Lawmakers Face Deadline for finding Medi-Cal Fix

SACRAMENTO — California lawmakers hope to tackle major issues in the state’s health care program for the poor over the next two weeks, starting with how to ensure the state doesn’t lose $1 billion in federal funding.

The potential billion-dollar loss comes as critics say Medi-Cal is already struggling to meet the needs of the 12.5 million people who rely on the system.

In calling a special session on health care, Gov. Jerry Brown told lawmakers to find long-term funding for Medi-Cal so the program doesn’t rely on the state’s general fund. Democratic proposals call for an expanded tax on health insurers and a new tobacco tax to help restore lost services and improve care.

Republicans have made their position clear: “Republicans do not raise taxes,” said state Sen. Jean Fuller of Bakersfield in her first news conference after taking over as Senate Republican leader on Thursday.

With Democrats needing a handful of Republican votes to pass any taxes, the end-of-session legislative fight is shaping up to be a busy final two weeks of deal-making in the health care special session alone. The Legislature also is looking at potential taxes to fund road and bridge improvements in a transportation special session while wading through hundreds of regular session bills.

‘Grievous cuts’ to program

“If you take a billion dollars out of the health care system it will be felt across the board,” said Anthony Wright, executive director of the health advocacy group Health Access. “People recognize that it’s not enough to just prevent the hole in the program, we need to invest in it. We’ve had grievous cuts to the program.”

Medi-Cal provides free health care to low-income people, including families, seniors, people with disabilities and children in foster care. Nearly a third of the state — 12.5 million people — are enrolled in Medi-Cal, which saw a dramatic increase under the Affordable Care Act.

But the state stands to lose $1 billion in federal funding after the Obama administration warned California that its tax system — currently California only taxes the plans that accept Medi-Cal patients — doesn’t comply with federal law. The federal government provides matching funds to California for Medi-Cal.

To prevent the $1 billion loss of matching federal funds, California must tax all health plans — not just those that accept Medi-Cal enrollees. Insurers that don’t participate in Medi-Cal are fighting the broader tax.

If all health care plans are forced to pay a new tax, it is likely the costs will be passed down to customers.

Lawmakers are weighing whether to tax all health plans at the same flat rate — as proposed by Assemblyman Marc Levine, D-San Rafael, or create a tiered system with different rates, as recommended by the governor.

Not enough progress

Jennifer Kent, director of the Department of Health Care Services, which administers the state’s Medi-Cal program, said the Brown administration isn’t wedded to one proposal and that its biggest concern is ensuring the new tax structure raises enough money to meet federal standards.

“There is progress being made,” Kent said. “We aren’t there yet.”

Democratic lawmakers also want to create another revenue stream for Medi-Cal by raising the tobacco tax.

“To the extent you keep people from smoking in the first place, it will in the long term prevent costs on our Medi-Cal program,” said Kent, whose attendance at a Wednesday news conference for a package of several tobacco-control bills indicated Brown supports such measures.

Assemblyman Richard Pan, D-Sacramento, is calling for the state to raise the tobacco tax by $2 on a pack of cigarettes, a measure he said would take the state from one of the nation’s lowest tax rates on cigarettes to eighth highest. The current state tax, 87 cents per pack, goes toward research, early childhood development and smoking prevention programs.

Pan, a doctor who sees Medi-Cal patients, said his bill would raise $1.5 billion in the first year and would go toward treating Medi-Cal patients with tobacco-related illnesses and fund programs that prevent smoking.

“Raising the tobacco tax has been proven to prevent and reduce smoking, especially among young people,” Pan said.

The special session on health care is scheduled to run concurrently with the regular session, which ends Sept. 11, though it can be extended if lawmakers come up with a deal. The state’s current tax on Medi-Cal plans doesn’t expire until mid-2016, giving lawmakers some leeway.

“It’s advisable to get this moved this session, though,” said Chris Hoene, executive director of the California Budget & Policy Center in Sacramento.

Need to act now

With 2016 an election year and several potential ballot measures calling for different taxes, Hoene said lawmakers may find it more difficult to find common ground if they wait. Democrats will need some Republican votes in both houses to reach the two-thirds majority needed to approve new taxes.

“The political dynamic only increases the closer we get to the election,” said Sen. Mark Leno, D-San Francisco. “If we don’t do it now and we do it next year, the clock runs and you get less thoughtful public policy when you are up against that deadline.”

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