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Proposition 52: State Fees on Hospitals. Federal Medi-Cal Matching Funds. Initiative Statutory and Constitutional Amendment.

The California Labor Federation supports this measure.


Click here to download California Labor’s 2016 Endorsements & Ballot Measures Analyses

A YES vote on this measure means:

The Hospital Quality Assurance Fee used to offset General Fund costs for Medi-Cal health care services and to draw down federal Medi-Cal funds would be made permanent and it would require a two-thirds vote of the Legislature to end or amend the fee.

A NO vote on this measure means:

No change would be made to the Hospital Quality Assurance Fee which would sunset in 2017 unless reauthorized by the Legislature.

Official Secretary of State Ballot Summary:

  • Increases required vote to two-thirds for the Legislature to amend a certain existing law that imposes fees on hospitals (for purpose of obtaining federal Medi-Cal matching funds) and that directs those fees and federal matching funds to hospital-provided Medi-Cal health care services, to uncompensated care provided by hospitals to uninsured patients, and to children’s health coverage.
  • Eliminates law’s ending date.
  • Declares that law’s fee proceeds shall not be considered revenues for purposes of applying state spending limit or determining required education funding.


The state Medicaid program (known as Medi-Cal in California) provides no and low-cost health coverage to 12.7 million Californians, about one-third of all adults in the state. The total cost of the Medi-Cal program is $95 billion annually—California pays for $24 billion, while the federal government covers the remainder of the cost. The state and federal government split the costs of the Medi-Cal system based on a set formula. The federal government’s contribution toward reimbursement for Medi-Cal expenditures for California is currently 50% for the traditional Medi-Cal population and 100% for the expansion population, which includes low-income adults without children. The federal match for the expansion population will incrementally decline to 90% by 2020.

Many states, including California, fund a portion of their share of Medicaid program costs through a fee on health care providers. The state collects funds through taxes on providers, which are then matched by the federal government for increased Medicaid reimbursement to providers. In California, the Legislature enacted a Hospital Quality Assurance Fee (QAF) in 2009, which is a fee on private hospitals to draw down federal funds for the Medi-Cal program. The QAF has been extended three times since 2009 and is set to sunset in 2017.

The QAF revenue is used to pay for children’s health care services in Medi-Cal that would otherwise be paid for out of the General Fund. In 2015-16, the fee is estimated to result in a General Fund savings of about $850 million. QAF revenue is also used to fund the state share of payment increases to public and private hospitals for providing Medi-Cal health care services. These payments leverage federal funds because the state and federal government share the cost of Medi-Cal services. Some of the QAF revenue is used to provide grants in support of health care expenditures to certain public hospitals. The use of fee revenue to draw down federal funds results in an estimated net benefit to the hospital industry of $3.5 billion annually. Public hospitals receive an estimated benefit of $235 million. Because some of the fee revenue is used to pay for Medi-Cal health care services, the federal government must approve any extension of the fee.

This measure would amend the state Constitution to make the current Hospital Quality Assurance Fee permanent. It would make it harder for the Legislature to end or make changes to the fee by changing the vote requirement for changes. It also exempts the QAF from being diverted into the state Rainy Day Fund or counting towards the Prop. 98 guarantee.

Legislative Analyst and Director of Finance estimate of fiscal impact:

State savings from increased revenues that offset state costs for children’s health coverage of around $500 million beginning in 2016-17 (half-year savings) to over $1 billion annually by 2019-20, likely growing between 5 percent to 10 percent annually thereafter. Increased revenues to support state and local public hospitals of around $90 million beginning in 2016-17 (half-year) to $250 million annually by 2019-20, likely growing between 5 percent to 10 percent annually thereafter.

Support and Opposition:

Supporters include the California Hospital Association, California Medical Association and the State Building and Construction Trades, among others. They state that private hospitals in California pay $3 billion a year to the state under the hospital fee program but that the state is diverting $620 million of the hospital fee money to offset budget deficits, rather than being used by hospitals to provide care to patients. Supporters state that in 2012, Medi-Cal underpaid California hospitals by more than $5 billion, which result in hospitals shifting these unpaid costs to private payers. They argue that the only way to ensure that the fees contributed by hospitals are used for their intended purpose is through a voter-approved ballot initiative which prohibits the state from diverting the money for non-health care purposes.

Opponents argue that this measure raises taxes and potentially gives billions of dollars to hospital executives with little accountability around access, affordability and quality of health care. They argue that hospital executives have a responsibility to provide best and most efficient care to their patients, and should be held accountable to that responsibility. This initiative would guarantee a revenue source and would make it much harder for the Legislature to end or even make changes to the fee, essentially giving money to hospitals without no standards or accountability.

Prior Positions

The Labor Federation no existing position on this issue.

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