Dive Brief:
- California is facing the loss of $1.1 billion in its health budget next year as it prepares to end its “managed care organization tax,” which currently taxes Medi-Cal managed care health plans, because it doesn't meet federal regulations.
- Although the state is looking for ways to replace or salvage the tax, a resolution is not widely expected until mid 2016, when the current tax has to end.
- In the meantime, the projected loss is already impacting healthcare-related legislation. Gov. Jerry Brown (D) has referenced the issue in vetoes to 15 bills, reports Kaiser Health News, and is expected to issue a state budget in January that cuts health and human services programs.
Dive Insight:
The state appears to be at odds with insurers over one possible way to preserve the tax: Assessing it on all managed care plans, not just the ones serving Medicaid enrollees.
The issue with the tax as it stands is California is requiring it in order to inflate the funds it spends on Medi-Cal, which brings in more matching funds from the federal government. The state then uses a complicated process that essentially reimburses those insurers for their tax contribution. However, Congress is nixing this scheme, leaving the one option of assessing the tax on all managed care plans--a concept being rejected by plans that wouldn't get reimbursements under the program, as well as Republican legislators, KHN reports.
While some states have managed to adapt their tax to comply with federal regulations, Pennsylvania, Ohio and Michigan are also still working through it. In California, some suggest that the looming impact of $1 billion in healthcare cuts could be enough to spur a deal.