AB 4 (Levine) 2nd Ext. Creates Key Funding Solution in Legislative Extraordinary Session
Today Assemblymember Marc Levine (D-San Rafael) introduced legislation to close a funding gap for Medi-Cal and other vital health services,bringinga needed solution to the legislative extraordinary session on health funding.
This fix would preserve$1.1 billion in federal matching funds that were threatened after the federal government rejected a sales tax on Medi-Cal plansthat California had previously used to provide its share of Medicaid funding. Resolving the problem is vital to implementation of the Affordable Care Act. AB 4 (Levine) 2nd Ext. also provides needed funding for in-home support services and developmental services.
"I applaud Governor Brown for convening this extraordinary session of the Legislature to act on this expeditiously, as waiting until 2016 is irresponsible," said Levine, a Member of the Committee on Public Health and Developmental Services in the Second Extraordinary Session. "This funding fix is broad-based,stable, and solves the problem we were called here to address. Almost half of all California's children receivehealth care through Medi-Cal, so we must come up with a real, sustainable solution now. I offer this potential solution, and welcome other proposals so that the Legislature can act on this crisis before adjourning in September."
AB 4 (Levine) 2nd Ext. would generate revenue through a broad-based Managed Care Organization (MCO) flat tax of $7.88 per person per month, a solution thatprovides $1.1 billion needed for Medi-Cal to prevent the loss of federal funds.There are 45 MCOs providing managed care coverage for 21 million Californians. Roughly 9 million of them are Medi-Cal patients. MCOs receive federal and state reimbursement for costs of services provided to Medi-Cal Californians.
AB 4 (Levine) 2nd Ext. would accomplish the following:
- Prevent a potential $1.1 billion funding shortfall for Medi-Cal;
- Restore previous cuts to Medi-Cal reimbursement rates and move to fully fund Medi-Cal;
- Reinstate In-Home Supportive Services (IHSS) hours; and
- Increase developmental services funding.
California currently taxes only Medicaid MCOs, an approach recently rejected by the federalgovernment. Thefederal Department of Health and Human Services, Centers for Medicare & Medicaid Services (CMS) notified California in July, 2014 that our current MCO tax is not in compliance with federal rules. CMS provided direction to California to construct a new MCO tax because of the fact that states do not have the " ability to tax only Medicaid MCOs. In order for a health care-related tax on MCOs to be permissible . . . the tax would have to apply more generally to all MCOs ." AB 4 (Levine) 2nd Ext. would resolve this problem.
Funding for Medi-Cal, IHSS, and developmental services is critical. These programs suffered deep cuts in the Great Recession, experienced increased costs, and have yet to receive adequate funding. Several organizations have called for long term funding for Medi-Cal, IHSS, and developmental services.
- "The community system for people with intellectual and developmental disabilities is currently collapsing due to historic divestment away from supporting some of our most vulnerable citizens," said Tony Anderson, executive director of The Arc California. "AB 4 (Levine) 2nd Ext. is an urgently needed bold policy that breaks through the delay. Every day that passes means more individuals and families are at risk." The Arc California is the state's oldest and largest advocacy association of people with intellectual and developmental disabilities and their families fighting for the human and civil rights of the intellectual and developmental disabled community since 1950.
- "California has made a promise to people with developmental disabilities and their families. Marin Ventures and others in this community need vital help in keeping this promise," said Jami R. Davis, Ph.D., Executive Director, Marin Ventures. "We look forward to working on the details of this proposal and others that seek to address this serious need." Marin Ventures is a Marin County community-based nonprofit that serves people with developmental disabilities.
- "California has always been an innovative leader and over many years we built a system of cost-efficient and effective programs to support elderly and disabled citizens. These home and community-based programs are a safety net for our friends, neighbors and community-members who would otherwise be at grave risk due to illness, infirmity or disability," said Lydia Missaelides, MHA, Executive Director, California Association for Adult Day Services. "Since the recession we have cut these programs again and again, until our safety net is full of holes and people are falling through the gaps. AB 4 (Levine) 2nd Ext. will provide funding for vital investments to repair the gaps and sustain all members of our community, no matter how vulnerable; ensuring their safety, protection and good quality of life. These investments are critical to our future, because in our state we take care of people, we don't leave them behind."
- "Now is the time to create a plan that will provide a stable funding source for the services that are critically needed to support our community members with developmental disabilities. These individuals desire to live and participate in our communities but, can only do so with the assistance of direct support professionals," said Stan Higgins, Executive Director, Oaks of Hebron. "The community based services, that are provided through 21 regional centers across the state, have been underfunded for several years causing erosion both to the quality and availability of these services." Oaks of Hebron is a nonprofit service provider through the North Bay Regional Center in Sonoma County.
- "The extension of a revised Managed Care Organization tax is a major concern for people with disabilities and seniors because without it we face over $1 billion in reductions next year. That would be devastating," said Marty Omoto, executive director of the California Disability-Senior Community Action Network. "AB 4 (Levine) 2nd Ext. reflects that urgent priority by providing funding for the continued 7% restoration in service hours for In-Home Supportive Services recipients next year, and provide for significant funding increases for Medi-Cal and developmental services providers that is so critically needed. Republicans and Democrats in the Legislature need to come together on this - our communities will depend on that." The California Disability-Senior Community Action Network is a non-partisan statewide advocacy group for people with disabilities and seniors.
- "Medi-Cal patients that are denied access to doctors due to low reimbursement rates are using emergency rooms for non-emergency medical treatment. This causes paramedics and EMTs to be held for hours and taken out of the 9-1-1 system because hospitals do not have the capacity to take custody of our patients," said Jason Sorrick, director of communications and government relations for American Medical Response. "AB 4 (Levine) 2nd Ext. will help create a reliable funding structure for vital health care services."
AB 4 (Levine) 2nd Ext. is co-authored by the following Assemblymembers: Richard Bloom (Santa Monica) , Cheryl R. Brown (San Bernardino), Ed Chau (Monterey Park), Kansen Chu (San Jose), Cristina Garcia (Bell Gardens), Roger Hernández (West Covina), Reginald Byron Jones-Sawyer, Sr. (South Los Angeles), Kevin McCarty (Sacramento), Adrin Nazarian (Sherman Oaks), Bill Quirk (Hayward), Anthony Rendon (Lakewood), Mark Stone (Monterey Bay), and Das Williams (Carpinteria).
A brief history of the MCO tax issue is attached.
Assemblymember Levine represents the 10th Assembly District, which includes Marin and Sonoma Counties.
A Brief History of the MCO Tax
- In July, 2013, California implemented the current MCO Tax, in accordance with SB 78 (2013), which imposed a sales tax of 3.9375% on Medi-Cal managed care plans' gross receipts effective July 1, 2013, through June 30, 2016.
- In July, 2014, CMS issued guidance indicating that MCO taxes similar to California's were likely no longer permissible for the purposes of funding the Medi-Cal program and, in turn, required states with such taxes to make appropriate modifications by the end of the states' next regular legislative session.
- In January, 2015, the Governor's Proposed 2015-16 Budget included a MCO Tax proposal, which would have implemented a new MCO provider tax effective July 1, 2015, that would have provided an ongoing source of funding for the Medi-Cal program, encouraged California's continued successful implementation of the Affordable Care Act, and minimized the need for reductions to the program. While that proposal provided a valuable start to the discussion, it has not been introduced into a bill as a formal proposal for legislative consideration in the regular session, the budget process, or the extraordinary session.
- On June 19, 2015, Governor Brown issued an Executive Order declaring that, " Extraordinary circumstances require the Legislature of the State of California to be convened in a special session . . . To consider and act upon legislation necessary to enact permanent and sustainable funding from a new managed care organization tax and/or alternative fund sources to provide:
- At least $1.1 billion annually to stabilize the General Fund's costs for Medi-Cal; and
- Sufficient funding to continue the 7 percent restoration of In-Home Supportive Services hours beyond 2015-16; and
- Sufficient funding to provide additional rate increases for providers of Medi-Cal and developmental disability services. "
- On June 30, 2015, the California Association of Health Plans stated in a letter to the Assembly Public Health and Developmental Services Committee that, " Fortunately, the federal government is allowing states to keep their current MCO tax structure in place until the end of their current legislative sessions. This gives California all of 2015 and 2016 to find an alternative to the MCO tax that is equitable, supports Medi-Cal, and is affordable ."
- For about 1 year, several models for creating a new MCO tax have been explored. However, no formal legislation has been introduced.
- The Governor releases the proposed 2016-17 state budget in January, 2016, to take effect July 1, 2016.
- The current MCO tax in California law expires June 30, 2016.