Jerry Brown Doesn’t Want to Give Doctors a Cut of New Tobacco Tax Money

Doctors have long argued that the money they receive for serving Medi-Cal patients isn’t enough to sustain a practice, leading to a shortage of medical providers willing to treat California’s poorest residents in rural communities and other pockets of the state.

But they have been unable to persuade a fiscally restrained Gov. Jerry Brown to allocate money in the state budget to raise reimbursement rates. So, the doctors went out and found the money themselves last year.

They co-sponsored a $2 tobacco tax increase on the Nov. 8 ballot, Proposition 56, which directed up to $1 billion of the money from the tax increase to Medi-Cal. Their coalition of hospitals, labor unions and other health groups spent $25 million on the campaign through Oct. 22.

Voters passed the measure, opening the door for the rate increases the doctors sought.

Or, so they thought.

Reimbursement rate increases were absent from Brown’s budget proposal released Tuesday. Instead, the proposal appropriates $1.2 billion of Proposition 56 money to cover cost increases for the Medi-Cal program. The administration predicts the state will have to pay an additional $1.8 billion into Medi-Cal, which it attributed to a “one-time retroactive payment of drug rebates to the federal government and miscalculation of costs” associated with a coordinated care initiative.

Now the California Medical Association, which represents approximately 43,000 doctors, is crying foul.

The measure was written to prohibit the governor from using the new revenue to supplant existing state general funds for Medi-Cal, but the association believes that’s exactly what Brown is proposing.

“We’re disappointed that Gov. Brown’s budget ignores the will of Proposition 56 voters,” said Joanne Adams, a spokeswoman for the California Medical Association. “The language of the initiative made it very clear that new tobacco tax revenues were to be used to supplement, not offset current state sources for increased payments, so that Medi-Cal patients can see a doctor when and where they need one.”

H.D. Palmer, a spokesman for the California Department of Finance, said the administration interprets the situation differently.

He agrees that the measure bars the state from reducing general fund spending and using Proposition 56 money in its place. But he said the new tax revenue will allow the state to grow general fund spending, not replace money already designated to the health care system.

“The availability of more than $1 billion in tobacco tax dollars is helping the state fund new growth in the Medi-Cal program, which is now providing care to one-third of Californians,” Palmer said.

During prior budget talks, the Brown administration pushed back against the need for rate increases. The administration has questioned whether higher reimbursement rates will automatically lead to better care. It was skeptical of across-the-board increases, instead preferring targeted raises aimed at specific provider types or services.

The budget proposal serves as a starting point for negotiations before the Legislature must approve the main spending proposal by June 15. The conversation also begins under uncertainty over health care funding if Republicans make good on a promise to repeal the Affordable Care Act and cut the billions in federal support that flow to California because of it.