Existing law establishes the Steven M. Thompson Physician Corps Loan Repayment Program in the California Physician Corps Program within the Health Professions Education Foundation, which provides financial incentives, including repayment of educational loans, to a physician and surgeon who practices in a medically underserved area, as defined. defined, and who is trained in, and practices, in certain practice settings or primary specialities, as defined. Existing law authorizes the selection committee to fill up to 20% of the available positions with program applicants from specialities outside of the primary specialties, including psychiatry. Existing law establishes the Medically Underserved Account for Physicians, a continuously appropriated account, within the Health Professions Education Fund that is managed by the Health Professions Education Foundation and the Office of Statewide Health Planning and Development, to primarily provide funding for the ongoing operations of the Steven M. Thompson Physician Corps Loan Repayment Program.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and imposes certain requirements on health care service plans. Existing law imposes various fines and administrative penalties on health care service plans for certain violations of the act, which are deposited into the Managed Care Administrative Fines and Penalties Fund. Existing law requires the first $1,000,000 in the fund to be transferred each year to the Medically Underserved Account for Physicians and to be used, upon appropriation by the Legislature, for purposes of the Steven M. Thompson Physician Corps Loan Repayment Program. Existing law requires all remaining funds to be transferred each year to the Major Risk Medical Insurance Fund and to be used, upon appropriation by the Legislature, for purposes of the Major Risk Medical Insurance Program.

The bill would instead require, after the first $1,000,000 is transferred from the Managed Care Administrative Fines and Penalties Fund to the Medically Underserved Account for Physicians, $1,000,000 to be transferred each year to the Major Risk Medical Insurance Fund to be used, upon appropriation by the Legislature, for the Major Risk Medical Insurance Program. The bill would require any amount remaining over the amounts transferred to the Medically Underserved Account for Physicians and the Major Risk Medical Insurance Fund to be transferred each year to the Medically Underserved Account for Physicians to be used, upon appropriation by the Legislature, for the Steven M. Thompson Physician Corps Loan Repayment Program, and provide that one-half of these moneys are to be used may be prioritized to fund the repayment of loans for those physicians providing psychiatric services or those physicians whose primary specialty is psychiatry program applicants who are trained in, and practice, psychiatry, under the Steven M. Thompson Physician Corps Loan Repayment Program.

The bill would also delete a reference to an obsolete program and make other technical, nonsubstantive changes.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of its provisions a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law requires health care service plans and insurers to disclose or provide for the disclosure to specified entities persons and the process that the plan uses to authorize or deny health care services under the benefits provided by the plan, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities.

This bill would expand the above requirement to include disclosure of the process the plan uses to authorize or deny behavioral health treatment. By changing the definition of an existing crime with respect to health care service plans, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Date of Hearing: June 29, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 1471

Author:(Hernandez) – As Amended Ver:April 21, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill redirects an additional portion of funds generated from fines and penalties on managed care plans into health professional loan repayment programs, as specified. Specifically, this bill:

1. Limits the amount of funds redirected to the Major Risk Medical Insurance Program (MRMIP) just to the second $1 million in the Managed Care Administrative Fines and Penalties Fund annually (currently, loan repayment programs receive the first $1 million and the MRMIP program receives all funds over $1 million).
2. Deposits any amount over $2 million in the fines and penalties fund to the Medically Underserved Account for Physicians (MUAP) for loan repayment programs, as specified.
3. Authorizes up to half of the amount over the first $2 million deposited into the MUAP to be prioritized to fund the repayment of loans for providers of psychiatric services.

FISCAL EFFECT:

1. This bill appears to conflict somewhat with a recent budget action. The comparison of this bill to current law and to the proposed budget action is shown below.

As a practical matter, in absence of state funding demand for MRMIP, funds could be redirected by statute to support other state needs, including comprehensive health care programs that are currently funded through the GF. Indeed, the administration proposed trailer bill language in 2016 redirecting funds from the Managed Care Administrative Fines and Penalties Fund to offset GF costs for the Medi-Cal program instead of supporting MRMIP. A compromise was reached whereby the 2016 Budget Act, pending gubernatorial approval at the time this analysis was prepared, redirects $2.016 million in 2016-17 that otherwise would be transferred to MRMIP, to the Department of Health Care Services to offset GF costs for Medi-Cal. Per budget bill language in SB 826 (Leno), the redirection is intended to continue until fiscal year 2019-20. However, it does not appear there are statutory modifications currently under consideration that would effectuate the intended redirection of funds for future years.

Due to the timing of this bill, additional loan repayment awards could not be provided by OSHPD until 2017-18, and technically the transfer could be effectuated July 1, 2017. Thus, the bill certainly conflicts with the intent language included in the budget, but it does not appear to conflict on a technical basis, as the redirection of funds to Medi-Cal is only for 2016-17.

1. If the budget action is not signed into law, and in years 2020-21 and beyond in any case, the bill would simply redirect funds from support of MRMIP to loan repayment programs. Given that long-term enrollment, long-term costs, and costs to reconcile past expenditures for MRMIP still appear uncertain, the reduction in funding for MRMIP could result in unknown potential future risk to the GF, which would become responsible for any MRMIP costs not covered by the program's currently available fund balance.

Additionally, the Office of Statewide Health Planning and Development would incur costs to administer the additional awards, commensurate with the level of funds transferred to the loan repayment program. Current law allows the fund to pay for administrative costs of up to five percent of the total state appropriation for the program.

COMMENTS:

1. Purpose. According to the author, the Steven M. Thompson Physician Corps Loan Repayment Program, funded by the MUAP, was created in response to physician shortages in medically underserved areas. The author notes funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. Additionally, the author notes this bill will help address a shortage of psychiatric services. This bill is author-sponsored and supported by mental health providers, the Medical Board of California, and local behavioral health agencies.
2. Background.
   1. Managed Care Administrative Fines and Penalties Fund. This fund is used to deposit various fines and administrative penalties for the licensing and regulation of health care service plans by the Department of Managed Health Care (DMHC). Revenue accumulation to the fund is variable based on the level and timing of enforcement activity and fines and penalties paid in a given year, and revenues transferred from the fund have fluctuated from about $1 million to over $9 million annually over the last five years.
   2. Major Risk Medical Insurance Program. MRMIP is a high-risk pool that was originally designed to provide health insurance to Californians unable to obtain coverage in the individual health insurance market because of a pre­existing condition. With the implementation of the federal Affordable Care Act, individuals may not be denied coverage because of a pre­existing condition. MRMIP caseload has declined from 6,570 in 2013 to 1,794 in 2015.
   3. Steven M. Thompson Physician Corps Loan Repayment Program. This loan repayment program is administered the Health Professions Education Foundation within the Office of Statewide Health Planning and Development (OSHPD). It provides for the repayment of educational loans for physicians and surgeons who practice in medically underserved areas (MUAs) of the state. This program would be the beneficiary of the redirection of fine and penalty revenue.
3. Prior Legislation.
   1. SB 20 (Hernandez), of 2013, upon a finding by the Department of Finance that MRMIP is inoperative, halted transfers of specified revenues from the Managed Care Administrative Fines and Penalties Fund to the MRMIP program, and instead transfers funds to the loan repayment program, similar to this bill. SB 20 was referred to the Suspense File in this committee in 2013 and not heard on suspense. It was amended to a new purpose on April 9, 2014.
   2. AB 860 (Perea and Bocanegra), of 2013, required that, after the first $1 million, is transferred each year from the Managed Care Administrative Fines and Penalties Fund to the MUAP, $600,000 be transferred each year from the fund to the Steven M. Thompson Medical School Scholarship Account, as specified. AB 860 would have required that any amount remaining over the amounts transferred to those two accounts be transferred each year to MRMIF for purposes of MRMIP. AB 860 was held on the Suspense File in this committee.
   3. SB 635 (Hernandez) of 2012 was similar to SB 20, but transferred the funds upon a finding that MRMIP is inoperative to a newly created Song-Brown Program Account, which supports training for health care professionals. SB 635 was held on the Suspense File in this committee.
   4. SB 1379 (Ducheny), Chapter 607, Statutes of 2008, requires fines and administrative penalties levied against health plans under Knox-Keene to be placed in the Managed Care Administrative Fines and Penalties Fund and used, upon appropriation by the Legislature, for a physician loan-repayment program and MRMIP, instead of being deposited into the Managed Care Fund.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: June 21, 2016

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

SBPCA Bill Id:SB 1471

Author:(Hernandez) – As Amended Ver:April 21, 2016

SENATE VOTE: 39-0

SUBJECT: Health professions development: loan repayment.

SUMMARY: Requires, on and after January 1, 2017 any funds over two million dollars in the Managed Care Administrative Fines and Penalties Fund (MCA Fund) to annually be transferred to the Medically Underserved Account for Physicians (MUAP) in the Health Professions Education Fund (HPEF), to be used for the purposes of the Steven M. Thompson Physician Corps Loan Repayment Program (SMT Program). Specifically, this bill:

1. Clarifies the current distribution of funds deposited into the MCA Fund as follows:
   1. The first $1 million to be transferred to the MUAP to be used for the SMT Program; and,
   2. On and after January 1, 2017, any amount over the first $1 million, including accrued interest, in the MCA Fund be transferred to the Major Risk Medical Insurance Fund (MRMIF) to be used for the Major Risk Medical Insurance Program (MRMIP).
2. Specifies that on and after January 1, 2017, and annually thereafter, any amount over the first $2 million, including accrued interest, in the MCA Fund be transferred to the MUAP within the HPEF, and upon appropriation by the Legislature, be used for the SMT Program.
3. Authorizes up to half of the amount over the first $2 million deposited into the MUAP within HPEF to be prioritized to fund the repayment of loans for providers of psychiatric services.
4. Deletes an obsolete reference in law to the Healthy Families Program.

EXISTING LAW:

1. Creates the SMT Program within the HPEF, administered by the Office of Statewide Health Planning and Development (OSHPD), which provides for the repayment of educational loans for physicians and surgeons who practice in medically underserved areas (MUAs) of the state.
2. Provides for the licensure and regulation of health care service plans (health plans) by the Department of Managed Health Care (DMHC) under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene). Subjects health plans to fines and administrative penalties for failing to comply with specified provisions of Knox-Keene. Requires health plans to pay specified assessments each fiscal year as a reimbursement of their share of the costs and expenses reasonably incurred in the administration of Knox-Keene.
3. Establishes the MRMIP, administered by the Managed Risk Medical Insurance Board (MRMIB), to provide major risk medical coverage to eligible persons who have been rejected for coverage by at least one private health plan. Creates the MRMIF for purposes of MRMIP.
4. Requires fines and administrative penalties assessed against health plans by DMHC to be deposited into the MCA Fund. Requires those fines and penalties collected up to $1 million be deposited into the MUAP in the HPEF for purposes of the SMT Program. Requires any amount over the first $1 million to be transferred to the MRMIF to be used, upon appropriation by the Legislature, for use by MRMIP.
   

FISCAL EFFECT: According to the Senate Appropriations Committee:

Unknown potential future cost pressure due to the reduction in funding for MRMIP (General Fund or Proposition 99 funds). Under current law, the cost of operating MRMIP is funded with subscriber premiums and state funds. The state has used Proposition 99 (Tobacco Tax) funds and transfers from MCA Fund to subsidize the program. Enrollment in MRMIP has declined significantly in recent years, from 4,782 in January 2014 to a projected enrollment of 1,400 in 2018. The declining MRMIP enrollment (and the existing MRMIF balance, estimated to be $132 million at the end of this fiscal year) should reduce the need for additional state funds in the future. However, as long as MRMIP is active there is a potential need for additional state funding. It is also important to note that final reconciliation of expenditures in MRMIP takes several years, so there is some uncertainty about future MRMIP funding needs, even with declining enrollment.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author the SMT Program was created in response to the physician shortage problem in MUAs, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. Additionally, through various stakeholder meetings and informational hearings related to the mental health workforce, mounting information, though largely anecdotal, highlight the shrinking psychiatry workforce. Added to the lack of providers is the low numbers who are willing to treat patients with insurance—both public health system and commercial market. The SMT Program currently allows for up to 20% of the available SMT Program funds to be awarded to applicants from specialties outside of the primary care specialties, including psychiatry, but is annually disbursed among other specialties. This bill will provide much-needed funding for the SMT Program to assist with loan repayment for physicians who agree to practice in MUAs of the state for a minimum of three years, as well as prioritizing new funds for those who provide psychiatric services.
2. BACKGROUND.
   1. Physician supply in California. California is home to the largest number of primary care physicians (PCPs) and nurse practitioners in the country. However, the state ranks 23rd in the number of PCPs per resident. An August 2014 report by the California HealthCare Foundation (CHCF) states that California has only 35 to 49 PCPs per 100,000 Medi-Cal enrollees. Federal guidelines call for the state to have 60 to 80 doctors per 100,000 patients. The supply of PCPs also varies substantially across California’s counties. The number of PCPs actively practicing in California counties is, in too many cases, at the bottom range of, or below, the state's need. According to 2011 Health Resources and Services Administration data, 29 of California’s 58 counties fall at the lower end or below the needed supply range for PCPs. In other words, half of Californians live in a community where they do not have adequate access to the health care services they need.
   2. Access to mental health care in California. According to a CHCF 2013 report, “Mental Health Care in California: Painting a Picture,” nearly one in six California adults has a mental health need, and approximately one in 20 suffers from a serious mental illness that makes it difficult to carry out major life activities. The rate among children is even higher: 1 in 13 suffers from a mental illness that limits participation in daily activities. According to the report, the distribution of licensed mental health providers varied considerably among California regions. The Bay Area has the greatest concentration of licensed mental health professionals, exceeding the state average. The Inland Empire and San Joaquin Valley fell well below the state average for all mental health professions. The Northern and Sierra region was below average in the numbers of psychiatrists and psychologists, but above average for marriage and family therapists.
      
   3. SMT Program. The SMT program was created in response to the physician-shortage problem in MUAs, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. According to OSHPD, the SMT program encourages recently licensed physicians to practice in Health Professional Shortage Areas (HPSAs) in California. The program repays up to $105,000 in educational loans in exchange for full-time service for at least three years. To be considered eligible for an award, applicants must:
      

a) Be an allopathic or osteopathic physician;

b) Be free of any contractual service obligations (i.e. the National Health Service Corps Federal Loan Repayment Program or other financial incentive programs);

c) Have outstanding educational debt from a government or commercial lending institution;

d) Have a valid, unrestricted license to practice medicine in California;

e) Be employed or have accepted employment in a HPSA in California; and,

f) Commit to providing full-time direct patient care in a HPSA.

Currently, up to 20% of the available SMT Program funds may be awarded to program applicants from specialties outside of the primary care specialties, including psychiatry.

• 1. Administrative Fines and Penalties. The purpose of the MCA Fund is to act as a depository for fines and administrative penalties associated with the licensing and regulation of health care service plans. In September of each year, DMHC transfers the revenue collected in the MCA Fund during the previous 12 month period. This amount fluctuates from year to year, based on the amounts of fines and penalties levied by DMHC. According to DMHC, the current balance in the MCA Fund is just over $3 million.
  2. MRMIP. MRMIP is a program originally developed to provide health insurance for Californians who were unable to obtain coverage in the individual insurance market due to pre-existing conditions. The Patient Protection and Affordable Care Act gave Californian's otherwise unable to obtain health insurance coverage additional choices, but according to the 2016 Application and Handbook, MRMIP will continue to provide coverage as well. MRMIP services are delivered through contracts with health insurance plans. MRMIP subscribers participate in the payment for the cost of their coverage by paying subscriber contributions, an annual deductible and copayments. MRMIP supplements subscriber contributions to cover the cost of care and is funded annually by tobacco tax funds.

1. SUPPORT. The California Psychiatric Association (CPA) states this bill will potentially increase the number of psychiatrists serving in California’s MUAs of California by giving psychiatrists an opportunity to better access loan repayments in the SMT Program. CPA notes that California has 339 areas designated as federal Mental HPSAs.
   
   The Medical Board of California (MBC) states this bill would provide much needed funding for the SMT Program to assist with loan repayment for physicians who agree to practice in medically underserved areas, as well as prioritize new funds for those who are trained in, and practice psychiatry, promoting MBC's mission of access to care.
   
   The Association of California Healthcare Districts supports this bill, noting that it is especially difficult for rural regions to attract a physician workforce and loan repayment programs are a critical step in solving the health care workforce shortage and ensuring access to health care services in the most underserved areas of the state.
   
2. POLICY COMMENT. SB 826 (Leno) which enacts the 2016-17 Budget redirects all monies in the MCA Fund above the first million dedicated to the SMT Program, to the Medi-Cal program through 2019-20, based on the assumption that the existing funds in the MRMIF will be sufficient to fund MRMIP. Since this bill conflicts with the recently enacted budget, the author may wish address this and identify an alternative funding source.
   
3. RELATED LEGISLATION. SB 1139 (Lara), would deem eligible any student, including a person without lawful immigration status and/or a person who is exempt from nonresident tuition, who meets the requirements for admission to participate in a medical school program and a medical residency training program; would prohibit specified grant and loan repayment and forgiveness programs from denying an application based on an applicant’s citizenship or immigration status; would require an applicant, when mandatory disclosure of a social security number is required, to provide it if one has been issued, or an individual taxpayer identification number that has been or will be submitted. SB 1139 is set to be heard in the Assembly Health Committee on June 28, 2016.
4. PREVIOUS LEGISLATION.
   1. SB 20 (Hernandez), of 2013, was substantially similar to this bill. SB 20 was held on suspense in the Assembly Appropriations Committee before being amended to a new purpose on April 9, 2014.
   2. AB 860 (Perea and Bocanegra), of 2013, would have required that, after the first $1 million, is transferred each year from the MCA Fund to the MUAP, $600,000 be transferred each year from the fund to the Steven M. Thompson Medical School Scholarship Account, as specified. AB 860 would have required that any amount remaining over the amounts transferred to those two accounts be transferred each year to MRMIF for purposes of MRMIP. AB 860 was held on suspense in the Assembly Appropriations Committee.
   3. SB 635 (Hernandez) of 2012 would have, upon a finding by the Department of Finance that MRMIP is inoperative, halted transfers of specified revenues from the MCA Fund to the MRMIP program, and instead transferred the funds to a newly created Song-Brown Program Account, which supports training for health care professionals. SB 635 was held on suspense in the Assembly Appropriations Committee.
   4. SB 1379 (Ducheny), Chapter 607, Statutes of 2008, requires fines and administrative penalties levied against health plans under Knox-Keene to be placed in the MCA Fund and used, upon appropriation by the Legislature, for a physician loan-repayment program and MRMIP, instead of being deposited into the State Managed Care Fund. Requires DMHC to make a one-time transfer of fine and administrative penalty revenue of $10 million to MRMIP and $1 million to the loan repayment program. Prohibits using the fines and administrative penalties authorized by Knox-Keene to reduce assessments on health plans.
   5. AB 2439 (De La Torre), Chapter 640, Statutes of 2008, mandates the MBC assess a $25 fee to applicants for issuance or renewal of a physician and surgeon's license. Provides that up to 15% of the funds collected shall be dedicated to loan assistance for physicians and surgeons who agree to practice in geriatric care settings or settings that primarily serve adults over the age of 65 or adults with disabilities.

REGISTERED SUPPORT / OPPOSITION:

Support

Association of California Healthcare Districts
California Association of Marriage and Family Therapists
California Psychiatric Association
County Behavioral Health Directors Association
Medical Board of California

Opposition

None on file.

Analysis Prepared by: Lara Flynn / HEALTH / (916) 319-2097

 THIRD READING  

Bill No: SB 1471

Author:

:

Vote:

SENATE HEALTH COMMITTEE: 7-0, 4/20/16

AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Pan, Roth

NO VOTE RECORDED: Nielsen, Wolk

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/27/16

AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

SUBJECT:

SOURCE: Author

DIGEST: This bill requires funds in the Managed Care Administrative Fines and Penalties Fund to be transferred each year to the Medically Underserved Account for Physicians in the Health Professions Education Fund and to the Major Risk Medical Insurance Fund, as specified.

ANALYSIS:

Existing law:

1. Creates the Steven M. Thompson Physician Corps Loan Repayment Program (SMT Program) within the Health Professions Education Fund (HPEF), administered by the Office of Statewide Health Planning and Development (OSHPD), which provides for the repayment of educational loans for physicians and surgeons who practice in medically underserved areas of the state, as defined.
2. Provides for the licensure and regulation of health care service plans (health plans) by the Department of Managed Health Care (DMHC) under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene). Subjects health plans to fines and administrative penalties for failing to comply with specified provisions of Knox-Keene. Requires health plans to pay specified assessments each fiscal year as a reimbursement of their share of the costs and expenses reasonably incurred in the administration of Knox-Keene.
3. Establishes the Major Risk Medical Insurance Program (MRMIP), administered by the Managed Risk Medical Insurance Board (MRMIB), to provide major risk medical coverage to eligible persons who have been rejected for coverage by at least one private health plan. Creates the Major Risk Medical Insurance Fund for purposes of MRMIP.
4. Requires fines and administrative penalties assessed against health plans by DMHC to be deposited into the Managed Care Administrative Fines and Penalties Fund (MCAFPF). Requires those fines and penalties collected up to $1 million be deposited into the Medically Underserved Account for Physicians in the HPEF for purposes of the SMT Program. Requires any amount over the first $1 million to be transferred to the Major Risk Medical Insurance Fund to be used, upon appropriation by the Legislature, for use by MRMIP.

This bill:

1. Requires, beginning January 1, 2017, and annually thereafter, the second $1 million to be transferred to the Major Risk Medical Insurance Fund to be used by MRMIP (after the first $1 million gets transferred to the HPEF for the SMT Program).
2. Requires, beginning January 1, 2017, and annually thereafter, any amount over the first $2 million, including accrued interest, to be transferred to the HPEF for the SMT Program. Allows up to one-half of these moneys to be prioritized to fund the loan repayment of those providing psychiatric services.
3. Makes other conforming changes, and deletes references to inoperative programs.

Comments

1. Author’s statement. According to the author, the SMT program was created in response to the physician shortage problem in underserved areas, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. Additionally, through various stakeholder meetings and informational hearings related to the mental health workforce, mounting information, though largely anecdotal, and various media reports highlight the shrinking psychiatry workforce. Added to the lack of providers is the low numbers who are willing to treat patients with insurance—both public health system and commercial market. The current SMT Program currently allows for up to 20% of the available SMT Program funds to be awarded to program applicants from specialties outside of the primary care specialties, including psychiatry, but is annually disbursed among other specialties. This bill will provide much-needed funding for the SMT Program to assist with loan repayment for physicians who agree to practice in medically underserved areas of the state for a minimum of three years, as well as prioritizing new funds for those who provide psychiatric services.
2. Primary Care Physician and Psychiatry Workforce Shortage. According to a report commissioned by the California Health Care Foundation, the number of primary care physicians actively practicing in California is at the very bottom range of, or below, the state's need. The distribution of these physicians is equally as poor. In 2008, there were 69,460 actively practicing physicians in California (this includes Doctors of Medicine and Doctors of Osteopathic Medicine) with only 35% of these physicians reported practicing primary care. This equates to 63 active primary care physicians per 100,000 persons. According to the Council on Graduate Medical Education, a range of 60 to 80 primary care physicians is needed per 100,000 persons to adequately meet the needs of the population. When the same metric is applied regionally, only 16 of 58 California counties fall within the needed supply range for primary care physicians. Additionally, California and the rest of the nation suffer from shortages of mental health providers. The maldistribution of existing providers compounds the issue, particularly for federally designated medically underserved areas. Recent studies show that the U.S. mental health provider shortage is also made worse by the aging of the psychiatry specialty. Shortages in psychiatry may be considered even more acute than they are in primary care. (http://www.modernhealthcare.com/article/20150715/NEWS/150719943)
3. The ACA. As a result of implementation of the Affordable Care Act (ACA), it is estimated that 3 to 7 million Californians will be newly eligible for health insurance starting in 2014. The ACA aims to change how care is delivered. It will provide incentives for expanded and improved primary care, which may affect demand for some health care professionals more than others, and create team-based models of service delivery. Research indicates that health care reform will place higher skill demands on all members of the health care workforce as systems try to improve quality while limiting costs. Studies have also found that insured persons use more health care services than uninsured persons, particularly in primary care and preventive services. This was the experience in Massachusetts, which saw a substantial increase in demand for primary care services as a result of its 2006 health reform.
4. SMT Program. The SMT program was created in response to the physician-shortage problem in underserved areas, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. According to OSHPD, the SMT program encourages recently licensed physicians to practice in Health Professional Shortage Areas (HPSAs) in California. The program repays up to $105,000 in educational loans in exchange for full-time service for at least three years. To be considered eligible for an award, applicants must:
   1. Be an allopathic or osteopathic physician;
   2. Be free of any contractual service obligations (i.e. the National Health Service Corps Federal Loan Repayment Program or other financial incentive programs);
   3. Have outstanding educational debt from a government or commercial lending institution;
   4. Have a valid, unrestricted license to practice medicine in California;
   5. Be employed or have accepted employment in a HPSA in California; and
   6. Commit to providing full-time direct patient care in a HPSA.

Currently, up to 20% of the available SMT Program funds may be awarded to program applicants from specialties outside of the primary care specialties, including psychiatry.

1. Administrative Fines and Penalties. The purpose of the MCAFPF is to act as a depository for fines and administrative penalties associated with the licensing and regulation of health care service plans. In September of each year, DMHC transfers the revenue collected in the MCAFPF during the previous 12 month period. This amount fluctuates from year to year, which is illustrated in the table below. According to DMHC, the current balance in the MCAFPF is $3,016,796.10.

*Pursuant to Health and Safety Code Section 1341.45, the first $1,000,000 is deposited into the Medically Underserved Account for Physicians within the Health Professions Education Fund.  Any amount over the first $1,000,000 is transferred to the Major Risk Medical Insurance Fund.

1. MRMIP. According to DHCS’s Web site and the MRMIP 2016 Application and Handbook, MRMIP provides state-subsidized coverage through two health plans to individuals denied coverage in the individual market or whose premiums exceed MRMIP premiums. MRMIP enrollment was expected largely to no longer be necessary, beginning in 2014, due to the reforms enacted under the ACA, such as guaranteed issue. According to information from DHCS, in January 2014, MRMIP enrollment was 4,782 individuals, and by December 2015, enrollment was at 1,794. Projected enrollment figures support the expected decline, with figures estimated at: 1,579 individuals in 2016; 1,485 in 2017; and 1,441 in 2018.

Related/Prior Legislation

SB 20 (Hernandez, of 2013) was substantially similar to this bill. SB 20 was held on suspense in the Assembly Appropriations Committee before being amended to a new purpose on April 9, 2014.

AB 860 (Perea and Bocanegra, of 2013) would have required that, after the first $1,000,000, is transferred each year from the MCAFPF to the Medically Underserved Account for Physicians, $600,000 be transferred each year from the fund to the Steven M. Thompson Medical School Scholarship Account, as specified. The bill would have required that any amount remaining over the amounts transferred to those two accounts be transferred each year to the Major Risk Medical Insurance Fund for purposes of MRMIP. AB 860 was held on suspense in the Assembly Appropriations Committee.

SB 635 (Hernandez, of 2012) would have, upon a finding by the Department of Finance that MRMIP is inoperative, halted transfers of specified revenues from the MCAFPF to the MRMIP program, and instead transferred the funds to a newly created Song-Brown Program Account, which supports training for health care professionals. SB 635 was held on suspense in the Assembly Appropriations Committee.

SB 1379 (Ducheny, Chapter 607, Statutes of 2008) required fines and administrative penalties levied against health plans under the Knox-Keene Act to be placed in the MCAFPF and used, upon appropriation by the Legislature, for a physician loan-repayment program and MRMIP, instead of being deposited into the State Managed Care Fund. Required DMHC to make a one-time transfer of fine and administrative penalty revenue of $10 million to MRMIP and $1 million to the loan repayment program. Prohibieds using the fines and administrative penalties authorized by the Knox-Keene Act to reduce assessments on health plans.

AB 2439 (De La Torre, Chapter 640, Statutes of 2008) mandated the Medical Board of California assess a $25 fee to applicants for issuance or renewal of a physician and surgeon's license. Provided that up to 15% of the funds collected shall be dedicated to loan assistance for physicians and surgeons who agree to practice in geriatric care settings or settings that primarily serve adults over the age of 65 or adults with disabilities.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• Unknown potential future cost pressure due to the reduction in funding for the MRMIP (General Fund or Proposition 99 funds). Under current law, the cost of operating the MRMIP is funded with subscriber premiums and state funds. The state has used Proposition 99 (Tobacco Tax) funds and transfers from the Managed Care Administrative Fines and Penalties Fund to subsidize the program. Enrollment in the MRMIP has declined significantly in recent years, from 4,782 in January 2014 to a projected enrollment of 1,400 in 2018. The declining MRMIP enrollment (and the existing MRMIP fund balance) should reduce the need for additional state funds in the future. However, as long as the MRMIP is active there is a potential need for additional state funding. It is also important to note that final reconciliation of expenditures in the MRMIP takes several years, so there is some uncertainty about future MRMIP funding needs, even with declining enrollment.

SUPPORT: (Verified 5/27/16)

California Association of Marriage and Family Therapists

California Medical Association

California Psychiatric Association

County Behavioral Health Directors Association of California

Medical Board of California

OPPOSITION: (Verified 5/27/16)

None received

ARGUMENTS IN SUPPORT: Supporters argue that this bill provides much needed funding for the SMT Program to assist with the loan repayment of physicians who agree to practice in medically underserved areas of the state. The Medical Board of California states that this bill promotes the Board’s mission of access to care.

Prepared by:

5/30/16 19:37:05

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SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 1471 (Hernandez) - Health professions development: loan repayment

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 1471 would change the allocation of funds from the Managed Care Administrative Fines and Penalties Fund that are transferred each year to the Medically Underserved Account for Physicians and the Major Risk Medical Insurance Fund.

Fiscal Impact:

Unknown potential future cost pressure due to the reduction in funding for the Major Risk Medical Insurance Program (General Fund or Proposition 99 funds). Under current law, the cost of operating the Program is funded with subscriber premiums and state funds. The state has used Proposition 99 (Tobacco Tax) funds and transfers from the Managed Care Administrative Fines and Penalties Fund to subsidize the program. Enrollment in the Program has declined significantly in recent years, from 4,782 in January 2014 to a projected enrollment of 1,400 in 2018. The declining Program enrollment (and the existing Program fund balance) should reduce the need for additional state funds in the future. However, as long as the Program is active there is a potential need for additional state funding. It is also important to note that final reconciliation of expenditures in the Program takes several years, so there is some uncertainty about future Program funding needs, even with declining enrollment.

Background:

Under current law, health plans in the state are regulated by the Department of Managed Health Care, under the Knox-Keene Health Care Service Act of 1975. The Department is authorized to assess administrative fines and penalties on health plans for violations of the Knox-Keene Act. Current law requires the first $1 million in fines and penalties to be transferred to the Medically Underserved Account for Physicians (within the Health Professions Education Fund) to support the Stephen M. Thompson Physician Corps Loan Repayment Program. Any remaining fines and penalties are transferred to the Major Risk Medical Insurance Fund, to support the Major Risk Medical Insurance Program.

Under Current law, the Steven M. Thompson Physician Corps Loan Repayment Program provides up to $105,000 in loan repayments for physicians who agree to work in medically underserved areas for at least three years

Under current law, the state operates the Major Risk Medical Insurance Program, which provides health care coverage to individuals who are unable to purchase coverage in the individual market due to a pre-existing condition. Premiums in the Program are set at 100 percent of what an equivalent policy would cost in the private market. Because individuals in the program have a preexisting condition, the cost of providing coverage for this population is significantly larger than the costs of the broader population. Therefore, the premiums paid by the state to participating health plans are higher than normal market rates. The state funds the gap between the cost coverage and the premiums charged to subscribers.

Under current law, the first $1 million in fines and penalties assessed by the Department of Managed Health Care is transferred to the Steven M. Thompson program. Any funds above the initial $1 million are transferred to support the Major Risk Medical Insurance Program. The amount of funding transferred to the Major Risk Medical Insurance Program has varied from less than $100,000 to over $8,000,000 depending on the fines and penalties levied by the Department in any given year.

Proposed Law:

SB 1471 would change the allocation of that funds in the Managed Care Administrative Fines and Penalties Fund that are transferred each year to the Medically Underserved Account for Physicians and the Major Risk Medical Insurance Fund.

Specifically, the bill would:

• Continue to require the first $1 million in fines and penalties in the Managed Care Administrative Fines and Penalties Fund to be transferred to the Steven M. Thompson Program;
• Require the second $1 million in fines and penalties in the Managed Care Administrative Fines and Penalties Fund to be transferred to the Major Risk Medical Insurance Fund;
• Require any funds beyond $2 million in fines and penalties in the Managed Care Administrative Fines and Penalties Fund to be transferred to the Steven M. Thompson Program;
• Authorize up to one-half of the funds (over $2 million) transferred under the bill to be used for loan repayments for psychiatrists under the Steven M. Thompson Program.

Related Legislation:

• SB 20 (Hernandez, 2013) would have required all the fines and penalties assessed by the Department of Managed Health Care to be available for support of the Steven M. Thompson Physician Corps Loan Repayment Program, once the Major Risk Medical Insurance Program becomes inoperative. That bill was held on the Assembly Appropriations Committee’s Suspense File and subsequently amended for another purpose.
• SB 635 (Hernandez, 2011) would have transferred fine and penalty revenues generated by the Department of Managed Health Care to another account for the support of medical education. That bill was held in the Assembly Appropriations Committee.
• AB 860 (Perea and Bocanegra) would have required certain fine and penalty revenues to be transferred for use in a related program to support medical education. That bill was held in the Assembly Appropriations Committee.

Staff Comments:

While fines and penalties assessed by the Department of Managed Health Care are deposited in the Managed Care Administrative Fines and Penalties Fund, under law fines and penalties are General Fund revenues.

The Major Risk Medical Insurance Program was created to allow individuals who are unable to purchase health care coverage in the private market because of a pre-existing condition to purchase affordable coverage. Beginning in 2014, the federal Affordable Care Act (and implementing state legislation) require insurance plans and health plans to provide “guaranteed issue” coverage to individuals as long as the individual pays his or her premiums. Individuals who have a pre-existing condition can no longer be denied coverage in the private market. Therefore, demand for coverage for the Major Risk Medical Insurance Program has declined significantly since January 1, 2014. However, state law authorizing the program has no sunset and there may be certain individuals (such undocumented immigrants or uninsured women who become pregnant) who may wish to participate in the program. At this time it is difficult to predict when demand for program funding will end absent legislative action.

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SENATE COMMITTEE ON HEALTH

Senator Ed Hernandez, O.D., Chair

BILL NO: SB 1471

SUBJECT: Health professions development: loan repayment.

SUMMARY:

Requires funds in the Managed Care Administrative Fines and Penalties Fund to be transferred each year to the Medically Underserved Account for Physicians in the Health Professions Education Fund and to the Major Risk Medical Insurance Fund, as specified.

Existing law:

1. Creates the Steven M. Thompson Physician Corps Loan Repayment Program (SMT Program) within the Health Professions Education Fund (HPEF), administered by the Office of Statewide Health Planning and Development (OSHPD), which provides for the repayment of educational loans for physicians and surgeons who practice in medically underserved areas of the state, as defined.
2. Provides for the licensure and regulation of health care service plans (health plans) by the Department of Managed Health Care (DMHC) under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene). Subjects health plans to fines and administrative penalties for failing to comply with specified provisions of Knox-Keene. Requires health plans to pay specified assessments each fiscal year as a reimbursement of their share of the costs and expenses reasonably incurred in the administration of Knox-Keene.
3. Establishes the Major Risk Medical Insurance Program (MRMIP), administered by the Managed Risk Medical Insurance Board (MRMIB), to provide major risk medical coverage to eligible persons who have been rejected for coverage by at least one private health plan. Creates the Major Risk Medical Insurance Fund for purposes of MRMIP.
4. Requires fines and administrative penalties assessed against health plans by DMHC to be deposited into the Managed Care Administrative Fines and Penalties Fund (MCAFPF). Requires those fines and penalties collected up to $1 million be deposited into the Medically Underserved Account for Physicians in the HPEF for purposes of the SMT Program. Requires any amount over the first $1 million to be transferred to the Major Risk Medical Insurance Fund to be used, upon appropriation by the Legislature, for use by MRMIP.

This bill:

1. Requires, beginning January 1, 2017, and annually thereafter, the second $1 million to be transferred to the Major Risk Medical Insurance Fund to be used by MRMIP (after the first $1 million gets transferred to the HPEF for the SMT Program).
2. Requires, beginning January 1, 2017, and annually thereafter, any amount over the first $2 million, including accrued interest, to be transferred to the HPEF for the SMT Program. Requires one-half of these moneys to fund repayment of loans for those physicians providing psychiatric services or those physicians whose primary specialty is psychiatry, as specified.
3. Prohibits existing continually appropriated funds deposited into the Medically Underserved Account for Physicians from being made available to fund the repayment of loans under the SMT Program for those physicians providing psychiatric services or those physicians whose primary specialty is psychiatry, as specified, except as provided in 2) above.
4. Makes other conforming changes, and deletes references to inoperative programs.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, the SMT program was created in response to the physician shortage problem in underserved areas, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. Additionally, through various stakeholder meetings and informational hearings related to the mental health workforce, mounting information, though largely anecdotal, and various media reports highlight the shrinking psychiatry workforce. Added to the lack of providers is the low numbers who are willing to treat patients with insurance—both public health system and commercial market. The current SMT Program currently allows for up to 20% of the available SMT Program funds to be awarded to program applicants from specialties outside of the primary care specialties, including psychiatry, but is annually disbursed among other specialties. This bill will provide much-needed funding for the SMT Program to assist with loan repayment for physicians who agree to practice in medically underserved areas of the state for a minimum of three years, as well as prioritizing new funds for those who provide psychiatric services.
2. Primary Care Physician and Psychiatry Workforce Shortage. According to a report commissioned by the California Health Care Foundation, the number of primary care physicians actively practicing in California is at the very bottom range of, or below, the state's need. The distribution of these physicians is equally as poor. In 2008, there were 69,460 actively practicing physicians in California (this includes Doctors of Medicine and Doctors of Osteopathic Medicine) with only 35% of these physicians reported practicing primary care. This equates to 63 active primary care physicians per 100,000 persons. According to the Council on Graduate Medical Education, a range of 60 to 80 primary care physicians is needed per 100,000 persons to adequately meet the needs of the population. When the same metric is applied regionally, only 16 of 58 California counties fall within the needed supply range for primary care physicians. Additionally, California and the rest of the nation suffer from shortages of mental health providers. The maldistribution of existing providers compounds the issue, particularly for federally designated medically underserved areas. Recent studies show that the U.S. mental health provider shortage is also made worse by the aging of the psychiatry specialty. Shortages in psychiatry may be considered even more acute than they are in primary care. ^[1]
3. The ACA. As a result of implementation of the Affordable Care Act (ACA), it is estimated that 3 to 7 million Californians will be newly eligible for health insurance starting in 2014. The ACA aims to change how care is delivered. It will provide incentives for expanded and improved primary care, which may affect demand for some health care professionals more than others, and create team-based models of service delivery. Research indicates that health care reform will place higher skill demands on all members of the health care workforce as systems try to improve quality while limiting costs. Studies have also found that insured persons use more health care services than uninsured persons, particularly in primary care and preventive services. This was the experience in Massachusetts, which saw a substantial increase in demand for primary care services as a result of its 2006 health reform.
4. SMT Program. The SMT program was created in response to the physician-shortage problem in underserved areas, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. According to OSHPD, the SMT program encourages recently licensed physicians to practice in Health Professional Shortage Areas (HPSAs) in California. The program repays up to $105,000 in educational loans in exchange for full-time service for at least three years. To be considered eligible for an award, applicants must:
   1. Be an allopathic or osteopathic physician;
   2. Be free of any contractual service obligations (i.e. the National Health Service Corps Federal Loan Repayment Program or other financial incentive programs);
   3. Have outstanding educational debt from a government or commercial lending institution;
   4. Have a valid, unrestricted license to practice medicine in California;
   5. Be employed or have accepted employment in a HPSA in California; and
   6. Commit to providing full-time direct patient care in a HPSA.

Currently, up to 20% of the available SMT Program funds may be awarded to program applicants from specialties outside of the primary care specialties, including psychiatry.

1. Administrative Fines and Penalties. The purpose of the MCAFPF is to act as a depository for fines and administrative penalties associated with the licensing and regulation of health care service plans. In September of each year, DMHC transfers the revenue collected in the MCAFPF during the previous 12 month period. This amount fluctuates from year to year, which is illustrated in the table below. According to DMHC, the current balance in the MCAFPF is $3,016,796.10.

*Pursuant to Health and Safety Code Section 1341.45, the first $1,000,000 is deposited into the Medically Underserved Account for Physicians within the Health Professions Education Fund.  Any amount over the first $1,000,000 is transferred to the Major Risk Medical Insurance Fund.

1. MRMIP. According to DHCS’s Web site and the MRMIP 2016 Application and Handbook, MRMIP provides state-subsidized coverage through two health plans to individuals denied coverage in the individual market or whose premiums exceed MRMIP premiums. MRMIP enrollment was expected largely to no longer be necessary, beginning in 2014, due to the reforms enacted under the ACA, such as guaranteed issue. According to information from DHCS, in January 2014, MRMIP enrollment was 4,782 individuals, and by December 2015, enrollment was at 1,794. Projected enrollment figures support the expected decline, with figures estimated at: 1,579 individuals in 2016; 1,485 in 2017; and 1,441 in 2018.
2. Related legislation. SB 1139 (Lara), would deem eligible any student, including a person without lawful immigration status and/or a person who is exempt from nonresident tuition, who meets the requirements for admission to participate in a medical school program and a medical residency training program; would prohibit specified grant and loan repayment and forgiveness programs from denying an application based on an applicant’s citizenship or immigration status; would require an applicant, when mandatory disclosure of a social security number is required, to provide it if one has been issued, or an individual taxpayer identification number that has been or will be submitted. SB 1139 is pending in the Senate Appropriations Committee.
3. Prior legislation. SB 20 (Hernandez, of 2013), was substantially similar to this bill. SB 20 was held on suspense in the Assembly Appropriations Committee before being amended to a new purpose on April 9, 2014.

AB 860 (Perea and Bocanegra, of 2013), would have required that, after the first $1,000,000, is transferred each year from the MCAFPF to the Medically Underserved Account for Physicians, $600,000 be transferred each year from the fund to the Steven M. Thompson Medical School Scholarship Account, as specified. The bill would require that any amount remaining over the amounts transferred to those two accounts be transferred each year to the Major Risk Medical Insurance Fund for purposes of MRMIP. AB 860 was held on suspense in the Assembly Appropriations Committee.

SB 635 (Hernandez, of 2012), would have, upon a finding by the Department of Finance that MRMIP is inoperative, halted transfers of specified revenues from the MCAFPF to the MRMIP program, and instead transferred the funds to a newly created Song-Brown Program Account, which supports training for health care professionals. SB 635 was held on suspense in the Assembly Appropriations Committee.

SB 1379 (Ducheny, Chapter 607, Statutes of 2008), requires fines and administrative penalties levied against health plans under the Knox-Keene Act to be placed in the MCAFPF and used, upon appropriation by the Legislature, for a physician loan-repayment program and MRMIP, instead of being deposited into the State Managed Care Fund. Requires DMHC to make a one-time transfer of fine and administrative penalty revenue of $10 million to MRMIP and $1 million to the loan repayment program. Prohibits using the fines and administrative penalties authorized by the Knox-Keene Act to reduce assessments on health plans.

AB 2439 (De La Torre, Chapter 640, Statutes of 2008), mandates the Medical Board of California assess a $25 fee to applicants for issuance or renewal of a physician and surgeon's license. Provides that up to 15% of the funds collected shall be dedicated to loan assistance for physicians and surgeons who agree to practice in geriatric care settings or settings that primarily serve adults over the age of 65 or adults with disabilities.

1. Clarifying Amendments.
   1. In SEC 1, Section 1341.45(c)(4)(B), clarify that up to one-half of the moneys deposited for the SMT Program may be prioritized to fund the loan repayment of those providing psychiatric services.
   2. In SEC 3 of the bill, page 6, in line 27, strike out “or psychiatric services” and in line 33, strike out “psychiatry,”
   3. Strike out SEC 4.

SUPPORT AND OPPOSITION:

Support: None received

Oppose: None received

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1. http://www.modernhealthcare.com/article/20150715/NEWS/150719943 ↑