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Federal Health Reform Puts California in a Bind

New America Media, News Report, Ngoc Nguyen Posted: Mar 29, 2010

The health care reform legislation signed by Pres. Obama last week gives California even more incentive to preserve public coverage programs, rather than gut them.

With the state facing a $20 billion budget gap, Gov. Schwarzenegger said last month he would completely eliminate a host of social service programs, including Healthy Families, the state-sponsored health insurance program for children, unless the federal government coughs up nearly $7 billion.

But under the new legislation, the childrens health coverage program and Medi-Cal are off limits. The state now faces a bind: It will have to balance the budget without making cuts to either of them. The state is also being asked to expand these public coverage programs at a time when it can hardly fund the existing ones.

The question is where the state will get the funding.

In May, when the governor typically submits a revised budget proposal to the state legislature, There will be some cuts that wont be possible otherwise the state would have to give up its entire federal Medicaid match, which is billions of dollars, said Kelly Hardy, policy director for Children Now, a national advocacy group.

The health care package includes a maintenance of effort provision that requires states to maintain Medicaid (Medi-Cal in California) and CHIP (Childrens Health Insurance Program) coverage.

Hardy called the provision a major victory for children in the state. Healthy Families, which insures 900,000 children, was on the chopping block last year, but lawmakers cobbled funds together in the eleventh hour to save it.

Schwarzenegger again targeted Healthy Families this year, threatening to dismantle the program unless the state got help from the federal government. So far, Washington has pledged $3 billion to the state.

With the passage of the new health care law, the governor and state legislators are still sifting through the legislation, and calculating what the new legislation will add to or drain from state coffers.

My concern about the federal government's health care reform is only how do we fund it, because they have shifted the funding from the federal government and said, Hey, you state, we want to cut down on our deficit, so you pick up the difference and you go, and it will cost us $3 billion more, said Schwarzenegger, during a press conference in Sacramento on Wednesday.

But rather than a being seen as burden, the federal reform could be an opportunity, says Health Access Executive Director Anthony Wright.

The federal government will, over the course of the next 10 years, provide $33 billion to help cover low-income Californians, said Wright. This will shift the responsibility for health care services for the poor from the county and local level to the federal government.

The contributions from Washington to help fund the Medicaid expansion will be significant.

For the first three years, the federal government will cover 100 percent of the cost of new Medicaid enrollees, gradually decreasing to 90 percent by 2020.

The federal government is providing a $9 to $1 match [for Medicaid], Wright said. Its a huge opportunity. We see this as a bargain rather than a burden for the state of California.

The federal government also raised by 23 percent its matching dollars for Healthy Families to 88 percent. That, Hardy says, means that for every $1 the state puts in, the federal government puts in $7. The new legislation also provides doctors with a higher rate to see patients, with the federal government picking up the full cost of the difference.

"We can drag our heels and fail to enroll people in these programs, or take advantage and bring as much federal money as possible into our health care system and economy," Wright said.

Additional money to the state could also come from the extension of a program that used federal stimulus money to temporarily increase the federal match for Medi-Cal from 50-50 to 60-40.

The state legislature passed two bills last year that helped to keep the Healthy Families program alive. One bill imposed a hospital provider fee that channeled $300 million to the childrens coverage program, and another bill assessed a temporary tax on insurers. Assemblymember Dave Jones, D-Sacramento, has introduced a bill to extend the hospital provider fee.

In a way, Wright says, the new health legislation makes a stronger case to say to Washington, We need more money to implement federal health care reform.

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