Keeping California’s kids healthy

In a bid to cut the state’s healthcare bills, the Brown administration will begin shuttering the Healthy Families insurance program for low-income children on Jan. 1. More than 850,000 kids will be shifted over the course of the year into HMOs that participate in Medi-Cal, California’s version of the federally subsidized Medicaid program. It may be too late now for the Legislature to rescue Healthy Families from its untimely and potentially disruptive end, even though lawmakers are heading to Sacramento on Monday to begin a special session devoted to healthcare issues. But state lawmakers and federal Medicaid officials should do as much as they can to ensure that these children’s parents won’t be left scrambling desperately to find a doctor or a dentist when their kids need one.

Healthy Families provides insurance to children in families too poor to afford private coverage but not quite poor enough to qualify for Medi-Cal, which is available to those whose earnings don’t exceed the federal poverty line ($19,000 for a family of three in 2012). The program receives more generous federal subsidies than Medi-Cal, yet it’s more expensive for the state because it offers doctors, dentists and hospitals higher rates than Medi-Cal pays. Those higher payments lead more providers to participate in Healthy Families, making it easier for the children it covers to obtain care.

Despite the success of Healthy Families, Gov. Jerry Brown persuaded the Legislature earlier this year to end it and cover its beneficiaries through Medi-Cal’s managed-care program instead. The goal was to save an estimated $13 million in the first half of 2013 and potentially even more in the future, narrowing the state’s budget gap. The change also promised two potential benefits for low-income families: Medi-Cal covers some healthcare costs that Healthy Families doesn’t, and its premiums and co-pays are lower.

Many children’s advocates in the state, however, say that the easier access to doctors in Healthy Families trumps Medi-Cal’s superior coverage and lower out-of-pocket costs. In some rural areas, new Medi-Cal patients may have to leave the county to find certain types of providers. That’s too much to ask of families who are barely scraping by, particularly if their children have chronic diseases or mental health issues. Imagine being a single mother with a full-time job, no car and a 10-year-old daughter who needs dialysis, but the only provider willing to treat her is 30 miles away.

With the 2010 federal healthcare law about to force tumultuous changes in the industry, now is an especially bad time to eliminate Healthy Families. In little more than a year, millions more low-income Californians will become eligible for Medi-Cal if the state extends it to those earning up to 133% of the poverty line, as provided by the new law. That expansion would put even more strain on an overburdened program. At the same time, new subsidies for private health insurance will become available for low- and moderate-income families. Besides, the cancellation of the program will not improve the state’s finances any time soon. Upset about the program’s demise, Republicans blocked the renewal of a tax on managed-care plans that had helped pay for it, costing the state nearly $200 million annually.

Ideally, lawmakers would move swiftly to preserve Healthy Families and the corresponding tax for at least one more year. That would allow low-income children and their parents to move together into new insurance coverage in 2014, whether it be through Medi-Cal or heavily subsidized private plans. The prospects of such an 11th-hour rescue are slim, however; the state has already sent notices to many Healthy Families beneficiaries telling them that their coverage is changing Jan. 1.

If Healthy Families can’t be saved, it’s imperative that federal officials withhold approval of the state’s plan until the state shows that the program’s beneficiaries will continue to have the same access to care as before. Although some Healthy Families participants are covered by insurers that also offer Medi-Cal HMOs, many others will have to be placed with new insurers. And just because an insurer offers a Medi-Cal HMO, that doesn’t mean its network of providers can handle an influx of new patients.

The state plans to shift Healthy Families recipients into Medi-Cal in four phases, starting in January with those who can move to Medi-Cal HMOs run by the same insurers and served by the same networks of doctors that serve them today. Soon after, though, the state will have to deal with children whose current doctors, dentists or therapists don’t participate in Medi-Cal. Meanwhile, children newly eligible for coverage will go straight into Medi-Cal HMOs, even in areas where access to care is in doubt.

State officials say kids whose HMOs can’t meet their needs will be allowed to seek care from out-of-network providers. That’s predicated on the risky assumption, however, that these families will be able to find any providers in their communities willing to treat patients at Medi-Cal’s low rates.

The federal Department of Health and Human Services and state lawmakers shouldn’t hesitate to slam the brakes on the transition if the state cannot preserve kids’ access to care. And as Senate President Pro Tem Darrell Steinberg (D-Sacramento) has suggested, the administration needs a way to monitor the performance of Medi-Cal HMOs after they’ve started adding former Healthy Families beneficiaries to see if problems emerge. That monitoring capability should be in place in a county before Healthy Families is terminated there.

The Brown administration seems determined to phase out Healthy Families as rapidly as it can. Making sure low-income kids have access to the healthcare they need, however, is more important than maximizing the potential savings to state government. If the state must bring Healthy Families to a premature end, lawmakers in Sacramento and regulators in Washington should keep a close eye on the process to make sure no children are pushed into a coverage abyss.