For the next four years, California's public hospitals will receive up to $472 million annually to cover hospital visits for the uninsured as part of a waiver (PDF) meant to reform the state's Medicaid program.
State officials were informed last week of the decision that seemed unlikely since the CMS had been reluctant to pay for the uninsured now that the Affordable Care Act has provided coverage to more Americans. Officials in Tennessee and Texas waiting to hear their fate on similar decisions are celebrating.
California had to make its case for keeping the funding. In 2014, the state expanded Medicaid to people who made 138% of the federal poverty level. That covered an additional 3 million people under Medi-Cal.
But an independent analysis by Navigant (PDF) found that at almost 4 million people, California has the second largest uninsured population in the U.S. That's despite Medicaid expansion and ACA coverage.
The group is composed of people who may be eligible for Medicaid but don't know it, which includes undocumented immigrants and those who can't afford marketplace coverage, even with the subsidies.
Had the CMS not continued the funds, patient care would have suffered, said Anthony Wright, executive director of Health Access California, a patient advocacy organization.
“It would have put safety net hospitals at significant risk financially,” Wright said. “County public hospitals would have likely have scaled back services and programs for the remaining uninsured.”
The state of California's waiver comes with $6.2 billion in federal funding for initiatives meant to implement value-based payment models. The waiver expired last fall.
The agency renewed the waiver and extended the safety net pool used for uncompensated care at public hospitals for just one year instead of five like the rest of the waiver's provisions.
It also then reduced the pool to $236 million in 2016 from what previously was $400 million annually. News of the funding made providers in other states optimistic about their waivers being renewed.
In March, Tennessee submitted a report that found the state would face hundreds of millions in uncompensated care costs even with Medicaid expansion.
“With this in mind, the news out of California is certainly encouraging,” said Joe Burchfield, senior vice president of government affairs at the Tennessee Hospital Association.
“It's clear that even under the best circumstances of (Medicaid expansion) there would still be a significant uncompensated care burden,” said John Hawkins, senior vice president for advocacy and public policy for the Texas Hospital Association.
Texas' report on uncompensated care is expected this month.
However, experts say it may be harder for the CMS to determine how much Texas and Tennessee should receive in uncompensated care since they didn't expand.
“California is in a stronger position,” said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities.
However, the CMS' decision for California does provide a precedent, said Kip Piper, a Washington-area consultant and former senior official at the CMS.
"It shows Medicaid expansion cannot be expected to eliminate uncompensated care and suggests a data-driven pathway" to further demonstrate their need, he added.