CHA News

DHCS Receives Federal Approval of the Managed Care Organization Tax

What’s happening: On Dec. 15, the Department of Health Care Services (DHCS) received federal approval of the managed care organization tax reauthorized in the 2023-24 budget.   

What else to know: The MCO tax is expected to generate nearly $5 billion annually in net revenue to the state.   

As part of the 2023-24 budget, the Newsom administration committed to spending approximately $2.7 billion annually on increasing Medi-Cal provider rates and payments, nearly $1 billion of which would be dedicated to hospitals starting in 2025. The specific parameters for these rate/payment increases are still under development. DHCS will publish its proposed spending plan for MCO tax proceeds as part of Governor Newsom’s budget release in January.