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Published: June 29, 2023

Legislature Passes Health Budget Trailer Bill that Provides Medi-Cal Rate Increases for Primary Care

The California legislature passed the 2023 -2024 health budget trailer bill, which renews the State’s Managed Care Organization (MCO) tax and provides the largest Medi-Cal rate increase in California history. Starting in 2024, the health budget trailer bill increases provider rates to at least 87.5 percent of Medicare for primary care, maternity care, and non-specialty mental health services. Starting in 2025, an additional annual appropriation of $1.38 billion will be directed to primary care providers in the Medi-Cal program.

The disparities in reimbursement rates for Medi-Cal hinder family physicians' ability to accept and treat more patients, which disproportionately affects patients' access to care. "The renewal of the MCO tax is transformative in addressing historic inequities in the healthcare system and will aid in improving family physicians's ability to provide adequate access to care for California's most vulnerable communities," said CAFP president Raul Ayala, MD.

Increasing Medi-Cal provider rates for primary care, including mental health services, is an important investment in health care. Despite strong evidence showing primary care lowers cost, improves health outcomes, and improves equity, primary care is grossly underfunded.  California spends from 6.1 percent to 10.8 percent on primary care, while the average among OECD countries is 14 percent.

Increasing primary care provider rates has the immediate impact of increasing access to care. There is also an important longer-term impact. The more we invest in primary care, including bridging gaps in pay, the more we can grow and expand the primary care provider workforce, decrease overall costs, and improve health outcomes.

The health budget trailer bill includes other investments in health care, including an additional $75 million starting in 2024 to be allocated annually to increase residency slots for primary and specialty care and expand the number of residency programs in California.  Starting in 2025, $150 million annually will be allocated to grow the healthcare workforce.  At least $500 million will be directed to family-planning related services in both Medi-Cal and FPACT and to abortion services.

The California Academy of Family Physicians (CAFP) and its more than 10,000 members commend Governor Gavin Newsom and the California legislature for their continued investments in health care and their collaborative efforts to reinstate the MCO tax to invest primary care in the Medi-Cal system and protect patients' access to timely and comprehensive care.


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