After federal funds are considered, the state will be able to spend more than $35 billion, said Jennifer Kent, a former administration official who helped the coalition propose a structure for the tax.
It would be the largest investment ever in Medi-Cal, California’s Medicaid system.
« We’re trying to serve a Medi-Cal program the size of the total population of some states, » said Linnea Koopmans, CEO of California Local Health Plans, who was part of the coalition. « It takes an investment of this magnitude to have a significant impact. »
To pull this off, physicians and health plans, hospitals and organized labor, emergency service providers, safety net clinics and Planned Parenthood had to support a single proposal, balancing the governor’s need to put money into the coffers of the state and the legislature’s desire to spend on constituent priorities like keeping hospitals open.
They did this by meeting for two hours each week since November, discussing the details of the expense at California Medical Association headquarters over lunch, where they filled the chalkboards in the conference room with calculations. Dustin Corcoran, the chief executive officer of the medical association that chairs the coalition, said he even dreamed about the tax.
“There was a lot of sausage making,” Corcoran said. « It’s not always pleasant or fun, but we’ve gotten to a point where we can be really proud of. »
Health plans will be taxed based on how many people they cover, and that money is used to leverage billions more from the federal government, all while passing on almost no cost to consumers. Historically, these managed care plan fees — the MCO fee — have been fed into the state’s general fund, used to balance the budget whenever times got tough.
But this year, nearly every health care advocate and elected official in the state has called for the money to stay in the health care system. California has added millions more people to Medicaid in recent years and is adding more benefits as the state overhauls the program. But there aren’t enough doctors to see all those new members. The coalition has been pushing hard for the state to step in and raise reimbursement rates so more doctors will treat Medi-Cal patients.
There have to be doctors to see people before they get to the emergency room, Corcoran said.
« The MCO fee in and of itself is not going to be a panacea for all the shortcomings of the Medi-Cal system, » Corcoran said. « But it can do a lot to address those historical inequalities. »
At one point, the Newsom administration wanted the bulk of the money to go into the general budget to fund existing priorities in Medi-Cal, such as extending the program to undocumented immigrants. In May, he outlined a plan to raise reimbursement rates for some specialties, balance the budget, and set aside the rest of the money to spread out over several years. This made lawmakers and industry leaders uneasy, worried that the money would be gobbled up by other budget priorities later.
Some of the spending will start next year, but most won’t start until 2025.
For next year, the deal is closer to what Newsom proposed in May. Some of the money will be used to balance the budget, with $3.5 billion going to the general fund. Three specialties will get their reimbursement rates increased: Primary care, OBGYN, and some mental health care services will begin paying 87.5 percent of what the federal government pays them through Medicare.
And $75 million will be used to create new residency slots for medical graduates. California is a net exporter of medical graduates, and these new residents will be concentrated in underserved areas, likely in the Central Valley, parts of Los Angeles and the Imperial Valley.
The deal includes money to support struggling hospitals, ease workforce shortages and entice more specialists to see Medi-Cal patients. It will be up to the Department of Health Services to determine who is online based on where patients are having the most difficulty getting care. Coalition leaders say they want to avoid a lobbying frenzy in which every special interest scrambles to get a pay raise.
“Instead of coming to the legislature just for our individual needs, this is a way to really look at things more holistically for patients,” said Jodi Hicks, CEO of Planned Parenthood Affiliates of California and coalition vice chair.
The state would spend $300 million on behavioral health beds under the deal, part of a push to stop people cycling in need of mental health care through prisons and emergency rooms. California has a shortage of 6,000 mental health beds and is preparing to ask voters in 2024 to approve nearly $5 billion in bonds to build more.
The last time California attempted to renew this tax, in 2016, it took a year of intense lobbying from the then governor. Jerry Brown and his administration, who eventually had to call a special session of the legislature to pass it.
Last year, the tax was due to expire with no renewal planned. Over the course of seven months, it became the largest investment ever made in Medi-Cal.
« It really feels like a win, » Koopmans said.
