The Los Angeles Healthy Kids Program Perseveres Amid Increasing Financial Strain: 3rd Case Study of Implementation

The Los Angeles Healthy Kids Program Perseveres amid Increasing Financial Strain: Third Case Study of Implementation Prepared for: Prepared by: Ian Hill Sara Hogan Patricia Barreto The Urban Institute THE URBANINSTITUTETHE URBANINSTITUTETHE URBANINSTITUTE October 2009 ACKNOWLEDGMENTS We would like to thanks all of the key informants with whom we met during our third site visit to Los Angeles in March 2009. Their insights into recent developments in California and the challenges they pose to Healthy Kids programs were invaluable to our analysis. In addition, we are grateful for the direction and support provided by our project officer at First 5 LA, Christine Ong. I. Introduction Children’s health coverage programs in California faced many challenges in 2008 and 2009. With state budget deficits for fiscal year 2010 estimated at $24 billion, proposals to expand children’s coverage—so prominent in the recent past—seemed a distant memory. Instead, both Medi-Cal and Healthy Families faced the threat of serious cuts, and even core funding for Healthy Kids programs was challenged when state lawmakers proposed to offset budget shortfalls by redirecting a significant portion of Proposition 10 tobacco tax revenues away from state and local First 5 organizations, and to the state general fund. In the end, most of the cuts were averted. Meanwhile, the Los Angeles Healthy Kids program soldiered on, providing comprehensive health and dental care to roughly 31,000 low-income children (Urban Institute et al. 2009). Since 2004, the Urban Institute and its partners1 have conducted a comprehensive evaluation of the Los Angeles Healthy Kids Program, under contract with First 5 LA. This third case study, reporting on the ongoing implementation of Healthy Kids, is presented as part of this five-year evaluation. Researchers from the Urban Institute and the University of California at Los Angeles conducted three days of one- to two-hour interviews with over 15 key informants—including First 5 LA commissioners, local providers, county public health staff, health plan administrators, advocates, and policy analysts—in March 2009. Questions explored new developments related to outreach and enrollment, benefits and service delivery, cost sharing, and financing. Given the approaching end of Healthy Kids Program Evaluation, a final set of questions explored stakeholders’ views of the broad “lessons learned” from Healthy Kids and also what these lessons might mean for the future of children’s coverage in California. This report summarizes the highlights from these discussions. II. State Budget Deficits Threaten Children’s Coverage Programs At the time of our site visit, California’s budget crisis was prominent on the minds of state and local health officials. With funding for Healthy Kids becoming increasingly scarce, shortages of much larger scale threatened Medi-Cal and Healthy Families. Growing from California’s deep budget deficit, 2008 and 2009 witnessed numerous direct threats to the structure and stability of children’s coverage programs. • Medi-Cal funding. In late-2008 and early-2009, the California Department of Health Services enacted a series of cuts to Medi-Cal including, a requirement that children renew eligibility every six months instead of annually. This provision was rescinded, however, when California needed to comply with maintenance of effort rules under the American Recovery and Reinvestment Act of 2009 (ARRA) in order to receive federal “stimulus” funds. • Healthy Families funding. Healthy Families, in late 2008 was on the verge of closing new enrollment for children because it had insufficient funds to continue open enrollment. First 5 California came to the program’s aid, however, by committing $17 million from its reserves to support enrollment for children ages zero through five. 1 • First 5 funding. Proposition 1D, a bill that would have changed how Proposition 10 tobacco tax revenues are allocated to and administered by First 5 California, First 5 LA, and the 57 other county First 5 commissions, was put before the voters of California in May 2009. Specifically, Prop 1D would have diverted to the state General Fund up to $340 million from First 5 California and reduced funding to county commissions by 50 percent—$268 million—annually for five years. The measure failed, 66 percent to 34 percent, safeguarding core funding for state and local First 5 organizations and, by extension, funds to support health coverage for young children in counties with Healthy Kids programs. • State budget crisis. California’s FY 2010 budget was passed in August 2009 and included $1.4 billion in Medi-Cal cuts and $179 million in cuts to Healthy Families. Cuts in the budget threatened to raise the number of uninsured children in the state to two million (from 915,000), in large part due to the placement of a cap on Healthy Families enrollment and, beginning in October 2009, disenrollment of