Health care: State Medi-Cal to get $10 billion infusion

California’s Medi-Cal program, a state-federal system that provides health care to 6.7 million people, is expected to receive at least $10 billion – more than a fourth of its entire budget – as part of federal legislation intended to boost public health care funding.

For the strapped state struggling to cover an unprecedented budget deficit, the money comes at a crucial time.

However, to obtain the funds, which by one estimate could be as high as $11.23 billion, the state will have to reverse restrictions on eligibility that it imposed last year.

Medi-Cal provides health care for mostly low-and moderate-income Californians through a $38 billion budget that includes roughly a 50-50 mix of state and federal money. The latest federal legislation boosts its portion of the match, resulting in a $10 billion increase over time. The only strings attached are that the state can’t rollback eligibility requirements or take money from the counties. The increase is part of the program known as the Federal Medical Assistance Percentages, or FMAP.

There appear to be few strings attached to the funds.

“We couldn’t reduce eligibility levels, but other than that, it is up to the governor and the Legislature to decide how this funding will be used,” said Toby Douglas, chief deputy director of the State Department of Health Care Services, which administers the Medi-Cal program. Gov. Arnold Schwarzenegger in December urged President-elect Obama to consider increasing. In January 2008, Schwarzenegger joined with a number of other governors seeking more money for Medi-Cal amid concerns that the Bush administration intended to freeze funding.

The infusion of Medi-Cal money has received little attention in the media, overshadowed by concerns over the economy and state and federal budgets. But within the health-care and business communities, the likelihood of new money for Medi-Cal has drawn close scrutiny.

Schwarzenegger, in a Dec. 2, 2008 letter, urged Obama to consider increasing California’s percentage of funding for Medi-Cal Dollars.

“Increasing the federal medical assistance percentage would help California stay afloat in this economic downturn when Californians rely on this program the most. A temporary increase will help reduce the financial strain of increased Medi-Cal enrollment and free up General Fund dollars for other uses and savings,” the governor’s office said.

“The overall FMAP formula must be re-evaluated, as the current formula puts California and other high-income states at a huge disadvantage. The overweighting of income for determining Medicaid matching rates is a contributing factor to California’s huge fiscal imbalance with the federal government where we sent $50 billion more to Washington in 2006 than we got back.”

The Legislature’s fiscal adviser said in an earlier analysis that California stood to gain up to $11 billion in federal funding, although the state first would have to rescind a controversial eligibility requirement that was contained in the prior fiscal year. That rule said that parents had to reaffirm their children’s eligibility twice a year.

“Based on our review of the proposed eligibility restrictions, the state would currently be ineligible for enhanced FMAP due to an eligibility procedure change the state enacted as part of the 2008-09 Budget Act. This change required families to submit a status report on behalf of their children every six months to confirm their continuing eligibility for Medi–Cal. (The parents are already required to submit this report.) In order to receive the new federal funds, the state would need to reverse this policy prior to July 1, 2009. This reversal would result in additional costs to the state of $92 million General Fund in 2009–10 (as estimated at the current Medi–Cal FMAP rate of 50 percent),” according to a report by the Legislative Analyst’s Office.

 “In addition, the Governor’s 2009–10 budget plan incorporates other proposed reductions in Medi–Cal Program eligibility rules that, if adopted, would achieve $324 million in General Fund savings in 2009–10,” the LAO said.

The California Medical Association urged state lawmakers to roll back eligibility restrictions, and estimated the size of the funding package at $11.2 billion.

The federal package requires that the state‘s eligibility and renewal rules cannot be more restrictive than they were on July 1, 2008. As part of the budget deal enacted last September, California moved from annual to semi-annual reporting on Medi-Cal eligibility. That added provision must be lifted in order for the state to receive the higher federal reimbursements for the program.

“This is another great opportunity for state lawmakers to maximize federal assistance,” said Dr. Dev A. GnanaDev, CMA president. “Restoring Medi-Cal’s eligibility rules makes smart fiscal sense and means more Californians will receive the health care they need.”

The state Legislature increased Medi-Cal eligibility reporting as one way to help cut costs. The move was expected to save the state $25 million in the fiscal year. 

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