Health Reform Will Add Coverage for 6 Million Californians; State Health Spending to Grow by 7 Percent

National health care reform will help 6 million California residents obtain health insurance and increase health care spending by state government by about 7 percent when it is fully implemented in 2016, according to a new RAND Corporation study.

The increase in coverage will be caused by a jump in people enrolling in Medi-Cal and buying policies through a newly created state insurance exchange. Most of the rise in state spending is the result of increased Medi-Cal costs, according to researchers.

The estimates are from a study of the impact that the Patient Protection and Affordable Care Act will have on California that was conducted by researchers from RAND Health and sponsored by The Council of State Governments, a group that helps state leaders share ideas and insights.

The project examined five states chosen because they represented good geographic distribution and include both large and small states. The other states studied are Connecticut, Illinois, Montana and Texas.

"As states move forward preparing for the many provisions of health care reform, it's important for them to have an adequate forecast of what is ahead," said Christine Eibner, co-author of the study and an economist at RAND, a nonprofit research organization.

"We believe this information will help all states to be better prepared to respond to the challenges posed by the Patient Protection and Affordable Care Act," said Chris Whatley, Washington director of The Council of State Governments.

Researchers used a microsimulation model developed by RAND to estimate how health reform policies will affect the number of state residents who obtain or change sources of health of insurance, the types of plans they enroll in, and spending in the private and public sectors. The analysis does not account for the fact that approximately one-fourth of uninsured Californians are undocumented immigrants and not allowed to access the exchange or Medi-Cal.

The estimates are intended to help elected officials and policymakers anticipate the choices that will likely be needed by individuals, employers, insurance companies and governments as various provisions of health reform are implemented.

Key findings from the analysis of California include:

• The percentage of California residents with health insurance will increase from 80 percent to 96 percent by 2016 under the Patient Protection and Affordable Care Act. The number of uninsured non-elderly in California will be one-fourth of what it would be in absence of the law (1.6 million people uninsured compared to 7.5 million people uninsured).
• By 2016, about of 17 percent of non-elderly California residents will obtain their health coverage through an insurance exchange created as a part of health reform.
• Enrollment in Medi-Cal will increase by 58 percent, with an additional 3.6 million California residents enrolled by 2016.
• The additional costs to the state would be about $2 billion annually by 2016 and $4 billion annually in 2020. The cumulative increase from 2011 to 2020 will be an estimated $16 billion.
• In most cases, the majority of new Medicaid enrollees will be newly eligible, but increased enrollment of those previously eligible will cost the states more because the federal government heavily subsidizes newly eligible enrollees.
• The percentage of California workers offered health insurance coverage through their employer will drop slightly by 2016. While more large companies will offer coverage to workers, the overall number will drop as fewer small employers offer coverage.

The full study can be found at www.rand.org. Other authors of the study are David Auerbach, Sarah Nowak, Jeanne Ringel, Federico Girosi, Elizabeth A. McGlynn and Jeffrey Wasserman.

RAND Health, a division of the RAND Corporation, is the nation's largest independent health policy research program, with a broad research portfolio that focuses on health care costs, quality and public health preparedness, among other topics.