California advocates push to reinstate MCO tax to enhance Medi-Cal – State of Reform

Earlier this week, Gov. Gavin Newsom launched his May Revision of the 2023-24 state budgetwhich requires reinstating a managed care group (MCO) tax within the state. An MCO tax—which was beforehand in place for over a decade, with the newest tax having expired in December—would enable California to obtain federal matching funds to help the Medi-Cal program.

California’s first MCO tax was handed in 2009 and though it expired in 2012, it persistently supplied secure funding for the Medi-Cal program. The construction of the tax has differed over time, with the sooner model having imposed taxes on revenues of managed care plans and more moderen variations having imposed taxes on managed care plans’ enrollment. The latest MCO tax started in January of 2020, which gathered an annual General Fund saving of over $1.5 billion.

“The California Medical Affiliation (CMA) applauds Governor Newsom’s ongoing efforts to attain common entry to healthcare protection for all Californians,” Donaldo Hernandez, MD, president of CMA mentioned in an announcement. “We help the renewal of the Managed Care Group (MCO) tax and urge that or not it’s absolutely invested within the Medi-Cal system that gives protection to at least one in each three Californians to considerably enhance entry to care and tackle well being disparities.”

CMA has been a longtime supporter of the MCO tax. In January, CMA urged the governor’s administration to dedicate MCO tax revenues to boost Medi-Cal reimbursement charges. CMA claims that California has not made across-the-board will increase to Medi-Cal charges for the reason that early Nineteen Nineties and that Medi-Cal nonetheless requires an ongoing income stream.

California will not be the one state to impose the MCO Tax. The Kaiser Household Basis (KFF) MCO Tax data tracking for states reveals that there was a gentle enhance of state’s utilizing the tax over the previous 5 years. In 2018, 12 states had a MCO Tax and by 2019, 14 states had one. That quantity dipped to 11 in 2020—not as a result of states did away with the tax, however as a result of they didn’t reply to KFF’s survey. In 2021, 14 states had a MCO Tax and final 12 months, a complete of 17 states had one—with Kansas and Washington state having carried out the tax for the primary time.

Whereas the tax requires federal approval, Newsom’s Might Revision predicts the reinstatement will lead to $19.4 billion in revenue from April 1st, 2023, till December thirty first, 2026, to extend and preserve investments in Medi-Cal. Annual income can be about $5 billion, and $2.5 billion of 2023 income could be used to attain a balanced finances and help Medi-Cal.

The remaining $11.1 billion would go in direction of Medi-Cal investments for securing entry, high quality, and fairness in Medi-Cal over an eight-to-10 12 months interval. Of these funds, $10.3 billion would go in direction of a particular fund reserve to permit for long-term sustainable Medi-Cal enhancement.

“Medi-Cal reimbursement charges current challenges in bringing extra suppliers into the system,” Linnea Koopmans, CEO of Native Well being Plans California, mentioned in an announcement. “The MCO Tax renewal is a chance to bolster charges and transfer us nearer to CalAIM’s coverage targets of entry, high quality, and fairness.”

The tax would additionally fund Medi-Cal supplier price will increase of at the least 87.5% for particular suppliers, and would nullify Assembly Bill 97which handed within the 2011-2012 session and reduce Medi-Cal supplier reimbursement charges by 10%, which CMA has lengthy advocated to undo.

“It is vitally welcome information {that a} vital share of the remaining supplier reimbursement price cuts from 2011 are proposed for elimination within the governor’s Might revision, as these cuts have had a damaging affect on affected person entry to take care of greater than a decade,” Hernandez mentioned.

The 87.5% supplier price enhance would go into impact on Jan. 1st, 2024, and would apply to major care suppliers, together with nurse practitioners and doctor’s assistants; maternity care, together with OB/GYNs and doulas; and non-specialty psychological well being service suppliers. Charge will increase can be handed on on to suppliers, and the state will direct managed care plans to pay suppliers these charges at a minimal.

“The MCO Tax is a invaluable instrument for producing much-needed extra income for the Medi-Cal program,” said the Neighborhood Clinic Affiliation of LA County (CCALAC). “We recognize the elevated income this proposed MCO mannequin will generate and the funding in critically wanted supplier price will increase.”

The price of price will increase could be about $237 million, with $98 million from the Common Fund for 2023-24. For the next calendar 12 months it might be $580 million, with $240 from the Common Fund. For the 2025-26 calendar 12 months, price will increase could be $582 million, with $241 from the Common Fund.

“The Might Revise, nonetheless, proposes to spend the income from the MCO tax over an 8-to-10-year interval,” CCALAC mentioned. “We are able to make a extra significant affect towards bettering the Medi-Cal program and guaranteeing a strong supplier community by making bigger investments over a shorter time-frame. We look ahead to continued dialog with the administration in regards to the MCO tax construction.”

Whereas the finances nonetheless has to cross the legislature and obtain the governor’s signature, a number of Californian organizations see advantages of the proposed MCO tax. If the MCO tax turns into accepted throughout the finalized finances, the Division of Well being Care Providers should submit a MCO tax proposal to CMS by June thirtieth.

The California Affiliation of Well being Plans (CAHP), which represents 43 full-service well being plans statewide, released a statement in response to the finances revision.

“California’s well being plans have been working constructively with the Administration on the proposed renewal of the Managed Care Group (MCO) Tax and are happy to see the Governor’s finances revision is proposing to speculate a portion of the tax revenues into the Medi-Cal program,” CAHP said. “Though we’re nonetheless evaluating the small print of the Governor’s proposal, California’s well being plans basically agree the MCO Tax ought to instantly profit and improve providers within the Medi-Cal program.”

CAHP additionally mentioned that the tax should be inexpensive for well being protection patrons within the particular person and employer markets, and should be predictable, secure, and equitable. CAHP appears ahead to extra developments, and believes that specializing in major and specialty care is an important start line.