California is considering whether to establish a Basic Health Program, an option under the Affordable Care Act of 2010 that would cover those who are earning less than 200 percent of the federal poverty level and who are ineligible for Medicaid or the Children’s Health Insurance Program (CHIP). To finance the Basic Health Program, the federal government would pay funds to the state that the feds would otherwise put toward coverage under the California Health Benefit Exchange. Legislation to establish a Basic Health Program in the state (Senate Bill 703, introduced by Sen. Ed Hernandez [D-West Covina, District 24]) is pending. What the Basic Health Program would mean for California’s residents and health care stakeholders was the subject of a California HealthCare Foundation briefing, held in Sacramento on April 27.
The implications of a Basic Health Program are anything but straightforward. The interdependency of the new Basic Health Program and the Exchange—combined with other program changes to roll out in 2014 under the Affordable Care Act—makes analyzing the Basic Health Program option exceedingly challenging. To help bring clarity, in 2011 the California HealthCare Foundation (CHCF) commissioned Mercer to study the financial feasibility of the Basic Health Program option for California; then, in a separate line of inquiry, we funded the Institute for Health Policy Solutions to explore the effect of income volatility on Basic Health Program eligibility. (The researchers were John Graves, Rick Curtis, and Jon Gruber.) Each analysis offered important perspectives on a subset of Basic Health Program considerations.
Because California policy staff and stakeholders continued to raise questions about the Basic Health Program’s impact, the CHCF commissioned the consulting firm HTMS to develop a broad framework for analyzing the implications of the Basic Health Program. Its research, based on stakeholder interviews and a review of previous analysis, was presented and discussed at the April 27 briefing.
New Research Looks at Likely Impact on Goals
Nancy Wise, vice president of planning and strategy at HTMS, invited attendees to consider the Basic Health Program within the context of five overarching policy goals:
* Expanding coverage
* Minimizing state financial risk
* Preserving the safety net
* Maximizing continuity of coverage and care
* Minimizing impact to the California Health Benefit Exchange
While acknowledging that considerable uncertainty remains about design of the Basic Health Program, she described potential impact in the five areas.
Expanding coverage. Differences in premiums between the Exchange and the Basic Health Program—not yet known, pending health plan negotiations—could be substantial. Reacting to the premise that consumer costs under a Basic Health Program would be considerably lower than through the Exchange, study respondents offered two strongly held and divergent perspectives. One group argued that affordability would be the primary driver of enrollment. They anticipated that many more people, tending to be healthier, would get coverage if a Basic Health Program were established.
A second group saw choice and access as primary drivers of consumer behavior. They assumed that the Basic Health Program would offer limited networks linked to Medi-Cal and safety-net care, and that constrained choice under the Basic Health Program would discourage enrollment when compared with networks in commercial plans expected to be available through the Exchange.
State financial risk. Because much remains to be determined through federal rule-making, state legislation, or program implementation, only rough estimates of the annual cost of the Basic Health Program could be made. Administering the program could cost $137 million to $300 million a year, and it is not yet known whether federal funds could offset those costs. The potential reduction in federal payments because of income fluctuations could range from $100 million to $550 million. These figures are fairly modest as a share of the estimated $3 billion total budget for the Basic Health Program, yet they still draw attention in California’s tight state budget environment.
In terms of savings, the state might receive around $225 million in federal funds on behalf of recent immigrants who are currently enrolled in Medi-Cal with state-only funding, if those people were moved to the Basic Health Program.
Safety-net and Medi-Cal providers. In California, the “safety net” is a catch-all concept; the characteristics of providers that serve predominately low-income Californians vary considerably across the state. Depending on the mix of patients served and the reimbursements offered through the Basic Health Program, there would likely be winners and losers among safety-net providers. Those who primarily serve Medi-Cal and uninsured patients today might benefit from better reimbursement, while those serving more commercially insured patients today might see payments erode if patients shift to the Basic Health Program. Further, there are open questions about how Federally Qualified Health Centers would be reimbursed under the Basic Health Program.
Continuity of coverage and care. The Basic Health Program would cover only those in a narrow income band. As enrollee incomes shift—either rising to levels eligible for subsidized coverage through the Exchange, or falling to Medi-Cal eligibility levels—administrative obstacles, cost, or access concerns might lead people to drop coverage. Wise of HTMS emphasized that respondents, especially medical group providers and consumer advocates, raised substantive concerns about continuity and administrative complexity. “Despite everyone’s best intentions,” she said, “it will be difficult.”
Impact on the Exchange. There were also concerns about the possible impact of the Basic Health Program on the Exchange. If one-third of the Exchange’s potential enrollment went to the Basic Health Program, the Exchange’s negotiating ability with health plans would be compromised, many worried. If the most heavily subsidized among the Exchange-eligible population were removed from its pool, some respondents argued that remaining Exchange enrollees would tend to be sicker.
What about the Population That Is Eligible for the Basic Health Program?
Gerald Kominski, director of the UCLA Center for Health Policy Research, presented new data (in briefing deck, slides 11-18) describing California’s population that would be eligible for the Basic Health Program. As of 2014, almost 1 million (948,000) Californians would be eligible: 55 percent of them female, and 51 percent in families with no health coverage. Among people potentially eligible for the Basic Health Program, some currently use the safety net; some use commercial providers; and many have no usual source of care.
Answering a question that has been of some concern, Kominski said the self-reported health status of those who would be eligible for the Basic Health Program skews slightly poorer than average for the state as a whole, but is similar to the remaining Exchange population.
Lucien Wulsin, director of the Insure the Uninsured Project, responding to the presentations and the complexity of the Basic Health Program, said: “I thought of it as a pretty clear choice. I did see two sides. Now I see thirteen.” Wulsin expanded the conversation with some broad observations. For example, he pointed out that although low premiums are attractive to people, they aren’t the only factor driving coverage decisions. Nationally, Medicaid has around 60 percent participation despite low or no consumer cost-sharing, and employer coverage has about an 85 percent take-up rate.
If the state seeks to advance all five policy goals mentioned above, there is no easy answer with respect to the Basic Health Program. The CHCF’s hope is that the analytic framework presented at the briefing will bring more clarity for stakeholders regarding the potential effects of the Basic Health Program.
Summing up the new information presented and the lively discussion it invoked, one attendee remarked, “I respect that CHCF doesn’t try to make complex matters simple.”