The CMS has tentatively approved California's multibillion-dollar Medicaid waiver but will substantially curtail its subsidies for uncompensated care. The decision highlights the Obama administration's growing reluctance to pay for healthcare for the uninsured now that most of them have access to coverage.
On Saturday, California officials announced an agreement with the Obama administration on a $6.2 billion waiver, known as Medi-Cal 2020, that would sustain the state's efforts to reform its Medicaid program under a massive transformation waiver that expired on Oct. 31.
The new waiver would include $3.3 billion to help public safety net hospitals maintain and launch delivery-system reform initiatives, including infrastructure development, system redesign and improvements targeting clinical outcomes and population health.
Providers welcomed the Obama administration's support for those initiatives, but they're not happy about the limited inclusion of federal funding for uncompensated care, known as the Safety Net Care Pool.
The CMS agreed to extend the safety net pool for just one year instead of five like the rest of the provisions. The pool also would be reduced to $236 million in 2016 from $400 million a year under the previous waiver.
Even though millions of Californians have gained coverage in the past two years, safety net providers say they would struggle to shoulder the costs of uncompensated care without the additional federal help.
“We will not have the ability to sufficiently take care of” the uninsured, said Dr. Susan Ehrlich, CEO at San Mateo (Calif.) Medical Center.
The future of the safety net pool depends on an independent study of public healthcare systems' continued need for it in light of the state's Medicaid expansion.
Since the expansion became effective at Jan. 1, 2014, about 2 million newly eligible people have signed up for Medi-Cal and another 1.1 million people who were already eligible but not enrolled also signed up.
California is among nine states that have federally funded uncompensated-care pools created under Medicaid Section 1115 demonstration waivers.
Earlier this year, the pools were the subject of a public feud between the Obama administration and Florida Gov. Rick Scott and Texas Gov. Greg Abbott. The Republican governors accused the administration of holding the funding hostage to force the states to expand their Medicaid programs.
The CMS rebuffed that interpretation of its messages to officials in Florida and Texas, but the administration did question why the federal government should subsidize care for uninsured Americans who would be covered if their states expanded Medicaid eligibility under the Affordable Care Act.
The agency echoed that position in a letter to California's Medicaid director explaining that the independent analysis of the safety net pool should assess why some Californians remain uninsured.
“Coverage is the best way to assure beneficiary access to healthcare for low income individuals and uncompensated-care pool funding should not pay for costs that would otherwise be covered in a Medicaid expansion,” CMS Medicaid Director Vikki Wachino wrote in the letter.
Erica Murray, CEO of the California Association of Public Hospitals and Health Systems, said the organization is hopeful that the study will help the CMS recognize how many people remain uninsured in the state.
The number is about 3 million, according to Enroll America, a not-for-profit organization working to get people signed up for health coverage under the ACA. About 2 million of them are eligible for Medicaid or premium subsidies for an exchange plan but have not enrolled. The rest are immigrants living in the U.S. without authorization.
Hospitals are not allowed to use money from the safety net pool to cover the costs of providing care to unauthorized immigrants; Medicaid disproportionate-share hospital payments help cover those costs.
Many other California residents who remain uninsured can't afford to buy plans sold in the state's insurance exchange, according to Anthony Wright, executive director of Health Access California, a patient advocacy organization. In some cases that's because they don't qualify for premium subsidizes. Other consumers are finding that the plans are too expensive even with the subsidies.
“Affordability is absolutely an issue in California, especially when you factor in cost of living,” Wright said.