Trump can stop Gavin Newsom’s healthcare tax — and – Latest News
California Democrats pushed a controversial new healthcare tax by the legislature with out a single Republican vote. Gov. Gavin Newsom included it within the 2026-27 price range bundle — the final of his governorship.
They most likely thought that settled the matter.
It didn’t.
Before Newsom’s new healthcare tax can take impact, it have to be accepted by the Trump administration. President Donald Trump can stop it.
California Democrats pushed a controversial new healthcare tax by the legislature with out a single Republican vote. Gov. Gavin Newsom included it within the 2026-27 price range bundle — the final of his governorship. David Buchan for Ca Post
Before Newsom’s new healthcare tax can take impact, it have to be accepted by the Trump administration. President Donald Trump can stop it. Getty Images
Why? Because the tax is designed to set off more federal Medicaid {dollars} being spent on the state, it wants sign-off from the Centers for Medicare & Medicaid Services, now headed by Dr. Mehmet Oz.
That makes this far more than a Sacramento price range battle. It is a take a look at of whether or not Washington will enable Newsom to shift more healthcare prices onto privately insured households to salvage a financing maneuver that retains federal Medicaid {dollars} flowing to a financially strained Medi-Cal program.
The provision is contained in SB 125, a price range trailer invoice Newsom signed. It imposes a flat $8.85-per-member, per-month tax on business health plans, Medi-Cal managed care plans and Obamacare market plans.
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Consider what that replaces. California had been taxing Medi-Cal plans roughly $274 per member per 30 days — and non-public plans simply $2.25. That 122-to-1 hole was no accident. It was the engine of the scheme.
This 12 months, Washington banned it: States should now tax all health plans equally. So Newsom cut the tax on Medi-Cal plans, and raised it on the non-public insurance coverage working households carry. His administration calls that straightforward compliance.
Opponents see one thing very completely different.
Why? Because the tax is designed to set off more federal Medicaid {dollars} being spent on the state, it wants sign-off from the Centers for Medicare & Medicaid Services, now headed by Dr. Mehmet Oz. REUTERS
Republican Assemblyman Carl DeMaio of San Diego referred to as the proposal “a wolf in sheep’s clothing,” warning that it might saddle California households with roughly $425 a 12 months in greater healthcare prices. Whether the ultimate determine lands there or not, common sense says health plans are unlikely to soak up a new tax with out passing no less than some of the price alongside to employers, staff and households.
The roots of this battle go back to Proposition 35.
California voters accepted the poll measure in 2024 after supporters argued the Managed Care Organization (MCO) tax would strengthen Medi-Cal and improve entry to care. I opposed it as a result of the MCO tax was by no means merely about enhancing healthcare. It was a financing mechanism designed to drag billions of further federal Medicaid {dollars} into California.
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Here’s the shell sport.
California taxes its health plans with one hand and pays the money proper back to them with the opposite. Nobody in Sacramento loses a dime. But each greenback that makes the spherical journey triggers matching funds from Washington. The complete level is to make the federal authorities choose up a greater share of California’s Medi-Cal invoice.
Supporters referred to as it sensible financing.
I noticed it as a government-financing scheme.
Republican Assemblyman Carl DeMaio of San Diego referred to as the proposal “a wolf in sheep’s clothing.” Getty Images
Eventually, these schemes collide with actuality.
Washington concluded that states have been gaming supplier taxes to maximise federal Medicaid {dollars} and shut it down. Rather than controlling Medi-Cal spending or reforming this system, Newsom got here back with a redesigned tax that spreads the burden to business health plans — salvaging the gimmick even because it raises billions much less than earlier than.
This price range maneuver didn’t occur in a vacuum.
Newsom and legislative Democrats dramatically expanded Medi-Cal, together with full-scope advantages for unlawful immigrants. Those prices got here in far greater than Sacramento projected, forcing state officers to scramble for financing.
Instead of admitting that California expanded authorities healthcare sooner than it might truthfully pay for it, Newsom’s reply is a new tax construction that critics say will in the end increase the price of non-public health insurance coverage.
Californians shouldn’t be stunned. When Sacramento expands authorities applications past what taxpayers can sustainably finance, somebody finally will get the invoice.
The Wall Street Journal aptly described the proposal as “Newsom’s health tax gambit.”
Instead of confronting the structural issues driving Medi-Cal’s exploding prices, Newsom is asking the Trump administration to approve a financing scheme that would raise premiums on privately insured Californians whereas serving to stabilize his price range.
There’s one other irony.
Supporters of Proposition 35 advised voters the MCO tax would strengthen healthcare companies and improve affected person entry — not turn out to be a instrument to alleviate stress on Sacramento’s price range. Yet much less than two years later, Newsom is asking Washington to approve a redesigned model as a result of the unique financing model no longer works underneath revised federal guidelines.
That ought to concern each Californian.
This isn’t simply an obscure healthcare regulation buried within the price range.
It’s a reminder that Sacramento has grown depending on sophisticated financing schemes as an alternative of confronting the hovering price of Medi-Cal itself. Rather than decreasing spending, Newsom’s reply is one other tax that may invariably show up within the month-to-month premiums paid by working Californians.
Fortunately, Sacramento doesn’t get the final phrase.
Newsom pushed SB 125 by Sacramento.
He hasn’t but received in Washington.
The Trump administration would do effectively to reject this scheme.
Jon Fleischman, a longtime strategist in California politics, writes at SoDoesItMatter.com.
