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California to lose big if Supreme Court scraps U.S. healthcare law

The state, one of the biggest beneficiaries of the Affordable Care Act, would lose out on as much as $15 billion annually in new federal money slated to come its way.

June 20, 2012|By Chad Terhune, Anna Gorman and Erin Loury, Los Angeles Times
  • If the Supreme Court scraps the Affordable Care Act, California will lose out on as much as $15 billion annually. Shown, the Supreme Court building in Washington.
If the Supreme Court scraps the Affordable Care Act, California will lose… (Haraz N. Ghanbari / AP )

If the Supreme Court scraps the Affordable Care Act in the coming days, California will lose out on as much as $15 billion annually in new federal money slated to come its way, dealing what state officials say would be a critical blow to efforts to expand coverage to the poor and uninsured.

The state is one of the biggest beneficiaries of the federal healthcare law because of its large number of uninsured residents — about 7 million people, or nearly 20% of California's population.

The cost of treating the uninsured here currently is borne by taxpayers, as well as consumers and employers who pay higher insurance premiums to subsidize their care. California families pay an extra $1,400 each in annual premiums, on average, to cover medical bills of the uninsured, according to the California Endowment, a private health foundation.

The healthcare law that passed Congress in 2010 was designed to ease that burden by pumping in money from the federal government. California could receive as much as $9 billion a year to expand Medi-Cal, the government program for the poor and disabled, according to estimates from the Kaiser Family Foundation.

An additional $6 billion a year would go directly to low- and middle-income people who buy subsidized policies through a state-run exchange that would open in 2014, according to calculations from the Urban Institute.

A Supreme Court decision to toss out the law would turn off that federal spigot.

"California would be a net loser if the court overturns the law, because it stands to receive such a big flow of money for the uninsured," said John Holahan, director of health policy at the Urban Institute, a Washington think tank.

Still, several of the federal law's more popular insurance provisions, such as guaranteed coverage for children and allowing young adults up to age 26 to stay on parents' policies, will remain in place because they are required by state law now. And some of the nation's biggest insurers have already agreed to continue other benefits such as mammograms, diabetes screenings and other preventive care at no cost.

But without the federal law, insurers could still deny coverage to Californians because of their medical histories or exclude pre-existing conditions from their policies.

Mikail Barron, 43, said she has been uninsured since 2004 and unable to find coverage because she has diabetes and arthritis.

"Getting insurance would mean everything to me," said Barron, who is studying to be a medical assistant at Cabrillo College near Santa Cruz and worries about medical bills wiping her out financially.

The Affordable Care Act requires nearly all Americans to have health insurance or pay a penalty, a provision that was challenged as unconstitutional by 26 states and a small-business group. The high court is expected to rule on that challenge as early as this week.

Critics say that the law fails to control ballooning healthcare costs and that it requires California to spend up to $6 billion from 2014 to 2019 to extend Medi-Cal.

"Californians don't have any confidence government is responsible when it comes to spending this money," said John Kabateck, state director of the National Federation of Independent Business.

The most controversial provision is the so-called individual mandate that requires nearly everyone to buy health insurance. Many believe the state could pass such a law on its own if the Supreme Court justices throw out only that provision. California nearly approved a mandate in 2008 under then-Gov. Arnold Schwarzenegger, a Republican.

"We've been on a long path to reform healthcare in California, and that is still our goal," said Diana Dooley, Gov. Jerry Brown's secretary of health and human services. "We have to take a breath after the decision comes down and see how far does it go and what are the implications."

The lack of federal healthcare money, however, would be harder to remedy, according to state Sen. Ed Hernandez (D-West Covina), chairman of the Senate health committee.

"Federal subsidies are key to making this work," he said. "We don't have the resources to put together a robust health package."

Last week, state lawmakers approved a budget with more than $1 billion in health-related cuts to help close an estimated $15.7-billion spending gap.

"Without the law, we're back to this chaotic political mess of solving healthcare in a state that is broke, essentially," said Robert Margolis, a physician and chief executive of HealthCare Partners, a large medical group that treats more than 500,000 patients across Southern California.

If the Supreme Court upholds the law, nearly 4 million Californians are expected to obtain new or improved coverage by 2019. Of the remaining uninsured, more than 1 million are expected to be ineligible because of their immigration status, and 2 million others are considered unlikely to participate even though they would be eligible, according to research by UCLA and UC Berkeley.

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