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Managed Care Tax Decision Left Until New Budget Proposal Arrives

Distrust ran high yesterday during part of a budget subcommittee hearing  when the subject turned to reinstitution of a managed care organization tax.

The MCO tax instituted in 2009 had the singular distinction of being embraced by the ones being taxed because the money was matched by federal dollars and was used to support the Healthy Families program. In the long run, health insurers made their money back and the state had more federal dollars in its coffers.

The MCO tax expired in December. The Brown administration wants to keep it going with one big difference: Since the state eliminated Healthy Families, a transition that started in January and runs through the end of this year, the governor would like to put the MCO tax money into a rainy-day fund for the state.

That didn’t play well at yesterday’s hearing of the Senate Budget Subcommittee on Health and Human Services.

“This tax was the classic bait and switch,” said Sen. Bill Emmerson (R-Redlands). “This was sold to the Legislature as a way to save Healthy Families. Then they shredded the Healthy Families budget and still want the tax.”

The tricky part is, a lot of stakeholders would like to see the tax renewed. In fact, officials from the California Association of Health Plans have said managed care organizations would be open to reinstating the tax if the money goes toward addressing California’s health care needs.

“We strongly advocated for this when it was used for Healthy Families,” said Nick Louizos, CAHP’s director of legislative affairs. “What we don’t want is for this tax to be used as a general fund backfill.”

The governor’s budget includes income from the MCO tax, even though it expired at the end of 2012. That has created problems for the transition of the Healthy Families program, which is currently experiencing an operating deficit of $125 million, even as its 860,000 children are being phased into Medi-Cal managed care plans.

“Are we going to supplement or supplant services?” Louizos asked.

That sentiment was echoed by a long line of health care advocates, who generally supported the idea of the MCO tax as long as it wasn’t just siphoned into the general fund.

“Health care belongs to health care,” said Vanessa Cajina, legislative advocate for the Western Center on Law and Poverty.

“We are in support of the MCO incentive,” said Serena Kirk, senior policy associate at Children’s Defense Fund California. “But this assessment was first created to help with children’s access to care.”

Sen. Mark DeSaulnier (D-Concord) said he’s heard promises from the administration that Healthy Families’ children wouldn’t lose services through the transition, and yet hundreds of children with autism have been denied services, and that number will rise as the transition continues. He cited concerns about several of the state’s other health care transitions, as well.

“I continue to have concerns,” DeSaulnier said. “We need to make sure promises made last year are delivered this year.”

The committee held the item open. Sen. Bill Monning (D-Carmel) said the committee will keep a close eye on this one.

“We will know more with the May revise,” Monning said, “and we’ll see what the governor does with these concerns.”

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