California's Health Care System May Change Under the
Deficit Reduction Act
At CPAT’s November 2006 luncheons, attendees learned of
important issues surrounding the federal Deficit Reduction Act
of 2005 (DRA), signed by President Bush earlier this year. The
Act is expected to generate $99 billion in federal entitlement
reductions over the next nine years by reducing budgets for various
programs and reconfiguring their current structure, including
Medicaid (or Medi-Cal as it is known in California).
Because of these reductions, the DRA could have dramatic implications
for California’s public health care system. This legislation
mandates that each state craft its own regulations governing a
variety of treatment options currently provided by Medicaid/Medi-Cal.
While states have a wide degree of latitude to determine coverage
guidelines, the possibility remains that current beneficiaries
at or slightly above the federal poverty level could lose certain
benefits or be required to increase their co-payments.
The Congressional Budget Office (CBO) analyzed the DRA and concluded
- 13 million people—20 percent of Medicaid enrollees—would
face higher co-payments for non-preferred prescription drugs
- One-third of those affected would be children and almost half
would be individuals with income below the poverty level
- 80 percent of the savings from higher cost sharing would be
due to decreased use of services (or, in the case of prescription
drugs, to the use of lower-cost drugs); the remaining 20 percent
would reflect lower payments to providers
- Many states would likely allow providers to deny services
for lack of payment
The DRA reduces both federal and state Medicaid spending and
changes healthcare access and coverage for low-income beneficiaries.
For the first time, children could be subject to cost sharing
under Medicaid, many adults could face a more limited set of Medicaid
benefits, and the elderly could face delays in Medicaid coverage
for nursing home services.
The extent of the DRA’s impact on California beneficiaries
depends on how the state chooses to structure eligibility for
Medi-Cal services. Medicaid began in 1965 through the Social Securities
Act, signed by President Johnson. Since then, each state has had
to manage the pros and cons of providing health care through combined
state and federal dollars. Some of the benefits include states
being able to expand coverage to low-income populations and children
and disabled individuals. In addition, more than half of these
costs were paid for through federal dollars. However, because
these programs were funded through federal money, states did not
have as much leeway with the way they could provide health coverage
in their state. Now under the DRA, additional funding for Medi-Cal
and the decision-making process will rely on California’s
To learn more about the Deficit Reduction Act, visit the CPAT
Web site at www.caaccess.org to view a copy of the DRA presentation
from the November event. Additional information is also available
through the following sources:
1. Henry J. Kaiser Family Foundation. Kaiser Foundation Commission
on Medicaid and the Uninsured “Deficit Reduction Act Of
2005: Implications For Medicaid.” February 2006.
2. National Center for Children in Poverty “The Deficit
Reduction Act of 2005, Opportunities and Challenges for ECCS Initiatives.”
3. Congressional Budget Office: Deficit Reduction Act Cost Estimate,
S. 1932. January 27, 2006.