Stretched Budgets Encouraging States To Hasten Health Implementation

California has “passed two bills that provide the mechanisms and functions of the exchange” and separate legislation to boost adverse-event reporting among hospitals, leading the way in implementation of reform. The advances come in the midst of growing budget shortfalls and increasing number of uninsured, both of which are taxing the state’s health safety net programs.

A new report from the UCLA Center for Health Policy Research finds “8.4 million Californians were uninsured in 2009 — up from 6.4 million in 2007, a 31% surge in just two years.” “The sharp increase was driven by widespread job loss, as areas that reported higher unemployment figures corresponded to areas with the highest rate of uninsured residents.” A higher number of uninsured means that state funds will have to be stretched further, to cover more people. As California HealthLine points out:

However, state budget issues continue to raise red flags for health care stakeholders. The budget, which is now about two months late, currently threatens cuts to health and human services, which critics say would hamper access to Medi-Cal, reduce home health services and make other changes. The budget delay also means that community clinics are now going without Medi-Cal reimbursements, which represents 50% to 80% of their revenue, and could force clinics to scale back their hours and service.

But what’s interesting is that this ongoing economic crisis in the states may be motivating state governments to implement health care reform more quickly, apply for all of the available federal grants and pressure even reluctant politicians to comply with the law’s requirements. For instance, I’ve noted that at least 19 of the 22 states that are suing the federal government over health care reform are also applying for the law’s recently released rate review grants and some — like Utah — are actively working with HHS to ensure that the law meets their needs.


Shana Alex Lavarreda, Director of Health Insurance Studies at the UCLA Center for Health Policy Research tells me that California, which is currently setting up its high risk insurance pool program, is rushing to implement reform precisely because it would lessen the stress on state safety net programs. “It’s funny, politically they were talking about, the change was happening too quickly, we need to slow it down, we need to put it off, now that it’s actually passed, I’m hearing many more complains along the lines of, why isn’t this here yet, why isn’t it fully implemented, why aren’t we getting our subsidies now?” she observed.

Lavarreda said that from the federal prospective, an increase in the uninsured would result in higher costs, but argued that “from the state budget prospective, that’s actually a really good thing.” “More people might be going into the exchange, including the people that would otherwise be eligible for Healthy Families [the CHIP program]. If the adults are going into the exchange, they might not want their kids to be on Healthy Families — the CHIP program here in the state — and they might pull out their kids from that program, which would actually reduce state expenditures. It’s possible that the exchanges would pull people out of the public programs if they prefer to be in the private programs, receiving subsidies from the federal government instead.”

Some lawmakers have argued that implementation itself might stress the state budget, but for now, it’s still too early to tell if states will need more funding. “For us, [the economic downturn] has pushed it to the forefront of our current legislature’s agenda,” Lavarreda stressed. “The problem is not getting better, it’s getting worse right now and we’re going to be incredibly active in getting as much federal funding as possible given our budget situation right now.”