After a federal ruling last year threatened to cut aid for Medi-Cal by more than $1 billion, the Brown administration and lawmakers proposed a set of tax increases and reductions that would avert the cut without forcing higher costs onto state taxpayers or consumers. That deal is being challenged, however, by conservatives opposed to new taxes — even if the net cost is zero. Lawmakers should reject this ideological rigidity and keep the federal aid flowing.
More than half of the $80-plus billion the state spends on Medi-Cal, the state's version of the Medicaid insurance program for the poor, comes from Washington. The exact amount of federal aid, though, is based on the amount the state spends to provide the benefits. California has been exploiting that wrinkle, charging insurers that cover Medi-Cal beneficiaries a tax on their premium revenue to raise money to spend on the program. The money has flowed right back to the insurers in the form of higher state payments per Medi-Cal beneficiary covered.
Last July, however, the federal officials overseeing Medicaid rejected this arrangement and similar ones across the country. Unless lawmakers came up with a replacement, the state would either have to cut Medi-Cal, which is dangerously underfunded, or dip more deeply into the General Fund.
So Gov. Brown, insurers and legislative leaders, including some top Assembly Republicans, hammered out an agreement to impose a new tax on all health insurers with HMO plans. Those in the Medi-Cal program would collect higher state payments per enrollee; the rest would benefit from other tax cuts designed to offset the new tax. The federal government, meanwhile, would kick in an estimated $1.35 billion a year that the state would use to restore selected healthcare services for the poor and the developmentally disabled and to beef up the rainy-day fund and other priorities.
What's not to like? You could argue that taxing insurers with one hand and paying them with the other is a way to game the system at the expense of federal taxpayers, some of whom are Californians. And so it is. But even with this extra reimbursement, California would receive less per enrollee than the national average, as it has for years. So it's not as if California is gouging the Medicaid program; to the contrary, it has been penalized for its own efficiency.
Still, conservative tax gadfly Grover Norquist called on Republicans Tuesday to reject the deal, writing that it would be "foolish" for GOP lawmakers "to give up the one thing that makes them relevant in Sacramento — the ability to block bills that raise taxes" in exchange for steering more dollars into programs they supported for the developmentally disabled. If the only thing making Republicans relevant is their ability to stop any and all tax increases, it's no wonder they're having so much trouble winning elections. But more to the point, the proposed Medi-Cal fix would not raise state taxes. Instead, it would preserve a funding stream that helps keep a vital program intact. Instead of viewing the budget through Norquist's blinkered perspective, lawmakers should accept a good deal when they're offered one.