Healthcare To Take a larger Share of California’s Budget

On January 10, 2013, Governor Brown presented a balanced budget for the coming fiscal year, which will begin on July 1. No proposed budget had purported to be balanced since Governor Schwarzenegger’s 2007 to 2008 budget, which he presented in January 2007.

According to an analysis by California Common Sense, while some departments have seen their budgets shrink, the Department of Health Care Services (DHCS) costs have risen dramatically. As one of the largest departments in the state,  spending on DHCS increased 62.2% between 2007 to 2008 and 2013 to 2014, rising from $17 billion to $27.6 billion.

Driving up the departments costs are nationally rising health care costs and increasing enrollment in Medi-CAL, which accounts for most of the departments budget.

The 2007 to 2008 proposed budget estimated a MediCAL caseload of 6.7 million enrollees while the proposed budget for 2013 to 2014 estimates 8.7 million enrollees, a 30% increase. That growth does not include an additional growth in enrollees that’s expected as a result of the enactment of the Affordable Care Act (ACA).

Combined with rising health care costs, increased Medi-Cal enrollment accounts for most of the programs additional costs to the state. The federal government matches DMHC’s funding for enrollees. For a temporary period, the federal government will fund a larger portion of costs arising from new enrollment under ACA.

The department’s $10.6 billion in additional state funding exceeds the state’s net spending increase by $2.8 billion, requiring other service areas to take cuts in order to maintain a balanced state budget.

Employee compensation and retirement benefit costs will also consume a much larger share of state spending in 2013 to 2014 compared to 2007 to 2008. Proposed annual salary spending has increased 15.5% among the executive, judicial, and legislative branches, though spending on legislative salaries has declined slightly.

Annual state contributions to retirement benefits – pensions and retiree health care – have increased $1.5 billion, or 24.8%. In particular, annual retiree health care payments have increased $682 billion and thus account for nearly half of the retirement cost growth. Furthermore, among annual retirement costs to the state, health care for retired employees and their beneficiaries grew the most at 61.2%. In comparison, annual pension contributions increased $790 million, or 16.4%.

Taken together, proposed annual spending on salary and retirement benefit costs increased $3.6 billion, an 18.4% increase since 2007 to 2008. That increase amounts to nearly half of the states $7.8 billion annual increase in spending across the budget. For more information, visit www.cacs.org.

Last Updated 8/2/2017

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