California budget deal: Some tobacco tax money for Medi-Cal providers

State lawmakers and Gov. Jerry Brown have struck a budget deal that uses at least $546 million in new tobacco tax funding to increase Medi-Cal provider reimbursements. The state doctors' association calls the modest hike "a step in the right direction," but says it's insufficient.

The compromise announced Tuesday affects the money generated by the voter-approved Prop. 56, which is expected to raise more than $1 billion a year for Medi-Cal.

Brown had wanted all of those funds put into Medi-Cal’s general operating expenses.

Doctors’ groups and some lawmakers said the funds should go towards improving providers’ reimbursement rates under the program, which serves about one out of every three Californians. The state has among the lowest reimbursement rates in the country. 

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The proposed budget - which lawmakers must approve by midnight Thursday - would allow the legislature to raise the amount dedicated to increasing reimbursement rates to as high as $800 million in January or May, if the state can afford it.

"This was about acknowledging ... that we have been under-resourcing [Medi-Cal providers] for years," said Sen. Holly Mitchell (D-Los Angeles), chair of the budget committee.

The new funding would most likely not make a huge difference. Even the $800 million figure would represent a modest increase of about 2.5 percent over the amount the state currently provides for Medi-Cal providers.

Still, Mitchell predicted it would persuade more doctors to take Medi-Cal patients.

"I think that we will continue to see expansion of provider networks, particularly in underserved areas in California," she said.

The budget allocation is good news, said John Baackes, CEO of LA Care Health Plan, a major provider of Medi-Cal insurance.

"It means that we’ll be able to maintain the network that we have in place," he said.

The decision to redirect at least some of the tobacco tax money toward reimbrusement rates " is a step in the right direction," said California Medical Association spokeswoman Joanne Adams. "However, there is still work to be done to fulfill the promise of Prop 56."

The Medical Association argues that all of the revenue generated by Prop. 56 should be used to raise Medi-Cal reimbursement rates.