California Prop 35 promises money for health care. Its critics warn it could be back

Among the election ads flooding TV, social media, and street corners, you won’t see any opposition to a ballot measure that recommends spending billions of dollars to pay more doctors for treating low-income patients.

But opponents of Proposition 35 have a warning even if they don’t have the money to pay for ads: The measure could backfire and cost the state billions in federal funding.

Prop. 35 would take existing taxes on health insurance plans and use the money to increase payments to doctors and other providers who see Medi-Cal patients. Its supporters have raised $50 million, from groups representing hospitals, doctors and insurers.

Medi-Cal, the subsidized insurance plan that serves about 14 million Californians, has grown in size over the past decade with increased eligibility and benefits. But those changes did not come with a commensurate increase in payment to doctors.

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

According to the California Public Policy Institute, this measure is leading and likely to pass.

But opponents, represented by a small coalition of public health advocates, senior citizens 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 administration of Biden and Trump has warned California that its tax on health plans to support Medi-Cal services takes unfair advantage of a loophole in state law. The federal Centers for Medicare and Medicaid Services is committed to closing that gap, officials wrote in a letter to California officials late last year.

“This is a terrible mistake for this plan,” said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Coalition, which is leading the opposition. “We can all have ideas on how to spend the money, but we have to raise the money first.”

The problem, opponents say, is how California taxes health plans and whether Prop. 35 how does it reduce changes in the future.

Currently, the Management System Tax, also known as the MCO Tax, raises money for Medi-Cal by charging health insurers who serve Medi-Cal and commercial patients. The federal government gives California a dollar match for any revenue generated by the tax. For Prop. 35 is an estimated $7 billion to $8 billion annually through 2027.

However, California has always placed a higher tax burden on Medi-Cal insurers than commercial insurers. In its letter to federal officials, federal officials said Medi-Cal plans represent 50% of all insured people but bear “99% of the total tax burden.” That goes against the spirit of the law, which is intended to redistribute money from commercial insurers to Medi-Cal plans, officials wrote.

Prop. 35 would cover the tax on commercial insurers to a lesser extent. Any attempt to change the tax would have to go back to the ballot box or be approved by three-fourths of the Legislature. Opponents say that means federal government reforms that require business taxes to be more equal to Medi-Cal taxes will force the state to cut taxes on Medi-Cal plans.

“The result of this is if the federal government follows through on their promise to change the tax laws, the money we collect from this tax will be significantly reduced and we will be leaving billions of dollars on the table,” Savage-Sangwan. said.

Proponents of the measure say the argument is bogus but provide no evidence. They say Prop. 35 will make the Medi-Cal program more stable and higher rates will encourage more providers to see low-income patients.

California’s Medi-Cal reimbursement rates fall in the bottom third of the rest of the state, according to the Kaiser Family Foundation, and rates for specialty services like maternity are among the lowest. the most in the country.

“Prov. 35 is a much-needed investment to protect and expand access to care for Medi-Cal patients and all Californians,” said Molly Weedn, spokeswoman for the E on Prop. campaign. 35, in the sentence. “The primary purpose of Prop. 35 is to provide stability and predictability … to address the significant shortage of providers who can see Medi-Cal patients.”

The California Association of Health Plans said it did not request a business tax break for the proposal and that it has always supported this tax structure to fund Medi-Cal. Higher taxes on business plans can increase fees.

Where is the Newsom government on Prop. 35?

The largest donors to the campaign are the California Hospital Association, Global Medical Response, and the California Medical Association, which collectively gave $38 million. The opposition has not raised any money, according to state campaign finance reports.

Gov. Gavin Newsom hasn’t taken a formal position on the measure, though he said at a press conference in July that he was concerned about how it would freeze tax revenue for one project. The federal budget he signed that month shifted most of the tax revenue from a tax on health insurers to the general fund to pay for the Medi-Cal program.

If voters approve Prop. 35, the state will face a shortfall of $ 2.6 billion in the current budget, which depends on taxes to fill the gaps. That deficit will rise to $11.9 billion over the next three budget cycles, according to an analysis from the Treasury Department.

“This effort is hindering our ability to have the kind of flexibility that’s needed in this time that we live in. But I’m just giving an opinion. Maybe you can read between a lot of the lines,” Newsom said at the conference. the media.

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

Savage-Sangwan said the opposition has not asked for money for its campaign.

“We’re using the smallest megaphone we have to get information,” he said.

Businesses in 2024 measure health care options

Political divide over Prop. 35 is not common. Opponents of the measure are often on the same side as its supporters when it comes to health policy issues in the Capitol. But public health advocates say they’re speaking out because the project’s implications are too dangerous.

“We want to make it clear that the prop’s goals are goals that we agree with. We recognize that our Medi-Cal providers are underpaid and that 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 many budget discussions, Sen. Caroline Menjivar, a Democrat from Van Nuys, came to oppose the proposal in part because the industry groups negotiating who will get the money from the tax have been left out by “public donors” and ” who do not have high-paid investors.”

“By listening to those with boots on the ground, the legislature created a plan to address many of Medi-Cal’s problems fairly over the next several years,” Menjivar said in a statement from the opposition campaign.

The tax is expected to generate more than $30 billion over the next four years. The budget Newsom signed puts most of the money in the state’s general spending account, but sets aside about $2 billion to increase fees for services including public health workers, private nursing , centers for adults and children and children at risk for Medi-Cal. not registered. If Prop. 35 may exceed, different groups will be increased by the fees.

Weedn with the Yes on Prop. 35 campaign said that this plan will not cause a reduction if it passes. It will be up to the Legislature to decide how to pay for the programs that opponents are concerned about, he said, and that the measure provides about $2 billion in variable funding each year. year for legal priorities.

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This story was published by CalMatters and distributed in partnership with The Associated Press.