The money comes from a tax on managed care insurance that was put in place 20 years ago and has historically 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,” said Adam Dougherty, chairman of emergency medicine at Sutter Medical Center in Sacramento. “The MCO tax literally impacts every aspect of Medicare, 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 proposed in May to use about $6.7 billion earmarked for Medicare pay hikes 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 passed a new budget on June 13 that largely follows the governor’s wishes and cancels 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. “I 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.
