Legislature Passes MCO Tax; More Work Towards Restoring Cuts and Investing in Medi-Cal

California lawmakers voted today on a bipartisan basis to revamp the tax on managed care organizations (MCOs). This allows California to meet new federal guidance and continue to draw down federal funds into the state’s health system. The proposed plan would expand the current tax on health plans, but lowers other taxes, reducing the impact of the tax. This new package will allow the state of California to continue to receive federal matching funds and prevent a $1.1 billion hole in the state budget.

The bipartisan vote for the revamping of the MCO tax allows California to continue to draw down federal funds and spares our health system of over $1 billion in cuts. However, there is more work to do. While the revamped MCO tax prevents new cuts, it largely maintains the status quo in terms of funding our health system and California will need new revenues to make major investments in Medi-Cal and other public health programs.

While preventing new cuts, California has yet to restore the ongoing cuts to Medi-Cal benefits and rates made during the recession. Voters will have the opportunity to raise revenues like the tobacco tax this November to allow California to invest in our health system and other vital services. Demonstrated by bipartisan vote, legislators agree that California should not make additional funding cuts to vital health programs and, in fact, need additional investments. Health Access is hopeful we can continue this momentum in the budget negotiations this summer and at the ballot box this November.

Click here to view Health Access’ budget scorecard of potential restorations and investments.