California stands to lose $20.5 billion a year in Obamacare funding — $15.5 billion for Medi-Cal and $5 billion in Covered California subsidies.
Gerald Kominski is director of the UCLA Center for Health Policy Research. This op-ed appeared in the Los Angeles Times.
No one knows exactly what Donald Trump’s pledge to “repeal and replace” the Affordable Care Act means. The hints, however, are troubling. No state has embraced the ACA — Obamacare — more enthusiastically and successfully than California. And no state has more to lose with Trumpcare.
California’s programs won’t be gone overnight. Despite campaign promises to the contrary, it is virtually impossible to repeal Obamacare on day one of the Trump administration. The Senate filibuster rule, which requires 60 votes to move legislation forward, provides Democrats with a mechanism to block a complete repeal effort. And there would be an enormous backlash against an immediate, abrupt repeal. More than 20 million Americans are newly insured under Obamacare, and many congressional leaders, including House Speaker Paul D. Ryan, understand the very real political costs of throwing them under the bus. So Obamacare is likely to continue through the end of 2017, and perhaps 2018.
The question is, what comes next? The Trump campaign was short on details. Suggestions included promoting health savings accounts linked to high-deductible health plans; allowing insurance to be sold across state lines in an effort to increase competition and thus affordability; and allowing everyone to deduct health insurance premiums from their taxes.
Since the election, Trump has emphasized maintaining at least two popular features of Obamacare — allowing children to stay on their parents’ policies up to age 26, and requiring insurers to offer insurance to those with pre-existing conditions without higher premiums. (There’s a caveat — premiums will go up if you aren’t continuously covered.)
What’s all but certain is that Trumpcare is likely to eliminate or severely curtail the two features of Obamacare that have produced the biggest gains in coverage: the expansion of Medicaid for the poor — Medi-Cal in California — and tax credits that subsidize premium payments for low-and middle-income earners buying insurance through government marketplaces. Three and a half million Californians have gained coverage because of Medi-Cal’s expansion, and 1.3 million more are buying Covered California insurance, 90 percent of them with tax credits.
In one “replace” scenario — contained in Ryan’s 2016 “A Better Way” proposal — those tax credits would continue but would no longer be scaled to income as they are under Obamacare. As a result, lower-income Californians receiving tax credits would have to pay more, while higher-income residents would pay less.
As for Medi-Cal, Trumpcare would fundamentally transform the program. Washington now compensates states based on their actual spending for covered services, which depends on how many people are enrolled in the Medicaid plans. Under Trumpcare, each state will instead receive a block grant program that fixes its allocation at a to-be-determined point in time. The exact point in time will be important. For California, the essential unknown is whether the block grant will take into account the cost of our expanded Medi-Cal population.
The real threat of block grants is that they are designed to grow, but only at a rate tied to general inflation. Because healthcare spending has always grown faster than inflation, the real value of Trumpcare block grants is guaranteed to shrink over time. In California, this could lead to cumulative cuts of 30-50% in Medi-Cal funding over the next 10 years.
The Golden State stands to lose $20.5 billion a year in Obamacare funding — $15.5 billion for Medi-Cal and $5 billion in Covered California subsidies. Trumpcare might restore some of it, but how could the state close a future funding gap?
For Medi-Cal, the options are some combination of cutting eligibility, cutting benefits and raising taxes. Paying providers less won’t be viable because California already has some of the lowest rates in the country for its Medicaid program.
For Covered California, higher taxes will be required if the state wants to keep the program going with health plans and policies that meet Obamacare standards. Californians would have to agree to make up whatever the shortfall is between Trumpcare’s tax credits and Obamacare credits. The only other option is reduced benefits.
A brand new state “single payer” plan is another possibility, but it would face its own challenges, particularly under a Republican administration in Washington hostile to innovations that aren’t based on the mythical “free” market for health. The economics and administration of single payer work best if all government health insurance programs — including Medicare, the Veterans Administration system and the military’s Tricare program, as well as the state’s CalPERS program for public employees — are folded into one plan. The Trump administration is not going to easily grant permission for California to exit the federal programs taking its share of the taxes that support them.
California’s experience with Obamacare has been extremely positive, and there are already indications that state politicians will try to keep it alive regardless of what Washington does. As the details of Trumpcare come into focus, so will the state’s best strategies to close the expected funding gaps. All options need to be considered, and no option should be ruled out quickly because it appears too difficult or politically impossible. Californians dream big, and that’s what will be required to keep healthcare accessible in the Golden State.