Judith Shanika Pelpola

Medicaid, better known as Medi-Cal in California, will cover a greatly increased number of patients by 2016 as a result of the Affordable Care Act (ACA). Popularly known as “Obamacare,” this recent healthcare reform has sparked numerous discussions regarding its effect on the already overstretched Medicaid and Medicare systems. California has decided to opt in to the new program established by the ACA, thus ensuring healthcare coverage under Medi-Cal for all individuals with an income below 133% of the federal poverty line.[i]1 According to the Washington Post, California expects to enroll an additional half a million people in the program by 2014, with that number increasing significantly by 2020.[i]2

Medi-Cal, like other Medicaid programs across the nation, was originally created for those eligible for welfare, specifically the elderly, the disabled, and single parents with young children. “It was set up as a program not for all poor people but for only certain categories of poor people, and it was originally tied to whether you got welfare checks,” Don Barr, a professor of Human Biology at Stanford, said. Once a state signed up for the program, it was required to support every person in the above categories. “Poor was defined in different ways for each of those groups… but if you were not in those three groups, even if you were extremely poor, you got zero coverage,” explained Barr. Thus many low-income individuals often go without healthcare coverage unless their employers provide it.

The federal government partially supports Medi-Cal, basing contributions on the average per capita income in the state. According to the US Department of Health and Human Services, the federal government pays 50% of Medi-Cal costs as of 2012.[i]3 California covers the remaining 50%, a financial burden that has strained the budget and made it difficult to expand Medi-Cal to other low-income individuals. This strain affects many other states, though lower-income states receive up to a 75% subsidy of costs from the federal government.

By setting an income level of 133% of the federal poverty line, the ACA makes healthcare coverage available for most low-income people below the specified income level. Currently, the eligible income level in California is around 60% of the federal poverty line, as calculated using Medi-Cal monthly income requirements divided by the poverty line (see 2012 HHS Poverty Guidelines).[i]4 “The Affordable Care Act has said, ‘let’s get away from this idea of this being only for certain categories of poor people; let’s make it for all poor people, ’” claimed Barr.

In raising the minimum income level, the ACA also eliminates shares of cost for many Medi-Cal and other lower-income patients. The share of cost program applies to those above the minimum income level who still qualify as low income, holding these patients financially responsible for a share of their medical expenses. However, this means that even those who were at 61% of the federal poverty line were forced to pay a share of cost, which is applied before Medi-Cal payment covers the remaining cost of care.[i]5 With the ACA, any individual or household earning up to 133% of the federal poverty line, currently $15,130 per year for a family of two or $1260 a month, will no longer have to pay healthcare costs. According to the Kaiser Family Foundation’s summary of the ACA, even those above this line will receive subsidies to help purchase coverage in the private sector.

One concern with regard to the ACA is the increase in cost that the program will incur. States like California will continue to cover the cost of patients under the original program, while the federal government will cover all incoming patients for the first few years. By 2020, states will cover 10% of the cost of the new patients, while the federal government covers the remaining 90%.[i]7 In the long run, the ACA is expected to reduce the federal deficit in part by reducing costs incurred by county hospitals and clinics, which provide uncompensated care for those who do not qualify for Medi-Cal. According to the Milken Institute, California hospitals provided $12 billion in uncompensated care in 2009.[i]8 Uncompensated care is supported only in part by payments from the federal government. In making previously uninsured, low-income patients eligible for Medi-Cal, the ACA ensures that many hospitals and doctors that provide such services will be compensated. “All of a sudden the hospitals and the doctors have a source of payment for these people,” clarifies Barr.

However, a shortage of doctors and care facilities is expected in places like the Veteran’s Hospital in Palo Alto, which accept Medi-Cal as payment. According to Barr, “this continues to be a very serious problem since Medi-Cal pays doctors less than 70% of what Medi-Care pays, and Medi-Care pays about 80% of what the private market pays. That means it’s less than half of the usual charges, so lots of doctors just say ‘we’re not going to take Medi-Cal.’” This puts strain on community clinics to which Medi-Cal patients turn. According to the New York Times, the Inland Empire of Southern California has only half of the number of recommended primary care physicians for its population.[i]10 This is a common concern across California counties. While the ACA provides for roughly 15,000 new doctors in community clinics nationwide, anxiety still remains regarding the number of primary care doctors for newly eligible patients. According to Barr, the question remains regarding the shortage of primary care doctors for new Medi-Cal and Medicaid patients across the country. “That’s the issue that is unclear…There are things in the Affordable Care Act to expand community clinic delivery systems and we’ll see if that’s going to be adequate.”

Donald Barr is a physician and an Associate Professor of Sociology and Human biology at Stanford University. He researches a wide variety of topics, one of which is the social and economic factors contributing to health disparities, and specifically to obesity.