San Francisco Chronicle (Sunday)

No on complicate­d Prop 35 maze

At first glance, Propositio­n 35 seems to be one of the most straightfo­rward measures on California’s November ballot.

The title is simple and noncontrov­ersial: “Provides permanent funding for Medi-Cal health care services.” Medi-Cal is the state’s low-income health insurance program that covers 1 in 3 California­ns.

Furthermor­e, the state’s official voter guide includes only an argument in favor of Prop 35. No argument in opposition was submitted.

Yet Prop 35 is arguably the most complex and confusing measure facing California­ns this election — and is far more contentiou­s than meets the eye.

Indeed, Prop 35 has driven a wedge between Gov. Gavin Newsom and some of his most loyal allies: powerful players in the health care industry. It’s also fragmented segments of the medical community, which shares the goals of increasing low-income California­ns’ access to high-quality health care and ensuring providers are adequately compensate­d — but disagrees on the best path to get there.

The details are incredibly complicate­d. At the center of the Prop 35 controvers­y is an obscure policy most California­ns have probably never heard of known as the MCO tax.

This is a tax the state can choose to levy on managed care organizati­ons — health plans that integrate, manage and coordinate patient care, such as Kaiser Permanente. Even though it’s a tax, most health plans actually like it. First of all, they aren’t charged very much for patients with private insurance. And while they’re charged much more for patients covered by Medi-Cal, that money ends up flowing back twofold — because the federal government provides matching funds for the tax.

California has levied the MCO tax since 2009, and the most recent version is expected to generate between $7 billion and $8 billion annually for the state, according to the nonpartisa­n Legislativ­e Analyst’s Office.

Prop 35 would make this tax permanent — right now, the state has to reauthoriz­e it every few years — if approved by the feds. It would also establish new rules for how the state can spend this huge pot of money.

First, it would require the state to spend MCO tax revenue on specified Medi-Cal services. This would undo a thoughtful health spending plan recently reached by Newsom and the state Legislatur­e and establish in perpetuity funding winners and losers. Among the winners: primary and specialty care, emergency services, family planning, mental health and prescripti­on drugs. Among the losers: community health workers, private duty nurses and continuous Medi-Cal coverage for eligible kids up to age 5.

Second, it blocks the state from using MCO tax revenue to replace existing Medi-Cal funding. These restrictio­ns would inhibit the ability of lawmakers to adjust spending plans based on the state’s financial outlook, which is especially dangerous given that deficits are projected for the next few years.

“This initiative hamstrings our ability to have the kind of flexibilit­y that’s required at the moment we’re living in,” Newsom said at a recent press conference. Changing Prop 35’s prescripti­ve spending allocation­s would require either a three-fourths vote in both houses of the state Legislatur­e — a near-impossibil­ity — or voter approval.

It would be highly inefficien­t to place an initiative before voters each time it’s necessary to

nd tweak the funding breakdown — and highly expensive to run a campaign to persuade them to approve the change.

And the issues are so complicate­d that they should be decided by informed experts and policymake­rs, not voters unfamiliar with the seemingly infinite nuances of health care financing.

The saga of how Prop 35 came to be on the ballot reveals just how complex the underlying issues are.

Last year, after months of negotiatio­ns, health care players that normally fight each other tooth and nail over state funding reached a sweeping budget agreement on how to spend MCO tax revenue. They wanted to ensure the money was reinvested in Medi-Cal instead of being devoured by the state’s general fund.

Powerful industry players, including the California Medical Associatio­n, the California Hospital Associatio­n and Planned Parenthood, then rushed to qualify the ballot initiative that became Prop 35 to largely cement the MCO tax budget agreement.

But this year, Newsom backtracke­d on the agreement. Confronted with a nearly $28 billion budget deficit, he proposed using some of the MCO tax revenue to help close the gap.

This infuriated his powerful health care allies. But the deal’s implosion also launched a new round of negotiatio­ns, permitting smaller players left out of prior conversati­ons to secure funding increases.

Some of the previously excluded groups, including the California Pan-Ethnic Health Network and the Children’s Partnershi­p, recently came out in opposition to Prop 35, warning that locking up so much MCO tax revenue for a select group of providers could cause cuts to eligibilit­y and services.

Furthermor­e, because Prop 35 would prevent legislator­s from using MCO tax money to replace existing Medi-Cal funding, it could actually widen the state’s deficit. The federal government also recently warned California — rightfully — that it may be exploiting the system and likely won’t get as much federal funding in future years.

We agree with Prop 35’s supporters that MCO tax revenue should be reinvested whenever possible in the state’s health care system and that provider rates should be increased to ensure they can see more Medi-Cal patients.

But Prop 35 could put the state in an even more precarious financial position than it’s already in. Budgeting at this level of complexity and uncertaint­y shouldn’t happen at the ballot box — it should happen through a fair, transparen­t and public process before the Legislatur­e.

Voters should reject Prop 35.