health plan fees and taxes, which pay for the state’s share of the Medicaid match. These would be repealed by the match.
Impacts from repeal would be most severe in the poorest and lowest income areas of the state: Central Valley, Rural North, Los Angeles and Inland Empire and Imperial counties because they have the highest percent of county residents qualifying for and receiving care and coverage under the Affordable Care Act.
You might want to discuss these issues with your local Congressman or Senator.
Prepared by: Lucien Wulsin, JD