What’s happening: On Nov. 5, California voters overwhelmingly approved Proposition (Prop) 35, making an existing tax on managed care organizations (MCO) permanent under state law — and directing most of the revenues toward expanding access to care for Medi-Cal patients through improved provider reimbursement. Now, work by the state, hospitals, and others to determine how these funds should be distributed begins.
What else to know: While Prop 35 specifies how much funding shall go to several different service categories, it does not set the methodologies for distributing the funds. The ball is now in the Department of Health Care Services’ court to develop these payment methodologies — in consultation with hospitals and other providers, including through a dedicated stakeholder advisory committee.
Prop 35 secures as much as around $5.4 billion for Medi-Cal provider payment increases beginning in 2025. Of this funding, $1.4 billion will support hospital emergency department services, outpatient services, designated public hospitals, and graduate medical education. However, getting these much-needed dollars to providers will take some time, for at least a couple reasons.
First, the state must develop the payment methodologies for distributing the funds. This policy development work was underway in the spring of 2024, but it was put on pause after the governor announced and secured changes to the MCO tax spending package that significantly scaled back the previously enacted investments. Policy development for next year’s investments is expected to resume in the coming weeks and be finished in the first half of 2025, after which the state must obtain federal approval of the selected payment methodologies, with implementation to follow.
Second, the timing of funding distributions will depend heavily on the specific payment methodologies chosen. For example, some methodologies could result in distributions that occur by the end of 2025, while others could result in distributions that do not occur until 2026 or later. While CHA will push for the fastest distributions possible, ensuring the dollars go exactly where intended may lead to longer implementation timelines.
Contact Ben Johnson, group vice president, financial policy, at bjohnson@calhospital.org if you have any questions.
