Government Gavin Newsomstate lawmakers and health care industry leaders have only a slim chance of reaching an agreement on billions of new dollars for Medi-Cal before it goes before voters in November.
An initiative backed by virtually every sector of the state’s health care industry, as well as the local Republican and Democratic parties, would secure money for Medi-Cal, California’s version of the Medicaid health insurance program for low-income residents. The money would be used primarily to increase payment rates for healthcare professionals who serve Medi-Cal patients.
Newsom, a Democrat, initially supported using the money for that purpose. But after California’s budget situation worsened, he changed course in May and proposed shifting most of it to reduce the state’s $45 billion budget deficit.
The money comes from a tax on health insurance that has been in place for two decades, but has historically been used to offset existing state spending rather than support new investments in Medi-Cal.
“The importance of this ballot initiative is that we are finally committed to making a serious investment in the viability of the Medi-Cal system,” said Adam Dougherty, chief of emergency medicine at Sutter Medical Center in Sacramento. “The MCO tax literally touches every aspect of the Medi-Cal system, and cannot be at the mercy of annual budget crises.”
Michael Genest, a former chief financial officer under Republican Gov. Arnold Schwarzenegger, noted that several ballot initiatives approved by voters in the past continue to limit the state’s fiscal choices, including one that limits property tax increases and another that a large part of the state guarantees. budget for schools.
“We do ballot box budgets in the state of California. We’ve done it forever. And everything we have done in that regard has proven to be very heavy on fiscal stability,” Genest said.
It’s possible that the Coalition to Protect Access to Care, made up of doctors, hospitals, health care facilities and other medical providers, could resolve their differences with state leaders before the June 27 deadline to repeal the initiative.
Newsom’s desire to recover most of the promised money puts him at odds with the initiative’s proponents, many of whom have long counted themselves among his allies. Elana Ross, a spokesperson for Newsom, declined to comment on the status of the initiative.
In May, Newsom proposed using about $6.7 billion previously earmarked for Medi-Cal pay increases and some other health care priorities, mainly 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 care.
The Legislature passed a new budget on June 13, largely following the governor’s wishes by canceling planned Medi-Cal increases in 2025. But Newsom hasn’t signed.
“What was passed represents an agreement between the Senate and the General Assembly – and not an agreement with the governor,” said HD Palmer, spokesman for the state Department of Finance. “We respectfully decline to speculate on what the contours of a final agreement would 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 almost all of the taxes they paid, which in theory would have no effect on insurance premiums.
California is one of 19 states that have implemented 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 improve access to care for Medi-Cal recipients,” said Dustin Corcoran, CEO of the California Medical Association and spokesperson for the ballot initiative.
Corcoran said internal polling shows the initiative has public support by “very healthy margins,” though he declined to share specific numbers.
If the initiative makes it to the November ballot and is approved, it would override any compromise Newsom makes 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, although that would require federal approval.
Supporters of the initiative say it is essentially a matter of health equity. Medi-Cal covers medical and mental health care for nearly 15 million Californians, over 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 provide socioeconomic support not traditionally covered by health insurance.
But access to care is notoriously poor for many Medi-Cal patients, in part because low payment rates deter providers from seeing them. The shortage is particularly acute in specialist care.
“Our patients wait months for access to specialists or travel great distances to see them,” said Joel Ramirez, chief medical officer of Camarena Health, a chain of more than two dozen community clinics based in Madera. “Higher rates would allow more providers.”
Ramirez said 60% to 70% of Camarena’s patients are on Medi-Cal, including many farmworkers. “It’s a big task for them to take time off work and arrange transportation to travel an hour for an appointment,” he said. “Whatever condition the patient has that needs a specialist’s attention is going untreated or incompletely treated.”
Dougherty, the chief of the emergency room at Sutter Medical Center, said more than half of his patients are on Medi-Cal and the emergency room is always at full capacity, with crowded waiting rooms and an inadequate number of beds. The initiative, he said, “allows us to hire more staff, add more beds and create more infrastructure for the volume we are seeing.”
KFF Health News, formerly known as Kaiser Health News, is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.
