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California Proposed May Revision Budget Adds Medi-Cal Expansions

This week, our In Focus section reviews California’s May Revision to the Governor’s Budget, which proposes a $267.8 billion budget (with $196.8 billion General Fund) for fiscal year 2021-22. The revised budget includes $24.4 billion in reserves, the largest in history. The May Revision builds on the California Advancing and Innovating Medi-Cal (CalAIM) proposal and introduces several Medi-Cal initiatives and benefits for fiscal year 2021-22.

California Governor Gavin Newsom lays out $207.7 billion ($54.2 billion General Fund and $153.5 billion other funds) for the state’s Health and Human Services (HHS) agency. Under HHS, the Medi-Cal budget is $115.6 billion ($21.5 billion General Fund) in fiscal year 2020-21 and $123.8 billion ($27.6 billion General Fund) in fiscal year 2021-22. The May Revision assumes that caseload will increase by approximately 7.1 percent from fiscal year 2019-20 to fiscal year 2020-21 and increase by 6.6 percent from fiscal year 2020-21 to fiscal year 2021-22. Medi-Cal is projected to cover approximately 14.5 million Californians in 2021-22, over one-third of the state’s population.

The May Revision includes $1.1 billion for CalAIM, which seeks to standardize and streamline the Medi-Cal program and address health disparities and social determinants of health for high-risk, high-cost Medi-Cal members through broad-based delivery system, program, and payment reform. An HMA summary of the revised CalAIM proposal can be found here. When speaking about CalAIM during his remarks on the May Revision, Newsom mentioned the upcoming re-procurement for managed care plans, which is scheduled to be released later this year, with implementation scheduled for January 2024. About 3 million of the state’s Medicaid managed care members will be reprocured under the new RFPs, including approximately 1.6 million for commercial plans[1] in two-county model markets, and over 1.2 million in Geographic Managed Care (GMC) model markets.

Most notably, the May Revision proposes to expand Medi-Cal coverage, including In-Home Supportive Services, to undocumented adults aged 60 and older effective no sooner than May 1, 2022, for $69 million ($50 million General Fund) in fiscal year 2021-22 and $1 billion ($859 million General Fund) ongoing.

Other Medi-Cal expansions the May Revision proposes to fund include:

  • Population Health Management Service
    • one-time $315 million ($31.5 million General Fund)
    • provide population health management services that would centralize administrative and clinical data from the Department, health plans, and providers
  • Medi-Cal Providing Access and Transforming Health Payments (PATH) 
    • one-time $200 million ($100 million General Fund)
    • Medi-Cal coverage of services 30 days prior to release for justice-involved populations
  • Five-Year Medi-Cal Eligibility Extension for Postpartum Individuals
    • $90.5 million ($45.3 million General Fund) in fiscal year 2021-22 and $362.2 million ($181.1 million General Fund) annually between 2022-23 and 2027-28
    • Extend Medi-Cal eligibility from 60 days to 12 months for most postpartum individuals, effective April 1, 2022 for up to five years
  • Doula Benefit
    • $403,000 ($152,000 General Fund) in fiscal year 2021-22 and approximately $4.4 million ($1.7 million General Fund) annually
    • add doula services as a covered benefit in the Medi-Cal program, effective January 1, 2022
  • Community Health Workers
    • $16.3 million ($6.2 million General Fund), increasing to $201 million ($76 million General Fund) by 2026-27
    • add community health workers to the class of health workers who are able to provide benefits and services to Medi-Cal beneficiaries, effective January 1, 2022
  • Medically Tailored Meals
    • one-time of $9.3 million General Fund
    • continue the provision of medically tailored meals in the period between the conclusion of the existing pilot program in 2021 and when medically tailored meals become available as an option for In-Lieu of Service (ILOS) under CalAIM

With an improved revenue outlook, the May Revision also proposes to eliminate suspensions of various HHS investments effective July 1, 2021, and December 31, 2021, including Proposition 56 supplemental payment increases, reversing the 7 percent reduction in In-Home Supportive Services hours, and Developmental Services provider rate increases. The budget allocates $2 billion for this.

Other May Revision funding proposals include:

  • Transforming Children’s Behavioral Health
    • $4 billion over four years for transforming children’s behavioral health, including screening students for early identification, connecting students to services for substance abuse, stress, trauma, grief, and psychological disorders; and developing interactive tools via a virtual platform
  • Drug Rebate Fund Reserve
    • $222 million in fiscal year 2020-21 to the Medi-Cal Drug Rebate Fund to maintain a reserve
  • Medication Therapy Management
    • $12.6 million ($4.4 million General Fund) to reimburse specialty pharmacies for services provided to beneficiaries with complex drug therapies in the fee-for-service delivery system, effective July 1, 2021
  • Support for Public Hospitals and Health Systems
    • $300 million one-time Coronavirus Fiscal Recovery Fund to help public health care systems cover costs associated with critical care delivery needs provided during and beyond the pandemic
  • Rates for Intermediate Care Facilities for Individuals with Developmental Disabilities (ICF/DD) and Pediatric Subacute Facilities
    • $24 million ($11 million General Fund) to address frozen rates for ICF/DD and pediatric subacute facility rates

For a full list of proposed funding initiatives, please see the full proposed May Revision budget here:

[1] Alameda and Contra Costa counties may not be part of the re-procurement as they have submitted letters of intent to the California Department of Health Services (DHCS) for model changes.