Final Budget Agreement Provides Over $1 Billion to Improve Medi-Cal Provider Payments


Last November California voters overwhelmingly approved Proposition 56 (a measure CPMA strongly supported), which added a $2 tax on tobacco products and stipulated that funds should increase access by improving provider payments.

In January, Governor Brown’s budget redirected ALL tobacco tax revenues to support the state’s General Fund obligations. The Governor’s revised May budget doubled down on the proposal, offering no additional funding to improve provider payments.

CPMA joined other healthcare stakeholders in calling for the implementation of the will of California voters to utilize the tobacco tax revenues for smoking cessation programs and improve access to healthcare.

The legislature listened - both houses rejected the Governor’s proposal and laid out a different framework for appropriating tobacco tax revenues into the final budget.

The Senate and Assembly approved the state budget, which includes a Prop 56 appropriation bill that provides over $1 billion ($546 million in state funds plus a federal match) for the 2017-2018 fiscal year to improve provider payments.

Specifically, the budget and Prop 56 appropriation bill provides:

  • $650 million for supplemental payments for physicians ($325 million in state funds plus a federal match). The legislative intent is for the rate increase to apply to physicians who participate in Medi-Cal fee-for-service or managed care.
  • $100 million for women’s health services ($50 million in state funds plus a federal match) and $8 million for HIV/AIDS waiver provider payments ($4 million in state funds plus a federal match). Physicians qualify for these supplemental payments if they provide such services.
  • $54 million for supplemental payments for Intermediate Care Facilities for the developmentally disabled ($27 million in state funds plus a federal match).


In addition, the appropriation bill includes a mechanism to increase the supplemental payments for doctors and dentists to $800 million depending on the state's fiscal condition, which would increase the allocation for physicians from $650 million to over $1 billion ($559.5 million in state funds plus a federal match).

While the budget does not appropriate all tobacco tax revenues to improve provider payments as required by Prop 56, it explicitly sets aside millions to improve those payments. The initiative required the state to improve payments to providers without specifying how to divide the revenues.

Questions remain about how the remainder of tobacco tax revenues will be invested – but the vote provides certainty that physicians will, at minimum, receive $650 million in the 2017-2018 fiscal year, $108 million for women's health and AIDS/HIV services, and 70 percent of future supplemental provider payments.

(Source: CMAnet [6/16/2017])