California Ineligible for More Than $10 Billion in Federal Stimulus Funds

Of the $31 billion in federal economic stimulus money California could receive over the next three fiscal years, it is ineligible for nearly one-third because of a change made in this year’s budget affecting eligibility for Medi-Cal, the state’s health care program for the poor. 

Were it eligible, the state would pocket $8.3 billion of the more than $10 billion in increased federal Medi-Cal funds available to California, allowing it to reduce general fund costs for the program. Local governments and public hospitals would receive the remaining $1.7 billion.

But in order to qualify for the windfall, California must have the same Medi-Cal eligibility rules today as those in place July 1, 2008.

Had lawmakers and Gov. Arnold Schwarzenegger enacted the budget on time, prior to the start of the current fiscal year on July 1, there would be no problem.

However, since the budget signed by the GOP governor was a record 85 days late, an attempt to save $70 million by changing eligibility rules for children receiving care from Medi-Cal prevents the state from qualifying for the federal money.

The change requires children to fill out a report every six months confirming their continuing eligibility along with their parents who were already filling out such reports.

Critics of the requirement say that most of the children who lose eligibility do so because they forget to turn in the paperwork, not because they actually lose eligibility. Sorting out such issues increases Medi-Cal costs to counties, who administer the program locally.

To get the federal money, the state must change the law before July 1, 2009 so that kids don’t need to fill out the report.

On February 25, the federal government made some of its increased funding available to cover Medi-Cal expenses from the previous six months.

But California can’t get any money until the law is changed and the Department of Health Care Services, which oversees Medi-Cal, certifies to the federal government that the six-month status report requirement has been repealed.

In a report on California and the American Recovery and Reinvestment Act – the federal stimulus package – the state’s Legislative Analyst queried the health care department as to when it would be able to draw down the additional federal funds. As soon as mid-March, the department said.

Several bills have been introduced to correct the problem. The most likely candidate to be used is a measure introduced March 3 in one of the special sessions called to deal with the state’s budget mess.

Measures passed in special sessions of the Legislature become law in 90 days, rather than the beginning of the next year as do most bills passed in the regular session.

Privately, lawmakers say they may act on the measure as early as March 12 so it will take effect before the July1 deadline.

The Schwarzenegger administration backs the move.

“We’ve already been in discussions with the Legislature on the need to make this law change, which is necessary to receive the maximum amount of federal funds,” said H.D. Palmer, a spokesman for the GOP governor’s Department of Finance. “We’re confident that the Legislature will take action well before the July 1 deadline.” 

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