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Legislation Impacting Healthcare Costs in 2024

On September 14, 2023, the California legislature adjourned the first session of its two-year legislative cycle. October 14, 2023, was the signing deadline for the 1,046 bills that made it to Governor Newsom’s desk. Of that total, the governor vetoed 156 bills, a higher number that may be attributed to concerns over increased spending and higher employer costs.

Here is a summary of three signed bills that are most likely to impact healthcare policy going forward:

AB 119-MCO Tax: This bill reinstates the Managed Care Organization (MCO) tax. After passing unanimously in both the Senate and Assembly, AB 119 was signed into law by Governor Newsom on June 29, 2023. The tax applies retroactively to April 1, 2023, through December 2026 and is projected to bring in $19.4 billion in funding over its lifetime. AB 119 requires managed care plans operating in California to pay up to $192.50 per enrollee per month of enrollment.

AB 118-Provider Payment Reserve Fund: This bill is a companion bill to the MCO tax that allocates $11.1 billion for the fund, which will be used to increase Medi-Cal reimbursement rates. Specifically, Medi-Cal reimbursement rates will increase for primary care, obstetric care, doula services, and non-specialty outpatient mental health services that must be at least 87.5% of the lowest maximum allowance set by the Medicare Program. The rate increases will go into effect on January 1, 2024. 

SB 525-Increase Minimum Wage for Healthcare Workers: Introduced by Senator Maria Elena Durazo (D-Los Angeles), this bill will raise the minimum wage for those considered California’s lowest paid health workers such as nursing assistants, medical techs and janitorial workers to $25 an hour over the next several years based on a tiered system and type of healthcare facility.

A contentious bill from the start, last minute amendments to strike a deal between the state’s largest labor union and bill sponsor, Service Employees International Union (SEIU), and the hospitals and dialysis centers resulted in the following parameters:

  • Dialysis clinics and large health systems with more than 10,000 workers would pay a minimum wage of $23 an hour in 2024, $24 in 2025, and $25 in 2026.
  • Hospitals with a high mix of Medi-Cal and Medicare patients, as well as rural independent hospitals would have to pay workers $18 an hour in 2024. That rate would increase 3.5% annually until it reaches $25 in 2033.
  • Community clinics would start the pay increase at $21 per hour in 2024, rising to $22 in 2026 and $25 in 2027.
  • Other health care employers would increase their minimum wage to $21 per hour in 2024, $23 in 2026 and $25 by 2028.
  • The union agreed to a 10-year moratorium on local measures that aim to increase compensation for medical workers. Also, for four years, the union will not take any dialysis-related measures to the ballot.

It is important to note that the bill author put out a letter clarifying the intent of the bill. Basically, this is confirmation that “individual practices” with less than 25 employees are not in the scope of this bill. Will they be impacted by it? Absolutely. But that’s a topic for another column.

More details on SB 525:…    

Gabriela Villanueva is CAP’s Government and External Affairs Analyst. Questions or comments related to this article should be directed to