Fiscal Outlook: Focus on IHSS and Medi-Cal
As part of the LAO’s California’s Fiscal Outlook, discussed in detail here, the LAO released fiscal outlooks for In-Home Supportive Services (IHSS) and Medi-Cal.
For IHSS, the LAO projects that State General Fund expenditures will grow by an average of 11 percent between 2018-19 and 2022-23. The three main drivers of this growth are:
- IHSS caseload – projected to grow by 5.8 percent annually,
- IHSS hours per case – projected to grow by 2.5 percent annually, and
- State minimum wage increases for IHSS providers – projected to cost $1.5 billion annually once they reach $15 per hour in 2022.
For Medi-Cal, the LAO projects that State General Fund spending will increase by 6.1 percent ($1.4 billion) in 2019-20. While the LAO anticipates that Medi-Cal caseload will decline slightly because of the continued strong economy, the caseload decline will be more than offset by the projected increase in Medi-Cal costs per enrollee. Costs are increasing due to increased use of services and increased prices paid by Medi-Cal. In addition, the gradual decline of the federal share for the optional Medi-Cal expansion and the Children’s Health Insurance Program (CHIP) will lead to increases in State General Fund spending, estimated at $400 million in 2019-20 for the expansion population and $200 million in 2019-20 for CHIP.
Both fiscal outlooks also assume that the managed care organization (MCO) tax will expire at the end of 2018-19. For IHSS, they project this would lead to lower IHSS General Fund spending growth in 2019-20 from savings due to the statutorily scheduled seven percent reduction in service hours if the MCO tax expires. For Medi-Cal, the LAO assumes that General Fund spending in Medi-Cal would increase by $1.5 billion in 2019-20 with the elimination of the General Fund offset due to the expiration of the MCO tax. An extension of the MCO tax and continued restoration of the seven percent reduction in hours may be considered by the Legislature during 2019-20 budget deliberations.