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The funding is stronger under the coverage initiative.  The federal government reimburses 50 percent of the cost of hospital care, which is often equal to or above the marginal cost of providing care and a greater reimbursement rate than received through the Safety Net Care Pool.  

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Investment in chronic care increases quality and reduces costs. It is possible to provide an upfront investment of funding such as is done in the coverage initiative to improve care and generate federal savings.  

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Funding need not be fragmented.  Medi-Cal funding streams could be consolidated with an eye to reducing duplicate or unnecessary treatment.

4-B. Improvements to Care and Reductions in Cost: Non-Medi-Cal Beneficiaries

Medicaid provides an important source of funding for uncompensated care for the medically indigent.  With the President’s interest in reducing the cost of the Medicaid program and the willingness to invest up-front to obtain savings down the road, it is likely that the waiver will have to address improvements in delivery of care to indigent populations.  Much of this care by nature is episodic related to trauma or other one time health episodes, but a significant part of the care is to people with ongoing chronic health conditions.  

Current Status of California

Many of the individuals whose services are paid for under the current Section 1115 waiver have chronic health conditions often associated with mental health and alcohol and drug diagnoses.  Often, those receiving this care are not eligible for Medi-Cal, or are unwilling or unable to complete the application process.  Treating these individuals is a county responsibility and, given the structure of California’s health care system, these individuals are often forced to seek out care in higher cost settings such as emergency rooms.  

Through the coverage initiative process in the current Section 1115 waiver, California has begun to reform how the medically indigent receive care.  Pending evaluation, the results of these initiatives may show success in achieving the goals of improving care and reducing the long term cost of the care.  

Change Options

It is likely that the waiver will need to address improvements to care for the uninsured.  The federal government will likely seek reforms in how care is delivered in order to shift this care to less costly settings and reduce overall cost.  

California’s ten coverage initiatives may be a good basis for reforming indigent care programs and creating long term savings.  This can only occur in an environment where funding for long term indigent care in hospitals and clinics is secured so that the public hospital system avoids the need to cut services and cost.  The entire model of financing hospitals depends on there being sufficient cost to draw down available federal funds through the certified public expenditure process under which no state general funds are necessary, only documentation

Health Management Associates/Harbage ConsultingPage 33

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