CHA News Article

Legislature Makes Budget Decisions on Key Health Care Issues
For CEOs, Government Relations Staff

Over the weekend, the Legislature’s budget conference committee completed its work of negotiating the differences between the Governor’s, Assembly’s, and Senate’s budgets. The Senate and Assembly now need to approve the final budget bill and the accompanying trailer bills and send them to the Governor no later than June 15, for his approval by July 1. 

Although most of the budget details have been worked out, it is expected that some of the trailer bills may lag behind the budget package and be approved later this month. Key budget issues decided by the budget conference committee include:

  • Medi-Cal expansion to undocumented immigrants: The Administration proposed to expand Medi-Cal eligibility to undocumented young adults ages 19 to 25 for a total cost in the budget year of $98 million, and the Assembly concurred with the Administration. The Senate wanted to expand that proposal by including seniors ages 65 and older, and increasing eligibility by one year for younger adults beginning with age 26 in 2021, age 27 in 2022, and so on. The cost for the Senate proposal in the budget year is an additional $62.5 million. Expanded coverage in these proposals would begin no sooner than January 2020. The conference committee approved the Governor’s proposed expansion of full-scope Medi-Cal to young adults ages 19-25, regardless of immigration status.
  • Health coverage mandate: The Administration proposed to require Californians to have health coverage or pay an annual tax penalty. The Senate approved as part of its budget an individual mandate, but the Assembly did not. The amount of financial assistance to provide to Californians to make their insurance more affordable remains a sticking point. The budget will contain an individual mandate, as proposed by the Governor.
  • Premium assistance: The Governor proposed using $300 million a year in penalty revenue from the coverage mandate to expand subsidies for low and middle-income people earning up to 600 percent of the federal poverty level. He placed a sunset on the assistance after three years, while maintaining the mandate. The Assembly approved using the penalty revenue to pay for expanded subsidies. The Senate proposed an additional $300 million per year over the Governor’s $300 million for premium assistance. The conference committee approved the Governor’s subsidy levels and added $450 million from the General Fund over three years to provide subsidies to individuals below 138 percent of the federal poverty level (FPL), as well as additional subsidies to individuals between 400 and 600 percent of the FPL.
  • Restoration of optional Medi-Cal benefits cut during the recession: The Governor proposed restoring optical benefits for Medi-Cal beneficiaries beginning in 2020 at a cost of $33.4 million. The Senate approved this request and proposed an additional $21.1 million to restore additional benefits, including audiology, incontinence supplies, podiatry, and speech therapy. The Assembly approved the restoration of all recession-era cuts to Medi-Cal and proposed funding of $38.9 million per year. The proposals vary in whether the funding should come from the state General Fund or Proposition 56, or a combination of the two. The conference committee approved restoration of many optional Medi-Cal benefits, although not all. $17.4 million in the budget year will be allocated to restoring audiology, incontinence creams/washes, optical, podiatry, and speech therapy services.
  • Single-payer health care commission: The Governor proposed eliminating the Council on Health Care Delivery Systems, which was created in last year’s budget, to redirect the $5 million budgeted for the commission to a new commission – the Healthy California for All Commission, which would more narrowly focus on how California could create a universal, single-payer health care system. The conference committee did not agree to the Governor’s proposal. However, the issue is still being negotiated, and further details are expected later this week.
  • Mental health workforce development: The Governor proposed spending $50 million over the next six years to support mental health workforce development through existing loan repayment and scholarship programs administered by the Office of Statewide Health Planning and Development. The Senate adopted the Governor’s proposal but with an additional $1 million to provide loan repayments for former foster youth serving as mental health providers in public facilities or provider shortage areas. The Senate also approved $2.7 million of Mental Health Services Act funds for psychiatry fellowships. The Assembly adopted the Governor’s proposal, but proposed $750,000 for loan repayments for former foster youth and $2.7 to fund psychiatry fellowships. The conference committee agreed to the Governor’s proposal with some modifications: $46.3 million from the General Fund for one-time mental health workforce development, $1 million for scholarships for former foster youth, and $2.7 million for psychiatry fellowships.
  • Managed care organization (MCO) enrollment tax: The Administration did not propose to extend the MCO tax as part of the budget, but both the Assembly and Senate approved General Fund savings and extending the MCO tax in this year’s budget. This remains one of the greatest differences between the Legislature and the Administration, and amounts to $1.4 billion this budget year, increasing to $1.8 billion in 2020-21 and 2021-22. The conference committee adopted placeholder trailer bill language to authorize an MCO tax, but the impact on the budget will not be counted until federal approval has been received.
  • Trailer bill language to require the Department of Health Care Services (DHCS) to work with stakeholders and the Legislature to analyze the Governor’s proposed Medi-Cal pharmacy benefit transition: In January, the Governor issued an Executive Order to create a single drug purchasing system in California. The order also carves out the pharmacy benefit from the responsibility of Medi-Cal managed care plans and transitions the benefit into the fee-for-service delivery system, which will impact hospitals that participate in the 340B Drug Discount Program. CHA, along with clinics and health plans, is asking the Legislature to adopt trailer bill language to require DHCS to provide the Legislature with a full analysis of this proposal and convene a stakeholder process. This issue is still under discussion.
  • Investment in Workforce Education and Training Five-Year Plan:  The Administration proposed expenditure authority from the Mental Health Services Fund of $100 million to support OSHPD’s 2020-25 Workforce Education and Training (WET) Program Five Year Plan, a framework of strategies to remedy the shortage of qualified providers in the public mental health system. The conference committee modified the proposal and agreed to $35 million from the General Fund and $25 million from the Mental Health Services Act to fund the five-year WET plan to train mental health professionals. It also included adopting placeholder budget bill language to require a county match of 33%  for expenditures of state funds.

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