May Budget Revision: Key Investments Still Needed

Earlier today, California Governor Jerry Brown released his May Revision for the proposed 2015-16 state budget, a $115.3 billion spending plan that he said focuses on “the fundamentals of health and education.”

The May revision includes $6.7 billion in additional revenues that the state has collected since the Governor’s January proposal, almost all dedicated to Proposition 98’s constitutional funding guarantee for education and Proposition 2’s “rainy day” reserve. As such, there were few new investments or restorations in health care beyond continued implementation of the Affordable Care Act. The most notable health-related change from January was that the Governor did allocate funding for Medi-Cal coverage for Californians impacted by the President’s recent executive order on immigration. This continues California’s longstanding policy to provide coverage to immigrants with “deferred action” status, but it does not go beyond existing law.

But on health care, the May Revision of the state budget continues the cuts to public health programs and Medi-Cal rates and benefits made during the recession. With the May Revision as the context, health and community advocates are urging the Legislature to craft a budget that includes investments needed to reduce barriers to coverage, increase access for Medi-Cal patients, and cover the remaining uninsured.

A RESPONSE ON REDUCING POVERTY: The biggest policy change in the Governor’s May Revision was a state Earned Income Tax Credit (EITC) on top of the federal credit, which has a proven track record for encouraging work and reducing poverty. Governor Brown said the state EITC had a “minimum of bureaucracy and complexity” and is “just a straight deliverance of funding to people who are working very hard and are earning very little money, so in that sense I think it does a lot of good things.” See the California Budget and Policy Center’s information on understanding the state EITC.

The Governor indicated he heard the critique from many, including legislators, Health and Human Services (HHS) Network advocates, Health Access California, and other allies—about the need to address poverty. “I’ve heard that loudly. I thought this was a reasonable response,” the Governor said of the $360 million proposal. Today and throughout this week, community advocates have held press conferences around the state, urging a comprehensive approach to helping low-income families beginning with a state budget that not only pays down the wall of debt but also breaks down the wall of poverty. Recognizing poverty is both a cause and a consequence of poor health, Health Access welcomes the proposed state EITC, but maintains this  should be part of a multi-pronged effort, including making Medi-Cal more inclusive so families getting the EITC are covered and are not one emergency away from financial ruin.


The Governor’s May Revision of his proposal budget includes $31.8 billion in general fund spending under the Health and Human Services Agency, representing a 5.9% increase from last year. The Department of Health Care Services, which operates Medi-Cal, has a $19 billion general fund budget ($98 billion includes over $61.4 billion in federal funds and $17.6 in other special funds and reimbursements).

Continued Implementation of the Affordable Care Act: The Governor’s May Revision includes funding for California’s continued implementation of the ACA. This includes funds for the mandatory (simplifying eligibility, enrollment, and retention rules) and “optional” (extending eligibility to adults without children, and parent and caretaker relatives living under 138% of the FPL) Medi-Cal expansion. In his press conference, the Governor again noted the significant rise in Medi-Cal enrollment, estimated in his May Revision to be 12.4 million in 2015-16.

The May Revision also includes an additional $125 million for managed care rate increases and $150 million recognizing the increased county workload required for eligibility determination.

Immigrant Health Care and the Remaining Uninsured: The Governor’s proposal allocates $200 million to fund Medi-Cal coverage and a few other health and human services programs for Californians newly eligible for relief under President Obama’s November 2014 executive order on immigration. This continues California’s longstanding tradition and policy of including Californians with “deferred action” immigration status in Medi-Cal coverage—people excluded under federal Medicaid and the Affordable Care Act. The budget also includes $5 million for grants to nonprofit organizations to help provide application assistance to Californians seeking deferred action status under the President’s order.

Consumer advocates, including Health Access, will continue pressing for expanding access to all Californians income eligible for Medi-Cal without regard for immigration status, as proposed in SB 4 (Lara). After accounting for those covered under the President’s Executive Action, the cost would be a small fraction of last year’s proposal, amounting to $100-300 million, or around 2 more cents for every dollar spent on Medi-Cal—far less than the “billions” the Governor speculated such an expansion would cost when questioned this morning. When asked if he would sign SB 4 during his press conference, the Governor said he’s not inclined to spend money that’s not available and pointed to the need to account for costs in the future and for future recessions.

OTHER HEALTH INVESTMENTS NEEDED: Perhaps most telling were the priorities that were not included in the Governor’s budget proposal, including many investments that health and community groups continues to support.

Medi-Cal Estate Recovery. Arguing that older low-income Californians should not have to make a trade-off between seeking health care coverage and keeping their family home, advocates are seeking that California limit Medi-Cal estate recovery to costs associated with long term care services and supports, consistent with minimum federal requirements. Last year, the Governor vetoed a bill to limit Medi-Cal estate recovery, arguing the policy change should be considered in the budget instead.

Restore Medi-Cal Benefits Eliminated in the 2009-10 Budget. Also missing from the May Revision are a number of Medi-Cal benefits that were eliminated in 2009 during the state’s fiscal crisis for budgetary, not policy reasons. They include, among other things: acupuncture, audiology, chiropractic, podiatry, speech therapy, and full restoration of adult dental coverage. Adult dental services, which gives Medi-Cal beneficiaries access to preventative care, restorations, and full dentures, were partially restored in the 2013-14 budget,. However, important services such as gum treatment and partial dentures or implants are still not covered in Medi-Cal.

Medi-Cal Provider Rates. To encourage more providers to participate in Medi-Cal and help increase access for Medi-Cal beneficiaries, providers and consumer groups have sought to increase reimbursements to providers in Medi-Cal. In fact, even before a recent 10% rate cut, California’s Medi-Cal provider reimbursement rates were among the lowest in the nation, making access to doctors, specialists, and beneficiaries harder for some of the 12 million Californians with Medi-Cal coverage.

WHAT’S NEXT? The Senate and Assembly Budget Subcommittees will have hearings on the Governor’s May Revision next week. We expect a Budget Conference Committee to convene at the end of the month to hash out differences between actions taken by the two houses. The deadline for a final budget to be passed is June 15th. Health Access will provide updates on our blog.