BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 4 (Lara) - Health care coverage:  immigration status
          
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          |Version: April 28, 2015         |Policy Vote: HEALTH 7 - 0       |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 4, 2015       |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.



          


          Bill  
          Summary:  SB 4 would extend Medi-Cal eligibility to individuals  
          who would otherwise be eligible, except for their immigration  
          status. The bill would require the Health and Human Services  
          agency to apply for federal authorization to offer unsubsidized  
          health care coverage through the California Health Benefit  
          Exchange (Covered California) for individuals who are currently  
          prohibited from obtaining coverage due to their immigration  
          status. If federal authorization is not received, the bill would  
          create a parallel health exchange through which such individuals  
          could purchase unsubsidized coverage.


          Fiscal  
          Impact:  The fiscal estimates below are subject to a great deal of  
          uncertainty. The rates at which undocumented immigrants are  
          likely to apply for either Medi-Cal or unsubsidized coverage are  







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          unknown at this time and are likely to be heavily influenced by  
          concerns over coming to the attention of immigration authorities  
          and language barriers. In addition, the age and health status of  
          those who ultimately would enroll in Medi-Cal will have a  
          significant impact on the costs to provide coverage. At this  
          time, there is limited information available to accurately  
          project the cost to provide coverage to this population.  
          Finally, a pending executive action by the President Obama would  
          shield about half of California's undocumented immigrant  
          population from deportation. If that executive action stands,  
          those individuals would be eligible for full-scope Medi-Cal  
          coverage under current law.

          The costs for the Medi-Cal expansion below reflect two  
          scenarios. The first scenario does not assume that the courts  
          uphold the President's Executive Action and therefore the  
          state's current undocumented population remains the same. The  
          second scenario assumes that the courts uphold the President's  
          Executive Action, which would make a significant number of  
          undocumented immigrants eligible for full scope Medi-Cal under  
          current law. This would significantly reduce the undocumented  
          population who would be made eligible for full scope Medi-Cal  
          under this bill. 

           Increased Medi-Cal costs without the President's Executive  
            Action. Likely annual increase in Medi-Cal spending between  
            $280 million and $740 million per year (General Fund). 

            Under current law, undocumented immigrants are eligible for  
            limited scope Medi-Cal benefits such as Emergency Medi-Cal and  
            Pregnancy-Only Medi-Cal. Under current practice, the federal  
            government provides funding for those services both in the  
            fee-for-service system and for undocumented immigrants who are  
            enrolled in managed care. Based on current practice, about 60  
            percent of Medi-Cal managed care costs for individuals covered  
            by this bill would be eligible for federal matching funds  
            (i.e. about 60 percent of Medi-Cal managed care costs for  
            immigrants are for services such as emergency services and  
            pregnancy-related services). This analysis assumes that on the  
            low end about 50 percent of eligible undocumented immigrants  
            would enroll in Medi-Cal under the bill - which is roughly the  
            number of undocumented immigrants, on average, who access  
            emergency- or pregnancy-related Medi-Cal services each year.  
            On the high end, this analysis assumes that about 60 percent  








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            of eligible individuals enroll in Medi-Cal - which is equal to  
            the pre-Affordable Care Act enrollment rate for Medi-Cal  
            eligible individuals in the state.

            The costs above reflect the annual cost to provide full-scope  
            Medi-Cal coverage to the enrolling individuals, accounting for  
            available federal matching funds, less the current state  
            spending to provide limited scope Medi-Cal services, as the  
            state is already incurring those costs. The analysis assumes  
            that the per member per month cost to provide coverage to  
            parents and children will be similar to such costs for the  
            existing Medi-Cal population. The analysis assumes that the  
            per member per month cost to provide coverage to childless  
            adults will range from 100 percent to 200 percent of the  
            current cost to provide coverage for parents in the existing  
            Medi-Cal population. (The administration indicates that the  
            current costs to provide coverage for childless adults under  
            the Medi-Cal expansion are significantly higher than has been  
            the case for previously eligible adults. Given the limited  
            experience of providing coverage for that population and the  
            fact that immigrants are generally younger and healthier than  
            the native born population, this analysis assumes costs to  
            cover this population will be lower.)

            The analysis also assumes that there will be reductions in  
            state spending on certain state-only health care programs  
            (such as FamilyPACT and the Every Woman Counts programs) due  
            to undocumented immigrants currently receiving services from  
            those programs shifting to full-scope Medi-Cal coverage.  
            Finally, by shifting individuals from fee-for-service Medi-Cal  
            into Medi-Cal managed care and enrolling additional  
            individuals in managed care, the state will receive additional  
            tax revenue under the Managed Care Organization Tax.

           Increased Medi-Cal costs under the President's Executive  
            Action. Likely increase in Medi-Cal spending between $175  
            million and $455 million per year (General Fund). Based on  
            estimates by the Pew Research Center, the pending Executive  
            Action would protect about 900,000 of the state's 2.5 million  
            undocumented immigrants from deportation. Under current law,  
            those individuals would be eligible for full-scope Medi-Cal.  
            Thus, the cost to provide coverage to those individuals would  
            not be attributable to this bill. The costs above reflect the  
            projected cost to provide full-scope Medi-Cal to the remaining  








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            income-eligible undocumented population who would not be  
            protected from deportation (assuming similar enrollment rates  
            as discussed above).
          
           Unknown, but potentially significant savings to the state  
            under realignment (General Fund). Under current law, the state  
            has set up a system to direct funds from the counties to the  
            state, under the premise that expansion of Medi-Cal will  
            reduce county expenditures for health care services to the  
            uninsured. This process is generally governed by formulas that  
            take into account historic and actual expenses by the  
            counties. Under the system, there is a maximum amount of  
            funding that can be redirected to the state. By expanding  
            Medi-Cal coverage, this bill will further reduce county health  
            care expenditures (in counties that are currently providing  
            health care services to the undocumented) and should increase  
            redirected funding to the state. The size of this impact is  
            unknown and would depend on enrollment in Medi-Cal, actual  
            reductions in county spending, and the amount of additional  
            redirections that would be allowed under the current system.

           Annual, fee-supported costs in the tens of millions per year  
            to provide coverage through Covered California (special fund).  
            The bill authorizes undocumented immigrants to purchase health  
            care coverage, without subsidy, through Covered California or  
            a parallel exchange. Individuals who purchase such coverage  
            would pay for the administrative costs of the Exchange, via  a  
            participation fee that Covered California assesses on  
            qualified health plans. Because coverage through Covered  
            California would be unsubsidized and because undocumented  
            immigrants tend to be low-income, enrollment rates through  
            Covered California are not likely to be high. If 20% of  
            undocumented immigrants who are not income eligible for  
            Medi-Cal enroll through Covered California, the administrative  
            costs and the fees collected to pay those costs would be about  
            $25 million per year.


          Background:  Under state and federal law, the Department of Health Care  
          Services operates the Medi-Cal program, which provides health  
          care coverage to pregnant women, children and their parents with  
          low incomes, as well as blind, disabled, and certain other  
          populations. Generally, the federal government provides a 50  
          percent federal match for state expenditures. 








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          Pursuant to the federal Affordable Care Act, California has  
          opted to expand eligibility for Medi-Cal up to 138 percent of  
          the federal poverty level and to include childless adults.  The  
          Affordable Care Act provides a significantly enhanced federal  
          match for the Medi-Cal expansion. Under the law, the federal  
          government will pay for 100 percent of the cost of the Medi-Cal  
          expansion in 2013-14, declining to a 90 percent federal match in  
          the 2020 federal fiscal year and thereafter.

          With the exception of certain populations (for example,  
          individuals eligible for limited scope Medi-Cal benefits or  
          individuals dually eligible for Medi-Cal and Medicare in most  
          counties), managed care is the primary system for providing  
          Medi-Cal benefits. Currently, there are about 12.2 million  
          Medi-Cal beneficiaries, more that 80 percent of whom are  
          enrolled in Medi-Cal managed care. 

          Federal law generally prohibits the use of federal matching  
          funds for services provided to undocumented immigrants (with  
          certain exceptions such as emergency coverage or pregnancy-only  
          coverage).

          Under the federal Affordable Care Act states are required to  
          establish American Health Benefit Exchanges. If a state does not  
          create an Exchange, the federal government will do so. Within  
          the Exchanges, individuals will be able to purchase health care  
          coverage with standardized benefit packages and actuarial  
          values. In addition, individuals with incomes between 100  
          percent and 400 percent of the federal poverty level will be  
          eligible for subsidies for coverage purchased in the Exchanges.

          California has established its own California Health Benefit  
          Exchange (referred to as "Covered California"). In order to  
          establish eligibility for subsidies, Covered California operates  
          call centers, contracts with counties, and works with other  
          groups to help consumers navigate the eligibility and enrollment  
          process.

          The Affordable care act prohibits undocumented immigrants from  
          purchasing coverage through health benefit exchanges set up with  
          federal grant funds or from receiving federal tax subsidies  
          through the exchanges.









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          Proposed Law:  
            SB 4 would extend Medi-Cal eligibility to individuals who  
          would otherwise be eligible, except for their immigration  
          status. The bill would require the Health and Human Services  
          agency to apply for federal authorization to offer unsubsidized  
          health care coverage through the California Health Benefit  
          Exchange (Covered California) for individuals who are currently  
          prohibited from obtaining coverage due to their immigration  
          status. If federal authorization is not received, the bill would  
          create a parallel health exchange through which such individuals  
          could purchase unsubsidized coverage.
          Specific provisions of the bill would:


              Require the Secretary of the Health and Human Services  
              agency to apply to the federal government for a waiver of  
              federal law to allow the state to offer health care coverage  
              through Covered California, without any premium subsidies or  
              cost sharing reductions;
              If federal approval is not received, the bill would  
              authorize in statute the creation of the California Health  
              Exchange Program for All Californians, governed by the  
              Covered California board and subject to most of the  
              requirements governing the operation of Covered California;
              Authorize the California Health Exchange Program for All  
              Californians to provide health care coverage to individuals  
              who would otherwise be eligible to purchase coverage through  
              Covered California, but for their immigration status;
              The bill does not authorize premium subsidies or reduced  
              cost sharing for coverage through the California Health  
              Exchange Program for All Californians;
              Create a new, continuously appropriated special fund to pay  
              for the operations of the California Health Exchange Program  
              for All Californians, to be supported by fees assessed on  
              coverage provided through the new exchange;
              Make individuals who would be eligible for full-scope  
              Medi-Cal benefits, but for their immigration status,  
              eligible for those services;
              Require the Department of Health Care Services to adopt  
              regulations to implement the necessary changes to Medi-Cal  
              by July 1, 2018, but also allow the Department to implement  
              the bill through other means until regulations are adopted;
              Require the Department of Health Care Services to  








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              transition individuals receiving limited scope Medi-Cal  
              benefits to full-scope coverage.


          Related  
          Legislation:  SB 1005 (Lara, 2014) was substantially similar to  
          this bill, except that bill required coverage provided through  
          Covered California or a parallel exchange to include premium  
          subsidies, to be paid with state funds. That bill was held on  
          this committee's Suspense File.


          Staff  
          Comments:  Under current practice, counties perform a  
          significant amount of the enrollment and caseload management for  
          the Medi-Cal program. By expanding Medi-Cal eligibility, this  
          bill will significantly increase county enrollment costs. Those  
          costs are paid through the Medi-Cal budget process.
          Under current law, the state imposes a 3.9% tax on Medi-Cal  
          managed care plans, which is used to draw down federal funding  
          and support the Medi-Cal program. Recent federal guidance  
          indicates that the state's existing tax on Medi-Cal managed care  
          plans is not allowed under federal rules, because it does not  
          apply to managed care plans in general. The Governor has  
          proposed to replace the existing tax with a tax on all managed  
          care plans.  This analysis assumes that managed care tax  
          revenues would be about 1 percent of premiums.







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