LAO assesses Newsom’s budget proposals to expand Medi-Cal, reduce Medi-Cal premiums, and establish Office of Health Care Affordability


Soraya Marashi


Last Wednesday, the California’s Legislative Analyst’s Office (LAO) released a brief assessing Gov. Gavin Newsom’s budget proposals to improve access to health care insurance and health care affordability in California. The brief also identifies potential problems and provides additional recommendations for each of his proposals.


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Expanding full-scope Medi-Cal coverage

The LAO concluded that Newsom’s proposal to expand full-scope Medi-Cal coverage to income-eligible undocumented residents aged 26 through 49 would significantly reduce the number of Californians who lack comprehensive insurance. 

“We estimate that the number of Californians who lack comprehensive health insurance would go down to about 2.2 million people following the proposal’s full implementation, which is roughly 1 million lower than the current level of about 3.2 million people,” the brief stated. 

The LAO also said the longer-than usual time frame for implementation of this expansion would impact access to coverage in the state. This extended implementation time frame could result in some young adults losing coverage while waiting for expansion to be implemented. Between the end of the public health emergencywhen federal Medicaid suspension prohibitions will stopand the expansion date, Jan. 1, 2024, the LAO estimates that 40,000 undocumented young adults could potentially lose full-scope coverage.

“These lapses could have a negative impact on health outcomes for the affected population and also would create additional administrative workload,” the LAO commented.

However, the brief noted the administration’s belief that earlier implementation could create workload challenges. The LAO recommended the legislature take a more incremental approach to expansion that could reduce, if not fully eliminate, some of these workload challenges. 

The LAO suggested two alternative approaches: directing counties to maintain full-scope coverage for enrollees who would otherwise be moved to restricted-scope coverage due to their age, or expanding coverage to people up to age 30 sooner than Jan. 1, 2024. 

The LAO also recommended the legislature request that the administration provide information about the feasibility, administrative cost, and caseload impact of adopting a faster implementation approach. 

Eliminating Medi-Cal premiums

The LAO concluded that Newsom’s proposal to reduce Medi-Cal premiums to zero cost would help improve health care affordability and access for the low-income impacted populations. 

Research in the brief shows that premium costs deter enrollment. Since failure to pay premiums can result in people being disenrolled from Medi-Cal, this proposal would likely result in fewer people losing Medi-Cal coverage.

However, the LAO noted that the fiscal impact of a potential increase in caseload is lacking in the administration’s cost estimate. While Newsom’s office believes any caseload impacts of the premium reductions would be minor and difficult to predict, the LAO disagrees. 

“Because the proposal would remove the deterrent effect of premiums and reduce the number of people who are disenrolled from Medi-Cal for not paying premiums, we think that there is a high likelihood there would be at least some impact on caseload,” the LAO said. “While there is considerable uncertainty about the caseload impact and corresponding costs, we think these costs could be in the tens of millions of dollars of the General Fund.” 

The LAO added that it’s unclear how this policy would impact potential enrollees who owe backpay, noting that these enrollees would still need to pay the past-due premiums before they could re-enroll in Medi-Cal, even after premiums have been eliminated.

The LAO said that while they are in agreement with the policy basis for this proposal, they recommend that the legislature request more information about the administration’s assumption of no caseload impact and how the administration would handle past-due premiums. 

“This information will be key to fully understanding both the budget and policy implications of the proposal–and to determining whether the proposal should be approved as is or with modifications to the cost estimates and/or trailer bill language,” the brief said.

Establishing an Office of Health Care Affordability

The LAO also commented on Newsom’s renewed proposal to establish the Office of Health Care Affordability, stating that although the establishment of this office would be a reasonable step for the state to control health care costs, it is also an ambitious endeavor due to the state’s geographic size, population, and regional diversity. 

The LAO recommended continued monitoring of implementation to ensure its success. LAO said this would allow the state to identify areas where adjustments to the office can be made, such as in its staffing levels and regulatory authority.

The LAO also recommended putting a regular and specific process in place to ensure legislative oversight of the office’s implementation and ongoing efforts.