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Managed Care Organization Tax Revived

During the 2019-2020 budget cycle, Governor Newsom did not include a proposal to extend the Managed Care Organization (MCO) tax, which expired on July 1, 2019. An active MCO tax package for the state’s General Fund leverages federal dollars to help fund the state’s Medicaid program, better known as Medi-Cal. At the time, the Governor expressed concern that pursuing a reauthorization of the MCO tax could conflict with the state’s efforts to renegotiate two Medi-Cal waivers set to expire in 2020 with the federal government. During both of Governor Newsom’s terms, he has expanded access to Medi-Cal for multiple segments of the population. According to a report by the California Health Care Foundation:

Medi-Cal, California’s Medicaid program, is the state’s health insurance program for Californians with low income, including nearly 4 in 10 children, one in five nonelderly adults, and two million seniors and people with disabilities. It also pays for more than 50% of all births in the state and 55% of all patient days in long-term care facilities. In total, over 13 million Californians—one in three—rely on the program for health coverage. Medi-Cal pays for essential primary, specialty, acute, behavioral health, and long-term care services.¹

It is well known that reimbursement for services provided through Medi-Cal coverage is prohibitively low, and has been for a long time, not leaving many options for providers to increase their base of Medi-Cal recipients. 

During May's budget revision, the Governor included an increase in Medi-Cal reimbursement rates in the proposed MCO tax package to at least 87.5% of Medicare for Primary Care (inclusive of Nurse Practitioners and Physician Assistants), Maternity Care (inclusive of OB/GYN and doulas,) and non-specialty mental health services, effective January 1, 2024. The proposal became final when the legislature passed the 2023-2024 budget on June 15th, 2023, giving many in the medical community renewed confidence in a better funded program.

The California Medical Association led a coalition during this year’s budget process to ensure that these dollars will be allocated annually for refunding and reinvesting in the Medi-Cal program, and not be made accessible for General Fund purposes.²

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

¹Finocchio, Len; Paci, James; Newman, Matthew. 2021. Medi-Cal Facts and Figures – 2021 Edition Essential Source of Coverage for Millions. August 18, 2021. Blue Sky Consulting Group.….

²California Medical Association. “Historic legislation renews MCO Tax and expands Medi-Cal patient access to care.” June 27, 2023.….