Optometrist Hunter Morgan poses in his office on Friday, March 1, 2024 in Encinitas, California. When Morgan bought the San Diego optometry clinic three years ago, one of the first things he did was start accepting patients enrolled in Medicaid. A government-funded health insurance program for the poor and disabled. After just five months, Morgan said he had to stop treating Medicaid patients because of the low pay. For an eye exam he charges $175, but the most he could get from Medicaid was about $40. (AP Photo/Gregory Bull)
SACRAMENTO, Calif. (AP) — When Hunter Morgan bought a Southern California optometry office three years ago, one of the first things he did was create a government-funded health insurance program for low-income people. The plan was to begin seeing a patient using Medicaid.
The previous owners did not accept Medicaid patients, which covers about one-third of California’s 39 million residents. But Morgan felt he had a responsibility to serve those in need.
After just five months, Morgan said he had to stop treating Medicaid patients because of the low pay. He charges his $175 for his eye exam, but the most he could get from Medicaid was about $40. That has made it difficult to pay staff and high rent in the upscale beach community of Encinitas, 25 miles (40 kilometers) north of San Diego.
“We couldn’t function like that,” he said.
California Governor Gavin Newsom and Democrats in the state Legislature have significantly increased the number of people receiving Medicaid, including all eligible adults who are in the country without legal permission. But while California’s Medicaid currently covers about 15 million people, the fees paid to doctors have not kept up.
That’s contributing to a crisis at some local hospitals, some of which needed emergency loans from the state Legislature last year to avoid closure. People enrolled in Medicaid may also have difficulty finding doctors who will treat them, forcing some to drive long distances to receive treatment.
Health care providers are seeking increased spending from California’s Medicaid program, known as Medi-Cal. But with consecutive multi-billion dollar budget deficits, California doesn’t have any extra money. To pay doctors more, Newsom and the state Legislature chose to raise taxes, but not in the way you might think.
Almost all states tax hospitals, nursing homes, ambulances, etc. to cover Medicaid costs. Since 2005, California has taxed managed care organizations, which are private companies that contract with the state to provide Medicaid benefits.
However, unlike most taxes, businesses do not have to pay the full amount. The state pays them most of it and then uses that money to induce more federal payments for Medicaid. That means more money for everyone.
Last year, Newsom signed legislation that significantly increased this tax. This means the state will receive $19.4 billion by 2026. On Thursday, the state Legislature is expected to vote on another increase, generating an estimated $1.5 billion more.
“California is using the full power of government to increase access to affordable, quality health care across the state,” Newsom said in a statement to The Associated Press.
California has traditionally used such surpluses to balance its budget. But now the state has vowed to use some of that money to pay doctors extra fees to treat Medicaid patients.
How much and who receives it will be completely decided this year. The first increases last year went to family doctors, maternity care and some mental health services. This year’s increase, which has not yet been approved by Congress, would include obstetrics, vaccines, abortion services, optometry and more.
Newsom is proposing to raise fees for optometrists to match those paid by Medicare, the federal health insurance program for people 65 and older. That could mean California’s roughly 8,000 licensed optometrists would receive more money for their Medicaid patients — about $130 per test instead of $47.
Although health care providers welcome the increase, they remain concerned. California’s budget deficit continues to grow.
“I think if things get really bad, we could use that money for other purposes,” said Kristin Schultz, executive director of the California Optometric Association.
Newsom already wants to change the tax increase he signed last year, which includes raising payments to providers by an additional $11 billion over five years. With a deficit this year, Newsom wants to spend $8 billion over four years to pay providers, he said. Providers will still receive the same increases, but they will expire sooner.
Additionally, the federal government must approve California’s taxes on managed care organizations every three years. The Biden administration has recently signaled that it wants to reduce the amount states can collect, which could force California to cut taxes in the future and hurt its ability to continue paying doctors high prices.
“This is really concerning,” Stuart Thompson, senior vice president of government affairs for the California Medical Association, said at a recent hearing before lawmakers. “We don’t want to create a scenario where we do a program for four years and then we reach a cliff.”
Republicans in Congress have criticized Mr. Newsom’s plan to raise taxes again. “There’s no guarantee that that’s going to stay in health care,” said Rep. Vince Fung, a Republican and vice chairman of the Congressional Budget Committee.
But Congressional Democrats appear to view the plan more favorably. Democrat Akira Weber, chair of the appropriations subcommittee that oversees health care spending, said the budget deficit needed “some changes” but remained committed to raising rates.
Increased payments to optometrists would be good news for people in Fresno, a Central Valley city with a large population of low-income farm workers who receive Medicaid.
At Fogg-Remington, an eye clinic in the city, Medicaid patients have historically made up about 15 percent of its clientele. But it stopped accepting new Medicaid patients in January, citing low fees and a new law requiring health care workers to earn at least $25 an hour.
Dr. Anthony Chavez, an optometrist at Fogg Remington, said if California were to raise rates, it would be a “no-brainer” to reverse the decision.
“We want to help these people,” Chavez said.
