Gov. Gavin Newsom and the state Legislature have allocated more than $4 billion annually to expand Medi-Cal. Newsom’s 2022 budget made the latest expansion possible.
In January, California became the first state to open its Medicaid program, called Medi-Cal, to any undocumented immigrant within its borders. About 700,000 adults between the ages of 26 and 49 are now eligible for publicly funded health insurance.
This is the fourth expansion of the program for undocumented immigrants, after children became eligible in 2015, young adults in 2019 and those over 50 in 2022.
No other state has gone as far as California — yet. Others have partially extended public health coverage to undocumented people. At least one — Minnesota — plans to follow California’s lead and offer coverage to low-income undocumented immigrants in the state next year.
These initiatives are based on the fundamental belief that opening Medicaid to more people is a cost-effective way to provide them with quality care. This is wrong. There are much better and less expensive ways to expand access to quality health coverage.
First a bit of background. Medicaid is the public health insurance plan for low-income residents. It is jointly administered and funded by the states and the federal government. The feds match at least $1 for every dollar states spend on the program.
Last year, California spent $152 billion on Medi-Cal. A quarter of that amount comes from the state’s General Fund.
The new Medi-Cal expansion could cost more than $2 billion each year, according to the state Legislative Analyst’s Office. And that may be a significant understatement.
More than 300,000 undocumented people crossed the Mexico-California border last year alone. If this trend continues, taxpayers who already subsidize Medi-Cal coverage for 14.6 million Californians could end up on the hook for more.
California cannot afford the additional costs. The state is already struggling with a $38 billion budget deficit, according to the governor’s calculations. The state Legislative Analyst’s Office pegged the budget deficit at $73 billion.
Yet Gov. Gavin Newsom is doubling down, recently saying he’s “committed” to expanding Medi-Cal. He may regret this commitment. States are poised to take a bigger share of their overall Medicaid bill as federal aid from the COVID era expires. This year, state Medicaid spending is expected to increase by 17%.
Adding more people to Medi-Cal won’t just put a strain on state coffers — it will make it harder for the program’s legacy beneficiaries to afford care. There are no longer enough providers to care for Medicaid recipients. According to a 2021 report by the Commission on Medicaid Payment and Access and CHIP, only 70% of physicians accept new Medicaid patients. This is compared to 90% of providers who report accepting new patients with private insurance.
The reason for this disparity is clear: Medicaid does not pay providers enough. The program reimburses doctors 30% less than Medicare. And Medicare pays 30% less than commercial insurance.
As a result, Medicaid recipients were 1.6 times less likely to be able to schedule a primary appointment and 3.3 times less likely to be able to schedule a specialty compared to those with private insurance.
When Medicaid recipients do not have access to a regular provider, they are more likely to go to the emergency room. A 2008 study of Oregon’s Medicaid expansion found that coverage was associated with a 40 percent increase in emergency room visits per person—including visits for conditions that could have been treated by a primary care provider.
Adding millions more people to Medi-Cal rolls could make these problems worse for all beneficiaries.
If improving access to quality care is really what California — and all other states considering such moves — are really after, there are better ways to do it.
California may start by lifting its ban on selling short-term plans. These plans can cost up to 70% less than unsubsidized options on the Obamacare exchanges. And since undocumented immigrants are not eligible to enroll in Obamacare or receive premium tax credits, short-term plans may be an especially good option.
Private insurance options can provide affordable care that state residents need. Lawmakers in California and across the country would do well to start expanding access to them — instead of their failed Medicaid programs.
Sally S. Pipes is president, CEO, and health policy fellow at the Pacific Research Institute. She wrote this column for CalMatters.