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PD Editorial: A tax plan to protect health care gains

California didn’t hesitate when the Affordable Care Act took effect, establishing a state health insurance exchange and expanding Medi-Cal, resulting in a sharp increase in the number of people with health coverage.

The biggest gains have come from Medi-Cal, the state’s insurance program for the poor, which has enrolled nearly 5 million people over the past two years, most of them newly eligible under President Barack Obama’s landmark health care law. Better yet, Washington is footing the bill. For now.

But California stands to lose about $1.1 billion of federal funding later this year unless state lawmakers revamp a tax on Medi-Cal managed health care plans that doesn’t comply with Obamacare rules.

A proposed fix is pending in Sacramento, but it needs a two-thirds majority for approval.

That means a handful Republican legislators must go along, and despite support from health insurers and the state Chamber of Commerce, it isn’t clear that the votes are there.

This one ought to be no-brainer.

Consider the numbers. Medi-Cal now covers 13.5 million people, about a quarter of non-elderly Californians. Under the Affordable Care Act, anyone earning less than 138 percent of the federal poverty rate - about $16,000 for an individual and $32,000 for a four-person household - is eligible for Medi-Cal. The expansion is a primary reason that the state’s uninsured rate has fallen from 16.3 percent to 13.6 percent since 2012.

Losing the federal subsidy for Medi-Cal would leave California with unpalatable options such as reducing access, backfilling with money from the state’s general fund and/or cutting reimbursement rates for hospitals and physicians that already are so low that some providers refuse to take Medi-Cal patients.

No one benefits from reducing access, and it would be foolish to leave federal money on the table.

A fix negotiated over the past year by health insurers and the Brown administration would keep California eligible for federal funding by replacing the existing tax, which is paid by about two dozen Medi-Cal managed care plans, with a new levy that would cover all health plans. To avoid a big tax hit for insurers who aren’t liable for the present tax, the plan includes reductions in the gross premiums tax and, in some cases, the corporation tax.

This is a win-win plan. It protects access and funding. But this is politics, so there are political calculations. Republicans don’t like voting for taxes, especially in an election year. And many GOP lawmakers don’t like Obamacare.

Only Democrats supported the tax plan Monday when it cleared a legislative conference committee. There are, however, indications that enough Assembly Republicans will go along if state funding for the developmentally disabled is restored. That would be an added benefit, and if it gets the plan through the Assembly, it might put pressure on state Senate Republicans to help preserve $1.1 billion in health care funding for low-income Californians.

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