LAO Issues Analysis of FY 2019-20 State Medi-Cal Budget

On Wednesday, the Legislative Analyst’s Office (LAO) released its analysis of Governor Gavin Newsom’s FY 2019-20 budget proposal related to Medi-Cal. The governor’s budget estimates the Medi-Cal budget at $20.7 billion General Fund ($98.5 billion total funds) in 2018-19, which is a significant $2.3 billion General Fund downward adjustment relative to the 2018-19 Budget Act. For FY 2019-20, the governor’s budget proposes $22.9 billion General Fund ($100.7 billion total funds) for Medi-Cal, which is a $2.2 billion increase over the revised 2018-19 General Fund estimate.

The LAO report examines key proposals made by Governor Newsom and its impact on the state’s Medi-Cal budget. The LAO recommends that the legislature seriously consider renewal of the Managed Care Organization (MCO) Tax Package, which expires at the end of FY 2018-19. Renewing the MCO tax would require statutory reauthorization from the legislature and federal government approval. The Newsom Administration, however, did not propose an extension of the MCO tax in its FY 2019-20 budget proposal. According to the LAO, allowing the MCO tax to expire would forego significant General Fund benefits.

Further, the LAO assesses proposals related to Medi-Cal coverage expansion for income-eligible undocumented young adults and proposed uses of Proposition 56 revenues in Medi-Cal. Citing the increasingly complex elements of the Medi-Cal budget, the LAO discusses the importance of short- and long-term steps to improve Medi-Cal fiscal estimates and transparency. The LAO will be releasing additional analyses on major components of the governor’s budget proposal, including Proposition 56 expenditures, initiatives to reduce prescription drug costs, and proposed changes to 1991 Realignment, over the coming weeks. The LAO analysis on the Medi-Cal budget is available here.