Medi-Cal: graduate medical education payments.

Senators Grove and Caballero anchor a measure that extends Medi-Cal’s graduate medical education payments to nondesignated district and municipal public hospitals and their affiliated government entities, aligning these payments with the methodology already used for designated public hospitals and establishing a dedicated fund to support the nonfederal share without drawing from the state General Fund. The legislation creates a new GME payment pathway modeled on the existing designated-public-hospital framework, while enabling additional payment forms subject to federal approval.

The core provisions authorize the department to provide direct and indirect Medi-Cal GME payments to district and municipal public hospitals, mirroring the direct and indirect components used for designated public hospitals. The department may pursue federal approval for other forms of GME payments to these hospitals and their affiliates, including payments tied to the volume of fee-for-service Medi-Cal activity or revenue, as well as incentive payments. The nonfederal share must come from voluntary intergovernmental transfers by the hospitals or their affiliated entities, with no reliance on state General Fund moneys, and it relies on cross-references to existing transfer authorities and definitions for eligible entities and hospital types.

To fund the nonfederal share, the bill creates the DMPH GME Special Fund in the State Treasury, to be continuously appropriated to the department for the purposes described. Moneys deposited into the fund come from voluntary intergovernmental transfers and other eligible public entities, and may be used to pay the nonfederal share, reimburse administrative costs, and otherwise support the Medi-Cal program. The department must determine annual transfer amounts to cover the nonfederal share plus a 5 percent cushion, with transfers certified as eligible for federal financial participation; if federal participation is unavailable or recouped, the corresponding funds must be returned to the transferring entities within 14 days. The section emphasizes that the transfers are voluntary and that no General Fund moneys are used for the nonfederal share, while allowing the department to seek FFP to the full extent permitted by law.

Implementation hinges on federal approvals and the availability of federal financial participation, with payments authorized to begin no sooner than January 1, 2026, and the department empowered to adjust requirements to meet federal rules or maximize FFP. The department is permitted to use non-regulatory guidance to implement or interpret the provisions and must consult with district and municipal hospitals throughout development and rollout. Definitions clarify that a district and municipal public hospital is a nondesignated public hospital, and an affiliated government entity encompasses the hospital’s training and practice groups and related public entities connected to clinical training.

Together, the provisions connect the new DMPH GME framework to the existing DPHS model while creating a distinct funding mechanism to extend Medi-Cal GME support to nondesignated public hospitals. The arrangement relies on voluntary IGTs, a continuously appropriated special fund, and federal approvals to govern the timing, form, and scope of payments, with ongoing consultation and guidance as implementation proceeds. The measure situates the expanded GME payments within the broader Medi-Cal governance structure (including references to cross-cutting transfer authorities and hospital definitions) and frames the broader aim as aligning nondesignated public hospitals with the current designated-public-hospital GME framework, subject to federal compliance and funding participation.