Gov. Gavin Newsom, state lawmakers and health industry leaders have a short window to reach a deal on billions of new dollars for Medi-Cal before it goes to voters in November.
An initiative, supported by nearly all sectors of the state’s health care industry as well as the local Republican and Democratic parties, would lock in money for Medi-Cal, California’s version of the Medicaid health insurance program for low-income residents . The funds will be used primarily to increase payment rates for health professionals serving Medi-Cal patients.
Newsom, a Democrat, initially supported using the money for that purpose. But after California’s fiscal situation darkened, he reversed course in May, proposing to divert most of it to reduce the state’s $45 billion budget deficit.
The money comes from a tax on managed care health plans that has existed for two decades, but historically has been used to offset existing government spending rather than support new investments in Medi-Cal.
“The significance of this ballot initiative is finally serious about investing in the sustainability of the Medi-Cal system,” said Adam Dougherty, chief of emergency medicine at Sutter Medical Center in Sacramento. “The MCO tax touches literally every aspect of the Medi-Cal system and cannot be at the mercy of budget crises every year.”
Michael Genest, former finance director under Republican Gov. Arnold Schwarzenegger, noted that several ballot initiatives approved by voters in the past continue to limit the state’s fiscal options, including one that limits property tax increases and another that guarantees a large share the state budget for schools.
“We budget ballots in the state of California. We’ve done it forever. And everything we’ve done on this issue has proven to be very hard on fiscal stability,” Genest said.
It is possible that the Coalition to Protect Access to Care, made up of doctors, hospitals, health plans and other medical providers, could settle their differences with state leaders before the June 27 deadline to withdraw the initiative.
Newsom’s desire to get back most of the money he promised puts him at odds with the initiative’s backers, many of whom have long been among his allies. Elana Ross, a spokeswoman for Newsom, declined to comment on the status of the initiative.
In May, Newsom proposed using about $6.7 billion previously earmarked for wage increases in Medi-Cal and some other health care priorities, mostly in 2025 and 2026, to offset existing state spending. His proposal would maintain Medi-Cal payment increases totaling about $300 million annually for certain primary care, mental health and maternity services.
The Legislature passed a new budget on June 13 largely following the governor’s wishes, canceling planned Medi-Cal increases in 2025. But Newsom has not signed it.
“What was passed represents a bicameral agreement between the Senate and the Assembly — not an agreement with the governor,” said HD Palmer, a spokesman for the state Treasury Department. “We will respectfully decline to speculate on what the contours of a final agreement will look like.”
Revenue from the managed care tax allows the state to draw matching federal dollars, more than doubling the amount available. Federal and state money would also be used to reimburse health plans for nearly all the taxes they paid, without theoretically having any effect on premiums.
California is among 19 states that have such an “MCO tax” to help fund their Medicaid programs. Using tax revenue to pay Medi-Cal providers more is “a generational opportunity to fundamentally fix access to care for Medi-Cal recipients,” said Dustin Corcoran, CEO of the California Medical Association and spokesman for the initiative. voting.
Corcoran said internal polling shows the initiative has public support by “very healthy margins,” though he declined to share specific numbers.
If the initiative ends up on the November ballot and is approved, it would bypass any compromise Newsom’s strike with lawmakers. It would restore previously planned Medi-Cal investments for 2025 and 2026. And it would make the increased funding, and more of it, permanent starting in 2027, though that would require federal approval.
Supporters of the initiative say it’s essentially a health equity issue. Medi-Cal covers medical and mental health services for nearly 15 million Californians, more than a third of the state, many of whom are among the poorest and most vulnerable residents. The program has a budget of about $157 billion, including recent expansions to cover all immigrants regardless of legal status and a $12 billion experiment to offer socioeconomic support not traditionally covered by health insurance.
But access to care is notoriously difficult for many Medi-Cal patients, in part because low payment rates discourage providers from seeing them. The shortage is particularly pronounced in special care.
“Our patients wait months to access specialists or travel long distances to see them,” said Joel Ramirez, chief medical officer of Camarena Health, a Madera-based chain of more than 20 community clinics. “Higher rates would allow for more providers.”
Ramirez said 60% to 70% of Camarena’s patients are on Medi-Cal, many of whom are farmers. “It’s a tall order for them to take time off work and take transportation to travel an hour for an appointment,” he said. “Whatever ailment the patient has that requires the attention of a specialist, is either not treated or undertreated.”
Dougherty, Sutter Medical Center’s ER chief, said more than half of his patients are on Medi-Cal and the ER is always at capacity, with jammed waiting rooms and insufficient beds. The initiative, he said, “allows us to hire more staff, add more beds, create more infrastructure for the volume we’re seeing.”
This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.
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