This paper examines three key aspects of the Medi-Cal program that affect cost and health outcomes: eligibility, scope of services, and method of payment. The 1982 reform legislation, A.B. 799, appears to have saved money, but had adverse health consequences for the affected population. Medi-Cal expenditures can be further reduced through changes in eligibility and services offered, but many costs may simply be shifted to local taxpayers. Nearly half the savings will accrue to taxpayers in other states because federal matching payments to California would be reduced. Expanded reliance on prepaid or capitated health plans may save money, but could cause access problems because of the heterogeneity of the patient population. Patient heterogeneity also means that the current method used to pay hospitals is unlikely to be viable in the long run.
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