The Managed Care Organization (MCO) tax is of critical importance for county funding and other Medi-Cal services, and the Governor’s proposal in the January Budget would spare health plans any net costs or losses while realizing $1.3 billion for critical Medi-Cal services. Counties are at risk of significant statewide and county financial liabilities for critical services in the absence of a MCO fix.
County Impact. MCO funding is vital to all counties. The MCO tax provides about $1.1 billion in health care financing for California, including implementation financing for the Coordinated Care Initiative (CCI), as well as other critical state-level Medi-Cal services. Furthermore, continuation of the CCI is tied to the county In-Home Supportive Services (IHSS) Maintenance of Effort (MOE) and the eventual plan to transition collective bargaining for IHSS workers from each county to the state. If the current MCO funding for the CCI is not continued, it could jeopardize the IHSS MOE and eventual transfer of collective bargaining. The loss of MCO funding for other Medi-Cal programs would also result in statewide cuts that could affect counties.
The current MCO tax expires June 30, 2016 and the Brown administration has proposed a new, broader MCO tax on almost all health plans. The administration would use this funding to continue support for children’s health services, as well ongoing funding for the restoration of a seven percent cut in IHSS recipient hours. Further, the Governor and legislative leaders intend to examine ways to increase fee-for-service Medi-Cal provider rates and rates for providers of services to developmentally disabled residents.
The Governor’s proposal requires all health plans to contribute funds that would be used by the state to draw down federal funding of at least an estimated $1.3 billion. In return, health plans would receive discounts on their Gross Premium Taxes and Corporate Taxes, as well as receive supplemental payments from the federal funds drawn down by the state, creating a net neutral balance for their participation. While the Governor’s proposal is called the MCO “tax,” it ensures that participating plans do not experience any net costs or losses.
(Note: While it is true that health plans will have no loss from Medi-Cal, there is a net loss to health plans for their commercial patients which will get passed on in terms of raised premiums to employer groups most likely. CSAC is in close communication with local and county-run health plans to ensure minimal impact on these providers, especially in regards to their commercial lines of business, such as IHSS providers.)
The Brown administration has also signaled a desire to prepare for increases in the state’s share of Medi-Cal costs under the Affordable Care Act. Under the Affordable Care Act, the state added nearly four million beneficiaries to the Medi-Cal caseload, and more than 12 million Californians – a third of the state’s population – receive health care services through the Medi-Cal program. Further, the federal reimbursement for new Medi-Cal recipients will step down from 100 percent to 90 percent in 2020.
It is worth noting that the Governor’s proclamation calling for the special session does not mention continued funding for the CCI, and it includes a reference to “and/or other fund sources” for the myriad of programs and services explained above.
The Legislature officially convened the health special session on June 19, 2015, but there is no timeline for when bills will be introduced or discussed. The administration released draft trailer bill language regarding their concept for the new MCO tax last year, and released an updated proposal with the Governor’s January budget proposal this year. The updated plan would not result in higher total tax payments for any health care provider.
Political Landscape. Despite the Governor’s efforts to date, achieving the two-thirds vote necessary in the Legislature to provide the fix has remained elusive as it is framed as a “tax.” However, there is no net increase to the health plans in the Governor’s January Budget proposal. The Special Session on Health Care remains open, but the Legislature has not yet taken up the Governor’s plan. |