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California 2019-20 Budget Overview

This week, our In Focus section reviews the California fiscal 2019-20 budget. California Governor Gavin Newsom signed his first budget, and much of its related legislation on June 27, 2019. The budget appropriates $214.8 billion ($147.8 billion General Fund) in total spending with $19.2 billion in reserves. The total reserves includes $16.5 billion in the Rainy Day Fund, $1.4 billion in the Special Fund for Economic Uncertainties, $900 million in the Safety Net Reserve, and nearly $400 million in the Public School System Stabilization Account.

Total Health and Human Services (HHS) funding increased from $160 billion ($39 billion General Fund) in 2018-2019 to $162.3 billion ($41.4 billion General Fund) in 2019-20, an increase of $2.3 billion (1.4 percent). The total HHS funding includes $102.2 billion ($20.3 billion General Fund) for the Department of Health Care Services (DHCS), California’s Medicaid agency.

Medi-Cal (California’s Medicaid program) related items in the budget include:

Expanding Medi-Cal coverage to undocumented individuals between 19 and 25 years of age. $98 million ($74.3 million General Fund) is included in the budget for this coverage expansion. This expansion builds on the existing undocumented coverage through 18 years of age, but doesn’t extend as far as the Senate proposal, which would have also provided coverage for undocumented individuals 65 years of age and older.

Expanding Medi-Cal coverage to low-income seniors (65 and older). $124.9 million ($64 million General Fund) is included in the budget for this coverage expansion. The ACA includes Medicaid expansion of up to 138 percent of the federal poverty line (FPL) for individuals between 19 and 64, but not for individuals 65 and older. With this Medi-Cal expansion to low-income seniors, now low-income individuals 65 and older are eligible for the same coverage as low-income adults 19-64 up to 138 percent FPL.

Managed Care Organization (MCO) tax. The current MCO tax runs through June 30, 2019, and the Administration was not seeking a renewal of the tax. The Legislature wanted a renewal of the tax to draw down federal matching funds, and the budget authorizes the State to seek renewal of the tax with the federal government. Federal approval is required for renewal of the tax.

Restoring Medi-Cal optional benefits. In 2009, the State eliminated the Medi-Cal optional benefits (which include optical, audiology, and others) due to the Great Recession. The budget restores these benefits for three years.

Tobacco tax revenue allocation (Proposition 56). The budget includes: $2.7 billion for supplemental provider payments to physicians, dentists, and other Medi-Cal providers; $544.2 million to establish a value based payment program; $120 million in one-time funding for the Physicians and Dentists Loan Repayment Program; $105 million for developmental and trauma screenings; and $50 million for provider training to deliver trauma screenings.

Prescription drug carve-out. In January, Governor Newsom issued an executive order directing DHCS to move the Medi-Cal managed care pharmacy benefit to fee-for-service (FFS) by 2021. The budget directs DHCS to establish a pharmacy advisory group, which it will keep updated on changes and savings expected from the carve-out, to interact with stakeholders.

In-Home Supportive Services (IHSS). The budget restores the 7 percent reduction in IHSS hours through December 31, 2021.

Additional $120 million in funding for the Whole Person Care Program. The budget makes available an additional $100 million through June 30, 2025 for the Whole Person Care Program, or a successor program, to provide supportive housing services, including, but not limited to, rental subsidies. Funding will be prioritized for individuals with mental illness who are also homeless or are at risk of becoming homeless. The budget also makes an additional $20 million available for non-Whole Person Care counties (through June 30, 2025) for development and implementation of programs to focus on coordinating health, behavioral health with a mental health or substance use disorder, and critical social services such as housing.

Health Home Program timeline extension. Existing law authorizes DHCS, subject to federal approval, to create the Health Home Program for enrollees with chronic conditions.  Existing law also creates the Health Home Program Account in the Special Deposit Fund within the State Treasury in order to collect and allocate non-General Fund public or private grant funds for the purposes of implementing the program. This budget extends the availability of the funds for implementing the program from June 30, 2020 to June 30, 2024.

Healthcare related items beyond Medi-Cal include:

Additional healthcare items in the budget include a state individual mandate coupled with additional assistance for purchasing insurance on Covered California, the State’s ACA Exchange. The budget includes a requirement for all Californians to have health insurance or pay a penalty. The individual mandate was previously required by the federal government, but it was recently zeroed out by Congress. The money received from the state individual mandate is expected to bring in approximately $1 billion for premium assistance for the next three years. There is also an additional $450 million in the budget to supplement this $1 billion over the next three years.

The premium assistance is for individuals between 200 and 600 percent of the FPL. Individuals between 200 and 400 percent of the FPL will receive additional assistance while individuals between 400 and 600 percent will receive assistance for the first time to buy insurance on Covered California. The 2019-20 Budget includes $428.6 million for premium assistance with 17 percent of the amount allocated for individuals between 200 and 400 percent of the FPL and 83 percent allocated to individuals between 400 and 600 percent of the FPL.

For more information, please contact Jason Silva.