California’s reckless Medi-Cal expansion a disservice to the poor

California under Obamacare has enrolled three times as many people as originally projected in Medi-Cal, the welfare program that subsidizes low-income Californians’ access to health care. The total is now 12 million, about one-third of the state’s population.

The overenrollment is provoking yet another fiscal crisis for the state, which is in a downward spiral of tax hikes and welfare dependency that is crushing job growth. Californians should be outraged that the state has condemned one-third of their neighbors to dependence on this poorly performing welfare program.

Medi-Cal’s yearly costs have jumped from $91.5 billion to $115.4 billion since Obamacare was passed in 2010. These costs are partially disguised because the federal government picks up much of the tab. However, federal handouts only camouflage real fiscal pain for the state. Legislators will reconvene Monday in the hopes of finding $2.3 billion to pony up the state’s share. $1.3 billion is needed to increase fees to doctors and dentists, who are paid so little that they are increasingly unwilling to see Medi-Cal patients. Another $1 billion has to be found to replace a deceptive “tax” that manipulates the formula to calculate federal funding, which the Obama administration has declared illegitimate.

A number of tax hikes have been proposed, which ignore the need for reform and only pave the way for more tax hikes. Real reform includes economic policies that allow people to rise out of dependency on government and earn enough income to get coverage with a good job.

Med-Cal pays providers much less than does Medicare or employer-based plans. In July, state health officials reported a drop of more than 14 percent during 2008-12 in the number of dentists willing to see Medi-Cal patients. Only 8,173 dentists were willing to see Medi-Cal patients in 2013. That’s only about one-quarter of all dentists practicing in the state.

Fees paid to doctors and dentists have an impact on access. The California HealthCare Foundation found that 24 percent of children enrolled in Medi-Cal visited an emergency department in the past year, compared with 13 percent of children covered by a parent’s employer-based plans. Further, over one-fifth of Medi-Cal beneficiaries said they had not visited a physician in the past year, about 50 percent higher than for commercial plan enrollees; and almost one fifth of Medi-Cal beneficiaries said they did not have a constant source of care other than the emergency department, also 50 percent higher than for those in commercial plans.

Raising fees won’t solve the problem. State Sen. Ed Hernandez notes that Medi-Cal’s fees for an office visit to a general practitioner are $16, half of New York Medicaid’s fees.

In every state, there is such a big gap between what commercial insurers pay and what Medicaid pays that equalizing access for Medicaid patients would require a tax hike far too large for voters to swallow. Instead of looking for ways to make Medi-Cal dependency more tolerable, California’s politicians should be implementing policies that will make low-income Californians independent of the program.

In this, California has a significant advantage over other states. Epidemiologists call it the “Hispanic health paradox.” Controlling for socioeconomic factors, Hispanics are healthier than other groups. Over half of Medi-Cal dependents are Hispanic, versus 16 percent of other states’ Medicaid dependents. Only 15 percent of Medi-Cal dependents smoke, versus 32 percent for other states.

Most Medi-Cal dependents are ready, willing and able to work their way up the income ladder. With a 6.3 percent unemployment rate, California ranks 43rd of 50 states. And that only includes people who are looking for work. California is also in the bottom 20 states with respect to people having given up looking for work.

State politicians should focus on policies that whittle down the unemployment crisis and reduce patients’ dependency on Medi-Cal. Raising taxes for Medi-Cal is not one of them.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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