Every year, the California Legislature is required to pass the state’s budget by the constitutional deadline of June 15. The process begins in January, with the Governor releasing his budget proposal indicating appropriation priorities. Negotiations then begin between the Governor, the Legislature, and lobbyists in order to reconcile differences in spending priorities, many times up until the deadline.
A highly contended budget item this year was Gov. Jerry Brown’s proposal to re-appropriate funds derived from the tobacco tax increase that voters approved last November with the passage of Prop. 56. It is estimated that the $2-per-cigarette-pack increase will generate between $1.3 and $1.7 billion in new revenue.
In the Governor’s January budget proposal, Brown targeted this new revenue to shore up funding for the overall Medi-Cal program, the state’s version of federal Medicaid. The proposal immediately became problematic for legislators and the California Medical Association (CMA), as well as the California Dental Association (CDA), both sponsors of Prop. 56, since much of the new revenue was advertised to go toward raising payments to doctors and dentists who treat the state’s approximately 14 million Medi-Cal patients. The primary reason promoted by Prop 56’s backers was to help increase provider rates and climb back from a recession induced 10-percent cut to payments to healthcare providers in 2011. California currently ranks 48th in the country on its reimbursement rates to providers who treat Medi-Cal patients.
Between January and May, both the CMA and CDA engaged in negotiations and budget committee hearings in an attempt to persuade Gov. Brown to designate funds from Prop. 56 to secure higher provider payments. When the Governor’s final budget was released in June, it revealed $325 million in new payments to physicians and $140 million to dentists. Another $50 million was to go toward increasing reimbursements to reproductive health providers and $27 million for higher payments to certain care facilities for the developmentally disabled. This left some $700 million in Prop. 56 funds for general Medi-Cal costs — a decrease from the Governor’s original proposal of $1.2 billion.
Ultimately, a compromise was reached but this may not be the last word of this issue, considering that current federal proposals to repeal the Affordable Care Act include deep cuts to Medicaid.