The 2025-26 Budget: Understanding Recent Increases in the Medi-Cal Senior Caseload

2025-26 BUDGET The 2025-26 Budget: Understanding Recent Increases in the Medi-Cal Senior Caseload GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2025 Summary and the related flexibilities implemented during its unwinding. Recent Growth in Medi-Cal Senior Caseload Due Mostly to Eligibility Expansions. As of Growth Raises Issues for Legislative December 2024, the senior caseload in Medi-Cal Consideration. Our findings show that, to a greater stands at 1.4 million, about 40 percent higher than extent than initial estimates suggested would be at the start of the continuous coverage period that the case, the Legislature’s policy choices to expand began in 2020 as a response to the COVID-19 Medi-Cal eligibility for seniors are having their pandemic. This brief explores the causes of this intended effects. In particular, asset test elimination growth. We find that the senior caseload is around appears to have been particularly effective at 225,000 higher than it would have been under extending Medi-Cal coverage to seniors. That said, a pre-pandemic law and policy baseline. We it will be important for the Legislature to monitor the estimate that at least 165,000 of these individuals extent to which senior growth continues to grow in are enrolled due to eligibility expansions, with the context of a constrained state budget. Given the remaining up to 60,000 individuals enrolled this sizable growth in the senior caseload—many of due to the continuous coverage requirement whom are enrolled in Medi-Cal for the first time—we raise issues that we think merit legislative oversight. BACKGROUND SENIORS IN MEDI-CAL Seniors Are a Small Caseload in Medi-Cal. Figure 1 Figure 1 shows our estimates of the composition of Medi-Cal enrollment as of December 2024. As the Seniors Make Up Just Under figure shows, families are the largest category 10 Percent of Medi-Cal Enrollment of Medi-Cal enrollees, followed by the Patient December 2024, LAO Estimates Protection and Affordable Care Act (ACA) optional expansion population (childless adults ages Seniors 19 through 64), seniors, persons with disabilities, Persons with Disabilities children in the Children’s Health Insurance Program (CHIP), and other enrollees. Together, families and CHIP the ACA population make up about three-quarters Other Families of Medi-Cal enrollment. Seniors make up just under 10 percent of Medi-Cal enrollment. ACA Optional State Costs Are Higher for Seniors. Figure 2 Expansion on the next page shows per-enrollee costs for each of the caseload categories. As the figure shows, ACA = Patient Protection and Affordable Care Act and CHIP = Children's Health Insurance Program. seniors are a relatively costly category in Medi-Cal, with annual costs per enrollee of around $15,000 www.lao.ca.gov 1 2025-26 BUDGET (total funds). This compares to the average annual cost per enrollee of Figure 2 about $8,000 (total funds) across all caseload categories. Unlike Costs for Seniors are Relatively High the ACA and CHIP populations, Annual Costs Per Enrollee, Total Funds, 2024-25 for which the federal government provides an “enhanced” match of 90 percent and 65 percent, Persons With Disabilities respectively, services provided to seniors, like families and Seniors persons with disabilities, receive a standard 50 percent federal Average match. (The federal government ACA Optional provides an enhanced match for Expansion certain functions and services that apply to all enrollees regardless Families of enrollment category.) While higher health care costs are CHIP expected as people age, seniors 5,000 10,000 15,000 20,000 25,000 also carry higher state costs due to the standard federal ACA = Patient Protection and Affordable Care Act and CHIP = Children's Health Insurance Program. reimbursement rate. Within Senior Category, Costs Figure 3 Vary Widely. As budgeted in the Medi-Cal estimate, the senior Per-Enrollee Costs for Seniors Range Widely category is the total of three aid Annual Costs Per Enrollee, Total Funds, 2024-25 categories—seniors receiving Supplemental Security Income (SSI) (budgeted as Public Assistance), Long Term seniors receiving long-term care in settings such as skilled nursing facilities (budgeted as Long Term), Public and all other non-disabled seniors Assistance (budgeted as Medically Needy). Programs in the Medically Needy Medically category include the aged, blind, Needy and disabled federal poverty level (ABD FPL) program and those 20,000 40,000 60,000 80,000 100,000 enrolled in share-of-cost Medi-Cal. As of December 2024, about two-thirds of seniors enrolled in Medi-Cal are in the Medically Needy As shown in the figure, total annual costs per senior category, with another 30 percent in the Public ranges widely, with costs for those in institutional Assistance category. Less than 3 percent of seniors care, such as skilled nursing facilities, totaling are in the Long-Term category. Figure 3 shows the nearly six times the next most costly aid category of per-enrollee costs for these three aid categories. Public Assistance. 2 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET RECENT POLICY CHANGES “non-MAGI” rules. Prior to January 1, 2024, these complex rules included a verification of assets, IMPACTING SENIORS commonly referred to as an asset test, and a variety Asset Test Elimination of income deductions and exemptions. With regard to assets, the rules limited the amount of countable Prior to January 2024, Medi-Cal Eligibility assets an applicant could have to $2,000 per for Seniors Based in Part on Complex Rules individual and $3,000 per couple. An additional Limiting Assets. Beginning January 1, 2015, $150 in assets was allowable for each additional the ACA created a simpler process (known as household member. Figure 4 summarizes selected the Modified Adjusted Gross Income, or MAGI, countable and noncountable assets under the methodology) for determining eligibility for most old rules. (More detail on these rules can be Medi-Cal applicants. Seniors and persons with found in Appendix A of the Department of Health disabilities, however, continued to apply under Figure 4 Treatment of Selected Assets Under Medi-Cal’s Prior Asset Test Rules Prior to January 1, 2024 Asset Type Countable Non-Countable Notes Primary Residence  Proceeds from the sale of a primary residence were exempt so long as the assets were used to purchase another home within six months of the sale. Other real estate assets  Up to $6,000 could have been exempt if the property produced an income of 6 percent of the property’s market value. Primary vehicle  Additional vehicles  Net market value of additional motor vehicles was counted. Recreational vehicles  Included recreational motor vehicles, boats, campers, and trailers. Annuities, retirement  Generally were not counted so long as payments of principal accounts, and pensions and interest were being received. (Payments count as income for eligibility determination purposes.) For annuities, the cash surrender value was counted if payments were deferred at any time. Life insurance   Term life insurance policies were exempt. Face value for other types of life insurance policies, either on life of individual or family member, was exempt, if value was $1,500 or less. Otherwise, cash surrender value was counted. College savings plans  529 and 529A savings plans were exempt. Household items  Personal effects   Clothing was exempt. Wedding rings, engagement rings, and heirlooms exempt. Jewelry under a market value of $100 was exempt. Assets used in a business  Assets being sold  Assets were not counted if applicant showed they were making a “bona fide effort to sell.” www.lao.ca.gov 3 2025-26 BUDGET Care Services’ [DHCS’] 2020 report on Medi-Cal restricted set of services, generally pregnancy and asset limits.) In many cases, the rules were fairly emergency services. Beginning in the mid-2010s, straightforward. For example, the value of a primary the state began to offer full-scope (comprehensive) residence and primary vehicle generally were not services to all individuals regardless of immigration counted as assets. In some other cases, however, status. (The state General Fund fully incurs the costs the rules could be complex. For example, funds of services provided beyond the partially federally dedicated for burial costs or burial plots, vaults, and funded restricted-scope services.) These expansions crypts were exempt so long as they were secured occurred incrementally, with an expansion to those using an irrevocable contract. If, on the other hand, age 50 and over effective July 1, 2022. the fund or space was secured using a revocable Continuous Coverage Period and Unwinding. contact, only the first $1,500 of the contract In 2020, as a COVID-19-related action, Congress was exempt. approved a temporary increase in federal funding for 2021-22 Budget Package Phased Out Asset most Medicaid costs. To be eligible for this increased Test. The 2021-22 budget package included trailer funding, states were required to comply with several bill legislation that phased out the asset test for requirements on top of standard Medicaid rules, seniors and persons with disabilities. Specifically, the most important being the “continuous coverage between July 1, 2022, and December 31, 2023, requirement.” This requirement prohibited states the asset limits were increased to $130,000 for from terminating eligibility for existing beneficiaries individuals and $195,000 for couples (with an except in limited circumstances. Largely as a result of additional $65,000 allowable for each additional these policies, Medi-Cal caseload increased by over household member), and were fully eliminated 3 million enrollees (25 percent) between March 2020 effective January 1, 2024. With regard to income, and June 2023, as shown in Figure 5. Counties seniors and persons with disabilities still must resumed eligibility processing in April 2023, which have countable income below 138 percent of the resulted in overall Medi-Cal caseload beginning to FPL—$20,783 for an individual in 2025. In general, decline starting in July 2023. During this continuous seniors and persons with disabilities with income coverage unwinding period, the state implemented over this threshold still can be eligible for Medi-Cal certain flexibilities meant to limit disruption of but must pay a share of cost. Based on our review eligibility redeterminations on enrollees and simplify of the legislative history, the elimination of the asset and reduce eligibility processing workload for test was meant to remove a barrier to enrollment, counties. Some of these flexibilities helped seniors encourage continuity of coverage, and make eligibility stay enrolled in Medi-Cal—for example, one policy determinations between MAGI and non-MAGI allowed counties to more easily renew eligibility for populations more equitable, among other goals. individuals who derive income from stable sources, such as social security and pensions. Other Policy Changes Elimination of a Medi-Cal Share of Cost Figure 5 for Seniors Up to 138 Percent of FPL. Prior to Overall Medi-Cal Caseload Increased About December 2020, seniors and persons with disabilities 25 Percent During Continuous Coverage Period whose incomes were between roughly 122 percent (In Millions) and 138 percent of the FPL had to pay a share of cost in order to receive Medi-Cal coverage. The 16 Beginning of continuous coverage unwinding 2019-20 budget package eliminated this share of cost for seniors and persons with disabilities up to 15 138 percent of FPL, consistent with the eligibility rules for children and adults through age 64. 14 Expansion of Full-Scope Medi-Cal Coverage to 13 Older Adults Regardless of Immigration Status. Beginning of continuous coverage period Historically, federal law has allowed for individuals 12 with unsatisfactory immigration status to receive a 1/1/2016 1/1/2017 1/1/2018 1/1/2019 1/1/2020 1/1/20211/1/2022 1/1/2023 1/1/2024 4 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET RECENT TRENDS IN THE SENIOR CASELOAD Senior Caseload Began to Increase More caseload in these three time periods. Based on Sharply in January 2024. Figure 6 shows data available on the California Health and Human the cumulative percentage change for each Services Agency (CalHHS) Open Data Portal, category of Medi-Cal enrollees from April 2020 the increases have continued through at least (when the continuous coverage period began) December 2024 (the last month of data available as through December 2024 (a year and a half after of publication of this report). the beginning of the unwinding of the continuous Increases Concentrated Within Single coverage requirement). As the figure shows, growth Program in Medi-Cal. Figure 8 on the next page in the senior caseload was largely consistent shows caseload in the three senior aid categories with the families category until the start of the from April 2021 through December 2024. Senior continuous coverage unwinding period. Specifically, caseload grew by about 320,000 individuals over both categories had grown by just over 20 percent the period, with growth occurring almost exclusively by June 2023. Thereafter, the families caseload in the Medically Needy category. More specifically, began to decrease in response to counties the growth has been almost exclusively in the resuming eligibility redeterminations while the “1H” aid code, which corresponds to the ABD senior caseload continued to grow, albeit more FPL program. ABD FPL program enrollees have slowly than during the continuous coverage period. countable income under 138 percent of the FPL, Starting in January 2024, senior caseload began are not enrolled in SSI, and do not have a share to increase sharply. Figure 7 on the next page, of cost. compares average monthly growth in the senior Figure 6 Senior Caseload Increased Sharply Beginning in January 2024 Cumulative Percentage Change 50% Seniors 40 30 Growth in the senior caseload initially slows during unwinding... ...before increasing sharply beginning in January 2024. 20 ACA Families 10 Persons With Disabilities CHIP -10 4/1/2020 7/1/202010/1/20201/1/2021 4/1/2021 7/1/202110/1/20211/1/2022 4/1/2022 7/1/202210/1/20221/1/2023 4/1/2023 7/1/202310/1/20231/1/2024 4/1/2024 7/1/202410/1/2024 ACA = Patient Protection and Affordable Care Act and CHIP = Children's Health Insurance Program. www.lao.ca.gov 5 2025-26 BUDGET Figure 7 Average Monthly Senior Caseload Growth in Three Selected Time Periods 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Continuous Coverage First Six Months Jan. 2024 - Dec. 2024 (Apr. 2020 - June 2023) of Unwinding (July 2023 - Dec. 2023) Figure 8 Growth in Medi-Cal Senior Caseload Concentrated in the Medically Needy Aid Category 1,000,000 Medically Needy 800,000 600,000 Public Assistance 400,000 200,000 Long Term 4/1/2021 4/1/2022 4/1/2023 4/1/2024 WHAT IS CAUSING THE GROWTH IN THE SENIOR CASELOAD? In this section, we estimate the extent to (1) the elimination of a Medi-Cal share of cost for which four possible explanations—each related seniors up to 138 percent of FPL; (2) enrollment to a policy change—are causing increases in the growth in the full-scope expansion of Medi-Cal senior caseload, while enrollment in the other to older adults regardless of immigrations status caseload categories is declining or has stabilized (hereafter “older adult expansion”); (3) the asset following the unwinding of the continuous coverage test elimination; and (4) the effects of continuous requirement These possible explanations include: coverage, the unwinding, and unwinding flexibilities. 6 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET We Estimate That Senior Caseload Is in the senior caseload.) The 1.2 million estimate Currently About 225,000 Higher Than Expected compares to actual enrollment on January 1, 2025 Under a Pre-Pandemic Law Baseline. Figure 9 that we estimate to be 1.4 million—a difference of shows seniors enrolled in Medi-Cal as a percent of about 225,000 seniors. (By applying a historical the total population over age 65. As shown in the percentage of seniors already enrolled in Medi-Cal figure, between 2015 and 2019, the share of seniors to our estimate of the January 1, 2025 population statewide who were enrolled in Medi-Cal ranged aged 65 and over, we are already accounting between about 18 percent and 18.5 percent. We for the extent to which the natural growth in the estimate that there were 6.5 million individuals age state’s overall senior population has contributed 65 and over as of January 1, 2025 in California. to the senior caseload increase.) This means that If 18.5 percent of these individuals were enrolled to explain what is driving recent increases in the in Medi-Cal, we estimate that the senior caseload senior caseload, we need to account for about would have been 1.2 million. This estimate reflects 225,000 seniors in excess of this pre-pandemic the number of individuals that would have been policy baseline (hereafter, “senior growth due to enrolled in Medi-Cal based on laws and policies policy changes”). in place before the pandemic (meaning without Estimate a Total of 165,000 of Senior the impacts of continuous coverage, unwinding Caseload Growth Is Due to Eligibility flexibilities, elimination of a share of cost for Expansions. In order to determine the extent to certain seniors, asset test elimination, or the older which particular policy changes have been driving adult expansion). (While possible that additional senior growth, we conducted an analysis to first seniors falling into poverty could have increased determine the total increases that are being driven this 18.5 percent threshold on the natural, the by eligibility expansions as opposed to the effects lack of growth in Medi-Cal enrollment for seniors of continuous coverage, the unwinding, and receiving SSI benefits and increasing real per unwinding flexibilities. In the paragraphs that follow, capita social security income—a key income we provide our analysis that results in our estimate source for seniors—leads us to think this is of at least 165,000 seniors being added due to unlikely to contribute significantly to increases eligibility expansions since 2020. (As a consequence of this estimate, Figure 9 it follows naturally that we estimate up to 60,000 seniors being added Percent of Seniors Enrolled in Medi-Cal due to the effects of continuous coverage, the unwinding, and 25% unwinding flexibilities, for a total increase of 225,000 seniors 23 due to policy changes.) Having the estimate for the total senior 21 caseload added by eligibility expansions allows us to estimate the caseload impact of the asset 19 test elimination—an impact that is very challenging to estimate on 17 its own without consideration of the impact of all the other policy 15 changes affecting the senior 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 caseload being implemented at the same time. www.lao.ca.gov 7 2025-26 BUDGET About 30,000 of Increase Due to Elimination first-time-enrolling seniors were more than twice of Medi-Cal Share of Cost for Seniors Up to the level as prior to the policy change. As shown 138 Percent FPL Beginning in December 2020. in Figure 11, this growth in first-time-enrolling As shown earlier in Figure 6, there was a large Medi-Cal enrollees is unique to seniors. From increase in the senior caseload in December 2020 the third quarter of 2022 through the fourth that coincided with the elimination of share-of-cost quarter of 2024, we estimate that about Medi-Cal for seniors and persons with disabilities 115,000 first-time-enrolling seniors enrolled with incomes between 122 percent and 138 percent in Medi-Cal over the historical average new of the FPL. Individuals who are enrolled in enrollment. Importantly, these increases in share-of-cost Medi-Cal, but who have not met their share of cost in Figure 10 a given month, are not reflected in the caseload data. By eliminating First-Time Enrolling Seniors the share-of-cost requirement for Average Quarterly Enrollment these individuals, we estimate that this expansion brought around 35,000 Average quarterly enrollment 30,000 new Medi-Cal members 30,000 in excess of pre-continuous coverage level. into the program in a single month. 25,000 About 115,000 of Senior Pre-continuous 20,000 coverage level. Growth Due to Policy Changes 15,000 Are First-Time Medi-Cal Enrollees as a Result of Eligibility 10,000 Expansions Since the Second 5,000 Half of 2022. Figure 10 shows the average number of Medi-Cal Before continuous Early continuous Asset test phase out Asset test coverage coverage (2022Q3 - 2023Q4) elimination enrollees over 65 who are enrolled (2016Q1 - 2020Q1) (2020Q2 - 2022Q2) (2024Q1 - 2024Q3) in Medi-Cal for the first time in their lives in four selected time periods—before the continuous coverage period, during continuous Figure 11 coverage but before the asset test phase out, the asset test phase-out Growth in First-Time Medi-Cal Enrollees Unique to Seniors period, and finally after elimination Cumulative Percent Change of the asset test. (The data in the figure are from the CalHHS 150% Open Data Portal.) As shown in Seniors the figure, the quarterly average 100 number of seniors enrolling in Medi-Cal for the first time during the first 27 months of continuous 50 coverage was virtually identical as it was before the pandemic. During the 18 months in which the asset limit was increased, but All Other not eliminated, first-time-enrolling Age Cohorts -50 seniors in Medi-Cal increased 2016 2017 2018 2019 2020 2021 2022 2023 2024 by about 60 percent. Once the Note: Data for the fourth quarter of 2024 is estimate based on the average of the first through third quarters of 2024. asset test was fully eliminated, All other age cohorts include 0 to 17, 18 to 25, 26 to 34, 35 to 44, 45 to 54, and 55 to 64. 8 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET individuals enrolling in Medi-Cal for the first time About 23,000 of Increase in Seniors Due to are definitionally not the result of continuous Eligibility Expansions Appears to Be Due to coverage unwinding flexibilities because the Older Adult Expansion. Figure 12 on the next flexibilities only helped those already enrolled in page shows recent trends in the caseload for the Medi-Cal stay in the program. Rather, this increase four expansions of full-scope Medi-Cal coverage to in first-time-enrolling seniors would be due to individuals regardless of immigration status. From eligibility expansions. July 2022 through September 2024, the caseload Additional 20,000 Growth in Recent Months in the expansion to individuals age 50 and older—a Due to Eligibility Expansions. As shown earlier group that is notably not limited to those age 65 in Figure 7, during the continuous coverage and over—increased by about 120,000 individuals. period, the average monthly increase in the senior Assuming recent trends continued, by December caseload was about 6,200. This was during a time 2024 we estimate the increase was about 135,000. in which counties were not conducting any eligibility Based on data on the restricted scope population redeterminations. Even with federal flexibilities, we prior to the expansions to adults and older adults, would not expect average monthly growth in the 17 percent of the individuals in the older adult senior caseload during the unwinding period to expansion were aged 65 and older in 2021-22. exceed this 6,200 figure. Yet, even after removing (See Figure 1 of our May 2021 publication, from the caseload the 115,000 first-time-enrolling Estimated Cost of Expanding Full-Scope Medi-Cal Medi-Cal enrollees that are due to eligibility Coverage to All Otherwise-Eligible Californians changes, we are left with average monthly growth Regardless of Immigration Status.) This translates of about 8,000 during 2024. We therefore assume to about 23,000 seniors, or less than 15 percent, that at least another 20,000 of the increase in of the at least 165,000 additional seniors due to senior caseload is due to eligibly expansions. eligibility expansions. (This estimate equals the difference between At Least 112,000 of Senior Increase Appears 8,000 and 6,200 multiplied by 12 months.) While to Be Due to Asset Test Elimination. After not first-time Medi-Cal members, we assume subtracting the 23,000 new seniors in Medi-Cal we that these individuals would have lost coverage estimate are due to the older adult expansion, and absent changes like the asset test elimination. the 30,000 that were shifted into Medi-Cal due to Combined with the 30,000 increase in seniors due the elimination of share of cost up to 138 percent of to the elimination of a Medi-Cal share of cost for the FPL, at least 112,000 additional seniors due to certain seniors and 115,000 first-time-enrolling eligibility changes remain. Presumably, these new seniors in Medi-Cal, we arrive at a total of at Medi-Cal seniors are the result of the asset test least 165,000 seniors who we estimate are in the elimination, the only other major eligibility change program due to eligibility changes. affecting seniors since the start of the pandemic. Estimate About Two-Thirds of Senior Growth This estimated caseload impact of the asset test Due to Eligibility Expansions Is From Asset Test elimination is at least three times the caseload Elimination. As discussed above, the elimination impact that was estimated at the time the policy of a Medi-Cal share of cost for certain seniors change was adopted (37,000). provides about 30,000 of the 165,000 estimated Net Effects of Continuous Coverage, senior growth due to eligibility expansions, leaving Unwinding, and Unwinding Flexibilities Account 135,000 of the growth to allocate between two for Up to Remaining 60,000 of Increase in eligibility expansions: (1) the older adult expansion Senior Caseload. Subtracting the at least and (2) the asset test elimination. In our analysis 165,000 increase in the senior caseload due to below, we estimate that the older adult expansion eligibility changes from the 225,000 total seniors has resulted in an increase of 23,000 seniors, due to policy changes leaves up to 60,000 seniors. thereby leaving the remaining balance of 112,000 to This figure is the net of the increase in the be due to the asset test elimination. senior caseload due to the continuous coverage period and flexibilities, less disenrollments due to the continuous coverage unwinding. www.lao.ca.gov 9 2025-26 BUDGET Figure 12 Recent Caseload Trends for Expansions of Medi-Cal to Individuals Regardless of Immigration Status Children (0-18) Older Adults (50 and Over) 250,000 425,000 200,000 375,000 150,000 325,000 100,000 275,000 7/2022 7/2023 7/2024 7/2022 7/2023 7/2024 Young Adults (19-25) Adults (26-49) 250,000 850,000 200,000 800,000 150,000 750,000 100,000 700,000 7/2022 7/2023 7/2024 7/2022 7/2023 7/2024 While this estimate is modest, senior caseload was families and the ACA optional expansion population, growing slowly before the continuous coverage which were declining prior to continuous coverage. period, meaning that the incremental effect of Summary of Factors Driving Growth in Senior continuous coverage, the unwinding, and flexibilities Caseload. Figure 13 summarizes our estimates was not as significant for seniors as it was for of the policy changes causing growth in the 10 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET senior caseload. As shown in the Figure 13 figure, we estimate that the majority (165,000) of the 225,000 seniors Estimated Causes of Increased Senior Caseload in in excess of a pre-pandemic Medi-Cal Due to Policy Changes law and policy baseline are due LAO Estimates, Caseload as of January 2025 to eligibility changes. Most of this 165,000 estimate is due Additional seniors due to eligibility changes 165,000 to the asset test elimination. (Due to elimination of share of cost for seniors up to 138 percent FPL) (30,000) (Due to older adult expansion) (23,000) The remaining 60,000 seniors (Due to asset test elimination) (112,000) are assumed to be due to the Additional seniors due to continuous coverage and unwinding flexibilities 60,000 effects of continuous coverage, the unwinding, and remaining Seniors in Excess of Pre-Pandemic Law and Policy Baseline 225,000 FPL = federal poverty level. enrollment flexibilities. ISSUES FOR LEGISLATIVE CONSIDERATION Considerations for the State Budget Asset Test Elimination a Good Example of Inherent Challenges in Projecting Costs Asset Test Elimination Appears to Cost for Some Medi-Cal Expansions. Our current Nearly $500 Million General Fund More Than estimates of the caseload and fiscal impacts of Originally Estimated. We assume that the average the asset test elimination raise questions about caseload increase due to the asset test elimination the original estimates. In general, it seems these across 2024-25 equals the caseload effect of at original estimates accounted mainly for individuals least 112,000 enrollees that we estimate as of who had applied for Medi-Cal and were initially January 1, 2025 (the midpoint of the fiscal year). rejected due to excess assets. The estimates did Multiplying this figure by average per-enrollee costs not seem to account for individuals who would have for the Medically Needy aid category ($12,533) been eligible for Medi-Cal but for the asset test produces total costs of $1.4 billion for the asset rules and who had never applied, a group which test elimination. (DHCS’ original caseload estimate appears to be significant. The asset test elimination included a small number of individuals who would is a good example of the challenges inherent in enroll in the Long-Term category; however, because producing fiscal estimates for proposals to extend essentially all of the growth we have observed has state programs to populations that are outside of been in the Medically Needy aid category, we only their existing reach. The asset test elimination is not apply the per-enrollee costs for that category for alone in this regard—the expansions of full-scope simplification purposes.) Applying a 50 percent Medi-Cal coverage to individuals regardless of nonfederal share as a rough rule of thumb results immigration status are also costing more than in General Fund costs of about $700 million in originally estimated due to a combination of higher 2024-25. If the caseload effect of the asset test caseload and per-enrollee costs. Upcoming elimination instead averaged 37,000 across budget hearings present a good opportunity for the 2024-25, as estimated at the time of enactment of Legislature to conduct oversight over the impacts of the asset test phase out, costs would have been these and other recent expansions. about $460 million ($230 million General Fund). Thus, we estimate the asset test elimination results Extent to Which Senior Caseload Continues in nearly $500 million more in General Fund costs to Grow Is an Issue to Watch. As mentioned in 2024-25 than was previously assumed to be earlier, sharp increases in the senior caseload have the case. continued through December 2024, the last month www.lao.ca.gov 11 2025-26 BUDGET for which we have caseload data. The duration and Additional Issues for extent of these increases will be key in eventually Legislative Oversight understanding the full fiscal and programmatic The caseload developments covered in this effects of the asset test elimination, the older adult report raise a number of issues that we think merit expansion, and other recent eligibility changes legislative oversight. affecting seniors. Prior eligibility expansions suggest that it can be some time before the full • Enrollee Educational Efforts. With so caseload effects of an expansion are realized, many seniors enrolling in Medi-Cal for the suggesting that it could be another year or more first time, educational efforts specifically before the senior caseload stabilizes. Additionally, aimed at seniors could be worth considering. we have begun to see sharp increases in the For example, in 2017, the scope of the In-Home Supportive Services (IHSS) caseload in state’s estate recovery policy was narrowed recent months, suggesting that senior caseload considerably. Generally speaking, only those growth in Medi-Cal may have fiscal implications for deceased members whose estates are subject the IHSS program as well. Continued monitoring to probate and who received specified nursing of data on new enrollees in Medi-Cal likely will facility or home- and community-based care be key, as the planned expiration of continuous services are subject to recovery. Despite coverage flexibilities likely will result in offsetting this narrowed scope, with so many seniors disenrollments in the senior caseload. enrolling in Medi-Cal for the first time, should the department consider any educational Asset Test Elimination a Powerful Tool for communications to help enrollees understand Helping Seniors Access Care. In watching the the estate recovery rules? extent to which the senior caseload continues to grow, the Legislature may wish to keep in mind • Access to Services. As of December 2024, the policy benefits deriving from the elimination of the senior caseload in Medi-Cal stands at the asset test. If our estimates are reflective of the 1.4 million, about 40 percent higher than at causes of recent increases in the senior caseload, it the start of the continuous coverage period. seems that a significant share of California seniors Given the particular health care needs of living in or near poverty were eligible for Medi-Cal seniors, should the state consider any actions but for the state’s historical restrictive limitation on to ensure sufficient access to services for assets. It also seems likely to us that a significant this population? number of seniors who were eligible for Medi-Cal • Potential Cost Pressures in Long-Term under prior law may not have enrolled due to Care. As shown earlier in Figure 8, the the complex asset rules. For example, a single increases in senior caseload have been individual with $20,000 in a retirement account concentrated in the Medically Needy may have chosen not to apply for Medi-Cal upon aid category and have not resulted in hearing that they could only have $2,000 in assets, corresponding increases in the relatively despite the retirement funds not being counted as costly long-term care aid category, which has assets under the rules. (The income derived from been largely flat since 2021. The Legislature the retirement account would have been considered may wish to ask the administration about the income.) It appears that the asset test elimination is potential for additional seniors in Medi-Cal proving to be a powerful tool for seniors in or near to eventually shift to the long-term care aid poverty to access health care. category, which would substantially increase state costs. Should the state consider additional actions to facilitate more transitions to less costly home- and community-based services in order to help prevent this cost growth? 12 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 13 2025-26 BUDGET 14 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 15 2025-26 BUDGET LAO PUBLICATIONS This report was prepared by Ryan Miller, and reviewed by Mark C. Newton and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 16 LEGISLATIVE ANALYST’S OFFICE