On December 15, the Centers for Medicare & Medicaid Services
(CMS) approved the Managed Care Organization (MCO) tax federal
waiver, which will allow the Department of Health Care Services
(DHCS) to move forward with implementation for the authorized
effective period, subject to any future changes in federal
requirements concerning health care-related taxes.
Assembly Bill 119 (Chapter 13, Statutes of 2023) authorized a
MCO tax (a tax imposed on all managed care plans per members
served in a prior year) effective April 1, 2023, through December
31, 2026, subject to federal approval. The MCO tax is estimated
to provide $19.4 billion in net non-federal funding over the tax
period to be used to maintain the Medi-Cal program and support
increased investments.
As previously reported in the CSAC
Budget Action Bulletin issued in June 2023, as part of the
2024-25 Governor’s Budget, DHCS is required to submit to the
Legislature a plan for targeted increases in specified domains to
Medi-Cal payments or other investments that are designed to
advance access, quality and equity for Medi-Cal beneficiaries and
promote greater provider participation.
In June 2023, DHCS published a high-level
term sheet, that proposes to target state funds, plus
matching federal funds, toward various rate increases and
investments, which are subject to legislative and federal
approval. DHCS is broadly reviewing literature, analyzing data,
and considering Medi-Cal members’ needs to put forward a proposal
in the 2024-25 Governor’s Budget.
In the coming days, DHCS will certify in writing that federal
approval has been received and issue notices to each MCO subject
to the tax, outlining the tax due for each tax period and the
dates on which the installment tax payments are due. In addition,
DHCS will be publishing on its website information related to the
MCO tax, including the approval letter, tax amounts due for each
tax period, and other pertinent information.
