DHCS—Technical Change to County Administration Funding

Background. The state delegates various administrative functions, including intake and eligibility determinations of new Medi–Cal applicants, to counties. The state reimburses the counties for the administration of this task based on expected county workload and costs.

Governor’s Budget Proposal. The budget plan proposes $19.6 million General Fund in the current year and $28.7 million in the budget year to pay county administration costs associated with eligibility determinations for new Medi–Cal applicants. However, both the current–year and budget–year proposals underfund county administration in that they do not accurately reflect upwards adjustments that DHCS made to its caseload growth projections due to the continued economic downturn. As such, the Governor’s proposal technically underfunds the county administration function by $1.3 million General Fund in the current year and $3.5 million in the budget year. Figure 7 below provides detailed information on proposed county administration funding for new eligibles.

We also note that the Governor’s budget plan achieves $24.7 million in General Fund savings on county administration of the Medi–Cal Program by suspending a statutory COLA. We believe it is reasonable to expect counties to take actions to constrain increases in their operating costs at a time when the economy and state finances are struggling.

However, we believe a different approach is warranted for budgeting for administrative costs directly related to changes in the Medi–Cal caseload. This additional caseload–driven funding would help to ensure that some key county activities, such as screening and removing ineligible persons from the Medi–Cal caseload, are conducted on a timely basis. Delays by counties in undertaking these activities could result in additional state caseload costs for ineligible persons amounting to the tens of millions of dollars or more annually.

LAO Recommendation. We recommend that the Legislature concur in the budget proposal to forego the COLA for counties, but recommend that the Legislature increase the county administration budget by $3.5 million General Fund in the budget year to account for increased workload due to expected caseload growth.