Legislative Analyst's Office, November 28, 1995

Background Information on
The Health Care "Safety Net"

California's Health Care Delivery System

Currently, Californians receive health care services through a variety of mechanisms:

What Is the Safety Net?

California's health care safety net represents the health-related services provided through counties for persons who lack health insurance or other coverage, such as Medi-Cal, and cannot pay for health services rendered. Although the state provides a host of health services through its Medi-Cal and various public health programs, counties are ultimately responsible for serving those with no other means of public or private support, as stipulated under Section 17000 of the Welfare and Institutions Code.

Who Uses the Safety Net?

According to hospital discharge data from the Department of Health Services' (DHS) Medically Indigent Care Reporting System (MICRS), the state served roughly 1.7 million medically indigent persons in 1992-93 (latest data available). The data show that a majority of those served: (1) received outpatient services, (2) received services in Los Angeles County, and (3) were identified as Hispanic. Furthermore, those receiving indigent care were categorized into these three age groups: 31 percent below the age of 21, 34 percent between the ages of 21 and 34, and 35 percent age 35 or older.

How Much Does the Safety Net Cost?

Figure 1 shows the amount of state and county expenditures on indigent health care in 1992-93 -- the latest year in which complete data are available from the DHS. The department indicates, however, that these data may not be reported by the counties on a consistent basis. It is not clear, for example, how the expenditure of federal disproportionate share hospital funds is reported by the counties.

How Has the Safety Net Been Funded?

Funding for the "safety net" has been provided through several different sources over the years. Below, we describe the major funding sources:

Major Shifts in Safety Net Funding

Several shifts have occurred within the state's health care safety net over the past five years.

Uninsured Rates Vary Significantly Across California

The UCLA Center for Health Policy Research report, entitled Health Insurance Coverage of Californians, 1989-92, examined recent trends in health insurance in California. Figure 7 compares the percent of the population lacking insurance and those covered by insurance or Medi-Cal in larger regions of the state. The report indicates that Los Angeles County's uninsured rate of 30.9 percent is the highest among the 30 largest metropolitan areas nationwide. Four other regions -- Orange, Sonoma, San Diego, and Fresno-Kern Counties -- have uninsured rates in excess of 20 percent.

The report further indicates that the majority of uninsured individuals are employed, largely in small firms. Those individuals employed full-time in small firms (less than 25 workers) are less likely to receive health insurance compared to employees in small firms in the rest of the nation -- 36 percent in the state versus 42 percent nationally. Many of the smaller firms are involved in the agricultural, retail, and service sectors of the economy.

Public-Private Partnerships

We list below some ways the state and counties have worked with private groups to improve health services for indigents or those who otherwise would be indigent.

Federal Medicaid Reform

Congress recently passed legislation that would make significant changes to the federal Medicaid Program (Medi-Cal in California).

Changes in Entitlement to Services. States would be required to provide some medical assistance to children under age 13 and pregnant women in families with incomes at or below the federal poverty level and to disabled persons, as defined by the state.

Increased Flexibility in Some Areas. The legislation would increase the states' discretion over several key areas, including eligibility criteria and benefit coverage. States would be authorized to establish the benefit package, with the exception of two mandatory benefits: (1) immunizations for eligible children and (2) pre-pregnancy family planning services and supplies, as determined by the state. In addition, states would no longer be required to: (1) cover specific services; (2) reimburse specific types of health care providers; (3) reimburse at specific rates; (4) provide services on a statewide basis; (5) provide services of the same duration, amount, and scope to all eligible individuals; (6) allow patients "freedom of choice" to select providers; or (7) reimburse noncontract hospitals and nursing facilities on the basis of reported actual costs.

Some Strings Are Still Attached. The legislation includes a state maintenance-of-effort requirement for three population groups: (1) pregnant women and children in families with incomes below 185 percent of poverty, (2) the elderly, and (3) the disabled. Also included is a maintenance-of-effort provision for Medicare premium assistance and payments to Federally Qualified Health Centers and rural health centers.

Payments to States. A federal maximum allotment would be established for each fiscal year beginning with federal fiscal year 1996 (October 1995 to September 1996). States would be required to match federal funds up to the federal cap. Funds would be allotted to states based on a funding formula. The DSH program would be eliminated, with the payments incorporated into the overall funds allotted to states according to the funding formula. In addition to this block grant funding, California would receive an estimated $1.6 billion over five years to partially offset costs for emergency services provided to undocumented persons.

Proposed Waiver for Los Angeles County. We note that this legislation puts at risk Los Angeles County's receipt of the $364 million in federal funds anticipated as a result of the proposed Medicaid waiver.

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