On May 12th, Gov. Gavin Newsom released his May Revision proposal of the 2023-2024 state budget. Despite a $32 billion shortfall, California associations are praising the revision for maintaining and protecting investments in healthcare.
Since the 2022 Budget Act was enacted last June following two years of growth, revenues have consistently fallen short of monthly estimates. California planned for this shortfall, and the governor and the legislature are paying down the state’s previous debts, prioritizing one-time investments, and building reserves. Although the May Revision does not forecast a recession that is expected in the latter half of this year, the Newsom administration recognizes increased risks to the budget that could greatly alter the state’s fiscal path in the near future.
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“In partnership with the legislature, we have made deep investments in California and its future—transformative efforts that will benefit generations of Californians, and that this budget will continue to guide as we navigate near-term ups and downs in revenue,” Newsom said in an announcement. “As we prepare for more risk and uncertainties ahead, it’s critical that we keep the state on a solid fiscal footing to protect Californians and our progress in remaking the future of our state.”
The May revision of the 2023-24 budget includes $245.7 billion, with $73.3 billion from the general fund) for all health and human services programs under the California Department of Health and Human Services (CalHHS), including:
- $151.2 billion, with $37.6 billion from the general fund, for the Medi-Cal program, which is expected to serve about 14.2 million Californians over the next couple of years
- $5.9 billion for child care
- $5 billion for the CalWORKS cash assistance program
- $3.6 billion for SSI/SSP
- $22.6 billion for in-home supportive services
- $14.1 billion for developmental services
- $3.5 billion for state hospitals
- $5.5 billion for public health
- $13.7 billion for the 1991 and 2011 state-local realignment
- $20.7 billion for other health and human services programs
Within the May Revision is a proposal to renew the Managed Care Organization (MCO) Tax, which would produce $19.4 billion to assist with maintaining the Medi-Cal program, and would support increased investments and reduce the needs for reductions to the program. The tax would run from April 1st, 2023, until Dec. 31st, 2026.
“California’s 21 public healthcare systems are grateful that the governor’s May Revision Budget has taken steps to protect Medi-Cal and the children, families, and seniors who depend on it,” Erica Murray, CEO of California Association of Public Hospitals and Health Systems (CAPH) said. “We applaud the preservation of the Medi-Cal coverage expansion and the inclusion of a Managed Care Organization tax.”
Under the tax, $8.3 billion in net general funds offset would support Medi-Cal and achieve a balanced budget, which includes $3.4 billion in net general fund offset on a cash basis for 2023-24. These funds would reflect an added $2.5 billion, and of the remaining $1.1 billion, the governor proposes to support Medi-Cal investments to improve access, quality, and equity of the program over a period of eight to 10 years.
The California Medical Association (CMA) calls the proposed MCO tax, which expired late last year, a win, and worked this year to reinstate and increase the tax. CMA said the proposed increase would be the first increase in over 20 years, and that it’s in part due to the elimination of the 10% Medi-Cal provider cuts authorized in the 2011-2012 state budget.
Murray believes that consistent and ongoing state funding through the MCO tax is required to address financial challenges public health systems currently face.
“As proposed, the MCO tax is not enough to avoid potential reductions in services at public health systems for our patients, most of whom rely on Medi-Cal or remain uninsured,” Murray said. “Our systems face a looming fiscal reckoning, brought on by decades of insufficient funding and rising costs. Public health system funding needs to be stabilized and prioritized so that already-disadvantaged Californians can continue to access critical health services.”
To increase rates by at least 87.5% of Medicare rates for primary care, obstetric care, and non-specialty mental health services, the revision proposes about $237 million, with $98 million from the general fund, for 2023-24. Each year after, the revision suggests about $580 million, with $240 million from the general fund.
“The provider reimbursement rate cuts from 2011 have had a detrimental impact on patient access to care for more than a decade, and I am very happy to see the governor’s May revised budget today, which will help us achieve justice and equity in access to care for Medi-Cal patients,” Donaldo Hernandez, MD, CMA President, said. “It is more important than ever to address the underfunding of the Medi-Cal system that makes it difficult for many patients to get access to primary and specialty care when they need it.”
Additional healthcare investments in the May Revision include reappropriating a one-time $2 million general fund amount from the Capital Infrastructure Security Program to go towards CalRX. Funds would be used to procure various pharmaceutical drugs to address urgent and emerging reproductive healthcare needs, such as Mifepristone, and to make insulin more affordable, among others.
For the Department of Public Health, the May Revision includes $5.5 billion, with $980.9 million from the general fund, for 2023-24. Ongoing funds of $300 million from the general fund would be maintained to modernize state and local public health infrastructure, and to transition towards a more resilient public health system.
The revision calls for a decrease of $50 million from the general fund to reduce resources for the COVID-19 response, which is driven in part by the end of the federal Public Health Emergency and emergency response activities. In tandem with dwindling funds related to COVID-19, the revision also reflects a decrease of $8 million from the general fund in 2022-23 for unspent workers’ compensation, which was previously authorized for COVID-related claims. The California Nurses Association has been advocating this year to pass Assembly Bill 1156, which would make it easier for registered nurses to file workers’ compensation claims.
The revision includes an additional $141.3 million in Opioid Settlement Funds over the next four years for the Department of Health Care Services to support the Naloxone Distribution Project, amounting to a total of $220.3 million over four years. This includes a $30 million one-time Opioid Settlements Fund in 2023-24 to support the development of a lower-cost or generic version of naloxone nasal spray, through CalRX Naloxone Access Initiative to make it more available statewide, as Californians continue to overdose.