Brown’s $170.7B Budget Includes Several Health Care Proposals

On Thursday, Gov. Jerry Brown (D) released his fiscal year 2016-2017 budget plan, which includes several health care proposals, the AP/KPCC's "KPCC News" reports ("KPCC News," AP/KPCC, 1/7).

The $170.7 billion proposed budget is about $3 billion larger than the state budget adopted last year (Nichols, "KXJZ News," Capital Public Radio, 1/7). General funding accounts for $122.6 billion, up by more than $10 billion from the current budget (Young, Sacramento Business Journal, 1/7).

MCO Tax Replacement Provisions

Brown's proposal includes a plan to replace the state's expiring tax on managed care organizations (Aliferis/Dembosky, "State of Health," KQED, 1/7). The current MCO tax expires in June.

In July 2015, federal officials said they would not reauthorize the formula California uses. With the current tax, only MCOs participating in Medi-Cal 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 2015 without passing a bill to restructure the expiring tax, leaving a $1.1 billion hole in the Medi-Cal budget. The Legislature has reconvened and still is debating the issue (California Healthline, 1/4).

Under Brown's budget plan, California would impose a new tax on insurers, with rates varying by enrollment. According to the California Department of Health Care Services, the tax would generate about $1.35 billion (Myers et al., Los Angeles Times, 1/7).

The tax would be offset by tax breaks, helping health plans gain about $90 million under the plan (Los Angeles Times, 1/7).

According to the proposal, the tax would be in place for three years starting in FY 2016‐2017.

Brown noted that a deal has not yet been made with insurers. However, he said he hopes to get the issue resolved in about a month ("State of Health," KQED, 1/7).

He added that he plans to be more active in lawmakers' negotiations over the tax replacement (Thompson/Williams, AP/Sacramento Bee, 1/8).

Medi-Cal Provisions

Under Brown's budget plan, Medi-Cal funding accounts for about $19.1 billion of the California Health and Human Services Agency's projected $34 billion budget for FY 2016-2017 (Murphy et al., Contra Costa Times, 1/7). Medi-Cal is California's Medicaid program.

Since California expanded Medi-Cal, the federal government has covered 100% of the cost of the expansion population. However, California starting in 2017 will be responsible for 5% of that cost, or about $740.2 million.

California also is responsible for 50% of the cost of residents who previously had been eligible for Medi-Cal but had not enrolled until the Affordable Care Act took effect. According to "State of Health," the cost is projected to account for $1.9 billion from the general fund ("State of Health," KQED, 1/7).

Meanwhile, Brown did not propose an increase in Medi-Cal reimbursement rates to help restore a 10% cut imposed during the recession (AP/Sacramento Bee, 1/8).

Other Health Care Provisions

The budget proposal also includes:

• $9.2 billion, including $3 billion in general funds, for the In-Home Supportive Services program, which would help restore a 7% cut in service hours;
• $3 billion for the California Department of Public Health, including $1.6 million to address disease outbreak detection and prevention;
• $1.9 billion in general funds for prison medical care; and
• $1.8 billion, including $1.7 billion in general funds, to support the Department of State Hospitals (FY 2016-2017 budget plan, January 2016).

In addition, the plan calls for:

• $145 million for SB 4, by Sen. Ricardo Lara (D-Bell Gardens), which expands Medi-Cal to about 170,000 undocumented immigrant children (Sundaram, New America Media, 1/7);
• Increased aid for the elderly, blind and people with disabilities (Los Angeles Times, 1/7); and
• Continuing the state's Coordinated Care Initiative, which combines funding and services for those dually eligible for Medi-Cal and Medicare (FY 2016-2017 budget plan, January 2016).

For more on CCI in the budget plan, see today's "Capitol Desk" report.

According to "KXJZ News," the California Legislature will hold budget hearings in coming months to develop its own spending proposal ("KXJZ News," Capital Public Radio, 1/7).

Reaction to Budget Plan

According to New America Media, Brown's budget plan has received mixed reaction.

While some advocates praised the proposal for providing health care coverage for the state's children, others said it could do more.

For example, advocacy group Children Now in a statement said the budget should invest more in "critical children's health and child welfare programs, such as the Early Mental Health Initiative."

Others criticized the plan for not restoring cuts to Medi-Cal and other services.

Anthony Wright, executive director of Health Access California, said, "Even though we are many years from the recession and have a significant surplus, the budget proposal largely continues the recession-era cuts to health and human services," adding, "It's high time to restore cuts to Medi-Cal benefits and rates and other public health programs" (New America Media, 1/7).

Further, state Senate President Pro Tempore Kevin de León (D-Los Angeles), in a statement said, "We still have to take a closer look at strengthening our health care system for the poor and developmentally disabled that has been starved for far too long" ("KPCC News," AP/KPCC, 1/7).

Meanwhile, the California Dental Association called on the state to increase support for Medi-Cal's "chronically underfunded and underperforming dental program, Denti-Cal."

CDA President Ken Wallis in a release said that "it's time for the state to move away from the ineffective dental managed care plan models and develop and test new and sustainably funded dental care programs that provide better access to care" (CDA release, 1/7).