California Leaders Tussle With Health Industry Over Billions Of New Dollars For Medi-Cal

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Gov. Gavin Newsom appears to have reversed course on an initiative supported by virtually every sector of the state’s health care industry as well as the local Republican and Democratic parties.

If you're enjoying this article, you'll love our daily morning newsletter, How To LA. Every weekday, you'll get fresh, community-driven stories that catch you up with our independent local news.Gov. Gavin Newsom, state lawmakers, and health industry leaders have a small window to reach an agreement on billions of new dollars for Medi-Cal before it’s put to voters in November.

Michael Genest, a former finance director under Republican Gov. Arnold Schwarzenegger, noted that several ballot initiatives approved by voters in the past continue to narrow the state’s fiscal choices, including one that limits property tax increases and another that guarantees a large share of the state budget to schools.

In May, Newsom proposed using about $6.7 billion previously earmarked for Medi-Cal pay hikes and some other health care priorities, mostly in 2025 and 2026, to offset existing state spending. His proposal would retain Medi-Cal payment increases totaling around $300 million a year for some primary care, mental health, and maternity services.

Revenue from the managed-care tax allows the state to draw matching federal dollars, more than doubling the amount available. Federal and state money would also be used to reimburse the health plans for nearly all the taxes they paid, theoretically having no effect on insurance premiums.California is among 19 states that have such an “MCO tax” in place to help fund their Medicaid programs.

Proponents of the initiative say it is fundamentally a question of health equity. Medi-Cal covers medical and mental health services for nearly 15 million Californians, well over a third of the state, many of them among the poorest and most vulnerable residents. The program has a budget ofBut access to care is notoriously spotty for many Medi-Cal patients, in part because low payment rates discourage providers from seeing them.

Dougherty, Sutter Medical Center’s ER chief, said that over half of his patients are on Medi-Cal and the ER is always at full capacity, with the waiting rooms jammed and an insufficient number of beds. The initiative, he said, “allows us to hire more staff, add more beds, create more infrastructure for the volume we’re seeing.

 

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