Reform Medi-Cal To Reduce Poverty

David Crane
Lecturer and Research Scholar at Stanford University and President of Govern for California

Ten years ago, California’s Department of Social Services — whose mission is “to serve, aid, and protect needy and vulnerable children and adults” — received nearly $10 billion, which was nearly 10 percent of the General Fund that year:

 

 

 

 

 

This year California’s General Fund is 34 percent larger. But DSS is receiving only $9 billion. As a result, its share of the General Fund dropped to just 6.5 percent:

 

 

 

 

 

Meanwhile, California has the nation’s highest poverty rate. Does that make sense?

DSS wasn’t the only loser. UC, CSU and Courts also lost budget share. At Govern For California we refer to DSS, UC, CSU and Courts as “Orphans” because they don’t have powerful special interests to parent them. Together they will receive $18 billion this year, no more than ten years ago. They are being crowded out.

There are several reasons for crowd-out but a big one is fast spending growth at Medi-Cal, the state’s single-payer health insurer for low-income residents. GF spending on Medi-Cal jumped 59 percent, nearly twice the rate at which aggregate GF spending grew. While Medi-Cal isn’t the only program growing faster than the GF (retirement spending grew 130 percent), it’s the biggest.

Total Medi-Cal spending this year (including $12 billion from Special Funds and $72 billion in federal funds) is $107 billion, nearly three times more than the $39 billion spent on Medi-Cal ten years ago. Yet emergency room visits are up, appointments are often difficult to get, and incentives are too often aligned with boosting revenues instead of health. So far as we can tell, the only clearly visible improvement to health from increased Medi-Cal spending has been to the bottom lines of hospitals and other providers.

That has to change. Too much Medi-Cal spending is the result of unnecessary services, unnecessarily-expensive costs per service, unnecessary limitations on scopes of practice that limit access and raise prices, and unproductive spending on a small percentage of Medi-Cal recipients (“Super-Users”) who don’t always get the care that could reduce their misery and the state’s cost. Those problems are fixable.

This is why the California Legislature and Governor-elect Newsom should reform Medi-Cal, both to improve health and to stop the crowding out of other state programs. The Orphans lost ground over the last decade when revenues grew 34 percent. Just imagine what will happen to them when the bull market ends and GF revenues fall $20 billion per year for three years as Governor Brown has warned.

Absent Medi-Cal reform, important programs will continue to be crowded out even as residents don’t get healthier.

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