President Barack Obama’s administration is approving California’s plan to restructure health-plan taxes to generate money for Medi-Cal, which provides health coverage to the poor.
The U.S. Centers for Medicare and Medicaid Services notified state officials of their decision on Tuesday, preventing a $1.1 billion hole in the state budget. However, federal officials required one tweak that will result in a modest reduction in revenue to the state.
The tax plan was the product of months of negotiations between Gov. Jerry Brown’s administration and health insurance companies. They agreed to create a new tax on health plans, drawing down federal matching dollars to fund Medi-Cal. In exchange, other insurance and corporation taxes were eliminated.
Health plans say the federal approval provides stability to the health-care safety net.