California Lawmakers To Address $1B Medi-Cal Budget Hole in 2016

A more than $1 billion hole in California’s Medi-Cal budget is likely to be a high-priority agenda item for California lawmakers this year, the AP/Sacramento Bee reports.

Medi-Cal is California’s Medicaid program (AP/Sacramento Bee, 1/3).


The California Legislature adjourned for 2015 without passing a bill to restructure the state’s expiring managed care organization tax, leaving a $1.1 billion hole in the Medi-Cal budget.

The current MCO tax expires in June. In July 2015, federal officials said they would not reauthorize the formula California uses.

With the current tax, only MCOs participating in Medi-Cal are taxed. California gets $1.1 billion in federal matching dollars on that money and then the MCOs are reimbursed through the Medi-Cal services they provide. Federal officials said if California wants to continue taxing MCOs, the state must tax all of them (California Healthline, 11/25/15).

The state Legislature reconvened Monday.

New Tax Deal Is a Priority

State Senate President Pro Tempore Kevin de Leon (D-Los Angeles) said, “We must hammer out a deal because we run the risk of a $1 billion hole in our general fund budget that has very real consequences, especially to the most vulnerable.”

Proposals so far include:

  • Imposing a $2-a-pack tax on cigarettes; and
  • Extending income taxes on the wealthy under Proposition 30.

Revenue from such taxes could help support spending on Medi-Cal and other social programs.

Senate Minority Leader Jean Fuller (R-Bakersfield) said, “We’ve overpromised in California,” adding, “We’ve promised that [Medi-Cal beneficiaries would] have services, but we’re paying such a low rate that doctors are opting out.”

According to the AP/Bee, state lawmakers also could try to use surging state revenues to support spending such programs. The state Legislative Analyst’s Office said that California could take in $3.6 billion more than projections for fiscal year 2015 with $12 billion in the state rainy day fund.

However, Nancy McFadden, Gov. Jerry Brown’s (D) chief adviser, has warned that lawmakers should not rely on the extra tax money. Last month, she told a Public Policy Institute of California panel that “just saying the general fund can pick this up doesn’t cut it” (AP/Sacramento Bee, 1/3).

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