Gov. Gavin Newsom, state lawmakers and health care industry leaders have just a short time to reach an agreement that would inject billions of dollars in new funds into Medicare before it goes to the vote in November.
The initiative, supported by nearly every sector of the state’s health care industry and local Republicans and Democrats, would set aside funds for Medi-Cal, California’s version of the Medicaid health insurance program for low-income people. The funds would be used primarily to increase payment rates for medical professionals who serve Medi-Cal patients.
Governor Gavin Newsom, a Democrat, initially supported using the money for this purpose, but as California’s fiscal situation worsened, he reversed course in May and proposed using most of the money to reduce the state’s $45 billion budget deficit.
The money comes from a tax on managed care health plans that has been in place for about 20 years, but historically it has been used to offset existing state spending rather than to support new investments in Medicare.
“The importance of this ballot initiative is that it makes us seriously invested in the survival of Medicare-Cal,” said Adam Dougherty, chairman of emergency medicine at Sutter Medical Center in Sacramento. “The MCO tax literally impacts every aspect of Medicare-Cal, and we can’t let it be subject to annual budget crises.”
Michael Genest, who served as finance director under Republican Gov. Arnold Schwarzenegger, noted that several past voter-approved ballot measures continue to narrow the state’s fiscal options, including one that caps property tax increases and another that guarantees a larger share of the state budget to schools.
“In California, we do budgeting by ballot box. We’ve always done that. And everything we’ve done in that respect has been very tough on fiscal stability,” Genest said.
The Protecting Access to Health Care Coalition, made up of doctors, hospitals, health plans and other health care providers, could resolve their differences with state leaders before the June 27 deadline to withdraw the proposal.
Newsom wants to recover most of the promised funding, but he is at odds with the plan’s backers, many of whom he has long considered his allies. Elana Ross, a spokeswoman for Newsom, declined to comment on the plan’s status.
Governor Newsom in May proposed using about $6.7 billion earmarked for Medicare pay raises and other health care priorities, mostly in 2025 and 2026, to offset the state’s existing spending. His proposal would keep Medicare payment increases at about $300 million per year and allocate them to some primary care, mental health and obstetric services.
The state legislature on June 13 largely followed the governor’s wishes and passed a new budget that would cancel Medicare increases scheduled for 2025, but has not been approved by Governor Newsom.
“What was approved was a bicameral agreement between the Senate and Assembly, not an agreement with the governor,” said H.D. Palmer, a spokesman for the state Treasury Department. “We would not speculate on what the contours of the final agreement might be.”
The revenues from the managed-care tax would allow states to extract matching funds from the federal government, more than doubling the amount available. Federal and state funds would also be used to repay nearly all of the tax paid by health insurance plans, but in theory would not affect premiums.
California is one of 19 states with an “MCO tax” to supplement funding for its Medicaid program. Using tax revenue to increase payments to Medicaid providers “is a generational opportunity to fundamentally improve access to care for Medicaid recipients,” said Dustin Corcoran, CEO of the California Medical Association and spokesman for the ballot initiative.
Corcoran said internal polling shows the initiative has public support by a “very healthy margin,” but declined to provide specific figures.
If the bill is put on the November ballot and approved, it would void the compromise Governor Newsom made with lawmakers. The bill would restore Medicare investments that were scheduled for 2025 and 2026. It would also make the increased funding, and the additional funding, permanent starting in 2027, subject to federal approval.
Supporters of the plan say it’s fundamentally a health equity issue. Medi-Cal covers medical and mental health services for about 15 million residents, well over a third of California’s population, many of them its poorest and most vulnerable residents. The program’s budget is about $157 billion, including a recent expansion to include all immigrants regardless of legal status and a $12 billion experiment to provide socioeconomic assistance not traditionally covered by health insurance.
But for many Medicare patients, access to care is notoriously uneven, in part because low payment rates make providers hesitant to see them. The shortages are especially acute in specialty care.
“Patients are waiting months or traveling long distances to see a specialist,” said Joel Ramirez, chief medical officer for Madera-based Camarena Health, which operates more than 20 community clinics. “If we could charge more, we could get more providers.”
Ramirez said 60 to 70 percent of Camarena Hospital’s patients are on Medicare, many of them agricultural workers. “It’s hard for them to take time off work and have transportation to travel an hour to get seen,” he said. “Patients who need to see a specialist are either not being treated or are being incompletely treated.”
Dougherty, Sutter Medical Center’s emergency department chief, said more than half of his patients are on Medicare-Cal, and his emergency department is always full, waiting rooms are crowded and beds are scarce. He said the initiative will “allow us to hire more staff, add more beds and build out the infrastructure to handle the volume of patients we’re seeing.”
This story was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Healthcare Foundation.
This article was reprinted from khn.org, a national newsroom and one of KFF’s core operating programs that produces in-depth journalism on health issues and is an independent source of health policy research, polling and journalism.
