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Budget Deal Brings Big Changes for Health Care

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Earlier this week, California’s Senate and Assembly, along with Gov. Gavin Newsom, finalized several important details of this year’s budget, a $300 billion spending package that includes several far-reaching features that will affect both health care delivery and hospital operations. While legislation is far from complete and it is expected that more issues will arise in August, this week’s budget deal includes: 

Office of Health Care Affordability: The Office of Health Care Affordability will be tasked with: 

  • Increasing transparency on cost and quality 
  • Developing cost targets for the health care field 
  • Enforcing compliance through financial penalties 
  • Monitoring market transactions that may adversely affect market competition, prices, quality, access, and the total cost of care 

Even though the first enforceable statewide cost target will not be in effect until 2026, it is expected that the office will take the remaining six months of 2022 to hire staff and then begin its regulatory work in earnest in 2023. CHA has been working with the authors of this bill for the past two years to make important changes to this concept so that it is workable for hospitals, and we will be deeply involved in all aspects of the work of the office. 

Retention Pay: Hospital health care workers and those in hospital affiliated settings will receive a state retention bonus up to $1,500 (a $1,000 base payment with a $500 match from the state for hospital-paid bonuses/COVID-19-related payments); for part-time workers, this amount drops to $1,250 ($750 base payment with a $500 match from the state for hospital-paid bonuses/COVID-19-related payments). Hospitals will serve as pass-through entities to deliver these payments, nearly $1.1 billion statewide, to health care workers.  

Shortly after the legal language of this bill became available, CHA flagged important problems with the original proposal that were fixed in this final version. 

Medi-Cal Expansion: Full Medi-Cal coverage for all income-eligible Californians will be expanded to beneficiaries ages 26-49, regardless of immigration status, starting no later than Jan. 1, 2024. California hospitals have long supported coverage expansions for undocumented individuals and support this step. 

Health Care Workforce Investments: Multiple new programs, approximately the same $1.7 billion proposed by the governor in January, will support the work of hospitals and other health care providers to replenish a depleted workforce including: 

  • Comprehensive Nursing Initiative — To increase the number of registered nurses, licensed vocational nurses, certified nursing assistants, certified nurse midwives, certified medical assistants, family nurse practitioners, and other health professions 
  • Psychiatric Resident Program — To increase the number of behavioral health providers, such as psychiatrists, psychiatric nurse practitioners, and psychologists 
  • Multilingual Health Initiatives — To increase the linguistic and cultural competencies in the workforce by expanding scholarships and loan repayment for multilingual applicants 

These investments will be critical to the long road hospitals now face to make sure that there are enough health care workers to meet the needs of all Californians. 

Behavioral Health Support: Several initiatives aim to reform the state’s behavioral health care system, including: 

  • Expanded Access to Medications for Addiction Treatment — Requires all certified alcohol and drug programs to either offer medication-assisted treatment directly or have an effective referral process in place 
  • Behavioral Health Bridge Housing $1.5 billion over two years for bridge housing solutions for people experiencing homelessness with serious mental illness 
  • Hospital Eligibility for Mental Health Funds — Clarifies that any funding administered by the Mental Health Services Oversight and Accountability Commission for crisis prevention, early intervention, and crisis response strategies shall be available to non-county entities, including health care providers, hospitals, and health systems. Expands eligible uses of funds to include education and training, as well as approaches to support crisis prevention, early intervention, and crisis response. 

These changes, along with many other new programs, will help address much-needed behavioral health care gaps throughout the state. 

In addition to these new funding areas, a proposal — opposed by CHA — that would have required that nonprofit hospitals allocate 25% of community benefits to address social determinants of health did not advance.  

Unlike last year’s budget, which focused heavily on the pandemic response and recovery, this year’s plan presents a longer-term vision for California, seeking to address stubborn issues such as substance use and mental health disorders, affordable housing and homelessness, health equity, and health care affordability, among other priorities. 

Stay tuned for deeper analysis on the Office of Health Care Affordability, retention payments (in the coming weeks, we will be providing FAQs and hosting webinars so you can ask more detailed questions; if you have immediate needs, contact Gideon Baum at, and other issues that could affect how California hospitals deliver care as we work together to find more steady ground in the aftermath of COVID-19.