CHA News Article

Legislature Approves MCO Tax Package; Includes Elimination of SNF ‘Clawback’

Yesterday, the Legislature passed the Managed Care Organization (MCO) tax package, which will result in a net tax cut and maintain more than $1 billion in critical federal funds. The legislation also includes provisions to fund services for individuals with development disabilities, and it eliminates the distinct-part skilled-nursing facility (DP/SNF) “clawback,” or recoupment of reimbursement for services provided by hospital-based DP/SNFs.

Over the course of the past five years, CHA has advocated for the elimination of devastating cuts to Medi-Cal reimbursement for DP/SNFs, which were first enacted by the Legislature in 2011 as part of the state’s efforts to close the budget deficit. While rates were restored on a prospective basis in 2013, DP/SNFs still faced the recoupment of previously paid reimbursement for a period of over two years. The passage of the MCO tax will prevent this recoupment and will help prevent the closure of these vital hospitals and their skilled-nursing facilities.

As compared to free-standing facilities, DP/SNFs care for patients of greater medical complexity and are often the only option for patients with specialized care needs or for individuals living in rural areas. Medi-Cal beneficiaries make up nearly 80 percent of individuals receiving skilled-nursing care in hospital-based facilities.

Yesterday’s vote ends a year-long process to revamp the MCO tax, which was necessary to meet new federal requirements that the tax apply to all managed care organizations, not only those that serve Medi-Cal beneficiaries.

The tax package now proceeds to the Governor, who is expected to sign the bills soon.

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