Governor released 2017-18 proposed state budget.

Amid uncertainty about changes in state revenue and policies in Washington, California Gov. Jerry Brown presented the $177.1 billion 17-18 proposed state budget today.  In keeping with the Governor’s vision, the plan lacks major red ink.  Currently, no issue is looming larger for California’s finances than the federal Affordable Care Act that Trump and congressional Republicans have vowed to repeal.  California receives more than $15 billion from the federal government to pay nearly all of the cost of Obamacare’s optional expansion of Medi-Cal covering 3.8 million childless adults. The law’s repeal would force the state to come up with another revenue source or roll back the Medi-Cal growth.  Additionally, congressional Republicans and the President Elect have discussed moves to Medicaid block grants, capped per beneficiary allotments to states, tax credits to enroll Medicaid beneficiaries in private insurance, and/or the creation of high-deductible plans coupled with health savings accounts.  Despite the many unknowns, the proposed state budget reflect existing state and federal law.

Of note to district/municipal public hospitals, there are currently no cuts proposed for the Medi-Cal program.  The budget assumes additional revenue for the Medi-Cal program from Proposition 56 (the tobacco tax increase) passed in November.  Much of this new revenue will partially offset growth in costs and caseload in the program.  The hospital quality assurance fee extension is also noticed in the budget as the state receives funding via the fee for health care coverage for children and the program’s administrative expenses.

The budget also assumes costs associated with administrative activities associated with implementation of federal regulations, most notably in the hospital world, the Medicaid managed care regulations that will change components of supplemental funding via Medi-Cal managed care plans (rate range and the hospital quality assurance fee).

Today’s release will be followed by weeks of legislative budget subcommittee hearings. The Governor will present a revised proposal in mid-May (the “May Revise”) that reflects April tax receipts and possibly the fiscal impact of any changes in policy crafted by congressional Republicans and Trump.  The state budget has to be passed by June 15.

In presenting the proposed budget, the Governor expressed serious concerns about the impact of a repeal of the ACA.  The DHLF on behalf of member hospitals and the patients you serve, shares those concerns.  This is a cornerstone of our 2017 federal advocacy which will be very dynamic as details are unfolding often.  Please take a moment to weigh in with your Congressional representatives per the federal alert sent earlier today.  This will be an ongoing discussion item at upcoming DHLF meetings.

We will keep you apprised of state budget and federal policy activities.  If you have any questions, please let me know.