Massive loophole leaves healthcare funding unprotected, California worse off long term
SACRAMENTO, CA — As California confronts growing pressure on Medi-Cal and the state’s healthcare safety net, organizations opposing Proposition 40 representing doctors, community clinics, care providers, and hospitals are warning that the measure fails to provide the additional, sustainable funding patients and providers need.
Proposition 40 is also missing key safeguards governing how money from the measure is spent, and does not guarantee that new revenue will improve patient care or lower costs.
Additionally, in a new policy and legal memo released today, former California Department of Health Care Services Director Jennifer Kent and Nielsen Merksamer Partner Kurt Oneto find that the poorly drafted measure contains contradictory language that gives Sacramento broad discretion over how to spend any new revenues. Prop. 40 states its revenues may not be used to “supplant existing state funds” for healthcare. But elsewhere, it expressly allows Proposition 40 revenues to “restore or address” reductions not only in federal funding but also state appropriations for healthcare.
That creates a significant loophole. In fact, the legal analysis of the measure concludes that the state could cut billions from existing healthcare appropriations and then use Proposition 40 revenue to backfill some or all of that reduction, potentially freeing existing state funds for other purposes without increasing overall healthcare spending.
Proposition 40 also does not establish specific funding levels for Medi-Cal rates, provider reimbursement, hospitals, clinics, physicians, coverage, or particular patient services. The Legislative Analyst’s Office notes that the state would determine how and when the money is spent, within the measure’s requirements.
“California physicians support a strong Medi-Cal program, but Proposition 40 is the wrong way to address the state’s health care funding challenges,” said California Medical Association President Dr. René Bravo. “The measure relies on an unstable revenue source, provides no clear accountability for how the money would be spent, and does not offer the long-term funding solution that patients and healthcare providers need.”
Healthcare organizations point to Proposition 56, the tobacco tax approved by voters in 2016, as an example of the difficulty of protecting dedicated healthcare revenue. Proposition 56 included language prohibiting the use of its revenues to supplant existing General Fund spending for specified purposes. After the measure passed, however, lawmakers used Proposition 56 revenues for existing Medi-Cal obligations instead of expanding coverage, as the measure stipulated.
Opponents of Proposition 40 say its funding language raises a similar concern, particularly because the measure expressly allows its revenues to address reductions in state appropriations in addition to federal funding.
The California Medical Association, California Primary Care Association, Planned Parenthood Affiliates of California, California Hospital Association, California Children’s Hospital Association, and other healthcare organizations all oppose Proposition 40.
“While Planned Parenthood Affiliates of California recognizes the need to address the devastating impacts of H.R. 1 and ongoing attacks on health care, Proposition 40’s uncertain impacts on the state budget and lack of specificity on health care spending will do more harm than good in the long term,” said Planned Parenthood Affiliates of California President and CEO Jodi Hicks.
California’s healthcare system faces ongoing funding needs, yet Proposition 40 provides a one-time source of revenue. The healthcare organizations opposing the measure say California needs a sustainable solution that protects existing healthcare funding and provides reliable, long-term support for patients and providers.
Earlier this week, the No on 40 coalition fact checked the false and misleading claim that Proposition 40 will address California’s healthcare needs.