Tricky Tax Timing for State Lawmakers to Fund Health Care

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 (David McNew/Getty)

The fate of a tax that funds health care for California's poorest citizens seems to be a great example of how in politics, as in life, timing really is everything.

And here's a key question: Is the proposal rolled out at the state Capitol on Monday, a $1.1 billion tax on health insurance plans, crafted cleverly enough to break through the otherwise ironclad position of legislative Republicans to voting against new taxes?

"We think this is an opportunity to address a number of pressing crises," said Assemblyman Marc Levine (D-San Rafael) as he gathered with health and disability advocates to urge passage of his plan.

The centerpiece of Levine's AB xx4 is a do-over of an existing tax that federal officials have decreed all but illegal, a tax that pays for a portion of California's Medi-Cal program. Without it, the state's general fund would be on the hook to make up the difference. The topic has been on the to-do list in Sacramento all year, and the focus of Gov. Jerry Brown's call for a special legislative session on health care financing.

But can the tax do more than fund just Medi-Cal? Levine and his Democratic co-authors believe so, as their plan would raise enough money to fund current levels of in-home supportive services (IHSS); restore the reimbursement rates paid to doctors who accept Medi-Cal patients; and restore recession-era cuts made to services for the developmentally disabled.


That package brings the price tag of the tax on managed care plans, when combined with some federal matching dollars, up to almost $1.9 billion a year -- funded by a tax of $7.88 per month for every Californian who currently buys health insurance.

The timing of the so-called MCO (managed care organizations) tax issue is a little murky. While the governor is urging action, federal officials have set a deadline for Aug. 31, 2016. Yes, it's better to solve problems sooner rather than later, but the California Legislature has a time-honored tradition of solving most problems only when faced with an immediate deadline.

Assemblyman Levine's plan seeks to speed up action by attaching two items that have bipartisan support: higher Medi-Cal reimbursement rates for doctors and restored spending on developmental disability programs.

"Rather than taking multiple bites at different apples," said Levine, "we may have an opportunity to fund these critical services."

But Republicans, at least in their initial reaction, suggested the timing is all wrong.

"The Democrats want to steamroll a tax increase for all Californians through in four weeks," said Assemblyman Travis Allen (R-Huntington Beach) in examining the plan from Democrats.

So how, then, would Allen and other Republicans pay for the additional services that have been rolled into the Medi-Cal proposal?

"Clearly there is room to find the money in the normal budget process," he said. And Allen argued Democrats should have done just that ... in the spring and early summer before the governor signed a new budget.

In the state Senate, newly introduced legislation from Sen. Jim Nielsen (R-Gerber) would direct any tax revenue windfall, like those in the past couple of years, be earmarked for developmental services.

But again, the real question here is timing. Advocates for the disabled, in particular, have been vocal in saying that there's no time to wait for funding those services. Democrats will argue there's a direct nexus between those programs and a tax on health insurance plans; insurers, for the most part, are keeping quiet to see how the political chips fall in these early days of the Legislature's final four weeks of work.

Nexus or no, the fate of those services may not wait for next summer when the existing tax must be canceled. And that's just what some believe will be the way to force action at the Capitol sooner rather than later.