California Relies on Federal Funds to Expand Undocumented Health Coverage
California is poised to adopt a sweeping health care expansion that extends full Medicaid benefits to undocumented young adults — with the expectation that the Trump administration will foot some of the bill despite the president’s aggressive stance against illegal immigration.
California will soon become the first state in the nation to provide full publicly financed health coverage to a segment of undocumented adults, a critical component of Gov. Gavin Newsom’s long game to create a universal health care system in the nation’s most populous state.
Federal law generally prohibits states from using federal funds to pay for undocumented health coverage. But California officials say they have a way to offset about a quarter of the expansion cost using Medicaid dollars — nearly $24 million of the $98 million price tag in the first year.
Federal law allows state reimbursement for emergency and labor and delivery care for undocumented immigrants, dating back to a 1986 law intended to prevent hospitals from dumping patients on the street.
California plans to bill the federal government for those services for an estimated 90,000 new undocumented enrollees age 19 to 25 in Medi-Cal, the state’s Medicaid program, according to Department of Finance spokesperson H.D. Palmer. The state will pay for a richer suite of Medi-Cal benefits on its own, including preventive and primary care, prescription drugs and hospitalizations.
The price tag will grow in future years, with total program costs projected at $315 million in 2021. California will pay most of that — $247 million — but bill the federal Centers for Medicare and Medicaid for the remainder. Those costs could rise and fall with changes in projected caseload and the use and intensity of services as more undocumented adults become eligible, according to the Newsom administration.
California officials are so certain that they’re on firm ground that Palmer said if the federal government were to object, “Congress would have to overturn federal law that has governed this issue and been on the books since 1986 under the Reagan administration.”
CMS confirmed Friday that California’s approach appears to be legal as long as the state adheres to existing requirements in Medicaid law. Spokesperson Johnathan Monroe told POLITICO that “illegal immigrants who otherwise meet the requirements for Medicaid in any state are entitled to receive services necessary for the treatment of an emergency medical condition, which includes labor and delivery for illegal immigrant pregnant women.”
The federal government already covers a portion of the overall cost of the state’s expansion of full-scope Medi-Cal to undocumented immigrant children through age 18, a program that started in 2016.
The consensus among Newsom administration officials and health policy experts interviewed by POLITICO is that the state is well within its existing authority to use federal money to cover a portion of Medi-Cal costs for undocumented young adults. But the state must be careful to only seek federal reimbursement for emergency services and labor and delivery care, said Cindy Mann, who served as the federal Medicaid director under former President Barack Obama from 2009 to 2015.
“There is a federal part, but it’s no different than what exists today,” she said. “People who would otherwise be eligible for full-scope Medicaid but aren’t because of their immigration status, the federal government pays for emergency Medicaid — emergency hospitalizations and labor and delivery.”
California health officials “have to establish, to the satisfaction of the federal government, that they are only paying for emergency Medicaid services,” Mann added. “The state is absolutely responsible for assuring that only the appropriate claims get sent to the federal government … . If they submit a claim and CMS says it’s improper, CMS will recoup those dollars.”
Carter Price, a senior mathematician and federal Medicaid expert with the RAND Corporation, a Washington, D.C.-based think tank, said California stands out as a state that’s willing to test the boundaries of the low-income health benefit. Outside California, five other states and the District of Columbia have expanded their Medicaid programs to cover undocumented children, according to the National Conference of State Legislatures.
“Folks are going to receive health care one way or the other,” Price said. “It’s fighting over how it’s paid for.”
Still, California could face political backlash from the Trump administration or the president himself, said Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation. The president has sought to undo Obamacare, impose Medicaid work requirements and stem the flow of immigrants into the country — most recently by threatening tariffs with Mexico.
Even more directly, Trump last year proposed a “public charge” rule that would penalize green card applicants who have used public services, including Medicaid.
“This is now a different political context with immigration being such a flash point nationally and California stepping out in front and expanding coverage for undocumented immigrants,” Levitt said. “Between the governor and the attorney general, California has certainly been a thorn in the side of the Trump administration … and they have staked out positions themselves as public opponents, so I could imagine the Trump administration using this to score political points.
“But it’s not clear to me how there could be retribution,” he said.
Because the Trump administration doesn’t consider the portion of expanded health care services it’ll pay for a new entitlement, it appears California is safe from Trump administrative backlash. But not from the wrath of his 2020 campaign, considering his rapid response director, Andrew Clark, lashed out Monday on Twitter against California Democrats for “providing health care to illegal immigrants” and “taxing people (legal residents!) who don’t have health insurance.”
Newsom, in an exclusive interview this week with POLITICO, said that kind of attack doesn’t bother him.
“I’m sure rhetorically he’ll have at it, but so what,” he said. “I have no doubt that someone who doesn’t believe in expanding health care would be opposed to a state that is … . If I’m going to be worried about Donald Trump’s feelings, and Tucker Carlson’s feelings and Fox News’ feelings, then I won’t be taking care of the people in this state and I won’t be doing justice to this position and to millions of Californians that will benefit because of our health care expansions.”
Democrats argue that universal health care, including coverage for undocumented residents, will ultimately help control rising costs by reducing expensive emergency room visits and ensuring a healthier population.
But legislative Republicans said they’re concerned about using taxpayer dollars for non-citizen health care and how Trump may respond to being an unwilling participant in California’s Medi-Cal expansion to undocumented immigrants.
California still needs federal approval for expansions of opioid treatment and optional Medi-Cal benefits previously cut during the recession. Higher Medi-Cal provider payments also require federal signoff, as does a $63 million proposal to provide free coverage for low-income seniors, half funded by the federal government.
The state also plans to ask CMS to approve an extension of its managed care organization tax and, come 2020, a new Medicaid waiver to administer a broad range of health care, mental health and homelessness prevention innovations. Those are worth billions of dollars.
“There’s a lot of concerns that with the ongoing political battles between the Newsom administration and the Trump administration, that money gets pulled back, which would have further adverse effects that could cause more pressure on the general fund,” said Assemblyman Devon Mathis (R-Visalia). “We’ve seen this happen in recent months with high-speed rail. Ultimately what happens is our citizens and their families are the ones that suffer.”