Monday, August 15, 2011

One Bad Idea Leads to More: California's Legislature and Obamacare

Like many other states, California is currently trying to get in front of the sweeping changes that the Obamacare health policy reform is going to bring in 2014. Two of the biggest challenges facing the Golden State will be accommodating millions of new enrollees in Medi-Cal, and launching a new Health Benefit Exchange allowing uninsured residents to purchase partially subsidized insurance. Yet the solution currently being discussed in the Legislature may be a case of taking a terrible law and making it worse.

This solution has taken form in state Senator Ed Hernandez's SB 703, which would effectively create a state-run basic health plan to compete with supplement the plans in the federally-mandated insurance exchange. The plan would be offered through local safety-net providers and have a similar payment structure to Healthy Families (i.e., higher payment rates than Medi-Cal). Only Californians with annual incomes between $14,500 and $21,800 would be eligible. Officials with California's Exchange are urging the bill's supporters to delay action, as the lack of clear federal guidelines make it unclear how this plan would work alongside the exchange. These officials also worry that the plan would draw healthier Californians away from the exchange, thus worsening its risk pool. Regardless, the bill has passed the Senate, and is now in the hands of the Assembly Appropriations committee.

So, let's review: at the federal level, Congress passed a bureaucratic monstrosity that creates significant uncertainty for businesses considering new hires, and adds enormously to the nation's entitlement liabilities at a time when its finances are literally crumbling under the weight of such liabilities. And part of California's plan for complying with it involves . . . paying providers more than the law calls for, while possibly undermining another one of the law's features?


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