As indicated in the following items, increasing uncertainty about Medi-Cal funding is driving concern, planning and decisions by the Governor, the Legislature and by healthcare stakeholders. The Governor kept a commitment in this year’s budget to fund expanded eligibility for children of undocumented parents by signing Senator Ricardo Lara’s SB 4, but drew the budgetary line on any further expansion of benefits or eligibility by vetoing a half-dozen bills sent to his desk at the end of the legislative session. His reason: Medi-Cal is facing a $2 billion shortfall (state & federal) in next year’s budget if legislators fail to agree on a replacement for the current Managed Care Organization tax which has been rejected by the federal government as ineligible for matching funds.

To compound funding uncertainty, the state’s proposal to renew its current “1115 Waiver,” set to expire on October 31, has not yet been approved by the Federal Centers for Medicare and Medicaid Services. Included below is this week’s report from the Legislative Analyst on the waiver negotiations, which points out that the state is asking for federal approval of an additional $17 billion in spending over the next 5 years, including $10 billion in new programs and benefits—including provider rate incentives—and $7 billion in continuing spending with new flexibility for hospitals and other Medi-Cal providers. The LAO report recaps concerns that if the feds don’t accept the state’s cost and savings assumptions, there may not be sufficient “headroom” to fund any increases in spending because of the federal requirement for a budget-neutral waiver.

Finally, on the funding front, several revenue-raising initiatives have been filed by various stakeholders with the Attorney General’s Office and some or all of them may be headed for the November 2016 ballot. These include a measure to raise the tobacco/e-cigarette tax by the equivalent of $2.00/pack, at least two measures which would extend the temporary Proposition 30 income tax on high-wealth taxpayers or expand those taxes and make them permanent, a measure to modify Proposition 13 property tax limits by increasing taxes on high-value real properties, and two or more measures to legalize, regulate and tax the sale of recreational marijuana. The enactment of one or more of these measures by voters could increase funding for California healthcare services by as little as a few hundred million dollars or as much as $4 billion.

Below, we have included a series of articles from the California Healthline that well summarize the most high-profile signing/veto actions of Governor Brown in the healthcare space as well as the recently released report by the Legislative Analyst's Office referenced above:

LAO ReportSection 1115 Waiver Renewal: Key Medi-Cal Financing Issues Remain Outstanding

California Healthline, “Brown Vetoes Medi-Cal Bills, Citing Expected $1.1B Budget Deficit

California Healthline, “New Law Will Expand Medi-Cal to 170K Undocumented Children

California Healthline, “53% of Uninsured Californians Eligible for Medi-Cal, ACA Subsidies