The Managed Risk Medical Insurance Board (MRMIB) administers several programs designed to provide health care coverage to adults and children. The Major Risk Medical Insurance Program provides health insurance to California residents unable to obtain it for themselves or their families because of preexisting medical conditions. The Access for Infants and Mothers program provides coverage for women seeking pregnancy-related and neonatal medical care and whose family incomes are between 200 percent and 300 percent of the federal poverty level. The Healthy Families Program provides health coverage for uninsured children in families with incomes up to 250 percent of the federal poverty level and not eligible for Medi-Cal.
The budget proposes $422 million from all funds for support of MRMIB programs in 2000-01, which is an increase of 32 percent over estimated current-year expenditures. This is due primarily to an increase of $71 million in federal funds and $42 million from the General Fund for caseload growth in the Healthy Families Program.
The Healthy Families Program implements the federal government's State Children's Health Insurance Program enacted in 1997. Funding for California generally is on a 2-to-1 federal/state matching basis. Families pay a relatively low monthly premium and can choose from a selection of managed care plans for their children. Coverage is similar to that offered to state employees and includes dental and vision benefits. The program began enrolling children in July 1998.
Current-Year Expansions. The 1999-00 Budget Act expanded eligibility in the Healthy Families Program by (1) increasing the family income limit from 200 percent to 250 percent of the poverty level, (2) allowing use of the same income deductions used in Medi-Cal in computing family income, (3) permitting enrollment of newborns (for those with family incomes of 200 percent to 250 percent of the federal poverty level), rather than excluding them until their first birthday, and (4) establishing a one-year, state-only program to cover children who entered the U.S. after August 22, 1996.
The Budget Proposal. The Governor proposes $336 million ($121.3 million General Fund) in MRMIB's budget for the Healthy Families Program in 2000-01, which is an increase of about 50 percent over estimated current-year expenditures. After accounting for program expenditures (outreach and related Medi-Cal benefits) in the Department of Health Services (DHS) and related expenditures in other departments, the total budget for the Healthy Families Program is proposed at $425 million ($141.8 million General Fund), which is an increase of 46 percent over the current year. The proposed increase is due primarily to an expected 32 percent increase in caseload in the budget year. We note that the budget does not include funding for provider rate increases in 2000-01. The rate increases will be negotiated in February and will be included in the May revision of the budget. The budget projects that enrollment will increase to 279,450 by the end of the current year and 369,518 by the end of the budget year.
The budget projects a slow-down in enrollment in the current year in the Healthy Families Program. While there is considerable uncertainty about the actual number of children who are eligible for the program, we estimate that the program's caseload at year's end will be 11 percent greater than the budget estimates, with an additional cost of $3.3 million ($1.1 million General Fund) in 1999-00. The administration will update its enrollment projections in the May revision of the budget.
Budget Assumes Significant Slow-Down in "Base" Enrollment. The budget estimates that 279,450 children will enroll in the Healthy Families Program by the end of the current year, and that 250,000 of these will be in families whose incomes are less than 200 percent of the federal poverty level. (This income group is referred to as the "base" population--children who qualify under the original income limits of the program.)
We believe that the base caseload of the budget's estimated current-year enrollment is understated. The budget projects that an average of 6,442 new enrollees (in this income group) will enroll each month between November 1999 and June 2000. Actual caseload data, however, show that an average of 15,280 new children enrolled each month during the nine months prior to November 1999. The budget, therefore, assumes a significant slow-downa 58 percent drop in the monthly averagein the last half of the current year.
Larger Caseload Will Cost More. Based on caseload trends to date, we see no reason to expect a 58 percent decline in the average number of new enrollees with incomes below 200 percent of the federal poverty level. Therefore, after adjusting for a slight slow-down in the base enrollment per month (since there is a diminishing percentage of children who are eligible but have not already enrolled) and for the disenrollment of some children who will be found no longer eligible for the program during their annual eligibility redetermination, we estimate that by the end of 1999-00 enrollment of the base population will total 281,500. This would be a 110 percent increase over the prior year, compared to the 87 percent increase reflected in the Governor's budget (for the base population only). We estimate that the cost associated with this caseload adjustment will be $3.3 million ($1.1 million General Fund). We note that the administration will provide an updated caseload estimate in the May revision of the budget.
The budget proposes to extend, for one year, Healthy Families eligibility for legal immigrant children who entered the U.S. after August 22, 1996, but only for those who enrolled in the program in the current year. We see no policy rationale for excluding certain legal immigrants from this one-year extension solely on the basis that they did not enroll in the program in the current year. Therefore, we recommend extending the budget proposal to include all legal immigrant children who entered the U.S. after August 22, 1996, at a General Fund cost of $2.4 million in 2000-01. (Increase Item 4280-101-0001 by $2,365,920.)
Background. Under the Healthy Families Program expansions that were implemented in the current year, legal immigrant children who entered the U.S. after August 22, 1996 (and who otherwise meet program eligibility requirements) became eligible for the program for a period of one year. The cost of these clients is borne solely by the General Fund because federal law excludes the use of federal funds to cover recent legal immigrant children under Title XXI of the Social Security Act (the State Children's Health Insurance Program).
Governor's Proposal. The budget proposes to provide a second year of eligibility for the recent legal immigrant children who enroll in the program in the current year. The General Fund cost of extending their coverage in the budget year is estimated to be $1.9 million.
No Policy Rationale for Distinguishing On Basis of Time of Enrollment. Under the Governor's budget proposal, a recent legal immigrant child who does not enroll in the program in the current year would be ineligible to apply for coverage in the budget year, while his or her counterpart who enrolled in the program in 1999-00 would be eligible to seek a second year of coverage. We see no policy rationale for basing eligibility on this distinction. We further note that applying the proposal to all recent legal immigrant children would not be costly in the context of this program--about $2.4 million from the General Fund.
Consequently, we recommend that the Legislature adopt the Governor's proposal but extend it to all recent legal immigrant children, regardless of whether they enrolled in the program in the current year. We estimate that adoption of this recommendation would increase the number of recent legal immigrant enrollees at the end of the budget year by about 5,370 children.
The budget double counts the caseload cost of the legal immigrants in 2000-01. Consequently, we recommend a technical correction to the budget, for a General Fund savings of $3 million. (Reduce Item 4280-101-0001 by $2,946,470.)
Due to a technical error, the budget double counts the caseload cost of the legal immigrant children for which it proposes to provide an additional year of health coverage. Accordingly, we recommend correction of this error, for a savings to the General Fund of $3 million in 2000-01.
Since 1992, the Access for Infants and Mothers (AIM) Program has served low- to moderate-income women who are pregnant but without health insurance to cover their pregnancy. The AIM Program covers comprehensive health care throughout the pregnancy, the delivery, and sixty days of post-pregnancy care for the mother and up to two years of care for the infant. The state contracts with health insurance plans to provide these services. To be eligible for the program, women must be pregnant, have no health coverage for their pregnancy, and have incomes between 200 percent and 300 percent of the federal poverty level. (The Medi-Cal Program provides coverage to pregnant women and their infants in families with incomes up to 200 percent of the federal poverty level.)
Currently, program participants pay a fee of 2 percent of their family income toward the costs of services received by the mother and the infant. For example, in 1998, a single pregnant woman without other children whose annual income was $21,701 would pay a fee of $434. Infants can receive coverage for a second year, for an additional $100, or $50 if the recommended one-year vaccinations are up to date.
The AIM Program is funded mostly through revenues from the Cigarette and Tobacco Products Surtax (C&T) Fund established by Proposition 99. In addition, federal Title XXI funds support about 65 percent of the cost of AIM infants between the ages of birth and one year whose family incomes are between 200 percent and 250 percent; the General Fund pays for the other 35 percent of these infants' costs.
We recommend reducing the budget's estimated level of spending for the Access for Infants and Mothers Program in the current year by $1.3 million, for a corresponding savings to the Perinatal Insurance Fund (Proposition 99), to reflect more realistic caseload changes.
Background. The MRMIB will promulgate regulations in February that will incorporate the use of income deductions in computing the family income of AIM applicants (these are the same income deductions used to assess eligibility in the Medi-Cal and Healthy Families Programs). Applying these income deductions in AIM will eliminate a current overlap in eligibility for the AIM and Medi-Cal Programs for those women whose income, before applying income deductions, is just above 200 percent of the federal poverty level.
Budget Proposal. The budget estimates that an average of 420 women will enroll in AIM in each of the first six months of the current year. Additionally, the budget assumes that, once income deductions are implemented in February, 25 percent of potential AIM enrollees will be ineligible for the program because their adjusted incomes will be less than 200 percent of the federal poverty level. Instead, these women will be eligible for the Medi-Cal Program. Accordingly, the budget estimates that 315 new women will enroll in AIM each month from February through the end of the current year. The budget further estimates that 315 new women will enroll each month in the budget year.
Overbudgeting in Current Year. We believe that the budget overestimates AIM's caseload in the current year by 2.8 percent, or 120 new enrollees, and is therefore overbudgeted by $1.3 million in Proposition 99 funds. Our estimate differs from the budget's in three ways. First, using actual data and historical trends, we estimate that the monthly enrollment of new women in the first half of the current year will average 399 women, rather than the budget's estimated 420 women. Second, by applying our caseload estimate of the first six months of the current year to the estimated 25 percent reduction in caseload beginning in February (due to the use of income deductions), we reduce the estimated caseload in the second six months of the current year to 299 new enrollees per month, compared to the budget's 315 women per month. Finally, we increase this estimated monthly enrollment of 299 women to a monthly average of 306 because the budget does not account for women of moderate income (just above 300 percent of poverty) who will become newly eligible for the AIM Program once income deductions are applied.
For these reasons, we recommend that the current year budget be reduced by $1.3 million in Proposition 99 funds.
Budget-Year Estimate Uncertain. We do not take issue with the budget's estimated caseload for the budget year, primarily because there is more uncertainty as to how the use of income deductions will affect enrollment in 2000-01. The administration will present updated estimates during the May revision of the budget.
The budget does not account for $2.2 million in unpaid claims that the board must pay in 1999-00. We recommend that the board present, at budget hearings, a fiscal plan for satisfying this obligation without jeopardizing the Perinatal Insurance Fund's reserve.
Background. One of the health plans that provide AIM services has presented the board with $3.2 million in back claims. By contractual agreement, MRMIB is required to pay these claims in the current year.
Budget Increases Appropriation for Payment of Claims. The budget includes a current-year deficiency request of $4.6 million. While the stated purpose of the deficiency is to accommodate a caseload increase, $2 million of the deficiency is to (1) pay $1 million of the back claims, and (2) increase the Perinatal Insurance Fund's (PIF) reserve from $485,000 (or 1 percent of current-year expenditures) to $1.4 million (or 3 percent). Thus, there is still $2.2 million in outstanding payments that MRMIB must make in the current year, but the budget does not include these expenditures.
Recommendation. If the Legislature adopts our previous recommendation--to reduce expenditures by $1.3 million in the current year--then these funds would be available to pay off 60 percent of the balance of unpaid claims. However, almost $1 million in unpaid claims would remain unaddressed. Further, any use of the PIF's balance in the current year would jeopardize the reserve (3 percent of the fund's expenditures).
Therefore, we recommend that the board present, at budget hearings, a fiscal plan for how it will pay the back claims while preserving the PIF's reserve.