Money for Nothing: California’s Reckless Medicaid Expansion

(A version of this Health Alert was published by the Riverside Press-Enterprise on August 14, 2015.)

California 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 population.

The current over-enrollment 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 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 reconvened on August 17, in the hopes of finding $2.3 billion dollars 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 in the future.  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 Medicare or employer-based plans. In July, state health officials reported a drop of more than 14 percent in the number of dentists willing to see Medi-Cal patients from 2008 to 2013. 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 last year, compared with only 13 percent of children covered by their parent’s employer-based health plans. Further, over one fifth of Medi-Cal beneficiaries said they had not visited a physician in the last year, about 50 percent higher than the percentage of commercial plan enrollees who had not; 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 those in commercial plans.

Raising fees won’t solve the problem. State senator Ed Hernandez notes that Medi-Cal’s fees for a general practitioner are only half of New York Medicaid’s fees, paying only $16 for a visit. That’s less than a barber earns for a man’s haircut.

This accurate observation reflects an unstated assumption that Medicaid in New York and other states is serving patients well, which is not the case. According to a report by the Urban Institute, a significantly higher proportion of Medicaid dependents in other states reported difficulties finding a provider taking new patients, and especially Medicaid patients, than Medi-Cal patients did in 2012.

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’ politicians should be implementing policies that will make low-income Californians independent.

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

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 twenty states with respect to people having given up looking for work.

State politicians should focus on policies that whittle down the unemployment crisis. Tax hikes for Medi-Cal are not one of them.

Comments (2)

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  1. Bob Hertz says:

    this is a very good article.

    Not a huge point, but I suspect that the dental fees are not as awful as that $16 doctor’s office visit fee. The article states that 24% of state dentists are in the program, which is actually quite a large number.

    My last point does not solve anything, but the very rich state of California should be troubled that one third of its population is poor enough to even qualify for Medicaid — whatever plan they ultimately get. I assume that immigration plays a large part in this dilemma.

    • Devon Herrick says:

      The national average of Americans in Medicaid is approximately 22%. One-third — the rate in California — is 50% higher than the national average. You could argue that immigration plays a part. But the job opportunities in California are relatively good. There are many moderate-income people in “flyover” country who reside in states that have a lower proportion of state residents enrolled in Medicaid. So there must be something driving enrollment besides immigration. Like New York state, the state of California may view federal funds from Medicaid as a form of economic development.