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Other Budget Issues

Last Updated: 5/18/2013
Budget Issue: Medi-Cal County Administrative Costs Associated With Implementing Federal Health Care Reform
Program: Department of Health Care Services
Finding or Recommendation: Require the administration to report at budget hearings and provide more detailed information about the assumptions and methodology used to estimate federal health care reform's net effect on Medi-Cal county administrative costs.
Further Detail


Counties Administer Medi-Cal Eligibility Determinations And Case Management. The state delegates various administrative functions, including intake and eligibility determinations of new Medi–Cal applicants and ongoing eligibility case management activities, to counties—hereafter referred to as county administration. Generally, the state allocates funds to counties based on expected county workload and costs.

Federal Health Care Reform Makes Major Changes To The Medi-Cal Program. The federal Patient Protection and Affordable Care Act (ACA) contains several provisions that are expected to affect the workload and costs associated with county administration. For example, the ACA gives California the option to expand Medi-Cal eligibility to over 1 million additional low-income adults. The ACA also makes several major changes intended to simplify and streamline the eligibility determination and redetermination processes, such as:

  • Creating an online website where individuals can apply for Medi-Cal or subsidized Exchange coverage.
  • Verifying eligibility information electronically.
  • Eliminating the asset test. (An asset test is currently used to restrict Medi-Cal eligibility to individuals with limited financial assets.)
  • Establishing a simpler method of calculating income based on tax records, known as Modified Adjusted Gross Income (MAGI).

Governor’s Proposal

The Governor’s May Revision proposes $755 million General Fund for county administration. Within that amount, the administration proposes a $71.9 million General Fund increase to pay for county administration associated with implementing the ACA, including $65 million for processing applications and eligibility redeterminations for newly enrolled populations, $4 million for training eligibility workers, and $2.9 million for County/Statewide planning and implementation support. In addition, the budget includes a $15.4 million Cost of Living Adjustment for county administration.

Analyst’s Comments

Net Effect Of The ACA On County Administration Is Uncertain. Certain aspects of the ACA—such as the potentially significant increase in Medi-Cal caseload—will increase costs. On the other hand, ACA provisions that simplify the eligibility determination process will likely reduce the average cost per enrollee across the entire Medi-Cal population. At this time, there is substantial uncertainty about the magnitude of these various fiscal effects and the degree to which potential savings would offset additional costs is unclear.

Administration Has Provided Very Little Detail To Support Estimated County Administration Costs. At the time of this analysis, the administration has provided very little detail to support its estimated county administration costs to implement the ACA. In addition, based on our understanding of the administration's proposal, it does not assume any savings associated with the streamlined eligibility and enrollment process that may at least partially offset additional costs.

Analyst’s Recommendation

Request Additional Information About Estimated County Administrative Costs. We recommend the Legislature require the administration to report at budget hearings and provide more detailed information about the assumptions and methodology used to estimate additional county administrative costs under the ACA and why it does not assume savings from the simplified eligibility process.