On Thursday, June 13, California lawmakers approved a $215 billion state budget, which Governor Gavin Newsom is expected to sign. Included in the budget are several health care reforms whose mammoth cost the state may soon regret.
Paramount among them is the expansion of Medi-Cal, the state’s Medicaid program to cover low-income undocumented immigrants up to the age of 26. This move will saddle California taxpayers with billions of dollars in new spending commitments and make it harder for all state residents to secure access to timely care.
Currently, Medi-Cal provides coverage to one-third of the state’s 39 million people. Undocumented minors through age 18 are already eligible for Medi-Cal. Raising that age cap to 26 is expected to bring an additional 90,000 people into the program at an estimated cost of $98 million a year, the state says.
That’s dubious. While campaigning for the state’s top job, Governor Newsom said that expanding Medi-Cal in this way would add 138,000 people to the program at a cost of $260 million a year.
It’s impossible to estimate exactly what this expansion will cost. That’s because raising the eligibility age will encourage more undocumented young people to come to California for “free” health care, courtesy of the Golden State’s taxpayers.
The expansion will also give momentum to those who want to open Medi-Cal to all undocumented residents. In fact, the State Assembly has passed a bill to do just that, at a cost of more than $3 billion a year.
The budget is banking on an individual mandate to cover the cost of enrolling undocumented young people in Medi-Cal, among other things. Anyone who doesn’t buy insurance would have to pay a penalty of $695 or 2 percent of their household income, whichever figure is larger. The state projects that the mandate will bring in over $1 billion over three years.
That mandate “penalty” is really a tax on those who don’t qualify for subsidized coverage through the insurance exchanges. The federal government offers income-based subsidies that become progressively less generous as a person’s income approaches 400 percent of the federal poverty line. California’s new state budget offers additional subsidies for those who make up to 600 percent of poverty, or $75,000 a year for an individual.
The benchmark individual market plan in California has premiums of more than $5,000 a year. Annual deductibles can run several thousand dollars more. Even relatively well-off Californians may find those costs too steep, especially given the high cost of living in the Golden State.
These folks may have to decide between buying an insurance plan that costs upwards of $7,000 before coverage kicks in — or a couple thousand dollars in new taxes. All to underwrite coverage for people who are not in the state legally.
Further, an expanded Medi-Cal could make it harder for everyone in the program to access care. Doctors typically limit the number of Medi-Cal patients they’ll see because the program pays them so little. Medi-Cal pays about 50 percent less than Medicare, which pays about 40 percent less than private insurance.
In 2013, only about half of California’s doctors were willing to see new Medi-Cal patients. Tens of thousands of new undocumented enrollees will be competing with Medi-Cal’s nearly 13 million existing beneficiaries for scarce appointments.
California’s lawmakers never seem to run out of ill-advised, unsustainable ideas for spending their constituents’ tax dollars. Someday, they will run out of other people’s money.
That day may come sooner than California’s leaders think. More than 1.2 million California residents left for other states between 2006 and 2017. Raising taxes to fund an ever-expanding Medi-Cal program will only drive more middle- and upper-income Californians elsewhere.