The California health plans that would pay higher taxes on their managed-care plans to bolster funding for the state's Medicaid program are still “crunching the numbers” on the controversial tax that was included in Gov. Jerry Brown's budget released Thursday.
The broader managed-care organization (MCO) tax would replace a narrower levy set to expire at the end of June. It only hit plans that participate in the state's Medicaid managed-care program, better known as Medi-Cal.
Less than half of health plans in the state operate Medicaid MCOs. The dozens of plans that don't tend to be smaller players. The proposed tax rate would be tiered based on enrollment.
Of the 47 insurers that are members of the California Association of Health Plans, only 22 are currently participating in the Medicaid managed-care program.
“Filling the $1.1 billion hole in the Medi-Cal budget remains a priority for health plans and we are analyzing and crunching the numbers on the latest proposal,” said Charles Bacchi, CEO of the California Association of Health Plans.
The three-year tax reform package is the culmination of months of negotiations between the governor and the health insurance industry. Brown said insurers would see an estimated $90 million net benefit from the compromise package.
Those benefits would mostly go to Medi-Cal carriers, which see it as a way to share responsibility for the program with the rest of the industry. The tax is needed to fill the $1.1 billion gap in the state's $34 billion health and human services budget, most of which goes to Medi-Cal. Proceeds will be matched with federal dollars and returned to health plans in the form of higher Medi-Cal rates.
The government's $122.6 billion budget now moves to the state Legislature, where it will require bipartisan support to muster the two-thirds majority needed to pass the bill.
Providers in the state remain dissatisfied with the compromise. The California Hospital Association criticized the budget for failing to restore rate reductions that went into effect in 2011 and cut most services up to 10%. Medi-Cal rates are among the lowest in the country.
The CHA is also fighting the state's effort to claw back payments made to hospital-based skilled-nursing facilities, which were hit with retroactive rate reductions under the earlier budget cuts.
Other provisions of the 2016-17 budget included extending Medi-Cal benefits to undocumented immigrant children under the age of 19 as of May 1. That move is widely supported across the state's healthcare industry.
Consumer advocates—while generally happy with the budget provisions—held rallies in five cities Friday to call for greater funding for health and human services programs. The state expects to post a nearly $8 billion surplus in the fiscal year that ends in June.
“The surplus was created in part from $15 billion in (state Health and Human Service Agency) cuts; it's high time to restore cuts to Medi-Cal benefits and rates and other public health programs," said Anthony Wright, executive director of Health Access California, the consumer advocacy coalition that organized the rallies.
The governor pleased advocates by recommending continuance of the state's effort to coordinate care for people eligible for both Medicare and Medicaid.
Twelve states have rolled out three-year demonstrations under the Affordable Care Act to improve coordination of health benefits for poor seniors eligible for both programs; without coordination, care can be frequently splintered and high-cost for both the federal and state governments.
Many have been struggling to achieve cost-savings goals because beneficiary participation is optional and most are deciding to opt out. As many as 50% of those eligible to participate in California's demonstration left the program, according to Mari Cantwell, director of California's Medi-Cal program.
“The two major reasons for the opt-out are a general fear and concern about changes in healthcare. We've also struggled with some coordinated efforts by different types of providers … who have been concerned about rates,” Cantwell said in a webinar last year.
Brown had flagged the demonstration in his annual budget proposal last year as costing the state money. He threatened to pull the pull the plug once it runs its course at the start of 2017 unless he saw signs of improvement.
In the days leading up to the release of his budget proposal, stakeholders expressed distress about the program ending.
“My concern is should California end the program that it would be signal the dual demonstrations are a failure,” said Jeff Myers, president of Medicaid Health Plans of America. He believes that the coordinated approach under these demonstrations is the best way to ensure these beneficiaries get the care they need.
On Thursday, Brown revealed a change of heart by offering to continue the demonstration until at least Jan. 1, 2018.
