Worried about a projected $2 Billion deficit for fiscal year July 2017-June 2018, and uncertainty with the federal change in Administration, yesterday California Governor Jerry Brown announced a State Budget proposal that largely freezes any new spending and reduces expenses in some areas. The Governor's clear message was that the overall Budget will fall out of balance if corrective action is not taken.
According to the Governor's Budget Summary, the two main factors causing this deficit are a revenue forecast that is $5.8 billion lower than expected and a current-year shortfall in the expanded Medi-Cal program. According to his office, the deficit would be billions worse if not for the passage of Proposition 52 (hospital fee), Proposition 56 (tobacco tax), and Proposition 57 (prison reform). Reductions in spending will save approximately $3 billion for an overall deficit of $2 billion next fiscal year.
As it relates to health care services, the Governor's proposal is clearly concerned about federal uncertainty and is calling for no action at this time. The Governor is concerned with the incoming presidential administration and leaders in Congress who have suggested major changes to the Medicaid program. Recent proposals have included reductions to federal funding for the expansion population, a block grant structure for Medicaid programs, capped per beneficiary allotments to states, tax credits to enroll Medicaid beneficiaries in private insurance, and creation of high deductible plans for the Medicaid program combined with health savings accounts.
At this point, it is not clear what those changes will be, or when/if they will take effect. As congressional deliberations begin, the Brown Administration stands ready to make appropriate adjustments within the fiscal constraints facing the state.
An overarching theme in the Governor's Budget was that he expects to constrain spending growth in the coming year. The Budget limits spending proposals to keep spending flat by pausing rate increases for child care, not providing Middle Class Scholarships to any new students, and not submitting a variety of spending proposals (including those to implement new legislation)from state departments that otherwise were justified.
In a communication with the Medi-Cal Pharmacy Program, CPhA confirmed that reimbursement for pharmacist-delivered services that were passed as a result of CPhA's sponsored bill, AB 1114, will not be impacted by the spending freeze at this time. As additional information is obtained by the Department of Health Care Services over the next few months, CPhA will review the Governor's May Revise to the budget proposal.
340B Drug Billing Requirements
The Department of Health Care Services will propose clarifying statutory provisions related to the 340B program in Medi-Cal. Existing statute requires 340B entities that provide drugs to Medi-Cal beneficiaries to use only drugs purchased under the 340B program and bill at their actual 340B acquisition cost plus any applicable dispensing fee. The Department is proposing clarifying language that explicitly applies these requirements to both Medi-Cal FFS and Medi-Cal managed care.
For a detailed review of the Department of Health Care Services impacts from the proposed Budget, please click here. To view the entire Budget summary, click here.