Governor Brown Announces 2013-14 California Budget Proposal

January 10, 2013

Governor Brown released his budget proposal for the 2013-14 Fiscal Year and announced that the State’s budget would be balanced for the first time since the Great Recession began in 2008. Brown also announced that California will implement the Medicaid eligibility expansion in the ACA, which the Supreme Court made optional last June.

Governor Brown affirmed that the State will move forward with the Medicaid expansion, and divided this component of the ACA into two parts: a mandatory expansion and an optional expansion. The mandatory expansion refers to the currently eligible population that is not enrolled, and the State will expand the program for these groups by simplifying eligibility requirement and enrollment processes and enhancing outreach and education efforts. The costs for this are shared 50/50 between the state and federal governments. The optional expansion refers to raising the eligibility threshold for the program from its current levels for different eligibility groups to a uniform income standard of 138% of the federal poverty level and extending coverage to all individuals regardless of their linkage to the old welfare categories. This expansion is 100% federally financed.

Brown proposed two ways of implementing the optional expansion, a state-based and a county-based option. The state-based option would build upon the current state Medi-Cal program with its existing managed care delivery system. It would use a standard benefit package, which would exclude long-term services and supports, for the new eligibility categories as required by the ACA; this is known as the benchmark package.

The county-based option would build upon the counties’ current Low-Income Health Programs. Counties would use the ACA’s eligibility requirements (138% of FPL) and the standard benchmark benefits package for the newly eligible Medi-Cal population. This option would require federal waivers of unspecified Medicaid program requirements. Counties would take on the operational and fiscal responsibilities for the Medi-Cal expansion. These responsibilities would include developing provider networks, setting reimbursement rates, and processing claims consistent with federal and state laws except to the extent waived.

The Governor’s budget suggests that the state will address its relationship with counties regarding the funding of county health services. This process would include a reallocation of realignment funds that counties have received from the state to finance their responsibility to provide health care for the uninsured – a responsibility now being assumed by the federal government. The summary of the proposal did not outline how these realignment reductions would be determined, but it will be negotiated among the counties, the legislature and the Administration.

The budget proposal also includes a permanent reauthorization of the Hospital Fee and the Gross Premiums Tax on Medi-Cal managed care plans. The Gross Premiums Tax will generate $85.9 million for the General Fund. The budget assumes savings of $135 million from managed care expansions that have the potential to improve efficiency and quality of care. The budget also projects savings from the Coordinated Care Initiative (CCI), which will allow individuals dually eligible for Medicare and Medicaid to receive benefits from both programs through one health plan. The program will be piloted in certain counties and is projected to save the General Fund $170.7 million in 2013-14. The proposal also assumes the 10% provider rate cut is implemented and that the primary care rate increase, funded by the federal government is implemented, with the state picking up its share of the restored primary care rates.


For the full budget proposal summary: