Why Newsom’s Allies In Health Care Are Slamming His Budget

THE BUDGET BACKLASH BEGINS: It’s hard having friends in a deficit year, and Gov. Gavin Newsom is upsetting some of his most reliable allies as he tries to close the state’s budget gap.

One of Newsom’s proposals is to sweep up an extra $7 billion from the state’s renewed tax on some health plans, called managed care organizations. These funds were initially promised to go toward pay raises for some health care workers and other health care investments.

Newsom’s move to walk back that pledge is not only ticking off his traditional supporters in the health sector, but also feeding appetite for a proposed new ballot measure to block governors from making similar maneuvers in the future.

“I was shocked by the governor’s new proposal on the MCO tax,” Akilah Weber, who chairs the Assembly’s health budget subcommittee, told Playbook. “It’s like all the discussions we’ve had about it for the last two years have been put on the shelf.”

As a quick refresher, some of the state’s biggest health industry players hammered out the MCO tax deal last year, landing on a more than $19 billion package to improve Medi-Cal amid budget negotiations at the time.

Hospitals, doctors, health plans, organized labor and a number of other influential constituencies agreed that proceeds from the tax should be used to raise rates for some medical providers, fund public hospitals and community clinics, and create more graduate education slots for new doctors, plus a host of other investments in the state’s safety net.

Groups that usually fought each other tooth and nail on health care issues all agreed on a major guiding principle: the money had to be used for Medi-Cal, not the general fund.

But the money set aside for those investments is looking pretty attractive with a roughly $28 billion budget hole to fill. And going back on a deal that took the better part of a year to negotiate has prompted disavowals from groups like Planned Parenthood and the California Medical Association, two steadfastly pro-Newsom groups.

Planned Parenthood Affiliates of California President Jodi Hicks tweeted that she was “deeply disappointed” in the proposal and CMA’s official statement echoed that language, saying: “Difficult budget decisions are ahead, but we cannot afford to miss the generational opportunity before us to establish an equitable health care system and finally attain true access to care for Californians.”

The move also has revived interest in a proposed ballot initiative supported by the same big-money health care interests that negotiated the MCO deal.

If passed, the measure would require future proceeds from the tax to always be used for Medi-Cal, so legislators can’t use the funds in future bad budget years — essentially blocking the same kind of move Newsom is making now. It’s not only endorsed by health care interests and organized labor, but by legislative leadership like Senate Pro Tem Mike McGuire and Assembly Speaker Robert Rivas.

Weber said she hasn’t been approached about endorsing the measure, but that organizers have even more reason to push for it.

“They have a responsibility, to the people in the communities they serve, to keep their doors open.”


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