The Affordable Care Act (ACA) has significantly expanded publicly funded health coverage over the past decade. Millions of Californians have gained health insurance through Medi-Cal, the state’s Medicaid program, and through subsidies of coverage purchased from Covered California, the statewide insurance marketplace. The ACA has been linked to improved financial well-being—including reduced debt, fewer bankruptcies, higher credit ratings, and access to credit. To highlight the impact of health coverage (or lack thereof) on poverty across California’s geographic regions and demographic groups, we developed a health-inclusive poverty measure.

Health insurance makes critical contributions to family resources

Building on the California Poverty Measure, our metric treats health insurance as a basic need, along with food and shelter. When insurance coverage is factored in, the resources families require to remain out of poverty increase by nearly 60 percent overall (the increase varies by age and region). As a result, poverty rates are substantially higher for Californians without insurance: 38.4 percent are living in poverty, compared to 18.5 percent of those covered by Medi-Cal and only 4.2 percent of those with employer-based coverage.

Health-inclusive poverty rates are at least twice as high among Californians who are uninsured

SOURCE: Author calculations from the health-inclusive CPM (fall 2021).

NOTES: Estimates do not include Californians age 65 and older because this group is mostly covered by Medicare. Medi-Cal counts are corrected for survey underreporting. All those who report “direct purchase” insurance are categorized as enrolled through Covered California. “Employer” is employer-based. “All other” includes access to the Indian Health Service, Veteran’s insurance, and Medicare.

Our metric also shows that the poverty-mitigating effect of publicly funded health coverage—particularly Medi-Cal—outstrips the impact of large safety net programs such as CalFresh and the 2021 federal Child Tax Credit. This is not surprising, given the high cost of health care and the wide reach of Medi-Cal, the state’s largest program expenditure. In the absence of Medi-Cal, poverty among young children could rise from 7 percent to as much as 16.9 percent. For adults age 45 to 64, poverty could increase from 13.1 percent to 19.3 percent.

Medi-Cal enrollment swelled during the pandemic, and California’s uninsured rate dropped, even amid historic levels of economic disruption. This increase was driven at least in part by the temporary suspension of annual eligibility redeterminations—a bureaucratic process that can cause people to lose coverage even if they remain income eligible. We estimate that in 2021, the program kept up to 2.4 million Californians under 65 out of poverty (assuming that all participants would be uninsured if they did not have Medi-Cal coverage).

Without Medi-Cal, poverty would be much higher—especially for children

SOURCE: Author calculations from the health-inclusive CPM (fall 2021).

NOTES: Estimates include Californians under age 65. The orange bar segments and corresponding orange numbers indicate the percentage point increase in health-inclusive poverty after zeroing out Medi-Cal from family resources (i.e., all Medi-Cal enrollees become uninsured). Education level refers to the adult with the highest level of education in the household.

Covered California mitigates poverty by subsidizing premiums for low- and middle-income Californians. Without these subsidies—which were enhanced during the pandemic—poverty would be a percentage point higher overall, and nearly 2 percentage points higher for adults aged 45–64 and Asian Americans—groups that are especially likely to purchase coverage.

Poverty rates are highest among demographic groups that are more likely to lack health coverage—non-citizens (27%) and those in families without at least one high school graduate (31.8%), in particular. The state plans to expand Medi-Cal to all income-eligible Californians, regardless of immigration status, in January 2024; we estimate that this will reduce poverty among non-citizens by 2.9 percentage points. It should have a substantial impact on undocumented immigrants and families with mixed immigration statuses.

The changing health insurance landscape could affect family finances

A health-inclusive poverty measure can help policymakers assess the impact of changes to insurance coverage over the next few years. The January 2024 Medi-Cal expansion could improve the economic circumstances of 1.6 million Californians and their families. However, now that the public health emergency is ending and Medi-Cal is resuming eligibility determinations, millions are expected to lose Medi-Cal coverage—though many could transition to other insurance. Monitoring the extent to which eligibility determinations cause Californians to become uninsured should be a high priority.

Covered California’s enhanced premium subsidies are federally funded through 2025. With enrollment through Covered California higher than it has ever been—nearly 2 million Californians purchased plans in 2022—it will be important to track both coverage and poverty rates after these enhanced subsidies expire.

Ultimately, this work helps policymakers understand the effect of public health insurance on household finances. It underscores the Medi-Cal program’s critical contribution to basic resources and yields a new appreciation of the way public spending on health insurance enhances economic well-being across the state.

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About the Authors

Caroline Danielson is a policy director and senior fellow at the Public Policy Institute of California. Her research focuses on multiple dimensions of the social safety net, including its role in mitigating poverty, program access and enrollment, and the integration and governance of programs. Her work has been published in numerous academic journals, including the Journal of Policy Analysis and the Social Service Review. Before coming to PPIC, she was a principal analyst at the University of California’s Welfare Policy Research Project and a faculty member in the Department of Politics at the State University of New York, Potsdam. She holds a PhD in political science from the University of Michigan and a master’s degree in policy analysis from the Pardee RAND graduate school.

Patricia Malagon is a research associate at the Public Policy Institute of California, where she focuses on social safety net programs. Before joining PPIC, she worked as a research assistant at the Institute for Research on Labor and Employment, where she analyzed racial disparities in program access and employment outcomes for CalWORKs participants. She holds a BA in political economy from the University of California, Berkeley.

Shannon McConville is a research fellow at the Public Policy Institute of California. Her research interests include health care access, utilization, and outcomes among vulnerable populations and the impact of vocational training programs on economic mobility. Her current work focuses on examining safety net programs, assessing the effects of Medicaid coverage expansions on individuals involved with the criminal justice system, and analyzing the employment outcomes and economic returns of career technical education. Before joining PPIC, she was a research training fellow in the Health Services and Policy Analysis doctoral program at the University of California, Berkeley; a senior research associate at the Department of Health Research and Policy at Stanford University; and a project manager at the Lewis Center for Regional Policy Studies at the University of California, Los Angeles. She holds a master’s in public policy from the University of California, Los Angeles.

Mary Severance is a senior editor at the Public Policy Institute of California. She edits and helps develop publications and briefings so that they are accessible to their audiences. She also writes copy for the PPIC website and for institutional publications. Before she joined PPIC in 2008 as the institute’s production editor, she was a senior project editor at University of California Press. She has also worked as a copyeditor and college English instructor. She holds an MA and PhD in English from the State University of New York, Buffalo, and a BA in English from Carleton College.