CEO Message

MCO Funding Must be Restored

California’s Legislature has a little more than a week to finalize the state budget for the coming year — no small task given the multibillion-dollar, multiyear deficit at hand. 

In the final days leading up to the June 15 deadline, there is still an opportunity through the annual budget process for critical funding for Medi-Cal to be allocated for the 2025 fiscal year. 

As a reminder, in an effort to balance the budget, the May budget revision proposed to divert resources from a fee assessed on managed care organizations (MCOs) that were previously committed to investing in Medi-Cal through provider payment increases. This would save the state $879 million in 2024-25 and $2.4 billion annually thereafter. For hospitals, the action would eliminate almost $1.5 billion in new annual funding (including federal matching dollars).   

CHA is part of a broad coalition of providers and health plans committed to ensuring these funds remain promised to Medi-Cal — not balancing the state budget — and we will continue to pursue a ballot initiative in November to lock in the MCO revenue for Medi-Cal providers. 

The Legislature’s budget counterproposal would reinstate some of that funding, but not perhaps until 2026. That’s too late for the millions of Californians who rely on Medi-Cal for health coverage but face significant access challenges due to the fact that Medi-Cal reimburses only about three-fourths of the actual cost of health services and providers are struggling to keep their heads above water. 

The fact is that the health care needs of Californians don’t go on hiatus because of the state’s budget challenges. Hospitals, clinics, doctors, Planned Parenthood, and other providers are unable to withstand additional delays in stabilizing the Medi-Cal program if they are to preserve access to care for California’s most vulnerable.  

Earlier this week, CHA sent an alert to hospital leaders asking that they contact their legislators to have them press for restoration of these critical MCO resources. A week earlier, CHA was part of a broad coalition that reached out to legislators seeking reinstatement of the funds

Rates for doctors, clinics, Planned Parenthood, emergency hospital services, maternity wards, and more have not increased in more than a decade — even as inflation has spiraled out of control. Last year, Madera Community Hospital closed, meaning residents in that Central Valley county — one of the poorest in California — now live in a hospital care desert. Other services throughout the state are degrading in real time. 

There is still time for legislators to hear directly from hospital leaders about why any delay in much-needed funds for Medi-Cal will put patient care and access at risk. These MCO resources are key to helping keep facilities open and closing the gap between capacity and demand in vital emergency department care, behavioral health services, and primary and specialty care. 

Please reach out to your state senators and Assembly members today or tomorrow using CHA’s alert as a guide. If you have any questions, contact Mark Farouk, vice president, state advocacy, at mfarouk@calhospital.org.