California should restore the Healthy Families program

One of Gov. Jerry Brown’s budget-cutting moves this year was to end the Healthy Families insurance program for low-income children and cover them instead through Medi-Cal, the state’s version of Medicaid. Now, at the very end of the legislative session, a bipartisan group of lawmakers is pushing to restore the program and boost its funding. Although we’re skeptical of 11th hour bills, we agree that Healthy Families should be reinstated.

Healthy Families is California’s version of the State Children’s Health Insurance Program, which Congress created in 1997 to provide coverage for low-income children whose parents weren’t poor enough to qualify for Medicaid. While Medicaid typically extends only to families earning no more than the federal poverty line, Healthy Families’ cutoff is two-and-a-half times that amount, or about $58,000 a year for a family of four. California has the most children in the program by far — more than 1.7 million as of 2010, almost twice as many as the state with the second highest number, Texas.

The Brown administration argues that moving Healthy Families kids into Medi-Cal will save the state up to $72 million a year, largely because the state pays doctors significantly less in Medi-Cal than in Healthy Families. Medi-Cal also provides better coverage for some kinds of treatment, such as mental health care, with lower premiums. But those advantages are illusory — the state’s low rates have driven so many doctors and hospitals out of Medi-Cal that it’s becoming increasingly difficult for patients to obtain treatment, particularly in rural areas.

The shift may also cost the state more than it saves. The federal government covered two-thirds of the cost of Healthy Families, but pays for only half of Medi-Cal. In addition, Healthy Families was financed in part by a tax on Medi-Cal managed-care plans. That tax — which was expected to bring in about $180 million this year and significantly more in future years — expired at the end of June, and Republicans have refused to provide the votes needed to renew it unless Healthy Families is restored.

The biggest problem with folding Healthy Families into Medi-Cal is that it forces hundreds of thousands of children to change insurers and doctors just before the federal healthcare reform law provides new ways for their parents to receive coverage. Most of those parents will be obtaining coverage from private insurers through a subsidized insurance exchange, not from Medi-Cal. As a result, children and their parents would be getting their healthcare from different programs, in many cases with separate networks of doctors and hospitals. That makes little sense. Lawmakers should preserve Healthy Families along with the tax on managed-care plans at least until the major changes wrought by the federal law are in place.