Plan to Expand Medi-Cal is a Costly Step Towards Single-Payer


It’s budget season in Sacramento. Governor Gavin Newsom’s spending proposal is the largest in the Golden State’s history.

There’s no shortage of expensive and misguided policies in his budget. Chief among them is his push to expand Medi-Cal, the state’s Medicaid program, to cover all undocumented immigrants. Doing so would make Medi-Cal worse for its legacy beneficiaries and nudge the state closer to the government-run, single-payer system that is the long-term goal of Newsom and his progressive allies.

The governor proposes spending $2.2 billion a year to enroll undocumented immigrants between the ages of 26 and 50 in the program. It would take another $614 million to set the new program up.

Three years ago, the state gave Medi-Cal coverage to undocumented adults up to age 26; last summer, it did the same for those over the age of 50.

These two most recent expansions resulted in roughly 325,000 new enrollees. Making Medi-Cal a universal entitlement for undocumented immigrants would grow the program by another 700,000-plus beneficiaries.

Medicaid was created more than a half-century ago as a safety net for the indigent, foster children, and the disabled. But it’s expanded well beyond that historical mandate. Medi-Cal now covers one in three Californians — some 14 million people.

Adding hundreds of thousands more people into the program will inevitably reduce the quality of care available to its beneficiaries.

That’s something those beneficiaries can’t afford. Already, Medi-Cal patients post worse health outcomes than those covered by conventional, employer-sponsored health plans. A 2015 UC Davis study found that Medi-Cal patients with common types of cancer had significantly lower survival rates than people with other forms of coverage.

Many Medi-Cal beneficiaries are unable to find a doctor when they need one. The share of California physicians who accept Medi-Cal has consistently declined over the years. One-third of the state’s providers don’t have a single Medi-Cal patient on their rolls. And just 40% of California’s doctors handle 80% of Medi-Cal visits.

Doctors can hardly be blamed for opting out. Medi-Cal’s reimbursement rates are among the nation’s lowest. Medi-Cal pays roughly half what Medicare does — which itself pays barely half as much as private insurers.

State legislators have been chipping away at Medi-Cal reimbursements for the past decade. Enrolling more people in the program will create more competition for scarce appointments — and thereby increase waits.

Of course, enrolling more people in public coverage is an end in itself for California’s progressives, negative consequences be damned. Governor Newsom has said that he considers Medi-Cal expansion a vital step towards “universal health care for all.”

He campaigned for the governorship on single-payer but has not yet gotten behind the latest legislative vehicle for it, AB 1400. He says he’s waiting on a report from his state-chartered “Healthy California for All” single-payer commission.

Perhaps he’s hoping that his bid for Medi-Cal expansion will satisfy his progressive base without alienating moderate voters as he runs for re-election this year.

California’s drive to put the government in charge of health care has national implications. For starters, federal tax dollars cover nearly two-thirds of the bill for Medi-Cal. Full-fledged single-payer would require federal waivers that allow for the redirection of Medicare and other dollars.

Further, when it comes to progressive health care ambitions, California is a bellwether. It was the first state to expand Medi-Cal to cover undocumented seniors last year. Since then, support for similar expansions has blossomed in other left-leaning states like Massachusetts, where progressives cite Medi-Cal as their model.

California is lucky to have a $45 billion budget surplus this year. Rather than save that surplus or use it to lessen the state’s worst-in-the-nation income tax burden, state leaders seem hell-bent on funneling yet more money and more people into an ineffective government program.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). 

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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