California May Have to Go It Alone On Healthcare

The ACA Has Been Working Here; We Should Stretch to Preserve It
By Ron Shinkman

A little more than three weeks ago the Affordable Care Act looked like it was here to stay. Now it looks like it's terminal.

            The surprising election of Donald J. Trump as the 45th President of the United States immediately put the ACA into the crosshairs of the Republican-controlled Congress. And Trump's recent decision to nominate Rep. Tom Price, a Georgia Republican, to head the U.S. Department of Health and Human Services, signals that the most aggressive actions to repeal the ACA will likely occur.

            Price has been behind most of the 60 show votes in the House to repeal the ACA, a move that actually sowed considerable confusion among Americans as to whether the healthcare reform law remained on the books.

            To his credit, Price actually has thought through plans for an ACA replacement. To his discredit, it's little more than some tax incentives to buy insurance without the delicate ecosystem that essentially forces the ACA to do its job. The health insurance exchanges will be kaput, essentially eliminating a single market where consumers can shop health plans head on. Medicaid expansion would also be gone, or perhaps block granted to states in a less than worst-case scenario.

            The ACA had its faults, but they could have easily been fixed with a few relatively minor tweaks. Instead, it will almost certainly be defunded by Republicans through the budget reconciliation process and starved to death, or simply put out of its misery. The replacement will likely insure far fewer Americans and increase their out-of-pocket costs.

            Ironically, those who voted for Trump in the largest proportion – whites without a college degree – have made some of the biggest gains under the ACA. The uninsured rate among that group with incomes below $36,000 a year dropped from 25% to 15%.  That's a drop of 10 percentage points, or 40% overall. By comparison, the overall rate of uninsured has dropped about six percentage points.

            Oh, Price wants to privatize Medicare as well – a plan that aligns with that of House Speaker Paul Ryan. The ACA story has conveniently provided a cover for that plan, which has barely been reported as of now.

            Given the situation – and the oppositionally opposed political climate in California – what are the state's options?

            Fiscally, not all that much. The Golden State still relies very heavily on the federal government for funding, particularly for tax subsidies for the Covered California health insurance exchange and money for the Medi-Cal program. The latter runs about $15 billion a year just for the Medi-Cal expansion under the ACA.

            But there are some choices. California is not North Dakota; it is the sixth-largest economy in the entire world. It therefore has the wealth and tax base to at least keep the tax subsidies for those purchasing coverage through Covered California in place (this would probably cost less than $5 billion a year, or about 3% of the state's annual budget). It could be paid for with a statewide sales tax levy of one-eighth of a percent.

             Should the Medicaid program become block granted, it likely would curtail future revenue growth. But it could provide flexibility for California to experiment. Of course, providers in California receive one of the lowest rates of reimbursement for Medicaid services in the country, so I'm unsure what this experiment would look like.

            But again, the $15 billion Medicaid shortfall if expansion is eliminated could be back-funded in a variety of ways. If the sales tax is bumped up by a penny, that would raise about 60% of what's needed. And there are many fees or other taxes that could be raised.

            Of course, such proposals are always met with that sneering question: Who's going to want to pay for this? My answer is simple: If California is the most liberal state in the nation, it has to be the most compassionate. And it should be willing to put its money where its idealism is.


Ron Shinkman is the Publisher of Payers & Providers.