Prop. 35 promises money for health care; critics warn that it could backfire

Amidst the blitz of campaign advertising that fills television, social media and street corners, you won’t see any opposition to measure of voting proposing to earmark billions of dollars to pay doctors more to treat low-income patients.

But the opponents of Statement 35 have a warning, even if they don’t have the money to pay for advertising: the measure could backfire and cause the state to lose billions in federal funding.

Proposition 35 would extend the existing tax on health insurance plans and use the money to increase payments to doctors and other providers who see Medi-Cal patients. His supporters have raised $50 millionfrom groups representing hospitals, doctors and insurance companies.

Medi-CalThe subsidized insurance plan, which serves about 14 million Californians, has grown in size over the past decade due to increased requirements and benefits. But these changes are not accompanied by a corresponding increase in the payment of doctors.

As a result, healthcare providers and advocates say too few doctors accept Medi-Cal, leaving patients with nowhere to turn.

According to California Institute of Public Policythe measure is leading and is likely to be adopted.

But opponents, represented by a small coalition of community health advocates, seniors and good government activists, say the details of the proposal put the state at risk of losing billions in federal funding.

That’s because the federal government, under the leadership of the Biden and Trump administrations, warned California that its health tax plans to fund Medi-Cal services unfairly exploit a loophole in federal regulations. The federal Centers for Medicare and Medicaid Services intends to close this loophole, regulators wrote in a letter to California officials late last year.

“This is a fatal flaw in this initiative,” said Kieran Savage-Sangwan, executive director of the California Pan-Ethnic Health Coalition, which is leading the opposition. “We can all have an opinion on how to spend the money, but first we have to raise the funds.”

The problem, opponents say, is how California taxes health plans and how Prop. 35 limits changes in the future.

Currently, the managed care organization tax, also known as the MCO tax, generates revenue for Medi-Cal by taxing health insurance companies that serve both Medi-Cal and commercially insured patients. The federal government gives California a dollar-for-dollar match of any money raised by the tax. For Prop. 35 is approximately US$7 to 8 billion annually by 2027.

However, California has historically placed most of the tax burden on Medi-Cal insurers rather than commercial insurers. In a letter to state officials, federal regulators said Medi-Cal plans represent 50 percent of all insured individuals but bear “99 percent of the total tax burden.” That goes against the spirit of the law, which aims to redistribute revenue from commercial insurers to Medi-Cal plans, regulators wrote.

Proposition 35 caps the tax on commercial insurers at a minimum rate. Any attempt to change the tax would have to go back to the ballot box or be approved by three-quarters of the legislature. Opponents say that means changes to a federal rule requiring the business tax to be more equal to the Medi-Cal tax would force the state to lower taxes on Medi-Cal plans.

“The net result of this is that when the federal government follows through on its promise to change the rules of this tax, the revenue we get from this tax will drop dramatically, leaving billions of dollars on the table,” Savage-Sangwan. said

Supporters of the measure said the argument was incorrect, but did not provide details. They say that Prop. 35 would make Medi-Cal more stable, and higher rates would encourage more providers to accept low-income patients.

Medi-Cal reimbursement rates in California fall in the bottom third of all other states, according to Kaiser Family Foundationand tariffs for certain services such as midwifery are among the lowest in the country.

“Prop. 35 is a much-needed investment to protect and expand health care access for Medi-Cal patients and all Californians,” said Molly Weedn, Yes on Prop. 35, in the statement. “The primary goal of Proposition 35 is to provide stability and predictability … to address the significant shortage of providers who can accept Medi-Cal patients.”

The California Association of Health Plans said it did not seek the business tax cap in the proposal and that it has historically supported that tax structure for paying for Medi-Cal. Higher tax on commercial plans may increase premiums.

Where Governor Newsom on Prop. 35?

The largest donors to the yes campaign are the California Hospital Association, Global Medical Response and the California Medical Association, which combined to donate $38 million. According to the opponents, the money was not collected government campaign finance records.

Gov. Gavin Newsom has not taken an official position on the measure, although he said at a press conference in July that he was concerned about how it would lock in tax revenue for a single purpose. In the state budget he signed that month, most of the tax revenue from the health insurance tax went into the general fund to pay for Medi-Cal.

If voters approve Proposition 35, the state will face a $2.6 billion current budget deficit that relies on the tax to fill gaps. That deficit will increase to $11.9 billion over the next three budget cycles, according to a Treasury Department analysis.

“This initiative limits our ability to be flexible, which is needed in the current times in which we live. I did not publicly oppose her. But I am expressing a point of view. Maybe you can read between these many, many lines.” Newsom stated this at a press conference.

Newsom’s office did not respond to multiple inquiries about whether he would formally oppose the measure.

Savage-Sangwan said the opposition did not solicit money for its campaign.

“We’re using the very little megaphone we have to just get the facts out there,” she said.

Trade-offs in the 2024 health care vote

The political divide over Proposition 35 is unusual. Opponents of the measure are often on the same side as its supporters when it comes to health care policy in the Capitol. But public health advocates say they are speaking out because the future consequences of the initiative are too risky.

“We want to make it clear that the goals of the ad are goals that we agree with. We recognize that our Medi-Cal providers are underpaid, and this disproportionately affects people of color, especially children of color,” said Mayra Alvarez, president of The Children’s Partnership, another opposition group.

Some lawmakers agree. During several budget hearings, Sen. Caroline Menjivar, D-Van Nuys, opposed the proposal in part because industry organizations negotiating who would get money from the tax did not include “community providers” and those “who do not have highly paid lobbyists”.

“By listening to those on the ground, the Legislature has developed a plan to fairly address Medi-Cal’s many challenges over the next several years,” Menjivar said in a statement from the opposition campaign.

The tax is expected to raise more than $30 billion over the next four years. The budget Newsom signed transfers most of the money to the state’s general spending account, but sets aside about $2 billion for rate increases for services including community health workers, private practice nurses, adult and child day care centers and children at risk of disease automatic exclusion from Medi-Cal. If Requirement 35 passes, various groups will receive rate increases.

Weedn from the Yes on Prop campaign. 35 said the initiative would not result in automatic cuts if passed. She said the Legislature would decide how to pay for programs of concern to opponents, and that the initiative provides about $2 billion annually for legislative priorities.