The reconciliation package now being debated in the U.S. House of Representatives will reform Medi-Cal, California’s version of Medicaid, the state-run safety-net health insurance program for the better. The California Medical Association (CMA) has released a letter condemning the proposed changes. The CMA’s rhetoric is strong but their arguments reveal more about ideology, and a misunderstanding of Medicaid’s purpose, than sound policy.
The bill restores the program to its original intent: serving as a safety net for the truly vulnerable. Medicaid was never designed to be a de facto public option. It was created to provide coverage for the disabled, low-income pregnant women, the elderly poor, and children. While the Affordable Care Act (ACA) eventually allowed states to expand Medicaid to all low-income able-bodied adults, it has continued to grow beyond what even that legislation intended. We should not celebrate enrollment growth in a safety net program as an end in itself.
States lack incentives to scrutinize eligibility due to Medicaid’s unique financing, especially for the ACA expansion population because the federal government covers 90 percent of the costs. Additionally, states typically pay Medicaid Managed Care Organizations (MCOs), private third-party companies, a per-member-per-month rate to administer the benefit. Thus, even if a patient utilizes no healthcare services, the MCO gets a payment, and the state gets most of that reimbursed by the federal government.
The results: a bloated system with little constraint on enrollment. In fact, many studies have shown that substantial numbers of Medicaid beneficiaries don’t even know they have coverage. About 15% of Medicaid beneficiaries have private insurance and large proportions assume they are uninsured. Even getting accurate counts of the number of Medicaid beneficiaries who are eligible has proven challenging. Some estimates have close to a quarter of beneficiaries being erroneously in the program.
The bill’s provisions focus on common sense eligibility verification: ensuring beneficiaries aren’t enrolled in multiple states, that they’re alive, that they’re not sitting on substantial assets, and that they meet citizenship or legal residency requirements. Governor Gavin Newsom himself recently endorsed this last idea.
Yet the CMA cites a Congressional Budget Office (CBO) report projecting that 13 million people could lose coverage. This figure is misleading. The CBO’s estimate rests on behavioral assumptions about how states might respond to fiscal changes, not concrete eligibility cuts. Given how difficult it’s been to determine the percentage of Medicaid beneficiaries who are actually eligible, the CBO’s estimate could be off by orders of magnitude.
More important, losing coverage due to ineligibility for a safety net program is not a policy failure. It’s responsible governance.
CMA worried that the community engagement requirements will result in lost coverage. Yet the requirements in the bill are quite modest: 20 hours per week of work, education, job training, or community service. There are numerous exemptions, such as pregnant women, caregivers, the medically frail, and others. These provisions apply only to able-bodied, working-age adults without dependents. We’ve long known that being in the workforce improves health outcomes. This policy reflects that reality.
Some of CMA’s objections also reveal selective amnesia. They oppose modest cost-sharing for Medicaid expansion adults, yet this was originally established in the Affordable Care Act (ACA) for those between 100% and 150% of the federal poverty level. They decry the potential expiration of enhanced ACA tax credits but say nothing about the ACA’s ban on Medicaid-eligible individuals purchasing exchange plans, even when private coverage offers better outcomes. It is, in fact, cheaper to cover people through subsidized ACA plans than through Medicaid and CMA should be encouraging that shift.
Importantly, this bill saves more than $800 billion over the next decade by restoring it to its pre-COVID growth trajectory.
The CMA should be celebrating, as the bill includes a long-overdue correction to the way physician services are paid under Medicare, tying updates to the Medicare Economic Index (MEI). After years of stagnation in physician reimbursement, this is a long-awaited victory that will help ensure seniors continue to have access to timely care.
The Medicaid savings help fund the very physician payment reforms CMA supports. We can’t have it both ways.
This bill doesn’t destroy Medicaid. It restores its integrity.
The CMA letter reflects a worldview where any reduction in Medicaid enrollment, regardless of eligibility, is inherently bad. That’s not just a policy disagreement; it’s a clash of first principles.
We believe in a better alternative: fix the commercial market so working-age Americans can afford private insurance and preserve Medicaid for those who truly need it.
Anthony DiGiorgio, DO, MHA, FAANS is a neurosurgeon who works at Zuckerberg San Francisco General Hospital and Trauma Center
Wayne Winegarden, PhD, is an economist and policy analyst at the Pacific Research Institute.