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HR 1 and Proposition 35 squeeze provider taxes; state weighs Prop 35 amendments or ballot change
Summary
DHCS and policy analysts told the subcommittee HR 1 imposes new federal limits on health‑care related taxes, leaving limited options to preserve current MCO tax revenue; Prop 35 creates additional state constraints and any amendment requires a three‑fourths legislative vote or a return to voters.
Tyler Sadrick, state Medicaid director, briefed the subcommittee on the complex interaction between federal HR 1 law and California's health provider tax structure, including the MCO tax and the hospital quality assurance fee (HQAF). DHCS told the committee HR 1 tightens federal standards for health care‑related taxes (broad‑based and uniform or generally redistributive), phases down maximum tax sizes to 3.5% of net patient revenue over four years and generally prohibits new or expanded taxes after the law's enactment.
"HR 1, in effect, prohibits new or increased health care…
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