CMS Approves California’s MCO Tax Waiver Amendment, Securing $7.2 Billion for Medi-Cal

The federal Centers for Medicare & Medicaid Services (CMS) has approved California’s Managed Care Organization (MCO) Tax waiver amendment, unlocking an estimated $7.2 billion in additional funding for Medi-Cal through December 2026. This approval represents a major milestone for California’s healthcare system and strengthens the state’s ability to sustain and improve care for millions of Medi-Cal beneficiaries.

What the MCO Tax Waiver Means

California’s MCO tax is a state-level assessment on managed care health plans. The revenue generated is used to draw down federal matching funds, significantly increasing the total resources available for Medi-Cal. CMS approval of the waiver amendment allows California to continue using this financing mechanism under updated federal guidelines.

With this amendment in place, the state can maintain financial stability for Medi-Cal managed care plans while supporting provider reimbursement and access to care.

Impact on Medi-Cal and Healthcare Providers

The additional $7.2 billion is expected to help:

• Strengthen Medi-Cal’s long-term financial sustainability
• Support managed care plans serving low-income individuals and families
• Improve reimbursement rates for healthcare providers
• Preserve access to essential healthcare services across the state

For providers, especially those serving high numbers of Medi-Cal patients, the funding helps offset rising healthcare costs and supports continued participation in the program.

Benefits for Patients and Communities

Medi-Cal serves more than one-third of Californians, including children, seniors, individuals with disabilities, and low-income families. The approved funding helps ensure continuity of coverage and access to preventive, primary, and specialty care. It also supports California’s broader goals of advancing health equity and improving outcomes for underserved populations.

What This Means Moving Forward

The CMS approval extends through December 2026, giving California time to plan future Medi-Cal financing strategies while maintaining program stability. State officials have emphasized that the funding will be critical as healthcare systems continue to recover from economic pressures and rising demand for services.

Overall, the approval of the MCO Tax waiver amendment reinforces California’s commitment to protecting and strengthening Medi-Cal, ensuring that millions of residents can continue to receive vital healthcare services in the years ahead.