November 5, 2024 Ballot Prop. 35

Proposition 35: Provides Permanent Funding for Medi-Cal Health Care Services. Initiative Statute.

Protect Access to Health Care Act of 2024.

Summary

Excerpted directly from the LAO Prop. 35 Analysis

Proposition 35 (Prop. 35) is a citizen-initiated ballot measure that would 1) require the state to request federal approval for the Managed Care Organization tax on an ongoing basis and 2) allocate those dollars for certain health care investments. (CA Budget and Policy Center)

Prop. 35 would make the existing tax on managed health care insurance plans called the Managed Care Organization Provider Tax (MCO or “health plan tax”) permanent, beginning in 2027. The state would still need federal approval to charge the tax. The tax would continue to be based on the number of people to whom health plans provide health coverage. The proposition allows the state to change the tax, if needed, and to get federal approval, within certain limits.

Currently, the health plan tax charges plans based on the number of people to whom they provide health coverage, including those in Medi-Cal. The tax rate is higher for those in Medi-Cal compared to other kinds of health coverage.

Medi-Cal is a federal-state program that provides health coverage for low-income people. The federal government and the state share the cost of the program. By charging the health plan tax, the state can receive more federal funding.  

The Legislature has not permanently approved this tax. Instead, it has approved it for a few years at a time, and it is set to expire in 2026. Both the California Legislature and the federal government must approve it again.

If the tax is also approved by the federal government, it will provide revenues to pay for health care services for low-income families with children, seniors, disabled persons, and other Medi-Cal recipients.  It guarantees that all of the revenue from the continued tax will be spent on investments to improve access to critical health care services and makes it impossible to divert these dollars to unrelated uses.

Proposition 35 also creates rules on how to use the revenue. Generally, these rules require the state to use more of the revenue to increase funding for Medi-Cal and other health programs. The rules are different in the short term (in 2025 and 2026) and the long term (in 2027 and after). Proposition 35 also changes which Medi-Cal services and other health programs get funding increases compared to current law.

Fiscal Impact

 In the short term, there would be no change to the existing temporary tax on health plans. There is anticipated increase in funding for Medi-Cal and other health programs between roughly $2 billion and $5 billion annually (including federal funds). Increased state costs between roughly $1 billion to $2 billion annually to implement funding increases. 

In the long term, unknown effect on state tax revenue, health program funding, and state costs. Fiscal effects depend on many factors, such as whether the Legislature would continue to approve the tax on health plans in the future if Proposition 35 is not passed by voters.  

What your vote means

A YES vote on this measure means: The existing state tax on health plan, which is set to expire in 2026, that provides funding for certain health programs would become permanent. New rules would direct how the state must use the revenue.

A NO vote on this measure means: An existing state tax on health plans would end in 2027, unless the Legislature continues it. The new rules would not become law.

Non-partisan Voter Information

Ballotpedia

CalMatters

CalMatters Prop 35 Explained (video)

Explicación de la Proposición 35 en las elecciones de California de 2024 (video)

California Budget and Policy Center

KQED

Project for an Informed Electorate Sacramento State, Prop. 35 PIE Initiative Explainer (video)

Public Opinion Polls

Public Policy Institute of California Statewide Survey, Sept. 2024

Public Policy Institute of California Statewide Survey, Oct. 2024

Pro/Con Statements