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Wary of cost & impacts on spending, Brown commits state to health reform

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POSTED January 13, 2013 5:00 p.m.

SACRAMENTO (AP) — Gov. Jerry Brown says he's firmly committed to making national health care reform work in California, but he also is wary of potential costs that could affect state spending for years to come.

In releasing his budget for the coming fiscal year last week, Brown pledged to be a reliable partner in implementing the federal Affordable Care Act by expanding Medicaid coverage for low-income Californians. Brown said he wants to move cautiously so the state can run a sustainable program that will not burden taxpayers with new expenses.

He set aside $350 million for the Medicaid expansion, but even his top health care aide said the true cost is not yet known.

"We're committed to bringing more people to the health care system, but we recognize there are big costs out there, there are big unknowns," Brown said. "We're going to move carefully, but we're going to move with commitment because I do believe people do need decent health care."

Starting in 2014, California will help the uninsured gain access to health care in two key ways: through a new insurance marketplace — or exchange —that will offer subsidies and tax credits to individuals and small business; and by expanding Medicaid, the federal-state health program for low-income people. The program is called Medi-Cal in California.

While the health insurance exchange is designed to be self-sustaining, Brown said he is concerned about expanding Medi-Cal because the program already consumes 20 percent of the state's $97.6 billion general fund, even as the state splits roughly half the cost with the federal government.

It serves about 8 million adults and children, nearly one out of every five residents.

Under the expansion, the state would cover an estimated 1.4 million more Californians who make up to 138 percent of the federal poverty line, or about $15,400 a year for an individual, according to a joint report released Monday by the University of California Berkeley Center for Labor Research and Education and the UCLA Center for Health Policy Research.

The study said another 240,000 to 510,000 people who already are eligible but not yet enrolled are expected to join because of the federal law's individual mandate and a simplified enrollment process.

The Obama administration is encouraging states to expand their Medicaid programs by offering more money. The federal government will pay all medical costs for newly eligible enrollees for the first three years, with funding decreasing to 90 percent by 2020. The state would continue to be reimbursed at 50 percent for everyone else.

State Health and Human Services Secretary Diana Dooley says the governor's budget proposes to include some funding for Medi-Cal expansion in the first half of 2014, but said true costs are not known.

"I think there are as many estimates as there are estimators," she said.

The expansion is projected to cost California $6.3 billion over 10 years, but that would be just 1.7 percent more than what the state would spend on MediCal without the expansion, according to the Kaiser Family Foundation.

Dooley said she is concerned that the federal government has not finalized rules for reimbursing states to determine who is a newly eligible Medi-Cal recipient. It's not clear what medical benefits will be required under the expansion. And even though Medicaid was exempted from across-the-board cuts that threatened to push the nation over the "fiscal cliff," Dooley said it is possible Medicaid spending could be reduced in the next round of deficit talks.

With so many unanswered questions, Brown has proposed two options for sharing some of the cost with California's 58 counties. One option would be to expand the state Medi-Cal program and ask counties to take on more responsibility for providing social services, such as child care. The other asks each county to run its own expansion program because many of them already have begun increasing coverage in anticipation of the health care reform law.

County officials and health advocates say the governor could be overreacting.

"It has been hard to really pin down on where the administration believes these hidden costs come from," said Vanessa Cajina of the Western Center on Law and Poverty, which advocates for the poor. "This is a very fiscally conservative governor, and any kind of expansion of services that aren't totally federally mandated, they're going to be going through with a fine-tooth comb."

In a statement, Los Angeles County Chief Executive Officer William Fujioka said, "It is unclear why the state needs county money to implement a Medicaid expansion that is paid for 100 percent by the federal government for the first three years."

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