Governor’s 2020-21 May Revise

The Governor released the May revision to the proposed 20-21 state budget today.  As has been recently reported, California has an estimated deficit of more than $54 billion related to COVID-19 and its resulting impacts on the economy.  The May Revise proposes to cancel new initiatives proposed in the Governor’s Budget released in January, cancels and reduces spending included in the 2019 Budget Act, draws down reserves, borrows from special funds and temporarily increases revenues. Additionally, some proposals are specifically tied to the amount of federal funds California might receive.

Specific to healthcare, below are areas of interest to district/municipal hospitals.

Starting with some positive news, according to the May Revise, “the state is not in a fiscal position to increase rates or expand programs given the drastic budget impacts of the COVID-19 Recession.”  In addition to a couple of other programs, the May Revise proposes to defer the creation of the Office of Health Care Affordability.  This serves to at least delay the state’s efforts related to various affordability proposals (caps on hospital growth as one example) that have been under discussion/consideration prior to the COVID-19 outbreak.

The most concerning of the proposals is the one that makes various changes to the way that managed care capitation rates are determined. These changes include various acuity, efficiency, and cost containment adjustments. These adjustments would be effective for the managed care rate year starting January 1, 2021, and would yield General Fund savings increasing each year.  Additionally, the May revision assumes a 1.5 percent rate reduction for the period July 1, 2019, through December 31, 2020.  We are reviewing this proposal for not only it’s impact on providers’ rates but also on the rate range and other supplemental programs via Medi-Cal managed care plans.

Other proposals of interest:

California Advancing and Innovating Medi-Cal (CalAIM):  The May Revision proposes to delay implementation of the CalAIM initiative.  CalAIM was contained in the January proposed budgeted and included various proposals to improve health outcomes of the Medi-Cal population by implementing delivery system, program and payment reform across the Medi-Cal program. 

Full-Scope Medi-Cal to Undocumented Older Adults:  The May Revision proposes to withdraw this proposal

Medi-Cal Aged, Blind, and Disabled Income Level Expansion:  The May Revision proposes not to implement the 2019 Budget Act expansion of Medi-Cal to aged, blind, and disabled individuals with incomes between 123 percent and 138 percent of the federal poverty level.

Funding for behavioral health counselors in emergency departments, Medi-Cal enrollment navigators, and the Medical Interpreters Pilot Project have been reverted to 2019 levels when they were augmented.

The following reductions will occur absent additional federal funds sufficient enough to restore them. 

The May Revision proposes to reduce adult dental benefits to the partial restoration levels of 2014. In addition, the May Revision proposes to eliminate audiology, incontinence creams and washes, speech therapy, optician/optical lab, podiatry, acupuncture, optometry, nurse anesthetists services, occupational and physical therapy, pharmacist services, screening, brief intervention and referral to treatments for opioids and other illicit drugs in Medi-Cal, and diabetes prevention program services. 

Proposition 56 Adjustments—Beginning in 2020-21, the May Revision proposes to shift $1.2 billion in Proposition 56 funding from providing supplemental payments for physician, dental, family health services, developmental screenings, and non-emergency medical transportation, value-based payments, and loan repayments for physicians and dentists to support growth in the Medi-Cal program compared to 2016 Budget Act.

The entire budget detail and summary is available at