Home Medi-Cal Targeted Provider Rate Increases and Investments 

Medi-Cal Targeted Provider Rate Increases and Investments

Assembly Bill (AB) 119 (Chapter 13, Statutes of 2023) authorized a Managed Care Organization (MCO) Provider Tax effective April 1, 2023 through December 31, 2026. Subject to federal approval, MCO tax revenues will be used to support the Medi-Cal program including, but not limited to, new targeted provider rate increases and other investments that advance access, quality, and equity for Medi-Cal members and promote provider participation in the Medi-Cal program.  

Proposition 35

California voters approved Proposition 35 at the November 5, 2024 General Election making permanent the MCO Tax, subject to continued federal approval, and dedicating the resulting revenues to specified Medi-Cal program purposes beginning in 2025.

The passage of Proposition 35 makes inoperative the additional provider payment increases and continuous coverage for children up to age four authorized by Senate Bill (SB) 159 (Chapter 40, Statutes of 2024), which would have been effective on January 1, 2025 or later. The passage of Proposition 35 does not impact the targeted provider rate increases which were implemented January 1, 2024.

Proposition 35 requires DHCS to consult with a stakeholder advisory committee, to be appointed by the Governor and Legislative leaders, prior to proposing or implementing any new provider payments or changes to existing provider payments supported by the MCO Tax. The DHCS website will be updated when additional information becomes available. 

Targeted Rate Increases Effective January 1, 2024

Pursuant to the 2023 Budget Act and AB 118 (Chapter 42, Statutes of 2023 adding Welfare & Institutions Code Section 14105.201), DHCS implemented Targeted Rate Increases for primary care, obstetric, and non-specialty mental health services effective for dates of service on or after January 1, 2024.

These rate increases apply to eligible providers in the Fee-For-Service delivery system, as well as eligible network providers contracted with Medi-Cal managed care plans. DHCS increased rates, as applicable, for targeted services to no less than 87.5% of the Medicare rate, inclusive of eliminating AB 97 provider payment reductions and incorporating applicable Proposition 56 supplemental payments into the base rate. DHCS calculated an equivalent rate increase for services that do not have a rate established by Medicare. DHCS received federal approval of the 2024 targeted rate increase in State Plan Amendment (SPA) 23-0035.

DHCS developed the code list through a review of existing Medi-Cal policies and procedures, review of current utilization data by provider taxonomy, review of literature, review by DHCS’s staff medical consultants, and consultation with technical experts. DHCS reserves the right to modify the code list for purposes including, but not limited to, accounting for changes to coding and billing definitions, applying technical corrections or updates, and obtaining or maintaining any necessary federal approvals.

Eligible Providers

Procedure codes identified as Primary/General Care are proposed to be reimbursed at the increased rate if the service is billed using Health Insurance Claim Form (CMS-1500) and provided by an otherwise eligible provider in the below provider type categories:

Physicians
Physician Assistants
Nurse Practitioners
Podiatrists
Certified Nurse Midwives
Licensed Midwives
Doula Providers
Psychologists
Licensed Professional Clinical Counselors
Licensed Clinical Social Workers
Marriage and Family Therapists

Other providers will continue to be reimbursed at the existing Medi-Cal rate for procedure codes identified as Primary/General Care.

Procedure codes identified as Obstetric and Non-Specialty Mental Health Services are proposed be reimbursed at the increased rate for all otherwise eligible providers.

Please see the notes on the Medi-Cal Targeted Provider Rate Increase Fee Schedule for further information regarding billing and eligibility restrictions.

Rate Information 

Due to the passage of Proposition 35, the CY 2024 Fee Schedule rates remain in effect until further notice.

Contact DHCS

Please direct any questions regarding billing and payment of the Targeted Rate Increases to the Medi-Cal Telephone Service Center. For questions related to billing and payment by Medi-Cal managed care plans, please contact the applicable managed care plan.

Legislation & Resources

Targeted Provider Rate Increases APL 25-012 (Supersedes All Plan Letters 24-007,10-014 and 10-003)
MCO Tax Term Sheet (July 3, 2024 superseded by Prop 35)
SB 159
Targeted Provider Rate Increases APL 24-007
July 17, 2024 Presentation Materials (superseded by APL 24-007)
Managed Care Organization Term Sheet (January 19, 2024 superseded by Prop 35)
Managed Care Organization Fiscal Chart (January 19, 2024 superseded by Prop 35)
Managed Care Organization Tax Waiver Approval and Companion Letter
SPA 23-0035
AB 118
AB 119
MCO Tax & Investments Spending Plan
Targeted Provider Rate Increases Frequently Asked Questions (FAQs)
California’s Managed Care Organization Tax FAQs (April 2025)