Medi-Cal Expansion: Covering More Californians for Less

Today, the California Legislature began a Special Session called by Governor Brown to implement aspects of the federal health reform law, including changes to Medi-Cal.

Under the Affordable Care Act, in 2014 California can expand Medi-Cal to low-income adults under age 65, including those without children living at home, a group not currently eligible unless they meet certain disability criteria.  An estimated 1.4 million California adults will be eligible for this expansion, of which between 750,000 and 910,000 are expected to enroll by 2019, according to a recent report I co-authored with colleagues from the UC Berkeley Labor Center and the UCLA Center for Health Policy Research.

The federal government will pay all medical costs for these newly-eligible enrollees from 2014 to 2016 and no less than 90 percent in future years, bringing billions in new federal dollars to the California economy. The Bay Area Council Economic Institute estimated that the provisions of the Affordable Care Act, including this Medi-Cal Expansion, will create approximately 100,000 jobs annually in health care and other industries in California.

Estimated state spending on Californians newly eligible for Medi-Cal will be less than $100 million annually for administrative costs in 2014 to 2016, increasing to between $309 and $381 million in 2019 when the state is also responsible for a small share of the medical costs. The state will incur additional spending for those already eligible for Medi-Cal, who are expected to enroll at a higher rate than they do today due to enrollment and renewal simplifications and other mandatory provisions of the Affordable Care Act.

We estimate that this new state spending will be offset in great part. The billions in new federal dollars circulating through the economy will result in new state tax revenue which will counterbalance some or most of the new Medi-Cal spending. Additionally, as uninsured Californians enroll in Medi-Cal under the Expansion the state could incur substantial savings in other areas of the budget, including other state health programs, mental health services, and state prisons.

The Governor and leaders in the State Legislature have expressed a commitment to implementing the Medi-Cal Expansion, but it has not yet been formally authorized in legislation and many details remain to be worked out.

As the specifics of the Medi-Cal Expansion implementation are determined, one thing is clear: California has a historic opportunity to expand coverage to low-income Californians with limited impact on the state budget.

Read the full report.