New LAO Report Estimates Medi-Cal Spending Falls in 2023-24, but Longer-Term Spending Rises – State of Reform

The Office of the Legislative Analyst (LAO) estimates a decrease in Medi-Cal General Fund spending in 2023-2024, but projects an increase in longer-term spending, according to a new publication. report.

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LAO estimates that General Medi-Cal Fund spending will increase from $35.5 billion in 2022-23 to $34.2 billion in 2023-24, a difference of $1.3 billion. The office’s projected spending for 2022-23 is also nearly $900 million lower than the 2022-23 budget bill.

The significant savings in Medi-Cal spending in 2022-23 can be attributed to additional increased federal funding for Medi-Cal that accompanies the extension of the Federal Public Health Emergency (PHE) until at least January 2023 , according to LAO.

LAO notes, however, that these savings will be partially offset by increased caseload costs resulting from the expansion of BSP’s continuous coverage requirement. LAO estimates $130 million in increased spending for caseload costs in 2022-23, as well as an increase in the number of senior Medi-Cal enrollees, who typically have higher general fund costs. students.

Planned decreases in General Medi-Cal Fund spending for 2023-24, according to LAO, are due to the “reduction” of several large, time-limited behavioral health initiatives, such as Behavioral Health Continuum Infrastructure, Housing Behavioral Health Transition Program, and the Child and Youth Behavioral Health Initiative. LAO says this reduction in General Fund spending will also be driven by federal refunds and deferrals.

The chart below shows LAO’s projection for Medi-Cal spending in 2023-24.

Image: Office of the Legislative Analyst

Looking ahead, LAO estimates general Medi-Cal fund spending will grow to more than $38 billion in 2026-27. LAO anticipates that the number of cases will gradually increase, following the decline in the number of cases following new eligibility determinations once the PHE is completed, due to the expected increase in the state’s overall population and the unemployment rate. LAO predicts this will result in more Medi-Cal-eligible income Californians.

LAO also highlights key uncertainties that will affect the actual amount of General Medi-Cal Fund spending in the years to come. These include an uncertain end date for the federal PHE, varied demographic and employment trends, and the uncertain impacts of inflation and upcoming policy changes on Medi-Cal spending.

According to LAO, some recently enacted changes in the way Medi-Cal services are provided and paid for have not yet been implemented, and their tax impacts are therefore currently difficult to quantify.

“For example, during the forecast period, DHCS plans to implement a number of changes affecting managed health care plans at Medi-Cal, including which plans will participate in Medi-Cal and how whose tariffs will be set,” the report said. “Depending, depending [on] how these changes impact costs, utilization, and quality of services, they could, on the net, increase or decrease overall Medi-Cal General Fund spending. Moreover, many of these policy changes are interrelated, further adding to the uncertainty.