State lawmakers last week convened the first hearing of a governor-ordered legislative special session on health care funding.
Senate leaders met Friday for the initial "extraordinary session" on how to come up with new funding for Medi-Cal and the developmentally disabled services program. The committee also expects to examine possible sources of funding for Medi-Cal provider rate increases.
The central issue is the looming loss of the managed care organization tax, which cannot continue in its current state, according to federal guidance.
Loss of the MCO tax would mean a shortfall of $1.1 billion for the state's Medi-Cal program. In addition, the state is bound to continue this year's restoration of a 7 percent rise in In-Home Supportive Services hours.
"Together you're looking at a $1.3 billion pressure on the state's finances," said Michael Wilkening, the undersecretary of the California Health and Human Services agency. "The federal government will not approve the MCO tax as it is, and that has been a stable source of funding. We need something to replace them."