California Healthline Daily Edition

Summaries of health policy coverage from major news organizations

Democratic Lawmakers Discuss Expiring MCO Tax at Hearing

On Tuesday, California Democrats attended an informational hearing to address the state's expiring managed care organization tax, the Los Angeles Times reports (Myers, Los Angeles Times, 12/1).


The current MCO tax expires in June 2016. In July, federal officials said they would not reauthorize the formula California uses.

With the current tax, only MCOs participating in Medi-Cal -- the state's Medicaid program -- are taxed. California gets $1.1 billion in federal matching dollars on that money and then the MCOs are reimbursed through the Medi-Cal services they provide. Federal officials said if California wants to continue taxing MCOs, the state must tax all of them.

The California Legislature adjourned for the year without passing a bill to restructure the tax, leaving a $1.1 billion hole in the Medi-Cal budget -- a deficit that was the central reason the governor in June convened the special session on health care (California Healthline, 11/25).

Details of Hearing

The hearing was convened by the state Legislature's health care special session conference committee, led by state Sen. Ed Hernandez (D-West Covina) and Assembly member Rob Bonta (D-Alameda) (Miller, "Capitol Alert," Sacramento Bee, 11/30). The hearing was attended only by Democratic lawmakers.

According to the Times, some lawmakers during the hearing expressed concerns about a lack of determination to revamp the tax.

State Sen. Holly Mitchell (D-Los Angeles) said, "The lack of alarm is troubling."

Further, Mari Cantwell, chief deputy director of the California Department of Health Care Services, said, "We are very concerned about entering 2016 without a replacement tax."

According to the Times, the hearing demonstrated that an agreement is not yet "in sight."

Nick Louizos, vice president of legislative affairs at the California Association of Health Plans, during the hearing said that a new tax on managed care plans should be "equitable and affordable." He also said the money generated by the tax should be used to boost health care service, rather than replace funds that would be diverted to other government programs (Los Angeles Times, 12/1).

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