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California estimates GOP health bill would cost $24B by 2027

Adrianna Williams/Getty Images

California would lose $24.3 billion in federal funding by 2027 for low-income health coverage under the current Republican plan to replace the Affordable Care Act, according to a new state analysis released Wednesday.

The changes in Medicaid in the bill, up for a vote in the House on Thursday, represent a "massive and significant fiscal shift" from the federal to state governments by setting caps on spending, reducing the amount of money available for new enrollees and eliminating other funding for hospitals and Planned Parenthood, the analysis said. The analysis, based on internal cost, utilization and enrollment data, was sent Tuesday to the state’s secretary of Health and Human Services and to California's congressional delegation.

"It’s really devastating," said Mari Cantwell, state Medicaid director with the California Department of Health Care Services, who co-wrote the analysis. "It raises some serious questions about whether we can continue to operate the program the way we do today."

Of the $24.3 billion in reduced federal dollars in 2027, the general fund's share would be $18.6 billion, the report says. The remaining $5.7 billion represents funding sent directly to counties and medical providers.

Although the analysis doesn't discuss how the state might deal with the shortfalls, Cantwell said it would have to look at changes to eligibility, benefits or provider rates — or all three.

The Republican bill, called the American Health Care Act, would dramatically change funding for Medi-Cal. Since its inception, Medicaid funding has been open-ended, based on need. Under the new bill, federal money would be capped either through block grants or fixed per-capita amounts.

Medi-Cal provides coverage to 13.5 million low-income residents, about half of California’s children and a third of the adults. About 3.7 million people of those became newly eligible for the publicly funded health coverage through the Affordable Care Act, helping to reduce the state’s uninsurance rate from 17 percent in 2013 to about 7 percent in 2016, according to the UC Berkeley Labor Center for Education and Research.

The public insurance program is funded jointly by California and the federal government and provides health, dental, mental health, long-term care and other services. The Affordable Care Act allowed states to expand their Medicaid programs in 2014 to low-income childless adults, and the federal government is paying nearly all of the costs for those new beneficiaries. Under the GOP bill, the federal share would plummet from 90 percent to 50 percent.

The bill could put hospitals, clinics and other providers in a tenuous financial position by forcing them to live within the cost limits while at the same time seeing more uninsured patients, the analysis said.

California health officials said they estimated that Medi-Cal costs would exceed per-capita caps by nearly $680 million in 2020, with the gap growing to $5.28 billion by 2027. That spending limit could have a "devastating and chilling effect" on any increases in provider payments or plan rates, according to the analysis.

The state also expects an additional $3.3 billion in costs in 2020, growing to $13 billion by 2027, because of a change that reduces federal funds for new enrollees and for people who have a break in coverage. The bill would require certain beneficiaries to renew coverage every six months rather than once a year, which state officials say will cause many to lose their coverage.

According to the analysis, the state would face additional costs from other federal cuts, including to a program that pays for in-home care for elderly and disabled residents. In addition, the analysis estimates that the proposed one-year freeze on federal funding to organizations that provide abortions would mean a loss of $400 million in payments to Planned Parenthood, which serves more than 600,000 people in Medi-Cal and a state family planning program.

Leaders of organizations representing the state's safety net system said Wednesday that the department's analysis confirmed many of their fears about the Republican plan.

"Passage of the American Health Care Act could take public health care systems and really the whole health care safety net in California ... back to the days of overcrowded emergency rooms, back to the days of huge funding losses and uncompensated care, and really back to a system stretched far too thin," said Erica Murray, president and CEO of the California Association of Public Hospitals and Health Systems.

The bill would also have a "disastrous" financial impact on community health centers, said Carmela Castellano-Garcia, president and CEO of CaliforniaHealth+ Advocates, which lobbies on behalf of California's community health centers.

"Many of our patients will become uninsured and then they will be paying out-of-pocket on a sliding fee scale, which will be at a financial loss to the health center," Castellano-Garcia said.

A new study by UC Berkeley’s Labor Center released Wednesday also warned of dramatic cuts in federal Medi-Cal funding that would threaten coverage for low-income adults. The center estimated that the state would have to increase spending by $10 billion each year to maintain coverage for those who became eligible for coverage under the Affordable Care Act. Without that funding, the researchers wrote, 3.7 million people could lose coverage by 2027.

This story was produced by Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.