Estimating the Cost of Expanding Full-Scope Medi-Cal Coverage to Undocumented Adults

This budget and policy post responds to several requests for our office to estimate the costs associated with expanding full-scope Medi-Cal coverage to undocumented adults. (We were not asked to provide a fiscal analysis of any particular proposed legislation, but rather were asked to provide a cost estimate of such a Medi-Cal coverage expansion.) Undocumented adults are currently eligible for restricted-scope Medi-Cal coverage, meaning primarily emergency and pregnancy-related services, but not full-scope coverage. The costs of restricted-scope coverage are shared between the federal and state governments. (Undocumented children under age 19 are already eligible for full-scope Medi-Cal coverage under Chapter 18 of 2015 [SB 75, Committee on Budget and Fiscal Review].) Based on a number of key assumptions that we had to make (including some that we outline below), we estimate that the total net state cost of this coverage expansion is approximately $3 billion in 2018‑19. (This net cost would be fully a state cost, and represents the change between the cost of providing full-scope Medi-Cal and the cost of providing restricted-scope Medi-Cal to the undocumented adult population.)

Eligible Population for the Coverage Expansion

We estimate that the total population of undocumented adults that would be income-eligible for full-scope Medi-Cal is around 1.2 million individuals. (Income eligibility for full-scope Medi-Cal is generally a household income at or below 138 percent of the federal poverty level.) According to data from the Department of Health Care Services, roughly 1 million undocumented adults (more than 80 percent of the total income-eligible population) are already enrolled in restricted-scope Medi-Cal coverage. Therefore, the number of individuals who are income-eligible for Medi-Cal, but are not currently enrolled in restricted-scope Medi-Cal, is relatively small—about 200,000 individuals. Figure 1 summarizes our estimate of the income-eligible undocumented adult population within six separate age bands.

Estimated Net Cost of Expanding Full-Scope Medi-Cal Coverage to Undocumented Adults

In 2018‑19, Approximately $3 Billion in State Funds to Expand Full-Scope Medi-Cal Coverage to All Undocumented Adults. Our estimate first calculates the total costs of providing full-scope Medi-Cal coverage to each of the identified age bands of undocumented adults. We note that the federal government will continue to share in the cost of providing restricted-scope services to undocumented adults even if the state opts to provide full-scope services to these individuals. Some key variables that we considered in calculating these costs include (1) the distribution of enrollees across different categories of aid such as disabled and family (which are used in the development of per member, per month capitation rates); (2) the distribution of enrollment in fee-for-service and managed care delivery systems; and (3) differences in enrollment and spending by age band. The total state cost of providing full-scope coverage—not accounting for costs already covered for those enrolled in restricted-scope Medi-Cal—is estimated to be about $4.7 billion in 2018‑19. We then calculated the costs associated with emergency and pregnancy-related services already provided to restricted-scope Medi-Cal enrollees, which are estimated to be roughly $1.7 billion in 2018‑19. The net cost, then, of the coverage expansion in 2018‑19 is approximately $3 billion. Figure 2 summarizes the total costs of providing full-scope Medi-Cal coverage to undocumented adults within the six separate age bands, with an offset for the costs already covered for undocumented adults currently enrolled in restricted-scope Medi-Cal.

Of the $3 billion in new net state costs, $2.7 billion of the costs would be for undocumented adults already enrolled in restricted-scope Medi-Cal (as mentioned previously, more than 80 percent of the income-eligible population), and the remaining $300 million would be for adults currently eligible for restricted-scope Medi-Cal but not enrolled.

Key Assumptions in Developing Our Cost Estimate

To develop our cost estimate, we made a number of important assumptions including: how the population that is income-eligible for coverage would be categorized within Medi-Cal, how the costs of coverage would be distributed across different age bands, and how many undocumented adults who are not currently enrolled in restricted-scope Medi-Cal would enroll in Medi-Cal were this proposal to become law. We would note that this is not an exhaustive list of assumptions made to develop our estimate; rather, it includes those assumptions we identified as having a significant impact on the overall costs of the coverage expansion.

Distribution of Undocumented Adults Across Categories of Aid. Our cost estimate is based on per member, per month capitation rates for each of the categories of aid used in Medi-Cal. We assumed that the distribution of undocumented adults across the categories of aid in Medi-Cal would be proportionate to the general Medi-Cal population, with two notable exceptions:

• Disabled Category of Aid. Based on available health interview survey data, the percentage of Medi-Cal enrollees who are categorized as disabled is likely much greater than the percentage of undocumented adults who would be categorized as disabled were they to enroll in full-scope Medi-Cal. (Though the data show a lower disabled rate among undocumented adults, it is unclear at this time why this is so.) Therefore, instead of assuming the number of undocumented adults that would be categorized as disabled would be proportionate to the percentage in the overall Medi-Cal population, our cost estimate adjusts the number of undocumented adults assigned to the disabled category of aid downward and redistributes those enrollees throughout other categories of aid within Medi-Cal. This downward adjustment results in significantly lower costs because nondisabled Medi-Cal enrollees, in general, tend to have lower health care costs than disabled program beneficiaries. To demonstrate the significance of this assumption, a one-percentage point change in the number of undocumented adults placed in this category of aid results in a $200 million change in the costs of expanding coverage.

• Adult Expansion Category of Aid. Based on available data from the administration, the percentage of Medi-Cal enrollees who are categorized as adult expansion enrollees—meaning those who became eligible for Medi-Cal when the state expanded eligibility for the program to include primarily childless adults who did not previously qualify—is likely greater than the percentage of undocumented adults who would be categorized as adult expansion were they to enroll in full-scope Medi-Cal. Therefore, similar to our downward adjustment for the disabled category of aid, our cost estimate adjusts the number of undocumented adults assigned to the adult expansion category of aid downward and redistributes those enrollees throughout other categories of aid within Medi-Cal. This downward adjustment results in slightly lower costs, primarily due to the relatively lower per member, per month costs associated with the other categories of aid. To demonstrate the significance of this assumption, a five-percentage point change in the number of undocumented adults placed in this category of aid results in a more than $60 million change in the costs of expanding coverage.

Distribution of Costs Across Different Age Bands. We estimated the total costs of coverage for each of the six age bands first based on the number of undocumented adults in each of the age bands and their associated expenditures, generally assuming a per member, per month cost that reflects this cost for each age band in the overall Medi-Cal population. We then made other adjustments given our aforementioned assumptions about how the undocumented adult population differs from the overall Medi-Cal population. Finally, the net cost for expanding full-scope Medi-Cal to a particular age band reflects the subtraction from total costs of costs already covered in the provision of restricted-scope Medi-Cal to that age band.

Take-Up Rate. For those undocumented adults already enrolled in restricted-scope Medi-Cal, we assumed a 100 percent take-up rate for full-scope Medi-Cal over a 12-month period, as “take-up” would be primarily an administrative change. For those undocumented adults who are currently eligible for restricted-scope Medi-Cal but are not enrolled (and who would, under this coverage expansion, become eligible for full-scope Medi-Cal), our office assumed a 50 percent take-up rate over a 12-month period. These take-up rates are consistent with what the administration assumed (and actual experience showed) was the take-up rate of full-scope Medi-Cal by undocumented children who became eligible under SB 75. Were we to assume a higher take-up rate, the costs of the proposal would increase. To demonstrate the significance of this assumption, a ten-percentage point change in the take-up rate results in a roughly $50 million change in the overall cost estimate.

Conclusion

While this cost estimate is based on currently available data about this population, we would note that there is inherent uncertainty about the number of undocumented adults who would be income-eligible for Medi-Cal under this proposal, and about the costs of expanding coverage to this population. This cost estimate is meant to inform the Legislature of the potential Medi-Cal-related direct costs and cost offsets—to the extent they could be identified and quantified—associated with this proposal. We did not take into account any change in other state and local health care programs that might occur due to this coverage expansion. To the extent we have additional data or information to share with the Legislature, we will do so in an expedited fashion.