Why Congressman Vince Fong is urging the Trump administration to reject a health tax in California | CA Politics 360
Congressman Vince Fong has voiced strong opposition to Governor Gavin Newsom’s proposed changes to California’s Managed Care Organization tax, arguing that the plan misuses resources and worsens the state’s affordability crisis.
The tax still needs federal approval but was passed by state lawmakers and Gov. Gavin Newsom last month. The updated tax is one of a variety of ways the state leaders tried to balance the state’s budget while grappling with increased healthcare costs following the Trump administration’s federal cuts through H.R.1. The state tax applies to health insurers, who have signaled they would pass the tax onto customers.
The changes are expected to result in private health insurance rate hikes of about $100 more a year for an individual, or $400 for a family of four.
Fong, along with other House members, sent a letter to the Department of Health and Human Services (HHS) urging it to reject the new managed care organization (MCO) tax proposal.
“Gavin Newsom is going to try to bail out or cover up his budget deficit by taking health care funds that were supposed to be dedicated to Medicaid in California,” Fong said. “That’s terrible policy.”
He explained that the governor’s plan would impose one of the largest tax increases in California’s history, potentially costing families $400 or more.
“It’s going to impact families, small businesses, it’s going to impact local governments,” Fong said. “All of that gets passed on, and all the while, it’s just to cover up Gavin Newsom’s fiscal responsibility. That’s why he should be rejected.”
Fong said the proposal violates Proposition 35, which was passed to ensure Medicaid funds are used solely for Medicaid purposes, such as increasing reimbursement rates, stabilizing provider networks, and improving access to care.
“Prop 35 was passed by the voters, supported by health care organizations across the state to ensure that this never happened,” Fong said. “The governor is ignoring Prop 35 with this proposal.”
He also criticized the state’s growing reliance on Medicaid funding, noting that spending has more than doubled under Newsom’s administration, from $93 billion to over $200 billion. “All the expansions that have occurred have been irresponsible,” Fong said.
Fong called for structural reforms to address waste, fraud, and abuse within the Medicaid system, pointing to billions of dollars in fraudulent payments identified in areas such as hospice care. He also criticized expansions, such as providing health care to undocumented immigrants, as contributing to the financial strain.
“The health care proposals to give health care to undocumented and illegal immigrants is not the right approach,” Fong said. “It’s wrong. It’s the wrong policy.”
He emphasized the need for transparency and an audit of the Medicaid system to find efficiencies and savings.
“There has to be, I think, an audit of the Medicaid system in California to look at where you can find efficiencies, where you can find savings, and how you can increase the reimbursement rates responsibly to ensure that doctors and hospitals and providers have stability,” Fong said.
Fong also criticized a potential “free rider penalty” under consideration by state lawmakers, which would tax large corporations with employees on Medicaid.
“That’s just doubling down on insanity,” Fong said. “The tax burden is enormous. People are leaving and businesses are leaving because they can’t afford to stay here.”
He warned that the state’s current trajectory could lead to the collapse of its Medicaid system. “How do you have a health care system when you have no emergency room, when you have no hospital, when you have no doctors that are going to provide health care to our communities?” Fong said.
Fong expressed concern about the state’s broader financial health, citing a $20 billion unemployment insurance debt to the federal government and the misuse of pandemic relief funds.
“The state of California spends over $565 million just to service that debt. It doesn’t even pay down the principal,” Fong said.
He concluded by urging Californians to pay attention to the implications of the MCO tax proposal.
“While it sounds wonky and arcane, it affects everybody,” Fong said. “Every single health care plan is going to see a tax increase, and it’s going to impact families, businesses, and local governments.”
Fong emphasized that the proposal is “terrible policy” and said it would worsen the affordability crisis in California.
“Gavin Newsom is fixing his problem by increasing taxes on the most vulnerable people in our state and on the businesses that we need to be successful,” Fong said.
KCRA 3 Political Director Ashley Zavala reports in-depth coverage of top California politics and policy issues. She is also the host of “California Politics 360.” Get informed each Sunday at 8:30 a.m. on KCRA 3.