Much of California’s current budget problem can be traced back 10 years to the dot-com boom, when the roaring economy sent tax revenues skyward and created big budget surpluses. Legislators and governors reacted by raising spending and cutting tax rates as if the boom-time would never end. When it did, the state was left with more commitments than it could afford with its now smaller tax base.
One of the programs that was expanded was Medi-Cal, the subsidized health program for the poor. Thanks partly to changes in eligibility rules adopted in 1999 and 2000, California has nearly 2 million more people on Medi-Cal today than a decade ago. The number of people eligible has grown by a third while the state’s population has climbed by only 16 percent. Nearly one out of every 5 Californians now receive their health care through state government.
When Democrats took over the governor’s office with Gray Davis in 1999, giving them their first shot at executive power in 16 years, one of the first things they did was to expand eligibility for Medi-Cal to parents in families with incomes up to 100 percent of the federal poverty level. The limit had been 86 percent of the poverty level. The state also made parents in two-parent working families, rather than just single parents, eligible if they met the income requirements.
Part of the goal of those changes was to make it easier for people to leave welfare and go to work, allowing them to earn a little bit of money without losing their health coverage.
The Legislature and the governor also eliminated quarterly eligibility reviews for families with children on Medi-Cal. Allowing them to go a full year between reviews meant that more families remained on the rolls for longer periods of time. That also contributed to the expansion.
Finally, lawmakers expanded no-cost Medi-Cal coverage for the elderly, blind and disabled, allowing those with incomes up to 133 percent of the poverty level to join the program.
None of those changes seem dramatic, and they did not exactly turn the program into a Cadillac system. But within a year of the changes, Medi-Cal’s enrollment jumped by 800,000, or about 15 percent. It kept climbing for several years before leveling out in the middle of the decade, but is climbing again now thanks to the economic recession. At least 1.2 million of the 1.8 million additional people eligible for Medi-Cal last year compared to 10 years ago can be traced to those dot-com era changes, according to the state Health and Welfare Agency.
For my last item tracing the growth of Medi-Cal as a portion of the state budget, look here.