California Health Plan Tax Moves Closer to Approval

February 22, 2016
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Sacramento Bee
By Jim Miller

California lawmakers are poised to act on legislation that would expand a tax on health care plans while spending hundreds of millions of dollars on services for the developmentally disabled.

No formal agreement has been announced, with a vote expected Thursday.

The necessary two-thirds approval requires the support of at least some Republicans in both houses. The GOP has consistently resisted calls for any tax increases, and sent mixed messages Monday. Republican leaders declined to say if any of their members will support the plan, although Assembly Republicans widely circulated a collection of laudatory comments – made by others – about the package. And Assemblywoman Kristin Olsen, R-Riverbank, called it a “great package” on Twitter.

But when a legislative committee approved the measure to broaden the existing tax on managed-care organizations, all four Republicans voted no. The panel voted unanimously for a companion measure that would significantly raise funding for the system of 21 regional centers that arrange services for almost 300,000 developmentally disabled people and their families, as well as forgive the debt of skilled nursing facilities common in rural parts of the state.

Democratic supporters were optimistic.

“I know it’s not done until it’s done, but we’re inching very close to the final vote,” said state Sen. Mark Leno, D-San Francisco.

The legislation broadens an existing tax on health plans to help pay for health care for the poor, but offsets any impact from the tax by reducing other taxes. The state would net an estimated $1.3 billion in federal matching money by agreeing to broaden the tax.

But to get Republican votes for the expanded tax, the package allocates $287 million of the new general fund money to help people with developmental disabilities. In addition, the package would effectively forgive a debt to the state by hospital-based, skilled-nursing facilities. They collected the money amid a court fight over 2011 rate reductions and rate freezes that the state ultimately won. That provision would cost an estimated $122.9 million in the coming fiscal year.

“We should all be encouraged with how far this proposal has come since last year, including restoring funding services for the most vulnerable in our society,” Senate Minority Leader Jean Fuller, R-Bakersfield, said in a statement. “I still believe we can invest in California’s priorities without this health care revenue plan.”

Advocates for the developmentally disabled have pushed for funding increases in recent years, saying they are vital to protect the system from collapse after years of rate freezes, inflation and minimum-wage increases have thinned the ranks of nonprofit agencies and businesses that deliver the services.

The $287 million would pay for a 7.5 percent compensation increase for employees, as well as a 2.5 percent rate for increase for regional center administrative costs, among other rate hikes.

In addition, there would be a 7.5 percent funding increase for vendors to raise the salaries of workers who spend almost all of their time working with developmentally disabled clients.

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