Governor's Budget Includes $670 Million for Medi-Cal; Preserves Provider Rate Cuts

The governor's budget is out and for the first time in years, California is expecting a multibillion dollar tax surplus. The governor is proposing a $8 billion in increased spending, with $670 million earmarked to expanded benefits under Medi-Cal.

The expanded benefits include mental health, substance use disorder, adult dental, and specialized nutrition services.

In his proposal, Brown noted that Medi-Cal is the "budget's second largest program." In keeping with his approach to being fiscally prudent, Brown included a warning about health care inflation and implementation of the Affordable Care Act. From his budget:

As the state implements federal health care reform, budgetary spending will become even more dependent on the rate of health care inflation. If this inflation rises faster than expected, annual General Fund spending could quickly rise by hundreds of millions of dollars.

Brown noted that the state's expansion of Medi-Cal, done as an option under the Affordable Care Act, as well as the shift of children from the Healthy Families program to Medi-Cal, means that the state's Medi-Cal caseload will expand just over 10 percent in the next budget year -- from 9.2 million to 10.1 million people. "The Medi-Cal caseload is expected to be approximately 24 percent of the state's total population," the governor notes.

The governor is also calling for a 6.4 percent increase in funding for In-Home Support Services, an area that faced significant cuts -- and court battles over the cuts -- in recent years.

One area that is drawing the frustration of advocates is rate cuts to Medi-Cal providers. in 2011, in the depths of the recession, the legislature passed AB 97 which called for 10 percent cuts in rates to most Medi-Cal providers. These cuts were also the subject of a long court battle, finally resolved last summer, and the state had been planning to collect the cuts retroactively. In his budget, the governor indicated the "retroactive recoupments" would be forgiven.

But the cuts themselves will go forward, resulting in more than $280 million in general fund savings over the next budget year, the governor estimates. In a coincidence, many of those cuts take effect today.

Anthony Wright, executive director of the consumer group Health Access took issue with the continuation of the provider rate cuts, saying that the state should "cancel the Medi-Cal rate reduction altogether." He noted that health and human services has suffered $15 billion in cuts in recent year, many of which have not been restored. "The level of services for California should not be set at the level of resources available during the worse recession since the Great Depression," Wright said in a statement. "There needs to be some balance between frugality and needed investments for the future.”

The governor's budget continues the Coordinated Care Initiative, an effort to move the "dual eligibles" -- people eligible for both Medicare and Medi-Cal -- into a single health plan.

Watch Gov. Jerry Brown's budget proposal: