California Healthline: LAO Report: State Could Lose $1 Billion
California stands to lose about $1 billion in federal health care funding through potential elimination of the current managed care organization tax if the governor’s proposed revision of the tax is not approved by federal officials, according to a report issued last week by the state Legislative Analyst’s Office.
The Feb. 12 LAO report gives an overview of the $21 billion health care budget proposed by Gov. Jerry Brown (D) and points out that the state will absorb a significant hit when it has to discontinue the current MCO tax. Brown has proposed a restructuring of the tax to replace that funding and comply with new federal guidance.
A July 25 letter from CMS officials said California’s existing MCO tax is inconsistent with federal Medicaid regulations — “thereby putting over $1 billion in federal funding to the state at risk in future years if the tax were extended in its current form,” the LAO report said.