As it turns out, the federal Patient Protection and Affordable Care Act (ACA), known popularly as “Obamacare,” could be a boon to the California budget. Given how the ACA is structured, the state could end up spending less on an unlikely source – prison inmates. The ACA is designed to expand healthcare coverage to low-income people, and its threshold for coverage applies to a lot of people now behind bars or about to be released back into society.
As a result, the state could save money immediately when inmates are hospitalized. But experts say it could also save money down the road by having the federal government pay for more services to help reduce recidivism rates.
Currently, many low-income Californians get healthcare coverage through Medi-Cal, which is California’s implementation of the federally managed Medicaid program.
Medi-Cal is paid for by a combination of state and federal funds, with more than half the funding from the federal government. Currently, most Medi-Cal enrollees are children or parents, but most of the money is spent on seniors and people with disabilities.
The savings will come because the ACA is about to expand the number of Californians covered under Medi-Cal, and the federal government is picking up almost all the cost of that expansion. As of October 1, ACA will expand Medi-Cal eligibility to all persons aged 18 to 64 who earn less than 134 percent of the federal poverty line. The practical effect is that it extends eligibility to childless adults and people who currently are ineligible because they earn slightly more than the current 100-percent threshold.
That expansion is likely to cast a net over inmates, said Lee Kemper of the County Medical Service Program, an organization funded by rural counties that helps administer health care to its indigent population. “There are roughly 1.5 million people who will become eligible for Medi-Cal under this current expansion,” said Kemper. “A lot of the people in prison or county jails are low-income single adults, so the potential here to link them to healthcare under Medi-Cal is pretty obvious.”
The expansion is significant to the state budget because the federal government will pay 100 percent of the cost of this expansion from 2014 to 2016, gradually reducing the federal share to 90 percent of the cost by 2020.
With regard to inmates, however, there’s a catch: While incarcerated, inmates are covered only when hospitalized outside a state institution. Federal law forbids Medicaid payments for health services provided to inmates inside correctional facilities such as state prisons and county jails.
As a result, the state saves money on those inmates treated outside prison walls.
Still, that can amount to significant savings after ACA kicks in. The California Department of Corrections and Rehabilitation (CDCR) spent $130 million to provide inpatient healthcare for inmates during the 2012-2013 fiscal year, and the potential savings from ACA’s expansion could amount to tens of millions of dollars, according to a 2013 report from the Legislative Analyst’s Office.
According to Aaron Edwards, an LAO analyst specializing in correctional health care, the LAO “suggested that the Legislature reduce the budget for inmate healthcare accordingly,” allocating those funds for other programs.
As important as savings may be on treatment for those inside prison, Edwards noted that more significant changes will occur after inmates are released back into society. “Formerly these people were childless adults who wouldn’t qualify for Medi-Cal,” he explained. “But with the Medi-Cal expansion, a lot of these recently released inmates will be qualifying [for healthcare coverage]. That’s where the major change is in terms of access of care, guys who are getting out of jail and out of prison.”
As a result, another hoped-for effect of the mandated expansion of Medi-Cal is reduced recidivism.
According to a CDRC report on the realignment of lower-level offenders from state prisons to county jails, most released inmates are re-arrested on drug or drug-related charges. Under expanded Medi-Cal coverage, it is anticipated that former inmates will qualify for various mental-health programs aimed at reducing their involvement with drugs. Fewer inmates returning to prison also could reduce costs to the state, especially since the federal government pays at least 90 percent of the cost of ACA-related treatment programs funded through Medi-Cal.
“The decision to do this was pretty recent,” explained Kemper. “It was in the budget act actually. But they [the Legislature] are requiring the Medi-Cal managed-care program to provide behavioral health coverage to the larger groups of Medi-Cal enrollees that they serve.”
That includes former inmates who may try to shake addiction-related problems that often send them back to prison. The challenge, says Kemper, is ensuring that there are enough service providers across the counties.
Currently, substance abuse treatment is supposed to be provided by the counties. But according to Matt Cate, the former CDRC secretary who now heads the California State Association of Counties, “There is currently not enough money to meet the need” for prison and jail inmates when they are released.
There has been a historic disregard for substance abuse as a disability, leading to, as Kemper says, “limited financial support from government” or insurance programs. “Substance abuse is generally not considered a disability under federal disability rules,” said Kemper. As a result, the infrastructure does not currently exist to deal with the increased number of people seeking treatment.
Cate said that the federal funds provided by the ACA’s expansion should begin to remedy this shortfall.
But despite the in-flow of federal funds, Kemper says the limited number of current providers makes it unwise to expect quick changes based on the ACA. “The reality is the plan has to figure out now how they’re going to implement this,” he warned. “The thinking with the budget is that the change takes place January 1, but it will likely take longer than that.”
In addition to getting newly eligible people to sign up for Medi-Cal, Kemper says that counties and state must work together to set up the network of health care providers appropriate to the diverse needs of the counties. “It is only recently that people have begun to look at the various interactions between health, social class, substance abuse, and crime,” said Kemper.
With the federal government poised to pay for it, however, the state may be able to accomplish a two-fer: spend less on health care for inmates and dramatically improve recidivism rates by increasing the availability of mental-health and drug-related services once those inmates are released.
Ed’s Note: Jonathan Lerner is a Capitol Weekly intern from the UC Sacramento Center’s public affairs journalism program.