June 27, 2017: After months of negotiations, California’s budget for 2017-2018 has passed the legislative branch and has been approved by Governor Jerry Brown. The implementation of this budget reflects a compromise made between the governor and lawmakers on how to fund Medi-Cal (California’s Medicaid system) and payments for health care providers from Proposition 56 tobacco tax funds. Brown’s initial budget proposal delegated Proposition 56 funds “to pay for typical year-to-year cost increases in the [Medicaid] program.” However, health care providers argued that the plain language of the law delegated much of those tax revenues as provider payments. For more information on the controversy, you can view our summary here.
Now, according to the California Budget and Policy Center’s analysis of the budget, of the projected $1.3 billion in tobacco tax funds that are to flow to Medi-Cal in 2017-2018, up to $546 million could go to doctors, dentists, and other Medi-Cal providers as “supplemental payments.” California will only disburse these payments if 1) the state receives “all necessary federal approvals” in order to ensure that federal Medicaid matching funds will be available to the state; and 2) the federal government does not cut funding for Medi-Cal. The Department of Health Care Services will later determine more rules for allocating these payments. The remaining funds will be used for ordinary spending growth in the program. Although parties reached a compromise this year, these numbers are subject to change for the 2018-2019 fiscal year.