Sacramento – Today, Senator Mike McGuire voted to support the renewal of the Managed Healthcare Organization (MCO) tax – an overhaul of the healthcare plan tax structure that funds Medi-Cal and will bring a much-needed influx of funding to developmental disability services.

By approving the MCO tax reform renewal today, the state will see $8 billion in federal matching funds over three years that was at risk without changes to the healthcare plan tax. Notably, the MCO tax legislation will put $300 million into developmental disability services, including a 7.5 percent increase to wage and benefits for direct care staff and regional center staff, as well as funding increases for administrative costs, transportation, supported and independent living programs and more – all for community-based developmental services programs. Funding increases have lacked for years and the California developmental disability system has been near crisis due to the lack of funding.

In addition, the MCO tax reform also relieves rural and critical access skilled nursing facilities that are associated with general acute care hospitals from repayment of a prior budget cut, including $325,000 for the Jerold Phelps Community Hospital in Garberville and $404,000 for Trinity Hospital in Trinity County.

“This is an important day for our developmentally disabled community as desperately needed dollars are invested back into services and programs that will benefit tens of thousands of the most vulnerable in our state,” Senator McGuire said. “This bipartisan reform will help our poorest and most medically fragile residents access the care they need and deserve.”   

Below are some key breakdowns for the MCO reform package:

S.B.X.2 No. 2 (Hernandez-Bonta) Medi-Cal: Managed Care Organizations.

• Replaces California’s current MCO tax which sunsets on July 1, 2016.
• Allows California to maximize existing federal dollars, nearly $8 billion in federal support over three years.
• Will not negatively impact premiums and relieves the plans of $371 million in corporation and insurance tax liability, annually for the three years. This tax savings must go towards reducing premiums, increased provider reimbursements or increased plan profits. 
• Provides stable and ongoing funding for Medi-Cal.
• Supported by Anthem, Blue Shield, California Association of Health Plans, CalChamber, California Dental Association, California Medical Association, California State Association of Counties, Health Net, L.A. Care Health Plans, Local Health Plans of CA, Molina Healthcare, Planned Parenthood, Sutter Health, Urban Counties and Western Center on Law and Poverty.

A.B.X.2 No. 1 (Thurmond-Beall) Medi-Cal: developmental services: funding.

• The MCO tax also raises enough revenue to free up General Fund dollars that will be used to provide a $300 million investment in the community-based developmental services system. With matching federal funds, this represents a $500 million investment.
• As a result, the developmental services system that supports nearly 300,000 of the state’s most vulnerable citizens will finally be stabilized after years of cuts and rates freezes that had a debilitating impact.
• Relieves rural and critical access skilled nursing facilities that are associated with general acute care hospitals from repayment of a prior budget cut.
• The bill also provides new resources to improve access to the system for families that have historically been especially underserved, including families of color and those who speak languages other than English.

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