CHA News Article

DHCS Releases Fiscal Impact Analysis of American Health Care Act Proposal

The Department of Health Care Services (DHCS), in collaboration with the Department of Finance, has released the attached analysis reviewing the proposed American Health Care Act (AHCA) and identifying preliminary programmatic and fiscal concerns. The analysis contains assumptions and, when possible, uses internal enrollment, cost and utilization data. According to DHCS’ analysis, the current federal proposal represents a significant shift of costs from the federal government to states, resulting in nearly $6 billion in costs to California in 2020, growing to $24.3 billion by 2027. The state General Fund share is estimated to be $4.3 billion in 2020, increasing to $18.6 billion in 2027.

DHCS’ most significant concerns include:

  • The AHCA imposes a new Medicaid funding methodology for nearly all enrollees and expenditures in Medi-Cal to a per capita spending limit based on 2016 data, representing a fundamental change in the federal-state partnership that has existed since the Medicaid program’s inception over 50 years ago. Consequently, DHCS estimates California will be responsible for a state share of approximately $680 million in 2020, growing to $5.3 billion by 2027.
  • The AHCA sets per capita spending limits and reduces the amount of federal funds available for new enrollees, including previous enrollees who have a break in coverage for more than one month, after 2019. The majority of individuals will be covered at the “traditional” 50 percent cost-sharing ratio instead of the 90 percent funding promised to states under the Affordable Care Act. In addition to reducing federal funding for states that chose to expand Medicaid coverage to individuals below 138 percent of the federal poverty level (FPL), the AHCA subjects these adult beneficiaries to a six-month redetermination to remain eligible for coverage. This additional administrative barrier will cause individuals to lose their coverage and shift the cost burden to states in an expedited manner. DHCS estimates this will cost $4.8 billion in 2020, and grow to over $18.5 billion in 2027. The General Fund share would be about $3.3 billion in 2020, increasing to $13 billion in 2027.
  • The AHCA eliminates enhanced federal funding of 6 percent for specific In-Home Supportive Services (IHSS) program costs beginning in 2020. California’s IHSS program is the largest in the country and is the core of DHCS’ home-and-community-based system, which allows the elderly and disabled to remain in their homes rather than placing them in a more costly institutional care setting. Serving over 480,000 beneficiaries today, this reduction in funding is estimated to increase state costs by about $400 million in 2020, growing annually.
  • The AHCA institutes a one-year freeze on federal payments to specified providers who provide abortion services. California has a long history of providing coverage and services for family planning. Established in 1997, the Family Planning, Access, Care and Treatment Program has been a model in delivering family planning services to low-income individuals and reducing the state’s teen pregnancy rates to near-historic lows, as well as reducing unintended pregnancy and the associated costs.
  • The AHCA removes the expanded presumptive eligibility program for hospitals. Approximately 25,000 individuals each month obtain coverage through this process in California. Due to the nature of presumptive eligibility and the removal of this provision, costs will shift to hospitals and individuals that will no longer be found eligible for Medi-Cal. In 2017-18, state expenditures on hospital presumptive eligibility is nearly $400 million ($192 million state General Fund).​