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News of the Day ... In Perspective

04/28/2006

Massachusetts-style coverage would cost California about $9.4 billion

According to the California HealthCare Foundation, adopting a plan like the one just passed in Massachusetts would cost the state of California between $6.8 and $9.4 billion—more if employers reduced their insurance offerings.

The estimate assumes an individual mandate with 100% compliance. In Massachusetts, the mandate is to be enforced by state income-tax penalties, which do not apply to those for whom coverage is deemed “unaffordable” (or who pay no state income tax). The California estimate also assumes that employers will continue to offer the same level of coverage although not required to do so.

The additional cost to the state of California of about $1,450 per uninsured person is relatively low because the plan would “leverage” additional federal subsidies and require healthy individuals to spend more.

Massachusetts is re-directing almost $1 billion from its uncompensated care pool to subsidize premiums for low-income persons—in other words, moving subsidies from hospitals to insurers. That amount equates to between $1,300 and $1,800 per uninsured person per year. California has a much higher percentage of uninsured (20.7% vs. 13.1%), and reallocation of disproportionate share funds would only provide $300 per uninsured person (CHCF, April 2006).

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