LAO 2006-07 Budget Analysis: Health and Social Services

Analysis of the 2006-07 Budget Bill

Legislative Analyst's Office
February 2006

Some Practical Steps to Increase Children’s Enrollment

The Governor’s budget plan includes a package of proposals that focus on encouraging the enrollment of uninsured children who are eligible for Medi-Cal and the Healthy Families Program but not currently participants. We find some of these proposals to be reasonable in their current form, but recommend that others be rejected or modified because they are overbudgeted or have not been demonstrated to be effective for combined General Fund savings of about $7 million.

A Multifaceted Approach to Enroll Children in Medi-Cal and HFP

Current estimates from the 2003 Children’s Health Insurance Survey indicate that more than 450,000 children in California are potentially eligible for Medi-Cal and the Healthy Families Program (HFP), but are not enrolled. The Governor’s budget plan proposes to increase the state’s efforts to enroll these children into Medi-Cal and HFP through a multifaceted approach that includes the following main components:

The administration projects that these efforts will cost about $7 million General Fund ($17 million all funds) in 2005-06 and about $52 million General Fund ($121 million all funds) in 2006-07 for Medi-Cal and HFP local assistance combined. The costs of the various components of the package are summarized in Figure 1. Below, we comment on each component and its ramifications in more detail.


Figure 1

The Administration’s Proposal to
Increase Enrollment in Children’s Health Coverage

(In Thousands)


General Fund

Federal Funds

Total Funds

Outreach Efforts




  Certified application assistance (CAA)




  CAA incentive payments




  County outreach




  Media campaign




  Streamlining Healthy Families Program (HFP) Enrollment Process




  Toll free line




Caseload Effects




  CAA payments




  Streamlining HFP enrollment process




  Streamlining annual redetermination for Medi-Cala









a  Includes county administration costs.


The Medi-Cal Program is administered by the Department of Health Services (DHS) and HFP is administered by the Managed Risk Medical Insurance Board (MRMIB).

Grant Funding for County-Based Outreach Efforts

Our analysis indicates that a proposed new program to provide grants to counties for outreach for children’s health programs could be effective in increasing enrollment in the Healthy Families Program and Medi-Cal, but we recommend that the Legislature modify the program’s allocation plan and enrollment strategy.

The Governor’s budget plan proposes to initiate a grant program to provide funds to counties for locally directed efforts to increase enrollment and retention of beneficiaries in Medi-Cal and HFP. The budget proposes $8.5 million General Fund ($19.7 million all funds) to begin phasing in this program in 2006-07, with a full-year cost of $13 million General Fund ($30 million all funds) for 2007-08 and subsequent years. The administration also proposes statutory language to establish this new program.

Grant Funding Targeted at Specified Counties. The majority of this funding is to be allocated among the 20 counties that DHS has identified as having (1) the highest number of children potentially eligible for Medi-Cal and HFP and (2) the largest existing caseload in those two programs. Based on survey data on uninsured children, two-thirds of this money would be divided among 5 of these 20 counties: Los Angeles, Orange, San Diego, San Bernardino, and Riverside. The other 38 counties would be able to apply competitively for a grant from a smaller pool of funds if they could demonstrate that they have an established coalition for outreach and enrollment. Counties receiving grant funds would be required to report quarterly on the results of their activities.

Proposed State Funding Could Replace Nonstate Sources. As now proposed by the administration, the grant funds provided by the state to counties could, in some cases, take the place of local public or private sources now used for these same activities. Various counties in the state are already conducting children’s enrollment and retention outreach efforts supported through a mix of funding from the state, county, and nonprofit organizations. For example, Los Angeles County is currently funding outreach efforts using funds from the California Endowment and the First 5 California Children and Families Commission (which receives its funding from a state tax increase on tobacco products authorized by a voter-approved initiative known as Proposition 10). Other foundations such as the David and Lucille Packard Foundation have also provided money for enrollment and retention efforts around the state in recent years.

Discussions with DHS indicate that the administration expects some of the state funding to supplant local resources now spent for enrollment efforts, thereby freeing up those local funds to directly provide health coverage for children who are ineligible for Medi-Cal or HFP. This may not occur in cases where local donors to these activities had designated their funds to be used only for outreach efforts. However, in other cases, it is possible that counties receiving these funds could shift local resources now used for outreach activities to other purposes.

We would also note, though, that counties have an incentive to use any additional state grant funding they receive to expand outreach for Medi-Cal or HFP, because in some cases it would relieve them of the cost of providing county-funded health care for these children.

Some Proposed Uses of Grant Funding May Be Ineffective. The Governor’s budget plan envisions that counties will engage in several types of outreach and retention activities. One component identified as a “major activity” would be to have grant recipients follow up with every family that obtains, but does not submit, an enrollment application they received through the Child Health and Disability Prevention (CHDP) “gateway” program. The gateway provides temporary Medi-Cal coverage to children when they receive certain preventive services from CHDP programs operated by counties. The administration’s proposal notes that only 16 percent of such applications given out to parents as part of the CHDP gateway are actually later completed by parents and submitted to the state.

Our review indicates that this strategy of relying upon the CHDP gateway program may not be an effective use of state resources. Each of these families already receives a follow-up reminder from the state if they have not followed through with their application. Also, DHS does not have information regarding how many of the children who use the CHDP gateway are likely to be eligible for full-scope Medi-Cal coverage or HFP coverage. A significant portion of these children may be eligible only for limited-scope Medi-Cal due to their immigration status, and thus may be less likely to be willing to apply.

Analyst’s Recommendation. We recommend approval of this budget request, with some modifications, because we find that the proposed overall approach of building on existing local efforts and requiring regular reporting is a reasonable approach for expanding outreach efforts.

We are concerned that the proposed funding allocation formula creates the risk that the state will provide additional funding primarily for the very counties that are best able to obtain nonstate funding sources for these same purposes. Accordingly, we further recommend that the Legislature modify the proposed statutory language for this new program so as to account for a county’s current access to other funding sources. This change is intended to allocate more grant funds to counties lacking alternative funding opportunities. The legislation should also be modified to require counties which receive the grants to maintain their ongoing level of support for these activities. The Legislature could consider permitting an exception in cases in which counties receiving these grants shifted their available funding to the direct provision of health coverage for children.

Because it is highly uncertain whether the proposed CHDP gateway follow-up would be cost-effective, we recommend that the Legislature remove from the proposed statutory language the requirement for this activity, and instead specify that these activities would not be supported through the grant program.

Statewide Media Campaign

We recommend that the Legislature reject a proposal to fund a statewide media campaign to encourage enrollment in children’s health programs because this approach has not been demonstrated to be effective in the past.

Proposal Would Reestablish Prior Media Efforts. From 1998 through 2002, the state conducted a paid media campaign to promote public awareness of the then-new HFP and the newly expanded eligibility rules for children in Medi-Cal. The media campaign funding was eliminated in 2002-03 because of the state’s budget problems. The administration is now proposing to spend $1.4 million from the General Fund (about $3.4 million from all fund sources) in the budget year and $4.9 million General Fund ($11.9 million all funds) annually thereafter to conduct a similar new media campaign.

Benefits of Media Campaign Not Evident. The DHS reports that, after improvements were made in this prior media campaign, the volume of calls made to a toll-free information line for enrollment in Medi-Cal increased. However, DHS further indicated the increase in call volume did not result in a commensurate increase in enrollment. Notably, neither DHS nor MRMIB are projecting an increase in caseload associated with their respective health coverage programs as a result of the renewed media campaign.

Analyst’s Recommendation. Because there is no evidence to demonstrate that the media campaign would meet its intended goal of increasing enrollment in Medi-Cal and HFP, we recommend that the Legislature deny this budget proposal in its entirety for General Fund savings of $1.4 million in 2006-07.

Expanding Application Assistance Incentives

We recommend the Legislature deny a proposal to provide increased incentive payments for certified application assistance to further encourage enrollment in children’s health programs. We believe it is premature to test the proposed incentive payments before the effect of the existing payments has been evaluated.

CAA Payments. The administration is proposing that the state budget about $14.6 million from the General Fund ($38.5 million from all fund sources) for certified application assistance for Medi-Cal and HFP. Of the $38.5 million in total spending, $11.8 million is for support of CAA and $26.7 million is for HFP caseload growth expected to result from these CAA activities. The CAA payments had been discontinued a few years ago because of the state’s budget problems, but were restored by this year’s budget. Currently, under this program, CAAs are paid $50 for each beneficiary they successfully enroll in HFP or Medi-Cal, and $25 more for each successful HFP reenrollment at the time of annual redetermination. The MRMIB estimates that about an additional 17,000 children will be enrolled in HFP by June 30, 2006, under the existing CAA program.

In addition to these ongoing payments to CAAs, the administration is now proposing to budget an additional $1 million from the General Fund ($2.5 million from all fund sources) for increased incentive payments to CAAs to further encourage the enrollment of more children in Medi-Cal and HFP. These incentive payments would be made to CAAs that increased the number of assisted initial applications or renewals of their enrollments by 20 percent over the prior quarter. The incentive payment would equal 40 percent of the total payments made to a CAA in the qualifying quarter. The MRMIB and DHS have not provided the Legislature with an estimate for the number of additional children they expect to be enrolled in HFP and Medi-Cal as a result of adding these incentive payments to CAAs.

CAA Payments a Successful Outreach Strategy. The CAA payment program has a demonstrated record of effectiveness, in that each payment signifies the successful enrollment of a beneficiary in these programs. The use of CAAs can also reduce state workload for the processing of program applications and appeals of denials of enrollment. When funding for CAA payments ended several years ago, the number of incomplete applications for HFP increased from 40 percent in 2003 to approximately 70 percent the following year, while the number of appeals of denials of enrollment increased from 130 per month to more than 600 per month. The appeals constituted a significant additional workload for MRMIB and increased problems for families attempting to enroll children in the program.

Analyst’s Recommendations. We recommend that the Legislature deny the proposal to provide increased incentive payments to CAAs for savings of $1 million General Fund in 2006-07. As previously mentioned, the basic CAA payment program was just restored last year. Consequently, we believe it is premature to test the proposed incentive payments before the full-year caseload impact of restoring the existing payments has been evaluated. Given that CAA proved before to be an effective strategy for increasing enrollment, it is unclear why additional incentive payments would be necessary.

Streamlining Healthy Families Enrollment

We recommend approval of funding and statutory changes proposed by the administration to streamline enrollment in the Healthy Families Program. Our analysis suggests these changes could significantly increase program enrollment for a fairly small administrative cost.

Changes Proposed to HFP Enrollment Process. The administration is proposing three changes to the application process to reduce barriers and expedite enrollment into HFP.

First, MRMIB is proposing to no longer require applicants to select a health plan at the time of their enrollment. Under this proposal, if a plan was not selected by a family when the child was being enrolled in HFP, the child would automatically be enrolled in the so-called community provider plan-the cheapest option for the enrollee.

Second, prepayments of the first month’s premium would no longer be required when an HFP application was submitted. Instead, the child’s family would be billed for premiums after the child was determined eligible and enrolled in the program.

The final change would be to expand the availability of the Web-based Health-e-App application to the general public so that any family could use a computer to apply for benefits online. Currently, Health-e-App is used only by county welfare offices and CAAs.

Assuming a January 1, 2007 start-up date for these three changes, MRMIB estimates that they would result in the enrollment of 12,400 more children in HFP by June 30, 2007. (We discuss this aspect of the HFP caseload estimate in a MRMIB analysis later in this chapter of the Analysis.) The MRMIB is requesting $32,000 from the General Fund ($91,000 all funds) to support a two-year limited-term position to coordinate these changes.

HFP Enrollment Changes Should Increase Enrollment. Our analysis indicates that all three of the administration’s proposals to streamline the HFP enrollment process are likely to prove effective. According to MRMIB, more than 170,000 HFP applications per year fail to include the premium payment or specify the plan in which the child should be enrolled, resulting in the denial of their application. Meanwhile, 64 percent of the applications now being completed on the Web-based Health-e-App are successfully enrolled in HFP compared to 50 percent of applications completed on the mail-in form. Such Web-based applications automatically require that all needed data fields are completed, which reduces mistakes, and the electronic format ensures that readability of the information is not an issue. It is highly likely that more children will be enrolled in HFP as a result of these changes.

Analyst’s Recommendation. For the reasons discussed above, we recommend approval of the funding and statutory changes proposed by the administration to streamline enrollment in HFP. Our analysis suggests these changes could significantly increase program enrollment for a fairly small administrative cost.

Simplifying Medi-Cal Reenrollment Forms

We find the administration’s proposal to streamline the annual Medi-Cal reenrollment form to be a practical step to encourage beneficiaries to remain in the program. However, we recommend that the Legislature reduce the funding for the caseload increase associated with this change, which we find to be overbudgeted.

Changes to Medi-Cal Form Make Sense. The administration budget plan proposes to implement changes to the annual redetermination form so as to ensure that currently enrolled Medi-Cal beneficiaries continue their participation in the program. The revised form would combine some sections of the existing form and eliminate other parts of the form containing information that is unlikely to change from the initial application for benefits. Other questions on the form would be reformatted to ask about changes in a family’s information rather than asking them to repeatedly provide information they have provided in the past. For example, the current form asks the applicant to list all children and other adults in the household, while a proposed revision would be less burdensome by asking only about any changes in the members of that household since the previous year.

The paperwork associated with programs like Medi-Cal has been cited in studies as a deterrent to applications for health coverage. Increased stability in the Medi-Cal rolls could also reduce the administrative costs associated with “churning,” in which eligible beneficiaries repeatedly leave the program only to reenroll again. The administration’s plan to simplify the redetermination form could effectively address these issues.

Estimated Medi-Cal Caseload Effect May Be High. The Governor’s budget assumes that this change in the form will increase Medi-Cal caseload costs by about $20 million General Fund in 2006-07. Our review indicates that the projected increase in the Medi-Cal Program resulting from these changes in the redetermination forms is probably somewhat overstated.

The Medi-Cal budget request is based on counties’ rough estimates of the impact of this change, and assumes the highest possible growth rate of caseload estimated by the various counties. If the actual growth rate that occurred was at the midpoint of the range of county estimates, the General Fund cost of this caseload growth would be about $4 million less than assumed in the Governor’s budget plan.

Analyst’s Recommendation. We recommend that the Legislature reduce the General Fund budget for Medi-Cal local assistance by $4 million to reflect a more reasonable mid-point estimate of the increase in caseload likely to result from simplification of the Medi-Cal form for redetermination of eligibility. We believe the underlying strategy for increasing enrollment is a sound one.

Staffing for Some Activities Should Be Rejected

We recommend that the Legislature reject seven of the ten positions proposed for the Department of Health Services to enact the administration’s children’s enrollment initiative. These seven positions are either associated with programs we believe should be denied or are unwarranted on a workload basis.

Additional Ten DHS Positions Proposed. The Governor’s budget plan includes ten positions and an augmentation of $466,000 from the General Fund ($932,000 all funds) for DHS to implement the various children’s enrollment proposals presented by the administration. A significant portion of these resources would be devoted to the development of the proposed media campaign and implementation of the proposed program to follow up on every CHDP family that obtains an application for health coverage but fails to complete it. As stated above, we recommend that the Legislature deny these proposals. Also, we believe that fewer staff are needed for the other enrollment expansion activities proposed by the administration because the outreach effort would rely on county program structures already in place. For these reasons, we recommend that the Legislature deny seven of the requested ten DHS positions for savings of $307,000 General Fund in 2006-07. One MRMIB position would also be approved as propsed.


For the reasons stated above, we find that some of the administration’s proposals to encourage the enrollment of uninsured children who are eligible for Medi-Cal and HFP are reasonable, while others should be rejected or modified because they are overbudgeted or have not been demonstrated to be effective. We recommend a combined reduction of about $7 million General Fund ($15 million all funds) and deletion of seven of 11 staff positions proposed for DHS and MRMIB.

Return to Health and Social Services Table of Contents, 2006-07 Budget Analysis