Covered California to Guarantee Health Insurers’ Profits to Save Obamacare Exchange

covered caCovered California is so desperate to keep insurance companies on its Obamacare exchange that the state plans to guarantee profits to the giant corporations.

Breitbart News reported early this month that despite the annual inflation rate of only 1.6 percent, Covered California is granting healthcare insurers average premium increases of 12.5 percent. But that appears to not be enough to lure insurers to stay on the exchange, if President Trump ends U.S. Treasury “cost-sharing” side payments to insurers that the courts have ruled are illegal.

According to the a study by the non-partisan Congressional Budget Office (CBO), titled “The Effects of Terminating Payments for Cost-Sharing Reductions,” Obamacare exchange insurance premiums will spike by another 20 percent in 2018. Given that 75 percent of Obamacare enrollees received free insurance through Medicaid, the CBO estimates that the U.S. deficit will jump by another $194 billion between 2017 and 2026 as a result.

Obamacare was sold to voters on a promise to slash healthcare insurance premiums by up to $2,500 per family. But new mandatory rules caused insurance premiums to spike by 68 percent between 2010 and 2015, according to the National Association of State Legislatures.

The national average cost of healthcare for a family of four in the United States is now $17,322. But in highly-regulated California, the average family healthcare premium is even worse, at $18,045.

With the tsunami of cash flooding into the health insurance industry since 2010, profits have more than doubled, and the healthcare stock index is up by 251 percent. The industry’s biggest Obamacare winner has been America’s largest health insurer, United Healthcare. With profits more than tripling since Obamacare passed, United Healthcare’s stock is up a stunning 592 percent.

But with concerns that President Trump or the courts will stop making illegal cost-sharing payments, big insurers like Anthem Blue Cross, Aetna and Humana are duping Obamacare coverage for 2018. One of the reasons that United Healthcare’s stock has been hitting a series of new all-time-highs this month is that the company is cutting its Obamacare coverage from 34 states in 2016 to 3 states in 2017, and possibly leaving Obamacare completely in 2018.

With many of the top health insurance industry players jumping ship on Obamacare, Southern California Public Radio reported that the board of Covered California will consider a plan on August 17 that would incentivize health insurers to offer coverage by guaranteeing that for any lack of profit or losses they suffer in 2018, California will guarantee them the right to jack up profits with higher premium increases in each of the following three years.

Covered California is referring the to the plan as an initiative to address market uncertainty over the actions that might be taken by the Trump administration and the courts.

But “[a]n economic system characterized by close, mutually advantageous relationships between business leaders and government officials” is the Oxford Dictionary’s definition of crony capitalism.

This article was originally published by Breitbart.com/California

Covered California announces increased rates of 12.5 percent for its 2018 health insurance plans

As reported by the Orange County Register:

Covered California on Tuesday announced that insurance rates will jump an average of 12.5 percent for next year, amid uncertainty about the future of Obamacare.

“Californians are paying about 3 percent more than they would have if not for the uncertainty,” said Peter Lee, executive director of the state’s exchange.

Additionally, Anthem Blue Cross will stop selling individual health plans in the Southern California market even as it continues to sell plans in parts of Northern and Central California.

“The uncertainty is also having an impact on plan participation,” Lee said. “It’s significant. About 153,000 of (Anthem Blue Cross) consumers will need to shop and change into 2018.”

Last year, rates increased an average of 13 percent statewide, a bigger jump than in 2015. This year, insurance companies were left in the dark as lawmakers pushed a bid to repeal Obamacare to the last possible minute before voting against such a move. …

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In Speech to Congress, Donald Trump Calls to ‘Restart the Engine’ of U.S. Economy

US Vice President Mike Pence (L) and Speaker of the House Paul Ryan (R) applaud as US President Donald J. Trump (C) arrives to deliver his first address to a joint session of Congress from the floor of the House of Representatives in Washington, DC, USA, 28 February 2017. / AFP / POOL / JIM LO SCALZO (Photo credit should read JIM LO SCALZO/AFP/Getty Images)

As reported by Fox News:

President Trump declared Tuesday that a “new chapter of American greatness is now beginning” as he made economic revival the centerpiece of his first address to Congress – issuing a clarion call to “restart the engine of the American economy” through tax cuts, better trade deals, immigration enforcement and a $1 trillion infrastructure program.

He also called on Congress to replace what he called the “imploding ObamaCare disaster” with legislation that lowers costs and expands access, an ambitious goal for GOP lawmakers still trying to come together on a plan.

The president outlined his agenda in an address to a joint session of Congress that lasted roughly an hour and focused largely on priorities at home, more than abroad. He offered a decidedly upbeat vision for the future of the country that stood in contrast to his at-times foreboding inauguration address.

“Everything that is broken in our country can be fixed. Every problem can be solved. And every hurting family can find healing, and hope,” Trump said, urging lawmakers to “join forces” to deliver.

Trump for the most part traded the contentious and punchy tone of the last few weeks for loftier – some might say more presidential – rhetoric. Declaring “the time for small thinking is over,” Trump appealed to the country to “believe, once more, in America.”

“A new chapter of American greatness is now beginning. A new national pride is sweeping across our nation,” he said. “And a new surge of optimism is placing impossible dreams firmly within our grasp.”

He described his address as a “message of unity and strength.”

The generally well-received speech could mark an opportunity for Trump to reset his young presidency after a rocky start in which clashes with the media and staffing controversies at times overshadowed action on the jobs front.

In perhaps the most memorable moment of the night, the audience broke out into extended applause as Trump introduced the widow of William “Ryan” Owens, the Navy SEAL killed in a raid in Yemen last month. Carryn Owens sobbed as lawmakers gave her a standing ovation and Trump said the raid he participated in yielded vital intelligence. His “legacy is etched into eternity,” Trump said.

In between the more dramatic moments were a host of policy prescriptions that could have a big impact on discussions in Congress.

Trump called for a “national rebuilding,” urging Congress to pass legislation that produces a $1 trillion public-private investment in infrastructure. …

Speaking to a key campaign promise that has yet to be realized, he said his team is developing “historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone.” He vowed a “big, big cut” including “massive tax relief for the middle class.”

And he urged Congress to replace ObamaCare “with reforms that expand choice, increase access, lower costs, and at the same time, provide better health care.”

He outlined “principles” to guide negotiations, including …

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Major Blow to Obamacare Mandate

MedizinHow much difference does a single line on a tax form make? For Obamacare’s individual mandate, the answer might be quite a lot.

Following President Donald Trump’s executive order instructing agencies to provide relief from the health law, the Internal Revenue Service appears to be taking a more lax approach to the coverage requirement.

The health law’s individual mandate requires everyone to either maintain qualifying health coverage or pay a tax penalty, known as a “shared responsibility payment.” The IRS was set to require filers to indicate whether they had maintained coverage in 2016 or paid the penalty by filling out line 61 on their form 1040s. Alternatively, they could claim exemption from the mandate by filing a form 8965.

For most filers, filling out line 61 would be mandatory. The IRS would not accept 1040s unless the coverage box was checked, or the shared responsibility payment noted, or the exemption form included. Otherwise they would be labeled “silent returns” and rejected.

Instead, however, filling out that line will be optional.

Earlier this month, the IRS quietly altered its rules to allow the submission of 1040s with nothing on line 61. The IRS says it still maintains the option to follow up with those who elect not to indicate their coverage status, although it’s not clear what circumstances might trigger a follow up.

But what would have been a mandatory disclosure will instead be voluntary. Silent returns will no longer be automatically rejected. The change is a direct result of the executive order President Donald Trump issued in January directing the government to provide relief from Obamacare to individuals and insurers, within the boundaries of the law.

“The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden,” the IRS said in a statement to Reason. “Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.”

The tax agency says the change will reduce the health law’s strain on taxpayers. “Processing silent returns means that taxpayer returns are not systemically rejected, allowing them to be processed and minimizing burden on taxpayers, including those expecting a refund,” the IRS statement said.

The change may seem minor. But it makes it clear that following Trump’s executive order, the agency’s trajectory is towards a less strict enforcement process.

Although the new policy leaves Obamacare’s individual mandate on the books, it may make it easier for individuals to go without coverage while avoiding the penalty. Essentially, if not explicitly, it is a weakening of the mandate enforcement mechanism.

“It’s hard to enforce something without information,” says Ryan Ellis, a Senior Fellow at the Conservative Reform Network.

The move has already raised questions about its legality. Federal law gives the administration broad authority to provide exemptions from the mandate. But “it does not allow the administration not to enforce the mandate, which it appears they may be doing here,” says Michael Cannon, health policy director at the libertarian Cato Institute. “Unless the Trump administration maintains the mandate is unconstitutional, the Constitution requires them to enforce it.”

“The mandate can only be weakened by Congress,” says Ellis. “This is a change to how the IRS is choosing to enforce it. They will count on voluntary disclosure of non-coverage rather than asking themselves.”

The IRS notes that taxpayers are still required to pay the mandate penalty, if applicable. “Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe‎,” the agency statement said.

Ellis says the new policy doesn’t fully rise to the level of declining to enforce the law. “If the IRS turns a blind eye to people’s status, that isn’t quite not enforcing it,” he says. “It’s more like the IRS wanting to maintain plausible deniability.”

Tax software companies are already making note of the change. Drake Software, which provides services to tax professionals, recently sent out a notice explaining the change in policy. As of February 3, the notice said, the IRS “will now accept an e-filed return that does not indicate either full-year coverage or an individual shared responsibility payment or does not include an exemption on Form 8965, as required by IRS instructions, Form 1040, line 61.”

The mandate is a key component of Obamacare’s coverage scheme, which is built on what experts sometimes describe as a “three-legged stool.” The law requires health insurers to sell to all comers regardless of health history, and offers subsidies to lower income individuals in order to offset the cost of coverage. In order to prevent people from signing up for coverage only after getting sick, it also requires most individuals to maintain qualifying coverage or face a tax penalty. While defending the health law in court, the Obama administration maintained that the mandate was essential to the structure of the law, designed to make sure that people did not take advantage of its protections.

In a 2012 case challenging the law’s insurance requirement, the Supreme Court ruled that the individual mandate was constitutional as a tax penalty. The IRS is in charge of collecting payments.

Some health policy experts have argued that the mandate was already too weak to be effective, as a result of the many exemptions that are included. A 2012 report by the consulting firm Milliman found that the mandate penalty offered only a modest financial incentives for families making 300-400 percent of the federal poverty line. More recently, health insurers have said that individuals signing up for coverage and then quickly dropping it after major health expenses is a key driver of losses, and rising health insurance premiums.

It’s too early to say whether the change will ultimately make any difference. But given the centrality of the mandate to the law’s coverage scheme and the unsteadiness of the law’s health insurance exchanges, with premiums rising and insurers scaling back participation, it is possible that even a marginal weakening of the mandate could cause further dysfunction. Health insurers have said the mandate is a priority, and asked for it to be strengthened. Weaker enforcement of the mandate could cause insurance carriers to further reduce participation in the exchanges. One major insurer, Humana, said today that it would completely exit Obamacare’s exchanges after this year.

It is also possible that congressional Republicans will make it moot by repealing much of the law, including its individual mandate, which, as a tax, can be taken down with just 51 Senate votes.

Regardless of its direct impact, however, the change may signal that the Trump administration intends to water down enforcement of the health law’s most controversial requirement, even if those steps are seemingly small. The Trump administration may not be tearing Obamacare down entirely, but it appears to be taking steps to weaken the law, however subtly, one line at a time.

This piece was originally published by Reason.com

Will Taxpayers Be Mugged by Sacramento?

TaxesGovernor Brown has just released his spending proposal for 2017-18 and taxpayers should not be blamed if they feel like they are walking down a dark alley in a high-crime neighborhood.

While the governor’s proposed budget has been described as austere, it still represents a spending boost of 5 percent, a rate of increase only slightly smaller than last year’s 6 percent. Because the state is in the process of rewarding its employees with generous pay increases and covering an expanding requirement to fund their pensions — pensions that are currently subsidized by six percent of the general fund budget — more spending does not represent an increase in the quantity or quality of services for average Californians.

The Brown budget contains no major program increases except for transportation. But the kicker is that this would be contingent on higher taxes on gasoline and car registration. So, while state workers will be kept snug and comfortable, if commuters want those pot holes repaired, they must pay extra.

However, the governor’s budget should not be regarded as anything more than a place holder, as the ability to fund it is threatened from all directions. The new administration in Washington, as well as a majority of both houses of Congress, have made it clear that Obamacare is on the verge of elimination. There can be little doubt that federal funding for California’s massive expansion of Medicaid is in jeopardy. Because, to paraphrase Ronald Reagan, a government program is the nearest thing to eternal life we’ll ever see on this earth, no one will be surprised when Sacramento looks to average taxpayers to make up the nearly $16 billion-dollar difference.

Then there is uncertain tax revenue. The extension of the nation’s highest income tax rates renders California highly vulnerable to economic fluctuations. Although growth had been tepid, we have experienced 90 months of economic expansion and financial experts warn us to be prepared for the next downturn.

As if these threats were not enough, Brown will have to contend with elements in his own party who believe in the axiom of former Senate leader, David Roberti, “When you’ve got it, spend it,” to which they would add the corollary, “If you don’t have it, spend it anyway.”

Chairman of the Assembly Budget Committee, Phil Ting, has already made it clear that he does not want to budget assuming the worst, that the Legislature must continue “investing in California,” a budgetary approach akin to Admiral David Farragut’s at the battle of Mobile Bay, “Damn the torpedoes, full speed ahead.” While Farragut was successful, is it appropriate to put California taxpayers at dire risk through imprudent spending?

In May, the governor will issue a revised budget, no doubt with major changes, in advance of the June 15 deadline for final passage. If revenue is down, taxpayers may be treated to the spectacle of a cage match between those committed to spending, backed by their special interest allies, and those who advocate a slightly more cautious approach.

In Sacramento, fiscal sanity is relative. Ironically, our eccentric governor who thinks nothing of lavishing nearly $100 billion on a bullet train, may be the dwindling middle class’s best hope to fend off major increases to their already staggering tax burden.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article was originally published by HJTA.org

House GOP leader asks Jerry Brown: How would you replace Obamacare?

As reported by the Sacramento Bee:

House Majority Leader Kevin McCarthy has written to Gov. Jerry Brown and the leaders of other states soliciting their input for replacing Obamacare.

Dismantling President Barack Obama’s signature health care legislation has been central to debate in Washington since voters in November handed Republicans control of the White House and Congress.

“As Obamacare continues to saddle patients with less choice, higher costs, and mountains of mandates, it is clear that major health care reforms must be made to strengthen and improve health care for all Americans,” McCarthy wrote in the letter last month, which was signed by five other House Republicans, including Ways and Means Chairman Kevin Brady of Texas.

“Lawmakers, governors, and state insurance commissioners have a tremendous opportunity to achieve our shared goal of enacting health care reforms that lower costs, improve quality, empower states and individuals, and bring our health care system into the 21st century,” they added. …

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As U.S. Moves Right, Will California’s Outlier Status Accelerate Exodus?

californiaAfter recovering from the shock of the presidential race, California pundits began absorbing what all this actually means. There is broad agreement that the rightward movement by the rest of America has only increased the political divide between the nation as a whole and California.

This divide has widened so significantly that Governor Brown joked about building a wall around the state to protect it from nasty conservatives. And a handful of ultra-progressives, distressed at the thought of a Trump presidency, are planning an initiative they hope will lead to California seceding from the United States. (Newsflash for backers of this “Calexit” effort: That a state can’t secede from the Union was resolved in 1865 when General Lee surrendered to General Grant at Appomattox).

Putting the jokes and unrealistic fantasies aside, there are real world implications for the increasing chasm. First, if it were evident prior to the election that California has “go it alone” policies on climate change, it is even clearer now. Sure, Washington will continue to pay lip service to greenhouse gas reductions, but broad, draconian laws and regulations perceived to be damaging to the economy will be shelved.

Second, the High Speed Rail project might have just graduated from being a mere pipedream to a true fantasy. Already Congress had shut the spigot of federal money and the project has been on life support using cap and trade revenue which doesn’t generate a fraction of what it needs for the train to become viable.

Third, perhaps the biggest hit to California will come in the area of health care. While other states have resisted full implementation, California has been held up as Obamacare’s shining example of “success.” But a Republican Congress is likely to repeal major parts of the law, including the funding for Medicaid expansion and elimination of the federal tax credits that lower premiums for most California enrollees.

This enormous gap between right America and left California will result in the state no longer being able to rely on the federal government to finance its left-of-center policies. And that’s bad news for taxpayers.

Without federal support and California’s majority party wanting no slowdown in their agenda, the pressure to raise taxes will grow even stronger. So even though California will have the highest income tax rates in the nation until 2030 – thanks to Prop. 55 – and the highest state sales tax, expect the alligators of the left to be searching for their next meal. No doubt, they will put Prop. 13 on the menu.

The non-stop pursuit of an even higher tax burden has already resulted in millions leaving California. The growing fissure between the rest of nation and the state’s pursuit of destructive progressive policies is giving millions more Californians an excuse to bail out.

It’s not just the hard data from the IRS and the Census Bureau that confirms this. We all know people who have made the choice to escape California’s hostile tax and regulatory environment. A neighbor of mine just left to visit the multi-acre parcel he bought in Texas. When he retires in four years, he will build a home on the property. He is currently an attorney with the state.

A close family relative and her husband left the Bay Area for Oregon in large part for tax reasons. This is especially ironic given that they are both liberals who, as California residents, voted for every tax increase on the state and local ballot.

Another close relative who was visiting her mother on the Gulf Coast of Florida tells of miles and miles of white sand beaches with homes on the ocean that can be purchased for what a 1,200 square-foot condo would cost in San Francisco. Derided as the “Redneck Riviera,” the Gulf Coast is now a favorite of former Californians in large part because there is no income tax.

Can California change course? As long as those interests which rely on government largess own the Legislature, the prognosis is not good. With trillions in public debt of all kinds, an unresponsive and arrogant administrative state and high cost of living, California is bound to see the exodus that has already started to accelerate quickly.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published by HJTA.org

Obamacare Sinking Under Weight of Math

Healthcare costsThe Affordable Care Act is collapsing, and President Obama blames Republicans.

Writing in the Journal of the American Medical Association, the president accused Republicans of undermining the health care law’s implementation. “It has come at a cost for the country,” Obama wrote, “most notably for the estimated 4 million Americans left uninsured because they live in GOP-led states that have yet to expand Medicaid.”

But expanding Medicaid also has come at a cost.

Medi-Cal, as Medicaid is called in California, has enrolled almost 5 million people since January 2014, when the Affordable Care Act expanded eligibility for the safety-net program. In 2010, 7.4 million Californians were covered by Medi-Cal. Today it’s more than 13 million, about one-third of the state population.

Covered California, the health care exchange where federally subsidized policies can be purchased from private insurers, has enrolled just 1.4 million people since it went online in the fall of 2013.

Is the dramatic expansion of Medi-Cal a success story?

Not if you run a hospital. California pays Medi-Cal providers less than it costs to provide the care to patients. The more people they treat, the more money they lose.

In 2009, hospitals in California were losing a total of about $2 billion annually on the care they provided to Medi-Cal patients. Today it’s about $8 billion.

The federal government provides matching funds for state Medicaid programs. To help California bring home every available federal dollar, the hospitals came up with the idea of paying a fee to the state, which would be put into the Medi-Cal program to help it qualify for matching funds. Then the state would have more money and could pay the hospitals for providing care to Medi-Cal patients.

It may sound like a game of three-card monte, but the California Hospital Association says the program has helped hospitals lose only $5 billion on Medi-Cal patients instead of $8 billion.

The hospital fee program was written into state law in 2009 and renewed three more times, most recently in 2013. It was well-supported but still bumpy: The state took a $1 billion annual cut of the hospital fees to pay for children’s health programs, and occasionally some of the hospital fees were diverted to other budget priorities.

So the hospitals are asking the voters of California to lock the hospital fee program into the law permanently. It will be on the Nov. 8 statewide ballot as Proposition 52, the Medi-Cal Funding and Accountability Act.

The measure has the endorsement of …

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Everybody Getting Sick of Obamacare

MedizinTo keep a comedy plot moving, things have to go terribly wrong, somebody has to hide the truth, and it all has to come crashing down at the end in something like a spectacular pie fight.

The whipped cream is about to hit the Affordable Care Act.

Covered California just announced that the average cost of premiums for policies sold on the state health insurance exchange will be 13.2 percent higher next year. In 14 other states, premiums for widely sold silver plans will rise an average of 11 percent.

The worse news is why: Health care costs are higher, two temporary programs to reduce risk for insurers are ending, and people signing up have been sicker than expected.

That’s the opposite of what was intended. The Affordable Care Act was supposed to reduce health care costs, outgrow its need for insurer subsidies, and get young and healthy people into the risk pool with its mandate to buy health insurance.

The individual market may have reached the dreaded death spiral — the point where insurance is so costly that only people who are sick will buy it, driving rates even higher.

There’s evidence of this in the latest numbers from the law’s “risk corridor” program, which is supposed to collect money from insurers with healthier customers (lower costs), and give that money to insurers with sicker customers (higher costs). For 2014, the program collected $362 million but owes $2.87 billion. For now, insurers will receive only 12.6 percent of the money they expected.

This has added to financial problems at the nonprofit member-run health plans known as co-ops. In 2014 there were 23 co-ops around the country. Today there are 11 — seven that lost money in 2015 and four that just announced they’re going out of business.

Five health plans have filed lawsuits over underpayments from the risk corridor program, which is set to end this year along with a second program that provides reinsurance. A third program for risk adjustment is permanent, although a Maryland health plan is challenging it in the courts.

Meanwhile, a federal judge ruled in May that the Obama administration is illegally giving money to insurance companies to pay for a cost-sharing reduction program that subsidizes the deductibles and co-payments of low-income people who buy silver policies on the exchanges.

In mid-2013, the administration removed the cost-sharing reduction program from its 2014 budget request and decided to pay for it with money that Congress appropriated for another purpose.

Congress has been trying for over a year to …

Click here to read the full story at the L.A. Daily News

“Honeymoon” Period is Over For Government Run Health Care

The announcement yesterday by Covered California that the statewide premium increase for Obamacare will be 13.2%, up from approximately four percent in each of the last two years, signals that the “honeymoon” period is over for government run health care in California and elsewhere.

The State of California and its taxpayers needs to brace itself for another major threat to its long-term fiscal sustainability because things could get ugly pretty quickly depending on many variables that determine California’s extraordinary level of government run health care spending.

The precise impact of the fiscal hit posed by the premium increases is difficult to pinpoint at this early stage, but there is no question that the state’s exposure to significant increases in Obamacare-driven health care expenditures will increase dramatically over the next few years.

Total costs for Obamacare in California are staggering, which means that any tweak to the program by the federal government could immediately expose the state to billions, or even tens of billions of dollars in increased costs unless corrective action is taken.

This fact is particularly troubling given the extremely poor track record of the California Democrat Legislature in being proactive on fiscal issues such as the state budget and the pension issue.

For example, Republican Presidential nominee Donald Trump says he plans to completely repeal Obamacare, which would blow a hole in California’s budget of tens of billions of dollars, unless coverage is dropped for millions of Medi-Cal recipients.

A few sets of summary figures paint a good picture the state’s total exposure in the event that federal government shifts more responsibility for the financing of Obamacare to the states, or decides to pull back all together.

According to the state’s approved 2016-17 budget, total state spending for Health and Human Services totaled $54 billion for 2016-17, which even now surpasses K-12 Education as the biggest category of state spending, which received $51.5 billion in 2016-17.

California State spending for Health and Human Services, primarily Medi-Cal, has increased by 46% since 2011-12, jumping from only $37 billion in 2011-12 to the $54 billion for 2016-17 noted above.

But if you add federal spending to the equation, the California Department of Health Care Services received a total $93 billion in 2016-17, nearly double the $47 billion received in 2011-12, according to the California Department of Finance.

The state’s Medi-Cal caseload has exploded in the past few years, increasing from 8 million in 2012-13 to a projected 14 million in 2016-17, covering over a third of the state’s population, according to the Governor’s May Revise.

For 2016-17 the state’s share of the Medi-Cal expansion under Obamacare is $16.2 billion ($819.5 million General Fund).  But this only assumes a 5% share of the cost for the State of California.  By 2020-21, the state share will double to 10%, while the federal government is supposed to continue to pick up 90% of the costs.

I don’t believe it’s reasonable to assume that these formulas will stay so one-sided for long, particularly in light of increased premium pressures as well as fiscal pressures on the federal budget.

Absent changes to current federal and state law, my preliminary analysis suggests that the state’s annual cost increases related to Obamacare could easily reach into the billions of dollars per year in the very near future, and significantly higher if the federal government decides to further shift its costs to the states, which is inevitable.

Future double-digit annual premium increases will only serve to exacerbate state costs and encourage more cost shifting by the federal government.

It is important to note that health care premium inflation is not something that will subside anytime soon, and the trend is only likely to increase for the foreseeable future.

The low-premium increases over the last two years of 4%, was a complete anomaly based on the historical 20-year averages.

Public agencies in California commonly assume an average of 10% annual increases in employer health care premiums.  According to the California Health Care Foundation, individual premium increases rose by 15% in 2014, 9% in 2013, 8.2% in 2012, and 10% in 2011—roughly an average of 8.75% per year.

“The key drivers of health care premium increases are advances in medical technology and subsequent increases in utilization, excel price inflation for medical services, cost-shifting, the high cost of regulatory compliance, and patient lifestyles (e.g. physical inactivity and increases in obesity),” according to a study by the Wellpoint Institute of Health Care Knowledge.

To sum up, the federal government’s future commitment to Obamacare financing is shaky at best, and any major changes could spell financial catastrophe for the State of California unless bold political leadership is exercised in Sacramento—something that has been in extremely short supply on the Democratic side of the aisle in Sacramento for quite some time.

David Kersten is executive director of the Kersten Institute for Governance and Public Policy (www.kersteninsitute.org) . He is an expert on fiscal issues and teaches a masters’ course on public budgeting for the University of San Francisco.