State Budget

Tuition Relief for Psychiatrists

$14,000,000 shall be available to support a loan repayment program of up to $300,000 of relief for psychiatrists, as follows:

$7,000,000 shall be available for psychiatrists that agree to a five-year service commitment at the State Department of State Hospitals.

 An additional $7,000,000 shall be available for psychiatrists that agree to a five-year service commitment to provide psychiatric services in a local public behavioral health system with an emphasis on prevention and early intervention services for individuals with serious mental illness that are likely to become justice-involved or deemed incompetent to stand trial, or for individuals with serious mental illness that are, or are at risk of, experiencing homelessness.


$128.9 million in 2023-24, as follows: 

  • $67.3 million for county behavioral health department activities, which includes $15 million for LA County’s planning activities to implement on an accelerated schedule by December 1, 2023.
  • $29.4 million to the trial courts for program administration and coordination of self-help centers.
  • $22.9 million to support public defender and legal services organizations that will provide legal counsel to CARE participants.
  • $6.1 million to the Department of Health Care Services (DHCS) to support implementation activities.
  • $3.2 million to the Judicial Council to support implementation activities.

MCO Tax 

The Legislature passed the health budget trailer bills, which includes the renewal of the State’s Managed Care Organization (MCO) Tax. This important financial mechanism will raise a total of $19.4 billion, with much of it being spent on the state’s health care infrastructure, including the largest Medi-Cal rate increase in California history. Among other things, this will provide $600 million for behavioral health facilities, including increasing inpatient psychiatric beds. Read more here. The budget anticipates:

  • Using $8.3 billion as a backfill to address budget shortfalls in 2023-24 and subsequent years, and
  • Transferring $11.1 billion to the Medi-Cal Provider Payment Reserve Fund for investments in the Medi-Cal program, including provider reimbursement rate increases, support for financially distressed hospitals, workforce development programs, and other investments. To implement the renewed MCO provider tax effective April 1, DHCS must submit the MCO provider tax renewal proposal to the federal Centers for Medicare & Medicaid Services (CMS) by June 30, 2023.

AB 119 is the vehicle for the MCO taxation structure. The spending plan for the MCO tax is in AB 118, the health omnibus trailer bill.
In 2024, the funds will be allocated as follows (please note these numbers do not include the federal matching funds; these details are outlined in AB 118):

  • $3.5 billion to the General Fund to balance the budget.
  • $241 million to raise 2024 reimbursement rates for primary, maternity and some mental health services, which will provide 87.5 percent of what the federal government pays through Medicare. 
  • $150 million to the Distressed Hospital Loan program (in addition to the $150 million that was allocated earlier this year).
  • $50 million into the hospital loan program for seismic retrofitting. 
  • $75 million for new medical residency slots. These funds will start in 2024 and continue for the next four years.

AB 118 also includes language allowing for additional targeted increases to Medi-Cal payments or other investments in January 2025 for the following:

  • Primary care services
  • Obstetric care and doula services
  • Non-specialty mental health services
  • Specialty care services
  • Community or hospital outpatient procedures and services
  • Family planning services and women’s health providers
  • Hospital-based emergency and emergency physician services
  • Ground emergency transport services
  • Designated public hospitals
  • Behavioral health care for beneficiaries in hospital and institutional long-term care settings
  • Investments to maintain and grow the health care workforce

Medi-Cal Provider Rate Increases

No sooner than January 1, 2024, or on the effective date of federal approval of the MCO provider tax as required, AB 118 specifies increases to provider reimbursement rates to at least 87.5 percent of Medicare for primary care, obstetric care, doula services and non-specialty mental health services. Payments are to be supported by MCO provider tax revenue or other state funds appropriated to DHCS for this purpose. As part of the 2024-25 Governor’s Budget, DHCS is required to submit to the Legislature a plan for targeted increases in specified domains to Medi-Cal payments or other investments that are designed to advance access, quality and equity for Medi-Cal beneficiaries and promote greater provider participation.
Distressed Hospital Loan Program

In addition to the $150 million one-time General Fund provided for the Distressed Hospital Loan Program by AB 112 (Chapter 6, Statutes of 2023) budget authorizes the transfer of up to $150 million from the Medi-Cal Provider Payment Reserve Fund (to be supported by MCO provider tax revenue), to the Program in 2023-24. Should there be a delay in federal approval of the revised MCO provider tax, AB 118 specifies the Director of Finance may authorize a short-term loan of up to $150 million from the General Fund for the Program.
The Distressed Hospital Loan Program will provide interest-free cashflow loans to not-for-profit hospitals and public hospitals in significant financial distress or to governmental entities representing a closed hospital, for purposes of preventing the closure of, or facilitating the reopening of, those hospitals.

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