Revised state budget proposal includes major health care cuts

May 15, 2020

Gov. Gavin Newsom released his updated state budget proposal this week for the fiscal year 2020-21. While the Governor’s January proposal provided billions in new revenues and health care spending, the revised proposal reflects an economy battered by the fallout from COVID-19, and sets the state for a month-long fight over program priorities in the Legislature and with the Newsom Administration. 

California began 2020 with a strong economy, historic reserves, a structurally balanced budget and a projected surplus of $5.6 billion. However, the Governor’s financial analysts now predict revenue declines of $41.2 billion due to job losses and business closures due to the public health emergency.

Meanwhile, the state’s social service obligations are expected to dramatically increase as millions of Californians seek help to deal with the economic devastation wrought by the COVID-19 outbreak. Health and Human Services spending is expected to increase by $7.1 billion, reflecting increased caseloads for safety net programs, including an additional 2 million Californians on Medi-Cal due to the skyrocketing number of the recently unemployed who may be eligible

These updated predictions result in an overall budget deficit of approximately $54.3 billion, of which $13.4 billion occurs in the current budget year (2019-20) and $40.9 billion in the currently being debated budget year (2020-21). This overall deficit is nearly 37% of the General Fund spending authorized in last year’s budget.

In his May budget revision, Gov. Newsom proposed reclaiming the health care funding made possible by the Proposition 56 tobacco tax, and instead uses it to address the looming budget deficit. While the administration’s plan protects funding for Proposition 56 graduate medical education, it eliminates the loan repayment program for physicians and dentists who agree to see more Medi-Cal patients.

Absent additional federal funds, Gov. Newsom proposes making the following health care program reductions:

  • $1.2 billion in Proposition 56 funding that had been used to provide supplemental Medi-Cal payments to physician and dentists, family health services, developmental screenings, non-emergency medical transportation, value-based payments, and loan repayments for physicians and dentists.
  • Adult dental and all optional benefits including audiology, incontinence creams and washes, speech therapy, optician/optical lab, podiatry, acupuncture, optometry, nurse anesthetists services, occupational and physical therapy, pharmacist services, screening, brief intervention and referral to treatments for opioids and other illicit drugs in Medi-Cal, and diabetes prevention program services, for a total General Fund savings of $54.7 million.
  • The elimination of special carve outs for Federally Qualified Health Centers for a savings of $100 million ($50 million General Fund).
  • Other health care programs totaling over $300 million in savings for budget year 2020-2021.

The Governor has also tabled new health care proposals from his January budget, including his plan to expand Medi-Cal coverage to include all adults aged 65 or older, regardless of their immigration status (approximately 90,000 adults). It would have built upon the coverage currently offered to children up to age 19, and young adults aged 19-26.

The Governor has also opted not to seek a new Office of Health Care Affordability and to delay implementation of the CalAIM initiative, which sought to reform Medi-Cal care.

Gov. Newsom has called on the federal government to step up to support states, including California. His new budget proposal contains billions in cuts that will be restored only if Congress and President Trump send more aid to states. This week, the House passed the Heroes Act, which contains funding that would help offset Newsom’s proposed “trigger restoration” cuts of $14 billion

California Medical Association (CMA) President Peter N. Bretan, Jr., M.D. called on state lawmakers to ensure Californians are protected, regardless of what action may or may not come from Washington. “Unfortunately, the budget outlined by Gov. Newsom will create additional pressure and uncertainty for physician practices. While we agree that the federal government must do more to stabilize our health care system and our economy, we know we cannot depend on federal action to ensure we have a budget that truly reflects California values.”

Act Now – Reject Governor's Budget Proposal!

CMA is asking physicians to contact their local legislators today as they debate the Governor’s proposed “solutions” to balance the health care budget. It is critically important the legislature understand the need to protect access to care for Medi-Cal enrollees and REJECT the Governor’s repurposing of Prop 56 tobacco tax revenue


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