Health and Social Services
Enhanced Federal Match Rate. For California, the federal government will pay about two-thirds of qualifying program costs compared with a federal share of about half in the Medi-Cal Program. In order to use all of the federal funds allotted to the state, California would have to spend an annual total of about $1.3 billion, including $443 million of state or local matching funds. Unused federal funds can be carried over for up to three years.
Choice of Separate Insurance Program or Medicaid Expansion. To be eligible for the new federal funds, states can choose to expand their Medicaid programs to cover additional children at higher income levels, or they can establish a separate insurance program. The separate insurance programs may offer a more limited benefit package than Medicaid, and may require families to pay a portion of the cost of coverage. States also can use a combination of the two approaches. States receive funding at the enhanced federal match rate for the additional children that they cover through either approach.
Chapter 623, Statutes of 1997 (AB 1126, Villaraigosa) Establishes the Healthy Families Insurance Program. The new insurance program, which is separate from Medi-Cal, will help low-income families purchase health coverage for their children starting July 1, 1998. It is administered by the Managed Risk Medical Insurance Board (MRMIB), which has been responsible for operating the state's health insurance purchasing pool for small businesses and several smaller subsidized health insurance programs. The new insurance program has the following major features:
Chapters 624 and 626, Statutes of 1997 (SB 903, Lee and AB 217, Figueroa) Broaden and Simplify Medi-Cal Eligibility for Poor Children.Children ages 14 through 18 in families up to 100 percent of FPL will be eligible for coverage now, rather than being phased in a year at a time as under prior law. These measures also generally eliminate asset limits for Medi-Cal coverage of children, require the Department of Health Services (DHS) to allow enrollment of children through a simplified mail-in form, and allow one month of continuing eligibility to enable children losing Medi-Cal time to enroll in Healthy Families.
Chapter 625, Statutes of 1997 (AB 1572, Villaraigosa) Provided Initial Funding. This measure appropriated $4.9 million ($1.8 million General Fund, $3.1 million federal funds) to MRMIB and DHS for start-up costs and outreach efforts for the Healthy Families Program.
|Healthy Families Program Funding
Governor's Budget Proposal
|Children's Health Insurance Program|
|Managed Risk Medical Insurance Board (MRMIB)|
|Health plan payments||32,488||63,150||95,638|
|Medi-Cal Program Expansion:|
|Department of Health Services
|Totals (new programs/activities)||$56,525||$119,997||$176,522|
|Access for Infants and Mothers--MRMIB||$1,660||$3,228||$4,888|
|Child Health and Disability Prevention--DHS||2,883||5,605||8,488|
|California Children's Services--DHS||1,497||5,806||7,303|
|Totals (existing programs)||$6,040||$14,639||$20,679|
|aSavings consist of $4.6 million from using mail-in applications and $3.8 million of avoided costs for children in Healthy Families who incur large medical bills and would otherwise use Medi-Cal on a share-of-cost basis.|
|bThe Governor's Budget Summary (page 121) indicates total cost of $201 million, but omits savings ($3.8 million) from the shift of share-of-cost children from Medi-Cal to Healthy Families.|
The budget proposes to spend $135 million of federal funds for the Healthy Families Program in 1998-99. This will result in a rollover of about $1.4 billion of unspent federal allocations. (As indicated above, unspent federal funds can be carried over for three years.) One reason for the large rollover is that the budget estimates that enrollment at the end of 1998-99 will be only 40 percent of the eligible children. However, even at full enrollment, the administration estimates that the state would use only about $320 million of federal funds annually, which is about $500 million less than the state's current annual allotment. Consequently, under the administration's projections, the Healthy Families Program will not be able to spend most of the federal funding allotted to California.
One explanation for the discrepancy between the state's federal funds allotment and planned spending is the federal allotments are based on the total number of low-income uninsured children. Most of these uninsured children, however, are in families with incomes low enough to qualify for Medi-Cal, and therefore they are not eligible for the new federal program. Absent Congressional action to expand the use of these federal funds, it appears likely that the state will not be able to spend a significant portion of its allotments.
The Medi-Cal budget request includes (in Item 4260-101-0001) a total of $27,034,000 ($9,183,500 General Fund) in 1998-99 and $2,253,000 ($769,000 General Fund) in the current year to provide one month of continuing Medi-Cal eligibility to children who otherwise would lose their eligibility for Medi-Cal without a share of cost, as required by SB 903. The purpose of providing continuing eligibility is to avoid gaps in coverage for children in families whose income rises above the limit for no-cost Medi-Cal coverage of the child. The additional month of Medi-Cal coverage would allow time for the family to enroll the child in the Healthy Families Program.
Transitional Coverage Available for Most Medi-Cal Children. The budget request proposes to provide one-month continuing coverage to all Medi-Cal children who are not in CalWORKs families (about 750,000 children). About two-thirds of the children covered by Medi-Cal are in CalWORKs families. CalWORKs families would not need the one-month continuing coverage because currently they are eligible for up to one year of "transitional" Medi-Cal coverage after their income increases above the CalWORKs limit due to employment, child support payments, or marriage.
About half of the children in non-CalWORKs families, however, are in the Medically Needy category and most (if not all) of them will be eligible for transitional Medi-Cal coverage as "Section 1931(b)" eligibles under the federal welfare reform law. (Please see our discussion of Section 1931(b) Medi-Cal eligibility in our analysis of the Medi-Cal Program.) Thus, the number of children who potentially might use the additional month of continuing coverage is about half the number assumed in the budget request. We estimate that providing one-month continuing coverage to this smaller number of children (at the regular federal match) would cost the General Fund $2.6 million less than the budget requests.
Federal Approval in Doubt. The requirements of SB 903 are contingent on the approval of federal matching funds. Such approval currently appears doubtful. Federal law authorizes states to provide up to 12 months of continuous eligibility to children when they enroll for Medicaid, or at their annual redetermination, with federal funding at the regular Medicaid matching rate (about 51 percent). The budget proposal, however, calls for extending children's Medi-Cal eligibility for one month after they have otherwise become ineligible, and assumes federal funding at the enhanced CHIP rate (about 66 percent). At this time, staff in the federal Health Care Financing Administration indicate that they doubt that the state's proposal for one-month continuing eligibility will be approved. Pending a final federal decision, we withhold recommendation on this request.
The California Children's Services (CCS) Program provides diagnostic and treatment services, medical case management, and medical and occupational therapy services to children under 21 years of age who have eligible medical conditions, such as severe genetic diseases, chronic health problems, or major traumatic injuries. The Medi-Cal Program pays for eligible CCS services for those children who are in Medi-Cal. Other costs attributed to the CCS Program are shared equally by the state General Fund and county funds.
Healthy Families Includes CCS Services. The Healthy Families Program includes CCS services as a benefit. Therefore, for those CCS children who also are enrolled in Healthy Families, federal funds will cover two-thirds of the cost of their CCS services, which otherwise would be borne entirely by the state and the counties. Currently, however, there is no requirement that CCS children enroll in Healthy Families if they are eligible.
The budget assumes that CCS-eligible families will decide to enroll in Healthy Families at about the same pace as other families, so that about one-third of the eligible CCS children would be enrolled in Healthy Families by the end of 1998-99. The budget also estimates that CCS children enrolled in Healthy Families will receive a total of $8.8 million of CCS services in 1998-99. As a covered benefit, about two-thirds of this cost will be paid by federal funds, resulting in a state General Fund savings of $2.9 million (and equivalent county savings).
Enrollment of Eligible CCS Children in Healthy Families Would Result in Net Savings. Enrolling all eligible CCS children in Healthy Families would provide more comprehensive health coverage to CCS children while also reducing state and county costs. Healthy Families provides a full scope of health care services, plus dental and vision care, whereas the CCS Program only covers services that address a child's CCS-eligible condition. Enactment of legislation requiring families that participate in CCS to also enroll in Healthy Families would ensure that all eligible CCS children have full health coverage without losing any existing CCS benefits. It also would allow the CCS Program to draw down additional federal funds at the two-thirds match rate for the Healthy Families Program.
We estimate that full enrollment of eligible CCS children in Healthy Families would result in a net General Fund savings of $6.2 million in 1998-99, assuming that the sign-up requirement is effective starting October 1998. (General Fund CCS costs would decrease by $9.1 million, but increased General Fund costs for the Healthy Families Program would offset almost $3 million of these savings.) Counties would experience a similar net savings in their share of CCS costs. Our savings estimate assumes that the families of CCS children would pay the Healthy Families monthly premium. Waiving premiums for families of CCS children would reduce the net state savings to about $6 million in 1998-99.
The Governor's budget proposes $558 million from the General Fund in the budget of the Department of Developmental Services (DDS) to support the regional centers, which provide community-based services to developmentally disabled clients. Many of these clients are children, some of whom are not eligible for Medi-Cal, but whose family incomes would qualify them for the Healthy Families Program.
The regional centers provide a wide range of services to enable clients to live in the community. The federal CHIP legislation authorizes states to include "home and community-based health care services and related supportive services" as benefits under their children's health insurance plans.
The Healthy Families Program currently does not include regional center services as a covered
benefit. We believe, however, that it may be feasible to include many of these services in the
package of benefits provided by the Healthy Families Program. Requiring enrollment in Healthy
Families for eligible children who use regional center services would ensure broad health
coverage for these children and would enable the state to maximize General Fund savings by
using federal funds to offset a portion of the costs. Accordingly, we recommend that DHS, DDS,
and MRMIB report during the budget hearings on (1) the feasibility of including regional center
services as a Healthy Families benefit and (2) the potential state savings that would result.