Could California Go It Alone With Obamacare? How Much Are You Willing To Pay?

January 31, 2017

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Source: Mercury News

How much would Californians be willing to spend to keep Obamacare in the Golden State?

That’s a question lawmakers might be asking residents in the months to come as President Donald Trump and the Republican Congress scurry to repeal the Affordable Care Act and scramble for a plan to replace it.

One GOP-generated proposal would allow individual states to keep Obamacare-style health insurance — for a price. And that ultimately could force California voters to decide whether they’d be willing to pay more in taxes to continue providing subsidized insurance coverage for at least 5 million residents.

How much — and to cover how many? That’s still a wide-open question.

“The big issue with California is the federal in-flow of dollars,’’ said Christine Eibner, a senior economist at RAND Corporation.

That amounts each year to $22.5 billion in federal funds — more than $17 billion of that to add millions of uninsured low-income adults to Medi-Cal, the state’s health program for the disabled and poor. The rest of that money provides subsidies to lower the cost of health plans for most of the 1.3 million who buy their insurance through the state’s health exchange.

The proposal that would allow states to maintain Obamacare-like plans comes with a catch: five percent less federal funding, according to a rough draft of the plan introduced last week by Republican Senators Susan Collins of Maine and Bill Cassidy of Louisiana.

“California would have to make a state investment in filling the gap,” Eibner said, “and how feasible that is for California will depend on the details of whatever reform is put in place.’’

The Patient Freedom Act of 2017 from Cassidy and Collins would offer states one of three options: continue the Affordable Care Act, but with 95 percent federal funding for financial assistance; choose a plan based on subsidized health savings accounts, or reject federal dollars completely.

Health care experts who have studied the first option say the five percent reduction in funding will mean higher costs for consumers — unless taxpayers or some other funding source fills the gap.

Others contend it’s worth looking into as California’s best hope of keeping most of the key protections and requirements of the existing law, including a ban on lifetime and annual limits; covering children until age 26; and prohibiting discrimination against patients with pre-existing conditions.

“There is a notion that states should have some flexibility — work out their own healthcare solutions, which I think underlies what they (Republicans) are trying to do,’’ said Lanhee Chen, a fellow at Stanford University’s Hoover Institution and a co-author of one of the conservative plans submitted.

“I think the issue comes back to: What are the guard rails? Would states pay for it?”

Covered California CEO Peter Lee declined to comment on any of the GOP replacement plans that have been submitted, including the Cassidy/Collins plan. Nor would he discuss a tax.

“It’s premature to look at a tax, to be talking about a tax,” said Lee. Instead, he noted, the discussion should be focused on how the federal government continues it role of supporting health care, through the employer tax exclusion, through Medicaid programs, and through tax credits.

“That,” said Lee, “is the right discussion to be having.”

Dr. Robert K. Ross, president and CEO of The California Endowment, a private health foundation in Los Angeles that was among the state’s biggest backers of Obamacare, told Kaiser Health News he is hearing talk of replacing federal dollars with revenue sources from the state general fund, or raising a new tax on anything from soda to marijuana.

And Ron Shinkman, founder and editor of Payers & Providers, a weekly newsletter about healthcare business and policy news in the state, believes California has enough wealth and tax base to at least keep in place the tax subsidies for those purchasing coverage through Covered California.

The cost? Shinkman estimates California could cover those subsidies with a statewide sales tax hike of three-quarters of a cent, based on the current estimate of about $4.2 billion to pay for those enrolled in Covered California plans who get federal subsidies.

And, he added, there are other taxing options available as well, such as an increased tax on high earners that could be passed by ballot proposition.

But would California voters, most of whom are not affected by Obamacare or Medi-Cal, go along with that?

“The spirit of the people in California is different than the middle parts of the country. This is the bluest of blue states,” Shinkman said. “I think we’re more willing to pay more to help other people.’’

Don’t count on it, said Jon Coupal, president of the Sacramento-based Howard Jarvis Taxpayers Association, who called the proposed tax “a horrible idea.”

In a state that Coupal said already has the nation’s highest income and state-level sales taxes, he said. “You are just giving people one more reason to leave the state.’’

At the state Department of Finance, spokesman H.D. Palmer said no such sales tax proposal of the kind is in the governor’s budget. Nor is there any similar proposal coming from the Legislature, at least at this point in time.

For now, Palmer said, it’s important to remember that the federal discussion has not been focused on a straight-up repeal of Obamacare, but on repeal and replace.

“The question remains as to what the specifics are/will be of ‘and replace,’ and how that compares to the current provisions” of the law, said Palmer. “That will allow for a more precise fiscal and policy analysis.”

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