Monday, September 29, 2014

Obamacare Nightmare for Low Income Families: Why Many Kids Lose Their Pediatrician After One Month

In Summary
  • Persons eligible for Medicaid (Medi-Cal in California) are, by federal law, removed from Covered California and automatically enrolled.  
    • Most adults are eligible for Medicaid at or below 138 percent of the federal poverty level.  
    • Most children are eligible for Medicaid at or below 266 percent of the federal poverty level.  
  • As children are born or a family's income drops, children are forced onto Medicaid while mom and dad remain on Covered California. 
  • This creates a complex web of differing health plans within the family while worsening doctor access for the children (fewer providers see new Medicaid patients).   
I was on the Armstrong and Getty Radio Program this morning discussing this article.  You can hear that audio here:

You can hear that entire hour of Armstrong and Getty here.  All Armstrong and Getty podcasts available here.

I have fielded more than a handful of inquiries from frustrated and angry parents over the byzantine run-around many receive from the interplay between Covered California (California's Obamacare Exchange), Medi-Cal (or Medicaid, the insurance program for low income persons in the Golden State) and the Children's Health Insurance Program (or "CHIP," a program for low income kids whose families make too much money to qualify for Medi-Cal in four different counties of California).

This topic arose again last week when I visited a client in California's central valley.  This client is a large group of doctors contracting with a major medical conglomerate.  They are troubled by a new phenomenon they are seeing more of for lower income families.

Expecting mothers on Covered California come in to have a baby and once that baby is born, the baby is covered under the mother's policy for the first month.  After that, the child moves onto their own plan.  However, a fair number of these children are no longer eligible for Covered California after that first month and are shuttled over to Medi-Cal.  That creates a problem in many cases because Medi-Cal generally reimburses less than Covered California.  Many providers only accept a limited quota of Medi-Cal patients.  And most of those quotas are filled with Obamacare's recent expansion of Medi-Cal eligibility from 100 percent to 138 percent of the federal poverty level.

The problem is exacerbated because it is easier for kids to qualify for Medi-Cal than it is for adults.  Furthermore, if an individual is eligible for Medi-Cal, federal law does not allow that person to purchase subsidized insurance in an Exchange.  The all knowing and benevolent government has decided that if an adult's income is below 138% he must have society's lowest grade of healthcare - Medicaid. Medicaid is so bad that a recent study found that having it was worse than having no coverage at all.

Medi-Cal Qualification for Adults:

And if a the child's family income is below 266 percent of the federal poverty level, that child is also forced onto Medicaid (1).  In at least one county, a child can get CHIP coverage at up to 416% of the federal poverty level (2).  There are no exceptions for getting subsidized Obamacare plans when your income falls below these levels.  The only way out at that point is to pay full premium for a private or Obamacare plan.  And that is simply not an economic possibility. (3

Adding to the bureaucratic nightmare many families face, "it is common for different members of the same family or tax household to be eligible for different programs.  In some cases, both parents could be eligible for tax credits through Covered California, while the children are eligible for Medi-Cal" according to California's Department of Healthcare Services site.  It goes on to state that:
[i]n other cases, one parent may be eligible for Covered California without subsidies because they have access to affordable coverage through their job, while their spouse is eligible for premium assistance tax credits through Covered California and the children are eligible for Medi-Cal.
The mind-numbing ordeal that results utterly stupefies.  Imagine an expecting couple making something between 139% and 265% of the federal poverty level (or $27,312 and $52,826 for a family of three). If Dad works for an employer that offers him affordable healthcare (meaning it costs him less than 9.5% of their household income) he is ineligible for any premium assistance in Covered California and makes too much for Medi-Cal.  So he would enroll in his employer's plan.  His wife works for a small company where healthcare is not offered.  So she is on Covered California getting a taxpayer subsidy to help with the premium.  (Also note that if their income is less than 250 percent of the federal poverty level they qualify for a different subsidy to help them pay copays and deductibles.)  When the child is born she is automatically added to the mother's plan for the first 30 days.  This means that the child's pediatrician would be on the same insurer and in the same network as mom.

However, after the bureaucracy's central planners get involved and evaluate the situation, they will realize that the child is to be transitioned to over to Medi-Cal based on the family income of 129 to 265 percent of the federal poverty level. And often times, a pediatrician that was accepting new Covered California patients may not be accepting new Medi-Cal patients since Medi-Cal reimburses at such low levels - even lower than Covered California.

Generally speaking, healthcare reimbursements are best from employer insurance plans, second best from Medicare (insurance for the elderly), third best from the Obamacare Exchange plans and worst from Medicaid/Medi-Cal. Most doctors accept (or are in network with) private plans and Medicare. Covered California's networks often offer as little as half of those providers and Medi-Cal has even fewer doctors accepting new patients.

The government likes to spin this by illuminating the high percentage of providers who accept Medi-Cal.  And that may be true.  However what is also true is that the overwhelming majority of doctors accepting Medi-Cal have a low quota of patients they can accept from Medi-Cal and then they shut their doors. To do otherwise would bankrupt them as Medi-Cal often pays less than a provider's raw cost for a procedure or treatment.

Turning back to our hypothetical family of three we see that the child may now lose his pediatrician after the first 30 days expire.  This has become a common enough problem for families that my client is convening a special session in order to explore the possibility of altering their policies to offer a longer grace period for treating such children.  But even after medical groups make such an allowance; the solution is only temporary.  They cannot afford to take all of these kids in at lower reimbursements and eventually this family will have three different insurance programs for its three different members.

Then, imagine the consternation arising when one of the parents is offered a pay raise changing the math on mother and child's eligibility. Not to worry, there will be bevy of DMV-esque employees there to line them up and offer their heart-felt assistance.


1.  266% of federal poverty level (FPL) for Kids is $52,826 per year for a family of three.

2.  California has a separate CHIP program in four counties that covers children up to 322% of the FPL in three of the counties and 416% of the FPL in one of the counties.

3.  I've received a number of questions from people who want know to why the government does not allow a family who is willing to make the sacrifice and buy up from an almost entirely subsidized Medicaid enrollment to a partially subsidized Obamacare plan so that they can consolidate family members onto one plan and procure a more robust provider network.  It seems abundantly practical and reasonable to most that a family who is willing for forego cable TV, keep a car for 10 years, and live more frugally in order to buy better healthcare should be permitted to do so.  I completely agree with that logic.  Yet, there appear to be at least three reasons the government does not want to allow this.
  • First, because of the lower reimbursements to doctors and smaller provider networks, Medicaid plans are less expensive on a macro-economic level than the partially subsidized PPACA Exchange plans.  This is the most sound rationale for the federal law disallowing subsidized "buy-ups."  Or as a doctor client of mine succinctly put it, "it makes it easier to screw doctors." 
  • Second, allowing some families to "buy-up" undercuts Obamacare supports' claims that the Medicaid expansion was ever necessary and creates a political difficulty for those wanting to further expand Medicaid.  It leads to the question - if some people can save and buy an Obamacare plan, why can't others?  And if they can't because they chose to have a different lifestyle, why should we subsidize them? 
  • And third, for those who might be inclined to ascribe a more cynical motive to the situation, persons on Medicaid (almost wholly government funded) are more dependent on government largesse than persons enrolled in Obamacare (partially government funded).  A more thorough domestication of the population better ensures re-election and the maintenance of power.