{"id":525920,"date":"2026-03-16T00:33:11","date_gmt":"2026-03-16T00:33:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/525920\/"},"modified":"2026-03-16T00:33:11","modified_gmt":"2026-03-16T00:33:11","slug":"the-medi-cal-money-pit-orange-county-register","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/525920\/","title":{"rendered":"The Medi-Cal money pit \u2013 Orange County Register"},"content":{"rendered":"

If you\u2019re wondering why there are tax increases on top of tax increases this year, coming soon to a ballot near you if you haven\u2019t seen them already, one reason is Medi-Cal spending.\u00a0<\/p>\n

In California, 14.5 million people are on Medi-Cal, the safety-net health insurance program for low-income people. As of last October, that included 1.7 million individuals who have what the government calls \u201cunsatisfactory immigration status.\u201d<\/p>\n

A new report<\/a> from the Legislative Analyst\u2019s Office warns that Medi-Cal spending has \u201cmore than doubled\u201d over the past ten years, even \u201cfaster than the growth in the overall state budget.\u201d In 2026-27, the governor\u2019s budget estimates that Medi-Cal will cost $222 billion, of which $49 billion will come out of the state\u2019s General Fund.<\/p>\n

A big chunk of the rest of the funding comes from provider taxes. These are taxes and fees paid by managed care organizations, hospitals and other providers of health care. Then when the state gives that money back to those same entities to pay for Medi-Cal services, the federal government reimburses the state for 50% or more of those payments.<\/p>\n

The higher the taxes on Medi-Cal providers, the more money California can \u201cdraw down\u201d in federal dollars.<\/p>\n

The federal government had rules intended to prevent gaming the system, such as a requirement for \u201cuniformity.\u201d That meant the states couldn\u2019t tax Medicaid providers only, or tax them at a higher rate than private providers. However, there were waivers and clever structures that some states exploited to collect extra money from the federal government. Sometimes they would use that money for things that were outside the scope of Medicaid.<\/p>\n

California did this and used some of the extra money to fund costly program expansions. For example, the governor and state lawmakers extended full-scope Medi-Cal (Medicaid) coverage to all income-eligible undocumented immigrants residing in the state.<\/p>\n

U.S. law prohibits the use of federal tax dollars to provide more than a limited form of Medicaid to undocumented immigrants, so California uses state funds to provide full-scope Medi-Cal to this \u201cexpansion population.\u201d However, it didn\u2019t escape the federal government\u2019s notice that some of the state money came from federal reimbursements of tax-boosted Medi-Cal expenses.<\/p>\n

Last July the president signed H.R. 1, also known as the One Big Beautiful Bill and the Working Families Tax Cut. It tightened up the Medicaid reimbursement rules. The Legislative Analyst\u2019s Office said this will require California to \u201cnotably reduce two large provider taxes \u2013 a tax on health plans and a fee on private hospitals,\u201d resulting in \u201cbillions of dollars of lost revenue.\u201d<\/p>\n

In late January the federal government\u2019s Centers for Medicare & Medicaid Services, or CMS, released a final rule that the agency said \u201cwould end states\u2019 ability to exploit a health care-related tax loophole currently used by seven states to generate billions in federal Medicaid payments \u2013 without contributing their fair share or expanding care for Medicaid enrollees.\u201d<\/p>\n

California is one of those seven states, of course. CMS cited<\/a> California\u2019s tax rates on managed care organizations, or MCOs, as an example of \u201cschemes\u201d that \u201ctechnically pass the current statistical test for permissibility due to an inadvertent loophole.\u201d The state\u2019s MCO tax rates are set at $274 (per member, per month) for Medicaid enrollees but only $1.75 for non-Medicaid members.<\/p>\n

H.R. 1 also requires Medicaid recipients between the ages of 19 and 64 (with many exceptions) to prove that they\u2019ve spent at least 80 hours per month working, studying, or volunteering. The requirement takes effect in 2027. In California, state officials have predicted that 1.4 million Medi-Cal enrollees will lose their coverage as a result of the work requirements. The new law also requires some Medi-Cal enrollees (working-age adults without kids) to have their eligibility redetermined every six months instead of every year. The LAO estimates that the work and renewal requirements together could mean 2.1 million fewer people on Medi-Cal by 2028.<\/p>\n

Although California doesn\u2019t have to enforce the work requirements on undocumented immigrants enrolled in state-funded Medi-Cal, Gov. Gavin Newsom said he will. Surging costs have already forced him to cut back the promised full-scope Medi-Cal benefits for the undocumented population. Newsom has cut dental benefits, added a $30 monthly premium and barred any more adults from enrolling.<\/p>\n

To \u201cfully assess drivers of base spending growth\u201d in Medi-Cal, the Legislative Analyst\u2019s Office recommended that the Legislature \u201cdirect the administration to provide more recent, granular information\u201d for the budget process. Specifically, the LAO said lawmakers need more data on managed care rate trends, pharmacy use, and \u201ccaseload, costs and utilization for members with UIS (unsatisfactory immigration status).\u201d<\/p>\n

It\u2019s an election year, so it\u2019s likely that the legislature would rather not know.<\/p>\n

Instead, we can expect much wailing about federal \u201ccuts\u201d to Medi-Cal that now require massive and multiple tax increases.<\/p>\n

The LAO suggested that the legislature could raise taxes on private insurance to subsidize Medi-Cal. \u201cWith a three-fourths vote in each house,\u201d the analyst wrote, the legislature could amend the 2024 measure, Proposition 35, to \u201callow for a more proportionate large tax \u2013 albeit with potentially higher costs for commercial health plans and their consumers.\u201d<\/p>\n

And if you think that\u2019s bad, wait until you see this: the \u201csingle-payer\u201d healthcare proposal is back. Assembly Bill 1900 would put the state of California in the business of running everyone\u2019s health care, replacing Medi-Cal, Medicare, union-negotiated health benefits and all private insurance. The bill states the \u201cintent\u201d of the Legislature to \u201cdevelop a revenue plan\u201d to pay for it. You know what that means. They have to pass it before we can find out what\u2019s in it.<\/p>\n

All of this goes to prove that health care is not a right. Health care is a service. Somebody has to provide that service. Somebody has to pay for it. If there are not enough providers and there\u2019s not enough money, somebody has to ration it.<\/p>\n

It also proves that government officials don\u2019t have what it takes to run a lemonade stand.<\/p>\n

Write Susan@SusanShelley.com and follow her on X @Susan_Shelley<\/p>\n","protected":false},"excerpt":{"rendered":"If you\u2019re wondering why there are tax increases on top of tax increases this year, coming soon to…\n","protected":false},"author":2,"featured_media":525921,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[97,252,253,1767,55607],"class_list":["post-525920","post","type-post","status-publish","format-standard","has-post-thumbnail","category-health-care","tag-health","tag-health-care","tag-healthcare","tag-opinion","tag-opinion-columnists"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/525920","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=525920"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/525920\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/525921"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=525920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=525920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=525920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}