Tax Increase on Medi-Cal Managed Care Plans Really for Governor’s $73 Billion Budget Deficit?

California Democrat lawmakers are pushing a bill to increase the tax on Medi-Cal managed care plans by another $1.5 billion, to fund the state share of cost in the Medi-Cal program. Or so we are told. While this appears to be in-the-weeds legislative lingo, it also appears to be a money grab to help Gov. Newsom shore up his $73 billion budget deficit… on the backs of the state’s poorest people, and physicians who can’t get full reimbursement for treating Medi-Cal patients.

This is what third world countries do when the results of Socialism or Communism come home to roost. All you need to know is this is money being taken out of your pockets to pay the governor’s bad debts.

Assembly Bill 119 in 2023 authorized amendments to the Medi-Cal Managed Care Organization Provider Tax (MCO tax), affecting the budget of the Department of Health Care Services, according to bill analysis.

Last year, the MCO tax was to expire.

2024’s Senate Bill 136 increases that tax, as the bill language shows:

Existing law sets forth certain taxing tiers and tax amounts for purposes of the tax periods of April 1, 2023, to December 31, 2023, inclusive, and the 2024, 2025, and 2026 calendar years. Under existing law, the Medi-Cal per enrollee tax amount for Medi-Cal taxing tier II, as defined, is $182.50 for the 2024 calendar year, $187.50 for the 2025 calendar year, and $192.50 for the 2026 calendar year.

This bill would raise that tax amount for that tier to $205 for all 3 of those calendar years. (emphasis the Globe)

SB 136 seeks to impose another $1.5 billion General Fund tax increase, which will be matched by federal funds to give the governor $3.1 billion.

Last year’s MCO Tax (Assembly Bill 119) also taxed health plans, however, those revenues were intended to fund Medi-Cal providers with much-needed rate increases to Medi-Cal physicians.

This MCO Tax will not fund rate increases, but will instead be used to backfill the Governor’s massive budget shortfall.

The bottom line is that AB 119 was a bad bill and was passed and signed into law by Gov. Gavin Newsom in June 2023. And Democrats are back with another bad bill to help provide cover for additional funding for Newsom’s budget deficit.

I wonder what federal auditors would say about this scheme…

The governor will be able to “shift” $3.1 billion from the MediCal Provider Payment Reserve Fund to the general fund to help shore up his $73 billion budget deficit. How many other state agency budgets are facing such a scheme?

Republican lawmakers warned in Assembly floor debate Monday that the “shift” and additional tax affects the long-term stability of the Medi-Cal Managed Care Organization Provider Tax-funded provider rate increases by creating a fiscal cliff when the MCO Tax expires.

Or the governor will just get another bill passed to extend the tax…

Assemblyman Vince Fong (R-Bakersfield) called this another “tax,” and reminded lawmakers that promises were made last year of no increases on the MCO tax. Fong said the governor was “diverting funds to cover state mismanagement.”

The vote on SB 136 was telling, almost entirely along party lines, but with a few curious abstentions on such a blatant tax increase:

This budget scheme does nothing to improve California’s healthcare system, which is why it is curious that Republicans, including the Minority Floor Leader, Assemblyman Heath Flora (R-Ripon), who is the policy leader, did not vote against the tax bill (his second questionable vote in one legislative session).

Republican Leader Assemblyman James Gallagher (R-Yuba City) voted an affirmative “no” on AB 136 (the second vote in one legislative session his number 2 guy did not vote with him).

And it is just a tax being used as a bait-and-switch funding mechanism to provide relief to the General Fund.

“Historically, these taxes on managed care plans — the MCO tax — have been swept into the state’s general fund, used to balance the budget whenever times got tough,” Politico reported in June when AB 119 was passed. “But this year, nearly every health care advocate and elected official in the state was demanding the money stay in the health care system.”

Until the Governor needed $3.1 billion for his deficit.

Notably, California has added millions more people to Medi-Cal in recent years, including illegal immigrants, so asking for the additional tax last year made sense – which is really where the costs are going.

“For the coming year, the deal hews closely to what Newsom proposed in May,” Politico reported. “Some of the money will be used to balance the budget, with $3.5 billion going into the general fund. Three specialties will get a boost to their reimbursement rates: Primary care, OBGYN and some mental health care services will start being paid 87.5 percent of what the federal government pays them through Medicare.”