Managed Care Tax Key in Healthy Families Shortfall

by David Gorn

RELATED TOPICS:

The Healthy Families program is short by almost $100 million, according to California health officials. That number will rise, officials said, because the current deficit only covers the program's operation for January and half of December.

The problem is restricted to this year, however, since the roughly 860,000 children in Healthy Families -- California's federally subsidized Children's Health Insurance Program -- are being moved into Medi-Cal managed care plans. This year's transition is planned in four phases. The first phase began Jan. 1.

"This (the funding shortfall) doesn't have anything to do with the transition," said Diana Dooley, Secretary of Health and Human Services. "It has to do with a failure to extend the MCO (Managed Care Organization) tax."

Health plans will be paid for Healthy Families care and services, Dooley said. Every year, she said, the Managed Risk Medical Insurance Board makes an estimate of the money it will need for Healthy Families. Sometimes that estimate is off and this time was way off because of expiration of the MCO tax, she said. 

"MRMIB has routinely had deficiencies," Dooley said. "We have a deficiency process every year. Sometimes they're right and sometimes they're wrong. There will be a deficiency [this year] that will be met through the deficiency process."

The MCO tax  -- a fee paid by managed care plans -- expired at the end of 2012. The state tried to reinstate the MCO tax last legislative session, and hopes to revive it during the current session. The task is made more difficult because the state needs a two-thirds legislative vote to pass it.

The Healthy Families deficiency started in the latter part of December, according to Janette Casillas, MRMIB's executive director. She said the deficit, which hit $33 million, does not include $15 million that the state is currently appropriating. The general fund deficit plus the state's additional draw of $15 million are matched by federal dollars, so the total shortfall is just under $100 million, Casillas said.

The health plans know payment will come and they will wait for it, said Patrick Johnston, executive director of the California Association of Health Plans.

Casillas said the idea of the MCO tax came from the health plans in 2009, as a way to buoy a struggling Healthy Families budget. Johnston said CAHP would support reinstating the MCO tax, under the right circumstances.

"Previously, the dire condition of the budget resulted in a threat to the Healthy Families program. They were talking about reducing or cutting the program," Johnston said. "The solution was having a tax on Medi-Cal managed care organizations … but now that Healthy Families has been transitioned into Medi-Cal, [the same] tax generated on Medi-Cal managed care plans should go to where the money is most needed."

That means using MCO tax money to supplement programs -- such as seniors and persons with disabilities -- rather than just funding Medi-Cal generally, Johnston said.

"They have the ability to fashion a bill, and if they get the two-thirds vote, then that's up to them," Johnston said. "But since the health plans are the ones being taxed, people will ask about our opinion, and we have a position on that. That's all good public policy discussion, we expect to be part of it."


to share your thoughts on this article.