Legislative Analyst's Office, July 17, 1997
Federal Expansion of Children's Health Coverage
Potential Savings That Could Provide Sources of State and Local Matching Funds
The House and Senate budget reconciliation bills currently pending in Congress
both provide additional funds for the states to expand health care coverage for
low-income children. The Senate bill authorizes expansion to cover children in
families with incomes up to 200 percent of the federal poverty level, while the
House bill allows coverage in families with incomes up to 300 percent of the poverty level. Both bills require a state match, but at a lower matching rate than under the Medi-Cal Program.
Annual State/Local Contribution
Could be Roughly $100 Million to $200 Million
Based on an initial reading of the two federal budget reconciliation bills
currently pending in Congress, it appears that the nonfederal contribution by the state and/or local governments needed in order for California to receive the full amount of new federal funds could be in the
range of $100 million to $200 million annually. Total funding for the new
program could be in the range of roughly $500 million to $800 million
annually at the maximum funding level.
Potential Sources of Savings
Federal Match for Existing Children's Health Programs. A number
of existing state and county programs provide health care to low-income children. Depending on how the state chooses to implement the
new federal program, some or all of the services provided by these
existing programs could be shifted to the new program. The federal
government then would cover most of the cost--the federal matching
rate for the new program could be up to 80 percent versus the current
51 percent federal match in the Medi-Cal Program. Figure 1 (see next
page) shows some of the existing state and local programs that might
be replaced, in whole or in part, by the new federal program.
Cost of Existing State and County Programs
Providing Health Care to Low-Income Children
||1997-98 Estimated Cost|
|Child Health and Disability Prevention
(CHDP). Provides health screening, immunizations, and case management to
children through age 18 with family income up to 200 percent of poverty who
do not qualify for Medi-Cal.
||$33.3 General Fund
$48.9 Proposition 99
|CHDP Follow-Up Treatment. Counties
and certain clinics must provide treatment for medical problems identified by
CHDP screens. This requirement is a
condition of receiving Proposition 99
funds under three programs--California
Healthcare for Indigents Program, Rural
Health Services, or Early Access to Primary Care clinic grants.
||Unknown portion of state
allocations to counties
and clinics (primarily
Proposition 99 funding)
are used for this program.
exceeds $16 in
|California Children's Services. Funds
services and case management for children with severe medical conditions on a
sliding-scale basis (only a nominal payment for families under 200 percent of
poverty). Families with incomes up to
(and in some cases exceeding) $40,000
||$41.7 General Fund
|Access for Infants and Mothers. Provides subsidized health insurance to
women and infants with incomes between 200 percent of poverty (the limit
for Medi-Cal coverage) and 300 percent
||$39 Proposition 99
|County Indigent Care. Provides health
care services to poor children who are
not covered by Medi-Cal. Specific services and qualifications vary by county.
||Unknown. State realignment and Proposition 99
funds help finance county
indigent care programs.
Potential Medi-Cal Savings. Medi-Cal currently pays major medical
costs for many uninsured children with family incomes that are too high
to qualify for regular ongoing Medi-Cal coverage. These are children
who qualify for Medi-Cal as "medically needy" or "medically indigent"
when their monthly medical bills exceed their share of cost (the difference between the family's income and the allowable income level). The
federal share of these medical costs under the current Medi-Cal Program is 51 percent. Some of these children presumably would be covered on a regular basis under the new federal program, with a higher
federal match rate. State savings (potentially tens of millions of dollars
annually) would result because the federal government would pay a
larger share of major medical expenses for these children.
May Limit Realization of State Savings
The House and Senate versions of the pending federal budget legislation limit states' ability to shift existing Medicaid caseload to the new
children's programs. The Senate version of the legislation also contains complex additional restrictions and state maintenance-of-effort
requirements. The state's ability to realize savings by shifting existing
programs to the new program will depend on the restrictions included in
the final legislation and in subsequent implementing regulations.
Federal Budget Legislation
Could Result in Other Medi-Cal Savings
The Senate version of the federal budget legislation would enable the
state to reimpose limits on Medi-Cal payments to providers for services
to "dual eligibles"--persons who qualify for both Medicare and Medi-Cal benefits. Medi-Cal pays for Medicare premiums, coinsurance, and
deductibles. Amounts billed for services under Medicare often exceed
Medi-Cal rates for those services. The federal courts recently overturned state law that prohibited Medi-Cal payments that would result in
the combined Medicare/Medi-Cal payment exceeding the allowable
Medi-Cal cost. Approval of the Senate provision, would enable California to realize approximately $140 million of annual General Fund savings, which would be available for any General Fund purpose.
Federal Budget Health Provisions
Also Include Some Cost Pressures
Both federal budget reconciliation bills include a phased reduction in
disproportionate share hospital (DSH) funding provided to the states. In
California, federal DSH funding totals about $1.1 billion annually, and is
allocated to public and private hospitals with significant Medi-Cal caseloads under the SB 855 program. These DSH payments have the effect of augmenting Medi-Cal hospital rates and help finance indigent
care. The proposed federal DSH limitations will have little or no effect in
1997-98, but they will result in a reduction of up to approximately
20 percent by 2002. A portion of any state or county savings resulting
from the expansion of children's health coverage could be used to mitigate this DSH funding reduction.
Another state cost pressure results from the failure of either bill to provide the $216 million in reimbursements to California for the cost of
emergency Medi-Cal services to illegal immigrants that is assumed in
the conference version of the state budget. The House bill provides
only $20 million annually nationwide, and the Senate bill contains no
funding for this purpose.