California Enacts Hospital Assessment to Fund Improved Medi-Cal Rates - October 27, 2009

California Governor Arnold Schwarzenegger (R) has signed into law legislation, A.B. 1383, to impose a temporary fee on California hospitals. The fee is projected to raise $2.3 billion annually, a majority of which will be used to increase Medi-Cal rates for hospitals, as well as for children’s health coverage. Public hospitals will receive supplemental payments under the law. The public hospital payments were reduced to reflect that they are not subject to the fee due to technical reasons. To implement the fee and supplemental payments, the state first must obtain federal approval. The assessment and supplemental payments will expire December 31, 2010; however, the California Hospital Association has indicated that it may pursue a ballot initiative to make the assessment and supplemental payments permanent.