Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services

Senate Budget Subcommitee number three on Health and Human Services will come to an order. Good morning, everyone. We have a very light agenda today. Nothing big to talk about, so we'll go pretty quickly. We continue to welcome public in person in person public comment as well as through the teleconference. Today's number is 1877-226-8163 with an access code of 736-2834.

As always, we are in room 1200 in the O Street Building and I'll again ask for the rest of my Committee Members to join us so we can establish a quorum. We're going to start off before we go into the voting portion, we're going to start off with our MCO Tax panel. We'll be hearing from the Administration on their plan for the MCO tax and the provider increased proposal.

We'll also be joined by some stakeholders of coalition regarding their insight and how it's going to impact them. And then we'll conclude our agenda with our vote only calendar consisting of items from California Health and Human Services, State Council and Developmental Disabilities EMSA in a variety of departments. After that, I won't read them every single one. So we can begin with our panel. I will ask. Yeah, I will ask DHCS to come up 23467. We have nine chairs.

We're going to have to be doing a little bit of swapping back and forth. Lao, Department of Finance to join us. Perfect timing. And as we get settled in, consultant, if we can establish a quorum.

Good morning. Senators. Menjivar.

Menjivar here. Eggman.

Here.

Here.

Eggman here. Grove.

Here.

Grove here. Roth.

Here.

Ross here. Yeah.

Should I tap it too? This is what happens when military equipment isn't made for women's bodies and then you get chronic back pain. Good thing I have a room of healthcare providers to help me out here. Welcome DHCS. We'll start off with you. If you could please go ahead and respond to the questions in the agenda.

Good morning, Chair, Members of the Subcommitee. Michelle Baass, Director of the Department of Healthcare Services, start providing by providing an overview of the MCO tax proposal and the provider rate increases, the Department is proposing to implement a new MCO tax effective April 1, 2023 through December 31, 2026. The tax will provide 19.4 billion in net revenue over the 3 and 3 quarter year period, which is roughly three times higher than the 6.5 billion over the three years proposed at Governor's Budget.

Of the 19.4 billion, 11.1 billion will be available to support additional investments in the medical program. This tax has no net impact to medical managed care plans and minimal impact to a subset of commercial health plans. Funds will help maintain the medical program and support investments that will help secure access, quality and equity in the Medi Cal program over an eight to 10 year period.

Extending expenditures over this long period instead of maximizing one time spending, will allow focus augmentations to be sustainable over a long period of time and give certainty to our providers while attending to the state's need of not creating out year budget challenges. CMS has indicated that it plans to change regulations governing provider taxes, and with this change we do not anticipate that the proposed model that you have before you will be approvable in the future.

We want to build a foundation with these investments and certainty for our providers that these rate increases are sustainable. To secure the April 1 effective date, the Legislature must approve the tax structure and the Department must submit the final tax proposal to CMS no later than June 30 of 2023.

We would also note that the Federal Government, as I mentioned earlier, has proposed their intention to change the federal tax regulations regarding this MCO tax with regard to the proportionality and making the requirement that the tax be more proportional between the Medicaid and non Medicaid liabilities. Thus, the Department does not anticipate this proposed model to be approvable in the future at this rate and cannot assume future MCO taxes will provide such a high net benefit to the state.

We want to be clear that we propose to renew the tax in 2027. However, based on conversations with CMS, we expect that this level of MCO revenue will not be sustainable in the out years. Just would note that the MCO is expected to bring 3.7 billion in calendar years 2023, 5 billion in calendar year 2024, 5.2 billion in calendar year 2025, and 5.4 billion in calendar year 2025 in state benefit on an accrual basis.

In terms of the proposed provider rate increases, effective January 1, 2024, the Department proposes to increase rates to at least 87.5% of Medicare for primary care inclusive of nurse practitioners and physician assistants, maternity care inclusive of OBGYN and doulas, and non specialty behavioral health or mental health services, subject to all federal approvals. These investments support our clinical comprehensive quality strategy and our focus areas on preventive care, maternal care and birth equity outcomes and integration of behavioral health.

Aligning our efforts towards upstream and preventive primary care purposes, which we know is foundational to providing kind of the comprehensive care at the highest quality. Typically, primary care and nonspecialty mental health are reimbursed at 70% to 100% Medicare and maternity care is reimbursed at 60% to 70% of Medicare. There is significant variation across individual codes, across the FIFA service and managed care delivery systems, and between medical managed care and plans in the delivery system.

This proposal works to secure that access and long term growth in provider participation in Medi Cal through higher provider reimbursement is more stable, equitable, and more streamlined. These rate increases will be made to the fee for service base and not as supplemental payments, allowing the increases to be passed on directly, efficiently and consistently to providers. This approach will broadly raise the reimbursement floor for applicable services to be closer to Medicare standards.

Assure providers consistency in reimbursement over the long term and reduces unevenness in reimbursement levels across codes within the same service areas. Additionally, by building these rate increases into the base, we eliminate the administrative burden for plans, providers and the states with regard to supplemental payments. For example, providers and plans have to reconcile supplemental payments and as such, there may be delays in supplemental payments going to our providers for the applicable services.

These rate increases will include the elimination of the historical AB 97 reductions and the shift of Proposition 56 supplemental payments into the base rate. The Department will annually review and revise the fee for service reimbursement rates for the applicable services. Based on changes to Medicare rates, the Department will direct Medi Cal managed care plans to pay network providers at least the fee for service rates, including equivalent requirements for capitated provider arrangements.

Network providers who are already paid at or above 87.5% of Medicare for some of these codes will see increases for codes that are below that 87.5% Medicare rate. Since the implementation of AB 97 reductions, the Department, in conjunction with the Legislature, has eliminated reductions for various provider types or services, including in last year's budget. The Department will be sharing with legislative staff today, including the remaining AB 97 reductions in place today and the fiscal estimate associated with those reductions.

In addition to the rate increases proposed for January 1, 2024 reflected in the May revision, the Department will return with a proposed set of investments and augmentations that will be put forward to the Legislature and the 202425 Governor's Budget. With an intended effective date of January 1, 2025.

The focus will be to look at additional augmentations to primary care, maternal care, behavioral health, as well as specialty care, outpatient and acute care systems with an attention on how to increase the commitment of providers to serve medical. Members support providers in disproportionately impacted areas and build robust teams and programs with a strong workforce to ensure care is provided at the right setting, the right time and at the highest quality.

In total, starting in 2025, we would be proposing 3.7 billion Total Fund, 1.5 billion General Fund or MCO tax revenue ongoing for rate increases beginning again in 2025 for roughly eight to 10 years. A General goal of our approach is to invest in the medical system in ways that promote additional federal dollars and really wanting to maximize additional federal matching funds to the Medi Cal system. This goal requires DHCS to assess the different approaches to sustainable rate augmentations which optimize this approach.

For this reason, we need the time to adequately access program investments so they are not only target priorities, but do so in an efficient manner. Happy to answer any questions.

I kind of included it in my.

Okay dive in we're going to be diving. Sorry. LEO any comment?

Jason Constantouros, LEO. We've released least an initial and email analysis on the Governor's proposed MCO Tax package last week and also shared some initial thoughts with the Committee also last week. The Committee also will be hearing from a number of stakeholders, so we understand that it would be advantageous to keep our comments relatively brief. For that reason, I thought it would be helpful to just condense our comments to three key points. The first is just an update to the Committee.

Last week we noted that there were some key information that the Administration still had not provided on the MCO Tax proposal and wanted to acknowledge that later in the week the Administration did provide that information. The crux of that information is summarized on page 46 of your agenda, which shows the year by year impact of the proposed MCO Tax.

Specifically, it shows the amount of revenue that the tax would gain and the net benefit to the state after factoring in the cost to the state to help cover the Medi-Cal portion of the MCO Tax. You can also see the proposed three uses of that net fiscal benefit, the amount that's going towards the general fund budget problem, and then also the amount that would be for proposed rate increases and also for future augmentation. So that table summarizes the administration's proposal.

The second point we wanted to emphasize is that the state's overall fiscal situation is going to be a salient issue when weighing the administration's proposal. This is an unprecedented fiscal opportunity for the Committee, but comes with trade-offs. The additional amount of funding that's used for Medi-Cal augmentations would not be available to address the budget problem and so this is a key trade off for the Legislature to consider.

In addition, the Legislature is facing some uncertainties here, for example, with what federal changes might come down in a few years and how that might impact the MCO Tax. And so one way to manage that uncertainty would be to consider limited term augmentations, for example, limited term supplemental payments, setting aside funds in a reserve for economic uncertainty. That's that it is going to fall on the Legislature's priorities.

If the Legislature is interested in adopting more ongoing and secure payments to providers, then focusing on base payments could be warranted. In that case, our emphasis is that that does come with a fiscal trade-off. And then finally, given that this is an unprecedented fiscal opportunity for the Legislature, we think it's important that the Legislature ensure that it has the opportunity to weigh in on these augmentations and set its priorities for them.

For example, we recommend modifying the proposed trailer legislation to more clearly establish the parameters that the Administration would look at when considering its proposed augmentations and provide information to the Legislature to ensure it can not only assess the governor's proposal, but also weigh it against other opportunities. We also think there are other opportunities the Legislature could explore to ensure it has adequate oversight and control over the funds. For example, as proposed, the two special funds would be continuously appropriated.

That means that the funds could be spent without appropriation in the budget. That arrangement has worked in past versions of the MCO Tax. But given that some portion of the funding would be used for specific augmentations, that's something the Legislature could look at and maybe consider requiring appropriation or adding some more guardrails to ensure that the funds are being used according to the Legislature's priorities. With that, we'd be happy to answer questions. Thank you.

Thank you, Department of Finance. Any additional comments?

Hi, Chair and Members. Kendra Tully from the Department of Finance. Nothing further to add, but happy to answer any questions.

Great. I would like to hear the rest of the panel before we go into questions to the department. So I'm going to welcome, see if we can squeeze as many here, maybe LEO, Department of LEO and Department of Finance. If you could render your seats for right now, because we're going to bring oh, there you go. Perfect. So I'd like to welcome up from the local Health Plans of California CEO Linnea Koopmans from AltiMed, Senior Vice President Of Government Relations, Berenice. Hi. Hi again, CMA.

Representing CMA, Stuart Thompson and representing SEIU, Matt Ledge. Leech. Lege. Not even close. Oh, they do. I'm not even looking at that. And then Ben Johnson from CHA and representing the Association of Health Plans. Nick, where are you? Hi, Nick. Lisa Matsubara probably butchered it too. I'm sorry. Planned Parenthood. Perfect. We have enough just right. We did it. So we're going to start with the local health plans of California. If you could address the three questions that were proposed to you.

Good morning, Chair and Committee Members.

Not on.

That would help.Yes. There we go. Good morning, Chair and Committee Members. Linnea Koopmans of the Local Health Plans of California. We represent the 16 local community-based medical managed care plans across the state, surveying more than 70% of Medi-Cal managed care enrollees. Thanks for having me to speak this morning regarding the proposed renewal of the MCO Tax and investments in Medi-Cal provider rates. LHPC is a member of the Coalition Protect Access to Care, which includes each of the groups participating on the panel this morning.

This group represents core partners in the delivery of Medi-Cal services, including clinics, doctors, hospitals, healthcare workers, and plans. We've joined together to collectively advocate for a renewal of an MCO tax that will maximize available federal funding for California and to reinvest those dollars back into the Medi-Cal program. The coalition, which initially formed in Los Angeles through the leadership of L.A. Care, began our work together with the understanding that to improve access to care to the one-in-three Californians enrolled in Medi-Cal.

California needs to commit to adequately fund the providers that are part of that critical safety net. The groups represented here today have celebrated the leadership of the Administration and Legislature in taking steps to get to universal coverage by expanding eligibility to undocumented Californians of all ages and pursue transformation of the Medi-Cal program through major initiatives like CalAIM. However, to fulfill the promise of access, equity, and quality, there needs to be significant additional investments in the delivery system.

We believe the MCO Tax represents a historic opportunity to make an impact on access, and the coalition has come together to Brose investments based on known gaps and needs in medical. Because the local plans serve over 9.3 Medi-Cal beneficiaries in 36 counties across the state, we have unique insight into the challenges faced by our system. While there's diversity and variation across counties based on geography, environmental conditions, and other factors, all of the local plans partner with the providers in their community to serve the Medi-Cal Members.

Yet all local plan members experience similar challenges in getting sufficient providers to participate in the program. The clinics who comprise, in some cases, more than 50% of local plan's primary care networks are struggling to recruit and retain providers to serve the significant volume of Medi-Cal patients who have a clinic as their medical home. In other areas of the state, local plan primary care networks rely heavily on independent physicians or small group practices.

However, in many cases, these providers are only able to serve a limited number of Medi-Cal beneficiaries due to low Medi-Cal reimbursement rates. Access to specialty care is a problem felt across the state for nearly all of the core Medi-Cal specialist provider types. We also understand the financial strain faced by some of our hospital partners, especially those that are unable to have a balanced payer mix to offset lower medical reimbursement rates. So to briefly speak to the questions posed by the Committee.

First, with respect to how local plans set provider rates, generally speaking, in order to establish adequate networks, despite all of the challenges that I've discussed, plans do generally have to narrow the gap between Medi-Cal and Medicare provider rates. However, particularly on the primary care side and for non specialty care, there's significant variation in what rates are paid to providers based on the local market, providers full supply, and payment arrangement.

For specialty care, it's not uncommon for plans to pay at or near Medicare rates, particularly for specialty types for which there are known workforce shortages and higher rates are necessary to get providers into the networks. Second, regarding how MCO Tax investments will support local plans in maintaining adequate networks, we know there are gaps in our delivery system and that a significant driver in equitable access is medical reimbursement rates.

We also know that for a program that serves over 15 million Californians, it will take substantial investments to really make a difference. Narrowing the payment differential between Medi-Cal and other payers is what is needed to support more robust networks and access in Medi-Cal.

Lastly, to the question about how plans will ensure their providers are benefiting from additional funding through the MCO Tax, the reason for local plans participation in the coalition is to advocate with and for our providers who need additional funding to serve the Medi-Cal population. So there's a commitment to ensure that providers are the recipients of enhanced funding. Mechanically, this would look different dependent on the payment approach taken by DHCS. However, there are ways to confirm that payments are flowing down to the providers delivering care.

In closing, I'll say that we appreciate the work the Administration has done to put forward a proposed tax that will allow California to maximize federal funding and to utilize those dollars to reinvest back into the Medi-Cal program. We know where the needs are in the system and are therefore where significant investments are needed to drive access, quality and equity. We look forward to working with the Legislature and the Administration in the coming weeks. Thanks.

Thank you so much. Representing CPCA is going to be Berenice from Ultimate.

Good morning, Madam Chair and Members of the Committee. My name is Berenice Nunez Constant and I'm the Senior Vice President of Government Relations at Ultimate Health Services, the largest FQHC in California, serving nearly 500,000 medical patients in L.A. and Orange County for more than 54 years.

I'm here on behalf of the California Primary Care Association to register our support of the coalition's proposal for renewal of the MCO Tax and to highlight specific dedicated allocations in the proposal for directed payments, same day payments, and community health workers. Allocating the MCO Tax in very specific ways and with a very specific timeline, is imperative to ensuring that Community Clinics, generally, and FQHC specifically, can continue to provide the highest quality health care to California's expanding Medi-Cal population.

Today, our funding formula for community health centers, which we call the Prospective Payment System, or PPS, does not account or it requires very specific triggering events and doesn't allow us to account for value based care, innovations, and comprehensive services that our patients need to thrive and be healthy in the State of California. This is why we need the adoption of the MCO Tax as envisioned by the coalition. It will go a long way to help us address this fundamental problem.

At ultimate and across California's community health centers, we serve the most vulnerable people that face disparities, that shock the conscience. Those who work in the FQHC setting are mission driven, hardworking people, people who are committed to the belief that we can eliminate disparities in healthcare access and outcomes for all, regardless of insurance coverage type, ability to pay, or immigration status. So thank you for your work on that.

Our workers come from the very same community that we care for, and we are deeply committed to lifting both up. During the pandemic, we were dogged in our determination to care for our communities, but we did not come through unscathed. Today, the healthcare delivery system is in crisis due to workforce shortages and safety net hospital closures, made worse only by our Medi-Cal reimbursement rates, generally, and our clinic rates specifically. Unlike other factions of the healthcare delivery system, clinics are predominantly Medi-Cal based.

This means we are getting paid $0.70 on the dollar for every patient we see, with no way to spread costs across on other lives. It's just simply an unsustainable formula for us. And if we can't sustain ourselves, the entire Medi-Cal service delivery backbone falls apart at the exact moment where you are all moving in the exact right direction of this historic Medi-Cal expansion for all. And we're all in the middle of implementing CalAIM.

To avoid this, we must ensure that the MCO Tax dollars are directed to the Medi-Cal program rather than used for other purposes, and we must also ensure that these dollars are expendable immediately. Now is when the system and the vulnerable populations we serve need these dollars the most. This current crisis will only be made worse if we are overly prudent with allocating these desperately needed health care dollars.

While we are supportive of the coalition's proposal as a whole, there are three elements of the proposal I would like to highlight for you today. First, we propose that the MCO Tax allocation includes 250,000,000 for an enhanced access and quality pool for community clinics to improve equity, quality and access for Medi-Cal managed care patients.

We envision this being administered through a managed care directed payment program, which would provide community clinics the additional resources needed to meet health plan goals of value based care while also achieving CalAIM, Medi-Cal expansion goals, and access and equity priorities. Second, we propose 50 million and the MCO Tax allocations be directed towards same day encounters for FQHCs and other community clinics for both health and mental health services.

This proposal will ensure that our patients will be able to receive their health and mental health services during the same visit, which will help them address the current which will help us address together the current mental health crisis for the underserved, but also will take away any undue burden for these patients of having to take multiple days off from work and really make the accommodations to be able to receive the services that they deserve.

Finally, we propose a $50 million allocation for community health workers as an allowable encounter for clinics. These workers are a critical resource to help us reach our communities where they are and in their language, in a culturally competent way. These are necessary components to really achieve true health equity.

In conjunction with other elements of the coalition's proposals such as primary care and specialty care funding, the three funding priority areas I just presented will ensure that the predominantly Latino, Spanish-speaking, and low-income communities we serve continue to receive the high quality care they deserve, but with the enhanced and more equitable access and improved health outcomes that they are entitled to.

Together, this will allow our patients to receive the comprehensive services they need when they need them, with the appropriate support and without adding undue burdens. Our more than 50 year history here in the State of California is proof that this needed funding will lead to enhanced and more equitable access and improved health outcomes for the populations we serve.

Thank you for the opportunity to share the transformative work that is being done by California's Community Health Centers, and we look forward to partnering with you to ensure an enhanced and more equitable delivery of Medi-Cal health services in California for those who need it most. Thank you.

Thank you so much for that. We're going to move on now to CMA. Stuart.

Thank you. Madam Chair and Members, Stuart Thompson, Senior Vice President for Government Relations for the California Medical Association. Just want to thank the Committee for engaging these discussions and the Administration for putting forward a proposal that presents a generational opportunity, really to invest in Medi-Cal rates. Physician reimbursement rates have not been raised since the late 1990s and actually have gone through two cuts since then.

And so our Association really views the MCO Tax as one of the biggest opportunities we have seen to make critical investments in the Medi-Cal system. We were asked to present answers to three General questions about the Medi-Cal system. The first is barriers to physician participation in the program. Two, how potential spending from the MCO Tax could be best allocated to improve access. And three other potential investments outside of reimbursement rates that we would see movement in the Medi-Cal system.

So, starting on barriers to the Medi-Cal system, first and foremost, it's really an issue about solvency and ability. Medical rates often don't cover the cost of providing the care for many different services in the Medi-Cal system. So physician groups, practices, systems, what have you, have to make a decision about how much Medi-Cal basically they can actually take without jeopardizing the financial underpinnings of their practice.

From CMA's perspective, our goal is to ensure that if a provider is in a community that has 60% Medi-Cal and Medicare, that they're able to see 60% of their patient base is Medi-Cal and Medicare. And right now, we are not falling short of that overall goal.

And in part, some of the physicians, because of these low reimbursement rates, actually provide a subsidy to the system and that since they cannot achieve cost in the services that they provide, they artificially have to cap the amount of Medi-Cal patients we see. And again, we find this tax as really a generational opportunity to get more physicians to participate in the system and to ensure that we are retaining the current physicians who are working there to see their current patient population.

And actually we looked there's a 2017 California Healthcare Foundation study that looked at physician participation in the Medi-Cal program and it found that physicians were participating in a rate that was lower than both national and state standards and ensuring access to care. From CMA's perspective, there's really three opportunities within the Medi-Cal system that we can improve upon. One is increasing reimbursement rates.

Two, alleviated administrative burdens that physicians face in participating in the program and three, really maximizing increasing opportunities for physicians to train and serve in the communities that they are most needed. And we believe that this proposal really provides us an opportunity to make real progress on those three issues. Looking at the MCO Tax, there is a critical need both in primary care and specialty care.

When we invest in primary care, as most of the Members of the Committee know, we are keeping people healthier earlier and making sure that they're staying out of ERs and their sicknesses or their treatments don't progress into a state in which we are now providing care, in kind of an emergency department, after which we could have addressed some of these issues earlier.

So for us, really maximizing primary care rates and investment in primary care, one, keeps people healthier and two, keeps people out of the most costly health care settings. But as you've heard earlier, specialty care obviously is a critical need.

I think when we look at clinics who are often on the front lines of providing primary care, when there is a real need to refer a patient to a specialist, it's often very hard to find a specific specialist or the wait times are such that it's not real access. And so we believe a large investment in both primary care and specialty care is needed to buttress up the system.

And finally, for us, I think our aspirational goal, and we thank the Administration, we cannot do this in one fell swoop again, is to get Medicare rates or Medi-Cal rates, excuse me, close to Medicare. Sometimes Medicare often can not provide the cost of providing the service. But for physicians, it's obviously a much higher reimbursement rate in a level that we are aspiring the Medi-Cal program to achieve.

And finally, on some of the investments that we can make in non physician reimbursement roles, graduate medical education, GME funding, we find, is an amazing investment. In Prop 56, which was the increase in tobacco tax from 2016, there was $40 million annually that provided for new graduate medical education spots. And the return on investment of those dollars has been incredible. And we've also been trying to focus some of those dollars into nontraditional training centers.

Traditionally, there's been large hospitals in large populated areas that have been the general training grounds for our next generation of physicians. And we have been working with our partners to create GME programs where there might be a rotation out into a rural area or where a clinic can serve as a training center.

And one, what that does is when you have a resident physician in a certain area, one, that's an immediate workforce help, that physician is in a hospital, is in a clinic, is in the community providing care. And two, there is a strong correlation to where a physician does their residency to where they end up practicing.

And so for us, it's a solution that, one, immediately puts a physician into the workforce in a needy area, and two, really strengthens the chances that physician ends up staying in that region. And I would just want to highlight again, we want to thank the Administration for their proposal. One of the issues that we advocated for is we understand the need for, or the underlying justification for spending these dollars over eight to 10 years.

We would advocate for spending these dollars over the 3.5 years of the tax. For us, trying to maximize these dollars into the medical program over the life of the tax, we believe, provides the greatest chance to improve access and really change the underpinning financial situation of the Medi-Cal providers. So, here to answer any questions, but again, thank you for the Committee, for this opportunity.

Thank you so much, we're going to move on now to SEIU. Matt.

Thank you, Matt Lege, on behalf of SEIU California, appreciate the Committee taking the time to hear this proposal today and giving us the opportunity to speak on this. We do see the MCO Tax as opportunity to invest in the healthcare workforce, which is really in crisis. Particularly before the Pandemic, we were looking at a shortage of about 500,000 healthcare workers in California to meet our care needs.

After the horrors of the Pandemic, we were seeing one-in-three healthcare workers considering leaving the profession and one-in-five actually leaving the profession. This is an opportunity not just to grow our existing workforce, but also needing to make investments to retain our workforce as well. Our workforce is made up primarily of women and people of color, particularly in the Allied Health jobs or in the nursing profession. And many of these jobs are entry-level jobs with no career ladder and stuck in low wages.

And so we see this as opportunity to take that bold action to try to invest in our workforce and provide career pathways to lift workers up as well. We want to ensure that this is an opportunity to see the investments that the state would be making into this, to have it trickle up to workers instead of trickle down. SEIU, a little bit different than some of my panelists on here, would not see direct reimbursement or rates going directly to workers pockets.

We would see those rates through our employers and then needing our employers to negotiate rates. And so we urge the Committee and the Legislature and Administration to think about what are some standards that we can put on the programs to ensure that the resources and investments are actually trickling up to workers as well, and that workers have a voice in the process. Because we know once workers have a voice, we're going to improve quality of care.

In our delivery system, investments in workers have been shown to reduce pressure sores, reduce patient falls, and increase productivity, and improve quality of health outcomes. Specifically, regarding the coalition's proposal, we would like to highlight a couple of particular ones. So the investments in our public hospitals and our hospitals in general, but particularly our public hospitals, who provide about 25% of the emergency care to all Medi-Cal patients who have chronically been underfunded and are going to need significant investment in the long-term.

It's an opportunity to not just invest in high road employers, but also ensure that those that are providing their share of Medi-Cal patients can continue to serve those patients. Also, touching on CMA's points around GME, I would just really highlight that, again. California has a provider shortage, but the great thing about California is once we train a physician here, they're going to stay here.

California has the highest rate of resident physicians staying in the state of around 72%, which just really underscores the need to make those investments. Finally, creating a fund to invest in labor management partnerships will give workers some of that opportunity. Although this is something in terms of a standard and proposal, we will look across all of these investments, but in particular trying to create pathways so the workers can advance in their career, can move from a medical assistant to an LVN to an RN and meet our access to care needs by ensuring we have a quality workforce.

Finally, I'll just close by highlighting the important commitments and as was touched on earlier, around health for all. We have seen that expanding coverage for all is a fantastic thing, improves the health of our communities, but we want to make sure that that investment also is coupled with fulfilling that promise of access with actually quality care.

And so for those reasons, we would continue to advocate for this investment to happen immediately, happen over the four years, three and a half years of the tax, and also see that throughout the investments, we're really asking those questions of how are we improving quality of care, which I think this proposal does, but also, how are we ensuring that workers have a voice in that process and that the investments go in a way to lift workers up? So with that, I close and happy to take any questions and appreciate the time.

Thank you so much, Ben, from CHA.

Good morning to the Committee. My name is Ben Johnson, Vice President of Policy at the California Hospital Association, representing over 400 of the state's hospitals. CHA appreciates the opportunity to share how we believe funding from the MCO Tax could be used to stabilize and improve access to care in the Medi-Cal program. California's hospitals provide care to the 15 million Californians who rely on the Medi-Cal program.

But unfortunately, access to hospitals is in danger in underserved communities across California, following years of stagnant reimbursement and unprecedented growth in the costs of providing care, especially since the onset of the COVID-19 pandemic. Medi-Cal rates for hospital services have been frozen since 2012-13, and in the decade since, prices and goods, including for the labor and the medical supplies that we pay for, have grown by over 30%.

And this situation has now become untenable as the state only reimburses $0.74 for every dollar in cost that hospitals incur when caring for Medi-Cal patients. In a challenging state fiscal environment, we believe the MCO Tax really presents the opportunity for addressing the inadequacies of reimbursement for Medi-Cal.

And we do appreciate the changes, the recent changes to the Governor's proposal to the MCO Tax to both thoughtfully maximize the revenues that would be generated by the tax and to state a clear intent to dedicate the funding to provider payment increases. However, we are worried that it could be too little, given the proposal to allocate the funding over an eight to 10 year window.

And it could be too late, given that key decisions over how to spend the money would be deferred until next year, with funding actually not flowing to providers for likely a longer time period thereafter, given the needs to obtain federal approval. And hospitals with ongoing financial deficits and high Medi-Cal patient mixes do not have this kind of time. Additionally, we know where the funding inadequacies lie and what funding mechanisms are available to the state to address them.

So specifically, CHA seeks structural payment reforms in three areas. First, we think the revenues must address the funding shortfall for hospital services stemming from the 2012-2013 rate freeze for hospital inpatient services, and this is necessary to stabilize and ultimately sustain access to these services.

And then second, while we recognize that long needed investments are necessary on the community-based the community side of mental health services, every day we are seeing crises in our emergency rooms with patients that are coming in and don't have anywhere to go, and they're waiting in patient hospital beds for days, sometimes weeks.

And so to ensure that these patients who are in mental health crisis can receive the right care at the right time, the right place, we believe reimbursement increases and improvements in our capacity to provide in-patient mental health care are absolutely needed. And then finally, alongside our medical Association and SEIU colleagues, we recognize that person-centered, high quality care is absolutely dependent on having a robust healthcare workforce. And we know that the best way to grow that workforce is to support it at home.

And so we support investments and enhanced payments for graduate medical education as well as the other workforce investments that our coalition partners are putting forward today. So, in conclusion, we're proud to stand with our coalition partners to address really one of the major remaining areas barriers to equitable care in California and address the inadequate reimbursement rates in Medi-Cal. Thank you for the opportunity to share CHA's perspective and happy to take questions.

Thank you, Ben. We'll turn over to Nick right now to represent on behalf of the Association of Health Plans.

Thank you, Madam Chair and Members Nick Louizos on behalf of the California Association of Health Plans, thank you for inviting us to comment on the MCO Tax proposal. Just by way of background, CAHP represents 43 Knox-Keene licensed health plans in both the commercial markets and in public programs. We deliver high quality and coordinated care to 27 million Californians. Most of our embers deliver Medi-Cal services up and down the State of California.

Our members are the entities that are paying the tax, along with Linnea's members, of course. The tax that is assessed on our member health plans in both the commercial markets and the public programs. Thus, we care deeply about both the tax formula and where the money is being invested in the Medi-Cal program from this revenue source. California's health plans supported the very first MCO Tax when it was designed to save the Healthy Families program.

The original tax spared premium payers at the time, as it was only applied to Medi-Cal managed care plans in our membership. Since that time, Healthy Families, of course, has been discontinued and the tax proceeds have been used to backfill the general fund instead. Around the same time, approximately, the Federal Government declared that health plan commercial lives of business must also be assessed. The tax thus impacting premiums for businesses and individuals purchasing health coverage.

These changes, of course, necessitated a closer inspection of any MCO Tax proposal by our membership. Our position nonetheless continues to be based on the same fundamental principles. Health plans believe that the MCO Tax must achieve the following principles number one, directly benefit and improve the Medi-Cal program. The tax must be affordable to those purchasing coverage. And three, the tax must also be predictable, stable, and as equitable as possible.

A core principle for our Members is that the MCO Tax must be used to supplement and not supplant resources in the Medi-Cal program. And this principle is especially relevant as the state is expanding Medi-Cal in a variety of ways in the coming years. Focusing on primary and specialty care is a very important place to start. Our Members deliver Medi-Cal services in a diverse set of regions across the state. Some of these regions have concerns about access and delivery to healthcare services.

This is especially true in rural parts of the state, where health plans have initiated a series of initiatives to try to bolster network and access to care, but more definitely needs to be done. This is why we're excited to finally have a discussion about how to use this revenue source to improve the Medi-Cal program instead of using the money to fix the budget. You know and I would echo the support for investing some of this in graduate medical education as well to address workforce issues.

Linnea with LHBC really addressed three questions that were directed towards the plans and you know the only other thing I would add is that on the third question, in terms of ensuring that the money be used and ensure that it does improve base rates to providers, again, our position has always been that the MCO Tax be used to benefit and improve the Medi-Cal program. We're glad to finally be sitting at a table where this is being taken seriously.

So we are committed to do everything possible to ensure that the provider rates are reflective of the spirit of this proposal. If indeed there is a tax and the money is being used and the Legislature agrees that base rates will be supplemented as a result. In fact, we've already begun technical discussions with the department and some of our people to make sure that this happens within the capitated arrangements that our plans have with medical groups and IPAs.

So we're excited to continue those conversations if this is the direction that the Legislature and the Administration finally go on this. So I'll just close. Thank you for your time. We do look forward to continued conversations with the Legislature and the Administration on this and to find an MCO Tax that mitigates the impacts to consumers as much as possible. I will just also add that we've had a series of conversations with the Administration.

We have asked them to see that within the confines of federal constraints and within the formula, whether there's the ability to improve or lower the tax on the commercial markets as much as possible. But in any case, we do look forward to continuing those conversations with you and to make tangible investments in the Medi-Cal program that can garner broad based health plan support. Thank you.

Thank you, Nick. Our last panelist is from Planned Parenthood. Lisa, go ahead.

Good morning, Chair and Members of the Committee. I'm Lisa Matsubara, Chief Legal and Advocacy Officer at Planned Parenthood Affiliates of California, representing the seven Planned Parenthood Affiliates operating over 100 health centers throughout the state. Together, these health centers provide over 1.3 million patient visits annually, with up to 85% of whom depend on Medicaid funding. Planned Parenthood's health centers are committed to the mission of providing equitable and affordable access to the full range of sexual and reproductive health care with dignity and free from judgment.

It's why patients know that when they need birth control, when they need testing and treatment for STIs, when they need an abortion, they turn to Planned Parenthood because they know that they can get care no matter what. 90% of the patients seen in Planned Parenthood health centers have incomes below 200% of the federal poverty level and depend on various medical programs to access essential health care services, including primary care and behavioral health services in addition to sexual reproductive health care

The majority of Planned Parenthood patients are young, have low incomes, and or belong to underrepresented or underserved communities. For many patients, sexual reproductive healthcare clinics like Planned Parenthood are the first and only source of health care.

Planned Parenthood is proud to be part of California's network of community based safety net providers, working towards the goal that everyone in this state, regardless of where they live or their ability to pay, have not only coverage, but meaningful and equitable access to quality healthcare services. Like many of the coalition members here today, Planned Parenthood affiliates worked to maintain and provide care to patients during the COVID-19 pandemic while keeping patients and their staff safe.

Affiliate health centers implemented innovative care delivery models such as drive by appointments, and advocated for the expansion of telehealth in the Medi-Cal programs. But the last three years also highlighted healthcare disparities and brought with it many challenges, including inflation, rising costs, increased STI rates, and increased demands for abortion, birth control, gender-affirming care, and behavioral health care and related services. This at a time when the US. Supreme Court overturned Roe v. Wade and states are passing abortion bans and bans on gender-affirming care.

The threats are not limited to legislation passed in other states. Several lawsuits also threaten access to medication, abortion, and the ability for minors to consent to family planning services, contributing to the uncertainty and the need to strengthen California's reproductive health care network. The revenue from the reauthorized MCO Tax would be crucial to maintain an advanced California's Medi-Cal system, a program that serves a third of our state's population. Specifically, we seek specific funding for comprehensive sexual and reproductive health care.

For reproductive health care providers, Medi-Cal reimbursements do not cover the full cost of providing family planning and abortion care. Nearly all abortion services provided to Medi-Cal patients are provided at a loss. Since 1985, there has been only one increase to the Medi-Cal base rate for abortion services. Meanwhile, costs have risen steadily over the last 38 years, with inflation producing a cumulative 180% price increase since the last base rate adjustment.

While supplemental payments made possible through Prop 56 revenue have improved reimbursement, they often still do not meet the cost of providing care and are part of a complicated system of billing that requires considerable resources to track down payments. We thank this Legislature and the Governor for continuing the Prop. 56 payments for family planning and women health services and for meeting the moment last year to make historic investments in California's abortion provider network. The one-time funding, however, presents a need for more sustainable solutions in an uncertain landscape.

So California's reproductive health care providers like Planned Parenthood continue to maintain and can continue to maintain and expand patient-centered services, build capacity, invest in our workforce, and provide high quality care and related health services to Medi-Cal beneficiaries. It is times of uncertainty and deficits when bold investments in Medi-Cal should be made. These are the times that disproportionately impact people of color, people with low incomes, our youth, and others who already face significant barriers to accessing health care.

And these are the times when significant, immediate and ongoing investments in Medicare are necessary to mitigate these impacts to improve equitable access for Californians while making sure that California's providers have the capacity to serve anyone who may seek care here. Again, thank you for the opportunity to participate today and we're grateful for the state's effort to fulfill its role as a reproductive freedom state. Thank you.

Thank you so much, panelists. Okay, we're going to dive in. While probably all my questions could take up the next 2 hours, I recognize I have my colleagues here. So we'll bounce back and forth. I'm going to start with the Department here. Director Baass, you mentioned in responding to why we're expanding it to eight to 10 years to bring certainty to the providers.

We have stakeholders representing so many providers today who are saying the contrary of that, that the eight to 10 doesn't bring certainty to them. In fact, they would have more certainty if they actually was implemented within the plans of the three to five years. Could you speak to that of what insight you're bringing regarding the need for eight and 10 and how it contradicts from what providers are saying?

Sure, thank you for the question. I will say I think we are all united here in terms of wanting to invest in the foundation of Medi-Cal and recognizing that provider rate increases haven't been addressed in many years. And I think I look at the table and we all kind of use that as kind of where we're all coming from.

Our goal in kind of the proposal for eight to 10 years is that we don't want to have a fiscal cliff after the 3 and 3/4 years of this proposal, where we know the Federal Government has we've been in technical assistance conversations with them and think that the model is in a place where they will approve. But they have signaled to us that they are intending to change regulations to close kind of the loophole with regard to proportionality.

And so the value of the MCO post 2026, we don't know that we can get it to the place where this model is. And so we want to provide certainty that the rate increases, the 1.5 billion annually in general fund rate increases over 3 billion total funds is available to our providers for a longer period of time, eight to 10 years under our proposal.

If we move forward with the proposal as proposed by the providers here in the kind of the three-year term, we don't have the certainty that we will be able to maintain those provider rate increases come 2027.

Given in the background, you'll see Members on page 47, the history of the previous fees and taxes. But each time since 2003, the Administration stakeholders have been able to come together and readjust each time the Federal Government has said, oh, we're going to disallow the Quality improvement Fee from 2003, or we need a more uniformity across Medi-Cal and commercial plans for it to be equitable.

What distrust do we have now, that should it change in 2026, we don't have the brains, if you will, to find a different way to adjust and move forward with a new tax.

Hi, Jacey Cooper, State Medicaid Director so the differences in the previous taxes we've submitted various tax models. Can you hear me now? Great. We've submitted previous tax models to the Federal Government. Typically what happens, we submit it to them and they are going to look at the methodology within there, do tweaks, sometimes it will be rejected, sometimes it's approved to move forward. That's within the existing and longstanding federal regulations, inclusive of the loophole on proportionality that Director Baass was mentioning.

In our conversations with CMS they have made attempts through previous of looking at this and have signaled this for quite some time. I would note that they haven't moved forward with the federal regulations. However, in our conversations they had very clear language to us saying that this tax is approvable. We did back and forth to mitigate those historical times where we came, submitted a tax to the Federal Government and had to make changes after the fact. We wanted to make sure it was approvable before we submitted it.

But they did mention, very specifically, they would be moving forward with a federal regulation package to close the historical loophole that exists in regards to the proportionality of the tax that has not impacted the previous tax. So that is the difference with this particular one. They have mentioned that they may even indicate that in our approval letter to the State of California.

So it's clear that they're putting us on notice that they think the tax would be approval through the 2026 time period, but by the time that the regulations would be to hit, it takes about 18 to 24 months for federal regs to go through based on what they have told us. And they felt that they could clear it through the 26 time period, which is why we felt comfortable putting this forward to the Legislature.

However, we do feel it's important in our due diligence to inform people that that is what the Federal Government has informed us of at this time and we need to make sure that we're making budget decisions and according to that guidance from the Federal Government.

I'll ask two more questions and then turn to my colleagues. Director Baass, on question number three related to what providers are remaining under AB 97, you said we're going to get that information later today. I'd love to see if there's anything inside on there on the remaining providers that haven't or won't be getting their 10% cut reinstated.

Sure. Do you want me to read? I can give you some highlights. We have chiropractors, clinical laboratories, pharmacy, physical therapists, ground, medical transportation.

Independent diagnostic testing facility crossover providers is a highlight of some of them. Most of the AB 97 reductions have been restored, particularly last year in the last year's budget. So, I mean, it's a short list. Yes, it's a short list.

Okay, thank you. And then regarding, you know--and this will be my, I'll switch over--some of the stakeholders here spoke about some of the concern of it being, how it's going to be distributed down to the actual providers. Right? Could you speak a little bit more of that plan? Walk us through the plan protections and base changes in the tax on it, please.

So happy to. So we would put forward to the Federal Government they have two different types of directed payments. One that essentially mandates a payment to provider and then then one that drives kind of supplemental payments.

We would put forward to the Federal Government a request that the managed care plans be required to pay at a minimum the rate that we put on file. That is why we're recommending to increase to the base rate. So it's guaranteed that that can flow downstream to providers. We know that some managed care plans pay fee for service, and some managed care plans pay a capitation rate to their providers as well.

In the instance where they pay fee for service, it's a very straight instance where they would pay at that 87.5%, for example, in what's in the budget or higher, if that is the rate on file, and there are some that are higher, and that would be a hold harmless for all providers in regards to any rate on file.

Under the capitation arraignment, we also can have directing them to ensure that they look at the capitation arraignment between themselves and the provider, look at the rate in which the capitation was agreed to, and ensure that the dollars pass through through that capitation arrangement between them and the provider. Managed care plans would be required to attest to the State of California that they have passed those dollars down to those providers to ensure that those dollars are going to the intended party, which is the providers in these cases.

And then there could be subject to audits or various pieces in the future. We would try to reduce an administrative burden of the plans, the state and the providers. That is one thing we've seen with Prop 56. The administrative burden in regards to how those supplementals have been implemented has been extreme. At the provider level, having to reconcile with the plan level, we're doing two to three years after clawback and at the state level.

So we're really trying to do administratively less burdensome implementations with these base rate increases. A directed payment approved by the Federal Government to ensure that providers can get these payments.

Okay, just a quick one before I turn over primary care providers, does that include PAs and MPs?

Yes, it does. It does.

Okay, thank you. So we're going to go clockwise to start with Senator Eggman.

Thank you. And thank you all for the presentation and all coming together. I am a firm believer that healthcare in our healthcare system is the most important thing that we do in California. It impacts every other aspect of anybody's life, no matter where they're sitting. So thank you all for the work you do. I guess in the Department, I've been a longtime champion of same day payments for clinics. Is that anywhere in the administration's plan? And if not, do you see a path with that?

I think as we think about behavioral health integration, as we think about primary care, which are some of the key areas that we're thinking through, I think it's something that we would want to talk through and kind of think about what are the opportunities with regard to ensuring that individuals get the care they need at the right place and at the right time?

Okay. And for the clinics, can you talk a little bit about how you see it functioning in the clinics with having being able to bill for two things on the same day?

Yeah, absolutely. And thank you for being our champion on this issue. I would say, I would just give you an example of a patient that comes through our doors, right? Imagine Señora Rosa, who is a newly eligible for Medi-Cal, potentially has not had access to health care her entire time that she's been in California. Stable, right? Is coming through our doors with the complexity of her situation, has likely been an essential worker over the pandemic.

Maybe she left the workforce during that time, has a myriad of things the community clinics really have to take on this very complex situation. Perhaps she has also had to take some time off of work and it is really hard to do so given that she's probably a frontline essential worker. And so that's a really complicated equation. They come through our doors today with a myriad of needs, and we are only able to provide them with one service that day. That's what we're able to bill.

And we're even limited to the provider that can provide that service as a billable provider. And so then she has to go home and hopefully we cross our fingers and hope that she's able to make that time to come back again. And so it is a very complicated equation, and it's only dictated because she's a medical patient that receives care at a community clinic or at a community clinic, because we're only subject to that limitation.

And then the final thing I'll say on this is that this equation, someone should not receive less comprehensive care simply because they are on Medi-Cal, right? It shouldn't be determined on their health insurance coverage. And so if we really want to access, if we really want to fix this issue of health equity that we all keep talking about, then we have to address these types of issues, and same day payment is one way to do that.

Thank you. So the administration's plan, as I understand it, is to increase rates to 87.9% of Medicare rates?

For primary care, maternity care, and non specialty behavioral health for starting January 1, 2025, and then coming back at Governor's Budget for additional rate increases starting January 1, 2025.

Okay. And I guess then to the providers, is that adequate facing what we're looking at now.

I think the, I want to start with saying again, I think everyone at the table has the same goal. To Director Baass's earlier statement, the need in Medi-Cal, frankly, is greater than what this MCO tax could provide. And so it's a great first step, I think, to improve access in the medical system. I think part of the reason that we're advocating for a spend over 3.5 years, the length of the tax, is to maximize access within the program. And we can only do that with funding.

And so we certainly understand that the CMS and the Federal Government might have a view of this tax. I think we would say, let's see if they change the regulation and deal with it then. And this is really an opportunity to invest in the system. So in the Governor's proposal, it's a great first step for us. But I do think from the physician reimbursement rate, again, this hasn't been raised since the '90s, the need is very great. So do we think that will certainly improve access?

Yes, but we think the best case to improving access in the system would be invested over the three and a half year period.

And then I guess, to the plans, if the Federal Government does change the proportionality loophole, do we have a backup plan then to be able to average it all out and still make it the tax function? To the plans.

I want to make sure that I understand the question, Senator, so that if the tax is somehow discontinued or lowered?

the proportionality loophole is gone. And so the Medi-Cal rates were the same as the commercial rates, you had to do that the same. Would the tax still be functional as a tool?

Well, I mean, you know, the tax is set to expire in three and a half years. So I think the Legislature would have to come back at that time and determine, you know, the path moving forward with respect to the tax formula, I think that would hold true with the spend as well. I mean, I think the Legislature would have to come together and work with the Administration, the plans, and the stakeholders here at this table to figure out what the most effective and efficient way is to maintain those services.

Obviously, our rates come from the state. They're developed by the state. And I think the MCO tax is just one consideration in a variety of considerations that are used to develop the rates for the plans that are then used to contract with providers. So I think it's a very complicated yeah, it's a very complicated situation, yeah.

I think that's what the Administration is suggesting, that three and a half years have a very complicated situation.

Yeah. Could I add? Not necessarily speaking to the tax formula, but I think just kind of reiterating the ask for the spend to align with the period of the tax, and in part kind of appreciating the Department is having conversations with CMS, but we also know that CMS for the past several taxes have said that they're going to change those rules, and we haven't seen that actually happen yet.

And we also know that if they're changing the rules on provider taxes, there's a lot of implications for not just California, but other states. So I think there's sort of a long road between where we are now and any future changes were they to take effect.

I definitely agree on that part. Yeah.

Okay. And to the Administration and the hospital. So I see the provider rates going up, and we're all kind of struggling with this hospital crisis. Can you talk about what the administration's plan is for the hospital crisis that we're facing now and the difference between what the Hospital Association is asking for?

So I'll start and then turn it over to State Medicaid Director Cooper. So as part of our proposal, I know not part of the MCO proposal, but we have the Distressed Hospital loan program that I think was intended, or is intended to really address the immediate needs facing hospitals today. As part of our proposal--

50 million, correct?

Pardon me?

The one the 150,000,000.

Yes. As part of our MCO proposal, we've identified for 2025 acute care, including ED use or ER use and outpatient services as priority areas for us in 2025. And so that directly relates to hospital financing.

We also would want to point out that we want to maximize our ability to draw down additional federal dollars with the MCO. And so that is why we're proposing to submit those rate increases in January for a start of January, 2025. Because there are lots of intricacies related to hospital financing, related to upper payment limits, additional supplemental payments, and wanting to have a complete understanding for how we can most efficiently and most effectively draw down additional federal dollars with these MCO revenues and not leave anything on the table.

And if I may, Ben Johnson from CHA. We do appreciate the Legislature approving that distress hospital loan program, but we do find that it is only a bridge to get those hospitals that are most critically at the edge of survival--maybe a dozen or so hospitals--through until structural reforms can be made to address the long standing shortfall in Medi-Cal reimbursement that hospitals, especially with high Medi-Cal payer mixes, are experiencing.

And if the funding were not to come faster than two years down the line, that can extend out those losses and put additional hospitals closer to the edge. And additionally, with the funding that would go into the Reserve, there isn't, I don't think, enough certainty about where that funding will end up. And it really defers a lot of those really key decisions when we really need to address what has been a looming and growing crisis for a decade, but especially with COVID-19.

Okay, maybe to Casey, and then that will be my last one for now. Do you know what our current hospital reimbursement rate is as compared to the Medicare rate?

Was that the 74 cents to a dollar one, or are we talking?

That was primary care.

So what I would say is hospital financing is complicated. It's going to vary between fee for service thank you. It's going to vary between fee for service and managed care. Both of them have what's called a base rate, and then we have supplemental payments for our hospitals.

When it comes to the fee for service side, for example, we are already at what's called the upper payment limit when it comes to Federal Government, meaning that we're paying at or nearly Medicare rates when it comes to those. And that's net benefit. When it comes to managed care, the base rate plus supplemental has a different bar in regards to that, and that's essentially average commercial rate, and we aren't necessarily there. So there's two ways that that can change.

You can negotiate rates with your managed care plans, which our hospitals do on a regular basis, and then we have our supplemental payments, which is our HPA for our hospital quality assurance fee. And in there, we actually have worked closely with our hospital partners for both 23 and 24, and we've increased that by $1.6 billion to ensure that we can have additional supplementals.

We still have room in regards to that, and we work closely with our hospital partners in regards to always looking at our supplemental payments. But to answer your question, for calendar year 2022, in managed care, the net benefit reimbursement and the net benefit, because some of this is self financed with fees, et cetera, but in managed care, the net benefit reimbursement on average for private hospitals is around $4,100 per day, and to designated public hospitals around $4,300 per day.

And so when considered kind of statewide, gross payment levels for hospitals match or exceed the Medicare reimbursement rates currently. But then again, we still have room on the average commercial rate for supplementals on the managed care side. Come January 1 of 2024, about 99.5% of our lives are going to be in managed care, which does allow us to, as Director Baass mentioned, continue to maximize federal funds where we can on supplemental payments on the managed care side.

But I think that's why you see the Administration focusing on some of the outpatient hospital rates, whether that's emergency room specialty care or outpatient hospital services. Those are things we want to consider in the 2025 rate augmentation. As Director Baass mentioned, though, it's very complicated with various federal upper payment limits and rules and regs and how that works. And so we want to be thoughtful and use data to drive what we recommend and work closely with our hospital partners on what is needed.

Go ahead, CHA. And then we'll, yeah.

If I may just respond. And we've appreciated that partnership over many years. In terms of really identifying non-General Fund resources to supplement what the state pays on the Medi-Cal side. But what has occurred over the last decade is a true increasing reliance on those supplemental payments. And those to a very significant degree, are self financed by the hospitals themselves.

And so when the hospitals put up the non-federal share, it means really for every dollar in gross payments, it really gets translates into 50 cents that the hospitals are receiving back. And so as that reliance on these non-General Fund resources has increased, it's really increased that gap between what it costs to provide care and the total reimbursement that Medi-Cal is providing. So happy to continue to work. I know it is very complicated and we're happy, of course, to meet with you all if you have any further questions on.

Thank you, Ben.

Thank you.

Senator Roth?

Thank you, Madam Chair. You know, generally I think the MCO tech should be used for health purposes. I realize the budget is a zero sum game, but when I look at the provider rate increases for outpatient non-specialty mental health services, I asked my colleague--who's much smarter than I what that meant--and she told me, but how does that outpatient mental health services piece relate to the need for additional inpatient behavioral health capacity?

I think I would maybe start, I think part of it is also kind of that prevention and primary care kind of perspective. The more we can do on mild to moderate or non specialty services to prevent visits to the ER or prevent crisis, the better it is for the entire continuum.

And so kind of just with the vein and the view of our comprehensive quality strategy and really trying to focus on some of these clinical areas of prevention and integration of behavioral health and physical health services using this first round of rate increases for January 1, 2024 to focus on some of those primary prevention types of services.

You know, we obviously--you all, not me. I'm not a healthcare provider. But you try to drive healthcare needs to the lowest possible denominator. So urgent care clinics, clinics, other services that do not involve an acute care setting. But the reality in the non-behavioral side is at some point people need to be admitted to an acute care facility.

And my concern in the behavioral health arena is the reimbursement rates generally are so low that acute care providers who have an opportunity to choose, choose not to build and staff behavioral health beds.

So if we increase the outpatient non-specialty mental health services emphasizing behavioral health care at the community and residential level, which we should of course, when someone needs to be admitted to acute care facility, there won't be a facility or bed to admit them to other than the wall of an emergency department on a gurney.

And I do think we need to figure--and I know we have General Fund backfill built in here--but I do think we need to figure out a way to begin to address the need for acute care behavioral health inpatient capacity in the state. You've heard me say it before. Riverside County has 77 public beds for a County of 2.5 million people.

There's not a hospital facility--acute care hospital facility--in the City of Riverside, 350,000 people, to my knowledge, that has a single acute care inpatient behavioral health bed. There may be a private profit, for-profit facility with some limited bed capacity, but with that to say it's a dire need is certainly an understatement. And I don't need to give you all a lecture. You all know it better than I because you work it every single day.

And personally, I'm thankful for the fact that you do and that we have all of you working the issue. So I guess my request is that we take another look at how we're dealing with these provider rates and whether outpatient solely is the right way to allocate the money that we do receive as a result of this MCO tax over whatever period of time people decide to have it apply to funding needs.

And second, Mr. Thompson and I don't always agree on everything, but on this particular issue having to do with workforce development, residency, GME preceptorships for those who are not physicians in training, I do think we need to take another look at the absence of that in the funding model, at least that's been presented to us. And I do think we need to take an innovative approach, as he suggested, to the use of GME and where it's applied.

And we focus on acute care general hospital facilities for training. And some of the training needs to be conducted there. But we have a whole raft of clinics and ambulatory care facilities spread out across the state in many places where there is no acute care facility. And perhaps we'll have more of those in the future as our acute care hospitals suffer continued distress.

And we ought to figure out a way to utilize that network of facilities beyond acute care hospitals to conduct our enhanced, hopefully GME training programs and other preceptorship programs in the healthcare delivery system, perhaps emphasizing and driving workforce development funding down to not exclusively, but maybe primarily our public and nonprofit facilities that are located training facilities that are generally providing most of the training in our underserved areas where there is not a general hospital where the training can be conducted the training is conducted in clinics and ambulatory care facilities. And then we have to figure out a way to incentivize acute care general hospitals with the facilities to provide clinical rotations, because right now, perhaps they're using those for their own purposes.

And I understand that, but we need to figure out a way to do this. So I guess my request is that we take another look, maybe at this General Fund backfill. We're going to have to work with you to figure out how to fill the gap elsewhere in the budget. But this is our opportunity to use this MCO tax to really build up our healthcare delivery system, in particular in the Medi-Cal arena. Thank you, Madam Chair.

Thank you, Senator Roth. We're going to move on to Senator Grove.

Thank you, Madam Chair. I didn't notice anybody's comments at the table. How about I start with I think that we found ourselves in this situation because of the catastrophic loss of the Madeira Hospital. And part of it was part of it, not all of it was Medi-Cal reimbursement rates.

I know that Kaweah Delta was next on the list, which is in my district, 670 beds, level two trauma center in the Central Valley, which was already in financial distress because they do serve over 70% of the Medi-Cal population. And there's not a well balanced commercial plan rate in the Medi-Cal rate because it's predominantly a high Medi-Cal population that we serve. So the rates are inadequate to start, like my colleagues have said. And so I appreciate the discussion.

I appreciate the Governor working with us, all of us, and coming up with the $50 million loan program that may, hasn't happened yet, but may get our hospitals out of the situation that they find that they're in because of the Medi-Cal reimbursement rate. But going back to the panel discussions, when every one of you at the table presented, every one of you presented at the table, does anyone--because no one recognized it--where's this $32 billion coming from? Roughly $32 billion. No one recognized that.

No one thanked the plans for coming to the table and doing this. No one said, I mean, every one of you and all of you. And I appreciate the hospitals, and I appreciate what you guys do to deliver care, and I appreciate the administration's participation, and I appreciate people representing what they need in this dollar. But no one said thank you to the plans for coming to the table to address this issue.

And so I want to personally thank the plans for doing that because you're providing $32 billion, which I thought in good faith with working with the.

Administration and other individuals, I thought in good faith making an agreement to support or to address or at least bring to the table this conversation about an MCO tax would go to the direct benefit of Medi-Cal providers and hospitals, not, no offense, but hospitals that didn't need it in areas where they are financially secure. But it's specifically addressing the poorest people in our state for health care. Because you can say access to healthcare or health care for all.

But if you're not providing access to health care because doctors and providers aren't treating health care, or you can only bill for one treatment per day in order to keep your doors open, that's not health care for all. So I personally want to thank the plans for coming forward and adding an inept $32 billion is the estimate that I have, is that correct? $32 billion? So I'll start there because everybody else is a taker. They're a provider. I do have questions. I think it's for the administration.

I want to focus on the primary care obstetrics and the non-specialty mental health services. Is there a specific code or specific codes in the reimbursement that will be affected? Because if I guess what I'm trying to get to because there's not a lot of specificity non-specialty mental health, like my colleague from Riverside. If the code section is to treat people that come in and they meet A, B, C, D, and E, and then you're going to do increase in medical payments for that particular individual.

But 95% of the patients that come in that get treated by the clinic are the homeless people that walk in that have wound care, that traditionally have mental health. But you can't address the wound care because you're only allowed mental health reimbursement for A, B, C, and D patient and this person only meets A requirements. So I'm interested in the specific codes that will be increased for those three things, primary care obstetrics and non-specialty mental health. Who can provide me with that list?

Yes. So happy to provide you a quick little overview and then we're happy to provide the list of codes. So for OB it would be maternity care broadly. So this would include prenatal, postnatal care, OB, provider payments that's inclusive of doula, and there's a variety of codes that that includes. For example, though it would not include various separate procedures or hospital procedures or anything that is outside of that, it does include delivery. So we can provide you the list of codes so that you have a good understanding of what's included in the maternity care pieces.

Give me a couple of examples of what's not covered.

So for example, we're not changing ancillary services for like an ultrasound payment, for example, or if there was a separate procedure. But broadly any provider payments tied to maternity care for prenatal postnatal delivery should be included in the list.

So if someone on Medi-Cal in my district or anywhere else in the state. Again, we serve a higher Medi-Cal population for Central Valley. Someone on Medi-Cal walks into a hospital for maternity care. Their delivery is covered with an increase in this reimbursement rate.

So this is dominantly focused on the provider payments within this particular augmentation. And then I would want to make sure I look specifically in regards to how it impacts any inpatient. So I'd want to get back to you on that to make sure I'm working with my SMEs on that particular.

Okay, please do that, because my hospitals tell me that every Medi-Cal baby they deliver, there is a significant loss of up to almost $10,000 per delivery.

Yes, we're happy to get that back to you.

Curious to see if that's included.

Sure.

Okay.

On the non-specialty mental health. So the way we provide services in the Medi-Cal program, we have what we call non-specialty mental health. That is the responsibility of our Medi-Cal managed care plans to provide. That includes medication management, therapy services, psychology services, and we have a list of those services. We're more than happy to provide you that code set. That is dominantly what we are focused on with this initial 87.5% augmentation. That is the bulk of the upstream preventative often done in primary care. Also then also sent to networks like Beacon or Magellan, if you're familiar with those, for that kind of mild to moderate is also a term that's been used for those mental health services. For specialty mental health services or substance use that's carved out to our county partners. We currently have a fee schedule that's based on cost-based reimbursement.

So that's a separate reimbursement that is not included in our proposals. So this is just for the non-specialty mental health services. And again, we can provide you that code list. It's a very easy defined code list. We use it often with our Medi-Cal managed care partners, and it's in our provider manual. We're happy to provide that for you.

I appreciate that specific list. Is there any specific increase for rates for hospitals themselves?

When it comes to mental health services, not at this time. That is not currently proposed.

What about hospitals in general, just for general services? I mean, when you look at the reimbursement rate for hospitals, we're in the top or the bottom five of the entire country, and we are the most expensive. Our hospitals are the most expensive. One of my colleagues asked about a daily reimbursement rate. I think it's like $4,800 to provide somebody a service to be in a hospital where the average is like 2000, 2200 state or nationwide.

And I think Missouri or somebody is the lowest at $1,300 a day. So we are obviously the expensive, most expensive, and I think that comes from the regulatory process, Seismic, all those things that hospitals have to I don't run a hospital, but I hear from a lot of people that do run a hospital, and it's almost impossible to comply with OSHPD. Hanging a TV, $5,500, put a screw in the wall, hang the TV. It's that simple. But they have to get certain requirements for hospitals is way different. So the cost to run a hospital is more expensive. Are there any, under this MCO taxes, any of this money going directly to hospitals?

So that would be included as part of our 2025 rate increases, where we've identified outpatient and acute care as categories where we are going to provide a recommendation in terms of at the next Governor's Budget on rate increases for hospital outpatient and acute care services, including EDER type services.

Have you guys consulted with any of the hospitals, the nine catastrophically affected hospitals in the State of California? We think there could be 11 because I've just text three of them and they can't make it till 2025. Is there an alternative solution for those hospitals, or are we just going to discontinue healthcare with those hospitals?

I think that's part of the distressed hospital loan program, kind of in terms of an immediate need for those hospitals if they qualify for that type of loan. I think that is one area where there's an investment. And we have heard from hospitals that their 2022 revenue cycle was very different from what they're seeing in 2023. And so lots of changes happened in 22 with regards to kind of the end of the COVID supplemental payments. And so I think continue to work with hospitals as issues come up.

Okay.

Senator, real quick, but I will say to that, I mean, at least one hospital in my district is $20 million in debt. That's just one hospital with the 150,000,000 that we just approved in early action. It's nowhere near enough to cover it. So I don't think we've heard it a couple of times from your director that that's not the end-all for these hospitals whatsoever. It doesn't even scratch the surface. So I don't think that is good enough to say, well, we have this pot for them.

I appreciate the Chair's comment, because between her hospital and my hospital and one other, that 150,000,000 is gone if it's allocated to those hospitals, and that's just to keep the doors open. It doesn't comply with other things that are in where future Medi-Cal payments are available or pledged already for Seismic, or pledged to the 401K plan, or pledged here. And so I think we have a very scary situation going on with our delivery of our healthcare system. And I was curious about the immediate response or increases to hospitals. But you're telling me that's not till 2025.

As part of this MCO proposal, I will just, as Ms. Cooper noted, come 2024, 99% of our Medi-Cal members will be in managed care plans. Hospitals today negotiate with their managed care plans and can use this year to negotiate rates for 2024. As part of this process, the state is not directly involved in those rate negotiations, but that is also an opportunity to increase revenue to hospitals in shorter order.

Okay, so another question I have is, you talk about equity. Right now the plans are funding the $34 billion, roughly. That's the number I have in front of me. If it's wrong, please correct me. 32 billion, sorry, $32 billion. The plans are funding that. But I made some phone calls to some friends I have back east and I asked them about how we get waivers because we can increase. So I learned something about Medi-Cal.

California can actually increase their Medi-Cal rates and then they can actually get a waiver from CMS to be able to get that reimbursement back to California. So is there a way to alleviate the complete cost or alleviate part of the cost that plans are putting forth? Because that's just a tax on those that have the blue plans, the managed health care plans, local plans. It's just an increased tax on those that have Medi-Cal insurance commercial plans, I guess you would say. So is there a way to create equity in the funding mechanism so that the Medi-Cal reimbursement rates are increased in California? The Feds reimburse California for that and alleviates the cost off of some of the plans? I know it's complicated, but that's kind of the gist.

So the short answer is essentially that's what we're doing. The 32 billion that's mentioned is the total, majority of that is federal funds, just to be clear, that are coming in. We then build the price of the tax into the Medi-Cal managed care plans rate. So essentially it's covered. The Medi-Cal managed care plans essentially don't have an impact from this tax. The commercial plans do, though. With non Medicaid lives and the way we build the model, there are tiers.

So there are some tiers where there is no tax applied to those lives. So smaller plans, we tried to essentially look at that. We also have a cap on the top of the lives. So there's tiers and then there's tax, and it applies to certain lives within there. And we did what we could to mitigate the impact to our commercial partners. In fact, even the size of this tax increased. We have a smaller impact to our commercial partners than we did historically in this tax.

We try to work very closely with our planned partners to mitigate the impact. And we are very appreciative of the tax and the ability to bring these dollars in to not only not have impacts to the Medi-Cal program, but to talk about the things we're talking about today, increasing our Medi-Cal rates. And so we're happy to provide you a year-over-year impact of the commercial plans, how we've tried to reduce the impact to them. But there's also some charts we can provide you in your office with the federal funds coming in and how we offset those dollars.

Just to stress, compared to the tax that expired in 2022, we've reduced the impact to commercial plans. And for some of our smaller and mid-sized plans, we've actually eliminated the impact to commercial plans. So we've done a lot of work with our plan partners in trying to build a model that really reflects kind of the goals to just to leverage federal funding.

Clarify. Right. In 2022, it was 33.8 million for the non Medi-Cal for commercial plans, and for this first year, it'll be 20.2 million. Year 2023 will be 20.2. So about 18 million lower than last year.

But it's 112,000,000 to the plans over four years. Correct or not?

That might be the math. It's 20.2 this year, 26.9 2024, 30.7 in 2025, and 34.6 billion.

That sounds about right.

Page 50.

Yeah.

I know that my colleagues on the dais have a lot more questions, and I wish I could ask all these questions that I have, but I do have a couple of questions in writing, like what's the guarantee? Where's the LAO? There you are. What's the estimated annual budget deficit you think that we'll face next year?

We're just in the midst of releasing our multi-year outlook, so I don't have those numbers in front of me, but it'd be released very shortly. Initially, we did estimate that through 23 24, revenues would be about $11 billion lower than estimated by the administration. And then even in the administration's own multi-year projections, they project deficits in the out years. So this is a constrained fiscal situation that the Legislature is entering into.

Thank you. And the reason why I asked that is I'm really concerned that there's nothing in writing. It just says that I've seen unless you can provide it to me. For instance, in the 2023 2024 budget that's coming up in 30 days, roughly, $3.3 billion. So $3.3 billion of this money is going to go to backfill the general fund, but only 98 million is going to go to the rate increases to people delivering our health care for access to all.

The actual number that I have is 3.388 billion, correct? Yes. It's in thousands. There's a lot of numbers, and I'm just an average everyday Californian. So billions and millions kind of get away from me a little bit. And 98 million is going to be delivered to our healthcare plans or not healthcare plans. I apologize. Healthcare access to the people who are on the ground providing the dollars or providing the services that these dollars are supposed to pay for. How come that's not switched? We don't give $98 million to the general fund and $3.3 billion to the people actually delivering access to health care to our poorest Californians. That's what this MCO tax is supposed to do is my understanding, unless I have a misunderstanding of what that tax is supposed to do.

So we've provided two different cuts of this so that's on a cash basis. And so the difference on a cash basis and accrual basis. So I recommend if you don't have it already, we'll provide you the accrual piece. But essentially for each year, you have a total tax that comes in. We have to build a certain amount into the managed care plans rates that will come out of that, and then you have a general fund gain.

And once you have that general fund gain, we have also taken out a portion which you are mentioning in regards to what's covering the Medi-Cal program so there's no losses. For example, in calendar year 2023, it's $2.5 billion. And then there are additional pieces. Once you cut that into a fiscal year, because we submit to the Federal Government on a calendar year, we cut it into fiscal year.

And then once you apply the cash lag on that, it's really just a cash part of when cash is coming in, cash is going out. I recommend you look at the accrual schedule. That will give you a better sense of what the tax brings in every year, both from a federal fund perspective, what goes towards the budget proportion for that time period, and then what would be going into the reserve to fund the rate increases that we've been talking about here today. That might be a better picture. So easier than the cash lag that can get a little bit complicated of when the federal funds come in and out and when we have to build it into our managed care plans rate.

Okay, so let's go to the percentage rate. So roughly it's about 40%, based on the information that I have that the general fund will retain. So if we address an accrual situation where we have the total dollar amount over the time period for accrual, and then we have cash coming in and cash going out, and then you have a build-up like you said on the general fund.

At the end of this process, what percentage will the general fund retain and what percentage will go to the and I realize I get it. I own a business in the real world. I'm a business owner. I get accrual. I get all that monthly cash in, cash out stuff. You have to set money aside for FICA, federal food, EDD, workers comp, everything that you have to set aside when you have an employer. So I get it.

But at the end of that time frame in my business, I can say 3% went here, 2% went there, and 5% went there. At the end of the time frame, what's the percentage rate that providers and hospitals are going to get from the tax provided by the plans that's going to get us out of the situation that we're in to still deliver care?

So total revenue general fund offset is 19.4 billion over the course of the MCO period. 11.1 billion will be available to invest in the Medi-Cal program. This is the first time, and I think everybody at the table acknowledges this is the first time that we're using MCO dollars to invest additionally into the Medi-Cal program, not just being used to support kind of and maintain the program. And then so 8.3 billion, so 42% will be used to maintain support in the Medi-Cal program. But I do want to highlight this is again the first time the administration has proposed an MCO that is using a majority of those dollars to actually augment the Medi-Cal program. As we've discussed here, we all have different approaches and different timeframe. But the commitment to augment the Medi-Cal program, this is the first time the MCO has been used to do that.

Is that because of the federal regulations that CMS put on us to be able to get this approved?

This is part of the administration's proposal. We fundamentally see the need to provide more additional resources to build the foundation and the Medi-Cal program. And this was important to us, important to our federal partners as well. But recognizing the need to build this foundation, that's why we came forward with this proposal.

Just because the Chair asked that question on the Federal Administration, I guess I would like to know any applications that the State of California has inputted. Has there always been a waiver to extend that for tax increase or excuse me, rate increases, or have we ever been denied?

We've had to do negotiations with the Federal Government on the methodology for them to find it approvable, but ultimately they have approved every MCO tax that we've put forward to them.

Okay, so is there negotiations going on with the Federal Government to allow us to increase our Med-Cal rates in order to be more equitable with the dollars that the plans are putting forth? Because we're going to get reimbursed from the Federal Government since they haven't denied us before. And realistically, politically, we're dealing with a democrat administration and a democrat administration and there's probably going to give us a waiver again. So are you negotiating with the Federal Government now to alleviate some of the cost off of our plans?

We have worked with them to get the proposal that's before you. Essentially they've deemed it approvable. We've done back and forth on the methodology to ensure that we are meeting the federal expectations and requirements. We expect the MCO tax to be approved upon submission to the Federal Government. When it comes to the managed care plan rates, we have a standard procedure in place for how we build that into the managed care plan rates.

And we've never had any issues with the Federal Government and any administration in order to get those approved. I would say though, they do have to be as we're increasing rates, I would say CMS also has a federal rule out right now on access where they are wanting all Medicaid programs to look at their base rates is what they're very focused on. They've also focused on primary care, maternity care, and behavioral health services, given the critical nature of what Medi-Cal and Medicaid nationwide does.

So I think right now we're very much in alignment of where the Federal Government is in regards to their priorities for Medicaid as well with this proposal. And so at this time, we don't anticipate any barriers with federal approval. And they've worked very closely with us. We essentially took this tax from what we've historically done and overdoubled it. And so they have provided a lot of technical assistance to us to find a pathway forward for this proposal to be considered by the Legislature.

Thank you. And I'm just going to make one last comment just so that it's on the record. I haven't talked personally to the Chair about her issues with her hospitals, but I can tell you that the hospitals in the Central Valley and in the high desert where it's 95 miles to the next available hospital, which is a long ways when you're having a heart attack or a stroke, they will not survive until 2025. And I appreciate the $150,000,000. I think it was gracious.

But if you're relying on that to get the hospitals through to 2025, it's not going to work unless there is some type of other alleviation for Seismic, other alleviation for bills that are coming through that are going to increase cost. One hospital says that a particular bill coming through is going to increase their cost by $10 million, and they don't have the money to meet the 401K obligations in the next 90 days. So how do you have that $10 million increase? And if we're not looking at a good faith proposal to increase the hospital rates until 2025, I wanted on the record that today, on this date, I warned you of the catastrophic healthcare situation we will find ourselves in when these hospitals can't survive. Thank you, Madam Chair, for the leeway.

Thank you so much. We spoke, well let me give the department a little bit of a break here. AltaMed, Berenice, can you speak and maybe I'm missing your answering. I know with the PPS there's some restriction to wage increases and so forth. Can you speak a little bit more of the direct impacts this current, as proposed MCO tax will have on community clinics? I know you shared three additional requests, but just as is how it directly impact community clinics.

Sure, I think thank you for that question. So the PPS rate structure today does not allow for FQHCs to bill directly for services provided by clinic staff, such as social workers, community health workers. So this would allow us to do that, extend amplify our billable providers. The cost of the services provided by these providers types have to be built into our PPS rate so that it just doesn't have to be a physician providing it. So that could be helpful.

This structure also doesn't adequately recognize the payment that FQHCs would have to make to these providers and can be a barrier for that culturally competent, low-cost workforce to address our social determinants of health. Similarly, it does not recognize home and community-based services, which is a big piece of what our communities need. And so this would allow us to be able to provide that as a service and then increasing investments in the Medi-Cal program with this necessary payment reform is key for CHCs to participate in the state's calam and quality improvement initiatives. And so that's just to say that the way that our PPS structure is created today, there's very specific events that are called triggering events that have to occur for us to be able to kind of renegotiate our prospective payment. And so the value-based care initiatives, CalAIM, all those things that are happening right now are not built into our rate today.

So essentially it's not really being accounted for. And I would just add the complexity of who we're serving is also another really tricky, complicated thing for us, because someone who's coming through our doors, typically there are cases where we provide the same day service for mental health and medical service, but that's just for clinics that are able to do that and to sustain that.

But that is obviously taking away from other services and we really don't even have the workforce to really be able to do that. And so that's just a little bit more about what the limitations of our current payment structure and what something like the current proposal that has been put forth would help us amplify our services.

Thank you. And on the third request you mentioned the 50 million for community health workers. And in this sub we heard a budget solution for the delayed proposals under HCAI investment in summer workforce, and one of them was community health workers. I'm wondering, given that the administration proposed that being delayed, how this tax can then supplement community health workers, knowing that's culturally competent it's a way to address their permit system. At least for my district, it's the number one utilized approach to getting individuals to care.

So the department is very supportive of the community health worker benefit that was added into Medi-Cal July 1 of 2022. What I would say is the HCAI is for the certification that they are running however, that does not stop any of the community health worker growth within the Medi-Cal program. We have separate requirements that allow somebody with lived experience, for example, to be certified and to move forward or to be what we to essentially be deemed eligible to provide those services.

We have a large number of our managed care plans today already contracting and providing community health worker services across the State of California. We're looking to see that growth, in fact, as a part of our plan incentive program that is a part of CalAIM. One of our incentives this year is to increase the utilization of community health workers across the State of California.

Because we agree with you 100%, getting community health workers in the community, doing preventive education, and post-acute care follow-up services is key to what we are also trying to achieve within the Medi-Cal program. One of our partners, or FQHCs are also looking at us. I think the piece here is that community health workers is not an independent billable visit for an FQHC. And that part I just want to be transparent about today. Yeah.

And I would just add we know some of our local managed care plans are also working with community colleges in their area to kind of work on the CHW pipeline as well and building some of those local partnerships to kind of directly develop the workforce as the plan and the community needs.

Thank you for that clarification.

May I just add just for some additional color? I think thank you for calling out the part about the billable service. It is not today, so that doesn't mean we don't provide these are one of the things that we provide anyway. But it would be nice to be able to have that support, right?

If we really want to implement Medi-Cal expansion in the way that it's intended to really reaching the underserved communities, we need to have that touch point all the way to their front door in some cases, and community health workers will be able to help us do that. The language piece is super important. And so I would just ask you all to think about this coverage as coverage does not equal access. And what access actually means for our community is to be able to see a provider that understands them, their culture, speaks their language, is able to provide the services that they need at the time that they need them. And so just coverage does not equal access and we're pushing for access.

Thank you. We've spent some time right now in this hearing talking about how we feel regarding the eight to 10 year implementation plan. We've heard from the department on that, but I also want to talk about the implementation going into January 2024 versus perhaps it being approved in a couple of weeks and that being going into effect right away. We've heard I'm talking about eight to 10 years. Hospitals are in distress right now. People need access to health right now.

This COVID will have long-lasting impacts and we're seeing them right now, mental health at the highest rates, with mental health illnesses at highest rates for our youth, and so forth, attacks on reproductive justice, it's happening right now. And if my mom were here with her religious hat, she would have say, well, the world could be over in three years, right? Investment should happen right now. So could we talk a little bit more about not being able to implement that during this calendar year versus starting in January for the provider rate increase?

Department, please.

So I just want to make sure I understand why we can't start the 87.5% increase in 2023. So we have already submitted we've already submitted our capitation rates for our managed care plans for the calendar 2023 to the Federal Government to be approved. So mid year rate increases are hard to achieve, oftentimes. It's why we always recommend rate increases to start at the beginning of a calendar year. It allows us to build it into our systems, get federal approval, and to implement those types of things. That is typically that we've done is why we're proposing the rate increase to start January 1 of '24 and then the subset January of 2025. So that is why, when it comes to the MCO tax, we would be able to submit it back to April 1 is the latest we could get it now of 2023. Forget that approval, but that requires us submit to the Federal Government by June 30 of 2023 in order to secure those federal funds that then can fund the rate increase. I just wanted to put the two on the table.

So just logistically, it all would align to start in January.

That's correct, to get federal approval and to make sure it's built into our managed care plans rate so that they can make sure that those dollars get to their providers.

Perfect. Thank you. And in talking to my colleague, talked a lot about specialty, and my colleague over here talked about the inpatient and so forth. I met with the Stakeholder Group. They're psychiatrists for children and so forth. They're deemed specialty. They're under the county jurisdiction that you have mentioned, and they are one of many under the specialty care. After hearing some of this discussion, just wanted to hear a little bit more of what we're thinking about potentially including them. I wrote down, and with all due respect, feel like we're doing the bare minimum here in these provider rates. I just gave the dire situation that the state is in and the nation as a whole, why we're not just doing a greater investment right now and including more providers than we are now.

From our perspective, we want to go deep with some of our investments to actually make meaningful change versus spreading the limited dollars more broadly across provider types. We want to make a difference in how these dollars really address access, and that's how we're approaching it. Director Cooper often used the term discipline in terms of how we think about this because we do want to make sure, again, that these are very targeted investments that make a difference in kind of providing the access that we know we need to build out as part of our foundation.

The only thing I would add is the specialty services that you're referencing. It's a different reimbursement methodology with the Federal Government. Essentially what we use is the county's cost to then build a rate and reimburse them. So they're currently getting paid cost for those services. And so that's why it wasn't considered in this initial swath. And payment reform for our behavioral health colleagues will go live July 1 of this year, and we will be working very closely with our county partners to ensure that those rates are right over the next few years. And so, since we've already moved forward with behavioral health payment reform, that's why we are addressing the parts of behavioral health payment that were not addressed with that augmentation under CalAIM, if that's helpful as well.

Thank you. And last thing before I turn back to my colleagues for another round of questions, should they have any, it's a personal thing for me. I'm pushing it this year, and I've been passionate about it is infertility services IVF for medical patients. There are about 21 states that cover this, 13 cover IVF specifically. I'm wondering, given this opportunity, this chunk of money, how we can invest into this population. When we talk about reproductive justice, I believe this includes under that umbrella of providing individuals the ability to start a family. I've heard you really diving in to ensure that the impact is felt versus putting different pockets, but I wanted to make sure that was out there. I just feel like that's a huge gap State of California hasn't closed for Medi Cal patients, our most vulnerable patients that you're seeing. I know we all have individuals or we know individuals that have gone through this process. As a lesbian myself, I am about to perhaps, maybe, in a couple of years, I'm not sure, go through, have to pay about $20,000 for IVF. I'm not a medical patient, but I have friends who've had to do it out of their own pockets, and that's not a decision that they should have to do. So putting out there as a point of privilege for one of the chairs priorities under this and seeing if there's room to see how we can get medical coverage for this. With that, I'll turn it over to Senator Grove for more questions.

Thank you, Madam Chair, for bringing that up. I know that we heard that Bill in Committee and I was so excited. I have a staffer that healthcare coverage has been offered at the staff level in this building that is saving every single dime she can scrape together, and every three years she goes through this process. And then I was gravely disappointed that the amendment was taken to exclude MediCal because you know what? Poor families that want to start a family, they're going to mandate it on the plans. Again, an additional cost of the plans, but poor families that are on MediCal don't have that access, and it's because California doesn't. It's all about budget priorities, right? Either want to fund it or you don't. I failed to ask this question. I appreciate the chair's indulgence on this. So we as a Legislature, the way I see this, you're asking us to approve this tax now to go over a period of years, but there's no framework or anything in writing that says this is actually going to go to the people who are delivering the services and not go to a budget backfill. And so, like I said, based on the information I have, roughly 40% goes back to the budget for a backfill. And I realized that we're in lean budget years, and I realize there has to be a mechanism for addressing those lean budget years and even the deficit years as the LAO is putting their multi year projection available or out. When is that going to be out, sir? It'll be out this morning. So we have this multi-year projection that's going to be out. What's our guarantee as legislators, if this tax is approved, that this is going to go to medical reimbursement rates or providing health care to our most vulnerable members in the State of California, a large number which I represent, and hospital reimbursements so that we can still access health care in the Central Valley, whether it's northern Central Valley or southern Central Valley. Because if we vote to approve this tax, I don't see anything or haven't seen anything in writing that says that that's where it's going to go. So how do we ensure it's not just going to be a budget mean? I'm not trying to be negative. I want to be helpful, but I want to make sure that if this goes forward and it has, I don't know, party support from both sides of the aisle, I've never voted for a tax in my life, and if I'm going to vote for this tax, I want to make sure the people I represent are covered and they have access to health care. And that when a homeless person walks in and they give you a medical card or whatever it is, and their arm has open wound care, they lose money for treating that patient because they don't have the code section to bill for that. I just don't want it to go back. Filling the budget is what I don't want. And I want some kind of good faith statement that the money is going to be used for what it's intended to be used for, which is Medi Cal reimbursement rates is the way I understand it. So access to healthcare could continue.

I'd like to co author that question as well.

Thank you, Madam Chair. So the budget materials that we released, including the trailer billing, which would turn into statute, really outline how these dollars would be used and kind of say that the dollars would go into the special fund that would be used for provider rate increases and specific on the 2024 rate increases that we've discussed. And then it indicates that we would come back in 24-25 budget to propose additional rate increases, so it's within the trailer Bill Language that we've proposed, but happy to entertain conversations about additional clarifications there.

I think there should be some guardrails because at least increase over other investments in that statement, I'm worried about it. In this Subcommitee. We've heard the request is 50% out of the safety net reserve. The request is to claw back the 333,000,000 from the Covered California Fund. Right. So those are examples that we're hearing this sub because there's no specific guardrails. So this is another example that maybe next year we're going to hear a proposal that we need to claw this back, but we'll pay it back, we just need to claw it back. So that's the guardrails parameters around that I think we maybe all of us would like to see in the TBL.

I appreciate that. Madam Chair. Go ahead, ma'am. Sorry.

No, I wanted to kind of speak to this discussion around kind of a sense of urgency to make the commitments to increasing provider rates. I think that is part of what the coalition has kind of come together around, which is that we know where the needs are. And I don't want to discount how complicated medical financing is and the importance of the details and mechanics. We do think we know where there are access problems, we know where the needs are and that the commitments can be made now and can work together to figure out the details for implementation.

I would say to that in the year 2023, you can find 500 studies for any single question you're asking. We're at a point where Berkeley, UCLA has a report for every single thing. I think we are no longer in the phase where, like, I wonder which demographic needs the most help, I wonder which service should be invested in. So it's hard for me to listen, to say, hey, we need to do more due diligence to look into what service needs help or not. We are definitely in a phase where we have all that information for us to invest into these services.

Now applaud the chair again, I'd like to ask the LAO the same question. Are there guardrails that the Legislature can put in place to make sure that this funding mechanism that the plans are paying for goes to the most vulnerable citizens, the most vulnerable people in our state?

Yeah. And that's a tricky question to some extent because any action taken today can be undone or proposed to be undone in next year's budget. That's always a risk that the Legislature faces when it's enacting guardrails. There are a couple of guardrails a Legislature could consider. One key tool that we recommend to the Legislature often consider is setting aside funds and reserved for economic uncertainty that could help protect any initiatives that are adopted so that if the budget situation does worsen, that could be tapped into before having to overturn the commitments that are made in the budget. The language we also think could be tightened a little bit too. For example, as we noted in our testimony, both funds in the trailer bill would be continuously appropriated, which means that the Administration could spend the funds without necessarily having an appropriation in the budget. And we think that Legislature could put some more guardrails around that, especially that arrangement was common in previous MCO tax measures. But because the MCO tax previously was just for General Fund backfill and now there's a proposal to expand it on Augmentations. That's something that could be revisited. For example, requiring appropriation for the provider Reserve, or also specifying putting more guardrails around how much funding is allocated to that reserve so that the Legislature can ensure the Administration is providing those monies.

And to that point, I think if I could turn this next question to the plans here, because you mentioned it's been done before, can you speak to that previous change that Department had to do? Shoot, if my memory serves me right.

Madam Chair, are you talking about how there was one instance where CMS asked the state to go back to the drawing board.

Yes, and they changed it without coming back?

Yeah, that had to do, and the Department can correct me on this. That had to do with the portion of the federal regulation that deals with hold harmless. There's some rules around that, I think that the state had to go, and equal distribution of the tax. So there was a modification in the tiers and that impacted the tax rate that some of the plans had to pay. There were a couple of plans that were initially exempt from that MCO Tax that ended up having to pay a tax. And that was a surprise, especially in the commercial markets when your rates are approved so far in advance, that financial burden is real and can impact the consumers as well. So that is something that we remember and that we hope is taken into consideration as a protection for our consumers with respect to this MCO tax. I know the Department has stated that this time they're taking a different approach in negotiating with CMS early, as opposed to approving a tax and negotiating on the back end. And so, be that as it may, I think some consideration about making sure that there are no surprises for our consumers as a result of this being enacted. I think that would be well within the Legislature to consider.

And would those guardrails recommended by LAO address this kind of situation?

No, I think those are separate. Yeah, I think there would need to be specific language stating that basically putting some limitations around the Department to change the tax after it's approved by the Legislature or having it go back to the Legislature. I don't know how practical that is, but anyways, just throwing stuff out there that could be a part of the debate.

Would you like to add something else or you're fine. Great. Let me turn yeah, go ahead.

Sorry, sir. Apologize to my colleague. I just want to follow up on the LAO's comments. Would there be an objection to the Legislature not approving? Would you object or the Administration object to not allowing a continuous appropriation? But if those dollars needed to be approved, could it come back to the Legislature so that we could have some type of say so on where that money goes in the continuous years, or is there an objection from you?

I think there's two pieces of the continuous appropriation, the first piece is to ensure that we're able to pay our plans to reimburse them for the tax. So that is kind of the traditional model of that continuous appropriation piece of it. And then the second piece is regarding kind of the provision of how we're proposing to use the dollars for rate increases. And so that's governed by the trailer bill that is before you, and that will be before you in next Governor's Budget so that we can just pay those rate increases without additional approval governed by the trailer Bill that would be approved.

I'm just trying to address the guardrails at the LAO. Would you comment on that for me? I want to address the guardrails. I guess my question is, I want to make sure that the money that is appropriated goes to where we say or everybody agrees at this moment. It's going to be appropriated and it can't change next year. Yes, sir.

Department of Finance.

How are you doing? Andrew Duffy, Department of Finance. So the language for the medical provider rate increase currently does have subject to appropriation language in it for the Administration to come back to the Legislature for the 24-25 Governor's Budget. Would also like to reiterate that the MCO is a critical component to the budget framework with the $31.5 billion deficit, and we will be returning in January with subsequent investments.

Thank you. But outside of that, if something were to change in 2026, there's no language 2025.

So the 19.4 billion, of that we have 10.3 billion, which is going into the provider rate Reserve, and then we have 816,000,000, I believe, for the 2024 provider rate increases. It's the proposal for the Legislature at the moment for consideration and any changes we'd come back to the Legislature discuss.

Thank you. When does that Reserve get allocated to the providers that are actually on the ground providing the service?

So that Reserve would be for the.

Eight to 10 years. Is that the one?

That is eight to 10 year reserve. The reserve would be for the January 1, 2025 rate increases that the Administration come forward to the Legislature at January 10 of next year for the proposal.

Okay, thank you. Thank you, Madam Chair, for the leeway on that. I'm not comfortable with that, but I would like some other type of guard, something that shows that if the Legislature approves this tax, not that think that the Administration on this $150,000,000. I find myself in this weird position because I think completely the Governor operated in really good faith to make sure these financially distressed hospitals were taken care of. And I just want to make sure that over the next few years that continues. Not that I doubt that it will, but I think that there's three branches of government for a reason and we should have some type of say so in that over the next few years to make sure that what we agree upon or what's agreed upon over the next budget cycle. This budget cycle coming up and this trailer Bill languages before us continues to go to make sure that the expansion of Medi Cal providing services that there is actually services provided and the people providing that service are getting paid for it. And I know we had stakeholder meetings with a lot of people, but there are a lot of people with different opinions in these stakeholder meetings. One of the comments made to me as a business owner is just increase your budget or just treat more people so that you can get more dollars. And when you're losing 50 cent $0.46 on the dollar for every patient you treat, that is a pathway to bankruptcy, no matter how you look at it, so you can't treat more patients and get more revenue. I think they were looking at it as more cash payments would be coming in, but you'd still be losing dollars. They don't look at that side. And to me, it's a very scary situation to represent an area that could possibly lose a horrendous access to health care. When you talk about the hospital situation that's going on in my district, and I know the chair's district. So thank you, Madam Chair, for the leeway, and thank you for hopefully expanding on that, because I would like to hear from my colleagues that you have concerns about this as well.

Senator Roth.

Thank you, Madam Chair. I think you've heard me on distressed hospitals before. I'm not sure that we can increase the Medi Cal reimbursement rates enough to take care of some of the hospitals in these rural areas that are presently distressed. I think it's going to require a much larger effort on the part of the Administration and this Legislature to essentially restructure the way we deliver healthcare services in these areas. And the traditional way may not be the way that we need to deliver them in the future, but apart from that, I want to step back from the specific MCO proposals that you all are making and we'll have to implement and just touch on the backfill again. Given the dire state of our behavioral health service system model in the State of California, from workforce development to providers to capacity to services, what I'd like to see, not necessarily from you all, but from the Administration as we move forward to the final budget, is what our options are with respect to this backfill. Recognizing that the budget is a zero sum game, are there decision points and decisions that we can make in terms of triaging and prioritizing this and other aspects of the budget to try to drive more money again within the four corners of the budget to the mental health and behavioral health system and the delivery of services to those most in need? I'm unable at this point to put a list of those options together, but I'm certain that there are folks in the Administration and the healthcare portion of the budget that can help us do that along with the other pieces of the budget. And maybe we need to take a look and figure out whether climate is more important than healthcare services and the delivery of behavioral health services or transportation is or is not more important than some of these other issues. I think it's very important that we talk about those things in the next couple of weeks because I think there's some need here that's not being addressed and it's not because you all haven't tried. So we appreciate you and look forward to the continuing conversation. Thank you. Madam Chair.

Senator Eggman.

Thank you. And I will align my comments with my colleagues. I also think the 1.5 million was great because it served as a bridge, but I just don't think the bridge goes far enough. So when people talk about this generational opportunity we have here, I think we need to set up some kind of fund to be able to help the hospitals. If we can't do reimbursement rates, then it's got to be another way that we can supplement it, especially the emergency rooms, the behavioral health beds, as has been mentioned. I was down in the valley this last week at Tulare Lake, and you're just really struck with the vast need that exists down. And our hotel was across from one of the hospitals. And anyway, that economy down there is rocky as it is, and I've said before, I think health care is the most important thing that we deal with. So, like the General, I don't know if maybe this new prison thing shouldn't play out like it's going. Maybe some of the climate stuff, maybe some of the transportation stuff. But I just think to back that, I think we all agree and we all acknowledge that there's a budget shortfall and we got to have a way to spend it or fill it. I don't know that taking it out of the backs of Medi Cal is the way to do it. And so I think I would just continue to advocate that our time limit be smaller, that our increase of rates and our stabilization of our hospitals comes earlier than later.

Thank you. I think we've exhausted the questions, comments. I'm doing pretty good over here, General.

Of course you are. You're a marine.

I want to summarize some of the main topics or themes we heard today. We heard that the eight to 10 years is not something that at least here in the dais, we feel comfortable with. We need those investments now within the three and a half years to see what we believe a greater good. We are worried around the frame of other investments in the future. We would like language guardrails. I mean, if we're looking at it's $922,000,000 for the first year and it drastically increases to billions of dollars throughout the next three years for this reserve investments that people need right now. We heard common themes around supporting our hospitals now because they're hurting now, and some could go and close like we saw just this year. Within this next two years, as the Administration proposes the 2025 support regarding emergency rooms, addressing the emergency room patients. We heard around I don't think anyone else said this, but I do, as a chair, I want to say the community health worker billing part really stood out for me the same day billing really stood out for me. Those are really on the ground investments that we see being tenfold returned in preventative care and so forth. There are common themes around specialty care that's very important on the behavioral, this is a group that is really invested in the behavioral aspect of it all. And investments on the pipeline, the GME, workforce investments. I know we're looking at perhaps a rural cycling in their residency year, but also increasing that. And SCIU is on board representing workplace employees. Just those pathways, training to advance. I do think that we're in a time where we can really provide this advancements and then down the line, which I will be here down the line in 12 years, I could turn back and say this is the return we got from investing in 2023 into that. I want to make sure I'm covering it. Any more common themes, ensuring there is that protection for the provider, the pass through you talked about both Director Baass and Director Cooper. I think those are common themes.

When you said something, it made me think of something that should be addressed. You brought up the 922,000,000, then it multiplies into billions. The final number that I have is 10,266,194,000 roughly could be different, but roughly $10 billion. Where'd that number come from? I mean, can't you hold 5 billion and distribute the other 5 billion? I mean, can we split the difference where'd that number come from that you have to hold 10 billion back in that fund? Can't we distribute 5 billion to the desperately needed people that are receiving services?

We're proposing to spend that entire 10 billion in the MediCal program in terms of augmentation.

It's just a plan that they're looking to spread it out

Right, over a longer period of time versus just the time period of the tax. Yes, it's the same dollar amount I think we're all in agreement with the dollar amount to be invested in the medical program, but it's the time period by which those dollars would be allocated.

So how did you allocate the time or how'd you come up, what was the formula to come up with the time period? I mean, if the tax is going to last, what, four years? Is it four years, three and a half years? How come that money can't be spent?

So in our discussions with CMS, the size of the MCO tax, which annually under this proposal is about $5 billion, they've indicated to us that they will be changing federal regulations with regard to the portionality of that tax. So we do not think that we will be able to raise 5 billion annually in revenue starting in 2027. And so we don't want a fiscal cliff to occur 2027. And so we've spread those dollars out for a longer period of time to provide sustainability and long term fiscal certainty to our providers that that rate increase will be available for eight to 10 years instead of three years with the potential of a cliff.

Sorry, Madam Chair, but I mean, if the rate is still not adequate enough to keep the providers alive and providing services, and it's my understanding this tax, whether it ends in four years or ends in eight, I mean if you're not providing adequate reimbursement rates. Like my colleague from Riverside said, we still have this cliff for delivery of services that we're going to face. Whether we face it this year, next year, four years from now or eight years from now. If this money isn't adequately applied to the people providing services which the State of California is requiring the expansion of medical patients and I don't mean to go over that, but it's a medical reimbursement rate problem that we have. So when are we going to address that? We have to address it and we can't address it six years from now.

Senator, I will say that that is our main points, that were my recap of our common themes here. Yes, that's right. That was like the first one I mentioned of that we all share the same thing on. We're not comfortable with the eight to 10 year. So I do want to echo your comments. I'm on board with your comments, I am. And I think that was all the common themes. I was able to recap all my colleagues main points here. I want to thank everyone for your participation, for including your insights, for coming to the table and talking about this. A big shout out. Thank you to Department. It's not always easy. You did receive most of the brunt, if not all of the brunt in this conversation, but that has not gone unnoticed here. Thank you again for that. We're going to hold this item open as Thursday is our last hearing and we'll have our decision there. Thank you for this panel. So, before we move on to the voting portion of it, we're going to hear public comments on this issue. I'd like to welcome those who would provide a public comment in person to come forward. I would like you to limit your comments to a minute with my discretion, and then we'll turn to those in teleconference. You may begin.

Good morning, Linda Nguy with Western Center on Law and Poverty. We support a larger and accelerated MCO tax to ensure recent Medi Cal eligibility and benefit expansions and planned investments, including continuous medical eligibility and share of cost reform, are implemented without cuts or delay and provide for future investments to increase medical access, quality, and equity. We support the proposed base rate increases, and we believe future provider rates should be focused on known access gaps and tied to quality and equity measures. And we support long term support by planning for timely ongoing renewal of the tax rather than spreading out the resources over a longer period of time, which diminishes the potential annual investment. Thank you.

Thank you.

Good morning. Coria Ayala representing Maxim Healthcare and CAMPS, the California Association of Medical Product Suppliers. And we urge the Committee to consider a rate increase for private duty nursing using MCO Dollars. Home health providers like Maxim are not able to provide the PDN hours needed to medically fragile kids that must have nursing care to remain living at home with their families. We can't compete with the higher paying healthcare employers at the current Medi Cal rate. Providing better pay for PDNs will actually save the state money by allowing more children to live at home with their families rather than endure long hospital stays to receive care. In regard to CAMPS, CAMPS is one of the providers, Madam Chair, that has not had the 10% reimbursement cut restored for medical supplies, non respiratory medical equipment, and internal nutrition products. We ask the Committee to consider using the MCO dollars. Thank you.

Hello, Madam Chair. Peter Kellison. On behalf of two clients. The first is the California Association for Health Services at Home, which is support of the PDN request that was previously made. The other one is for the Pediatric Day Healthcare Coalition. These are 19 facilities in California that provide intensive nursing care to the most severely disabled pediatric kids. In the last month, the 19 facilities, and they're located in Stockton, North Hollywood, Bakersfield, Fresno. In the last month, they have lost 64% of their staff. They are not nearing the cliff. They are at the cliff. They cannot compete with the other employers, and they're losing staff at such a rate that many of the facilities will be closing this summer. So we understand that there is a process here. We are raising the red flag that if there is an ability to provide rate increases for these facilities to continue to enable families to continue to lead activities of daily living. That would be terrific. Thank you very much.

Good morning, Kelly Brooks. On behalf of the California Association of Public Hospitals and Health Systems. We are grateful that the May revision includes a reformatted MCO tax and thank the Administration for their leadership and vision to propose a tax to help stabilize the medical program. We also want to thank the Senate for your leadership on distressed hospital issues and for the conversation here this morning. Increased funding is critical for our systems, which face a looming fiscal crisis brought on by decades of insufficient funding and rising costs. Public health systems provide approximately 25% of the inpatient hospital days to medical recipients, while also providing world class trauma and burn care to anyone who needs it. And we provide primary specialty and behavioral health care through our Federally Qualified Health Centers and clinics, going beyond the traditional role of a hospital for our patients. Importantly, public health care systems are also key to workforce strategies in California by training half of all doctors in the state. Such training programs help ensure there are enough providers to ensure access for low income, historically marginalized communities. We ask that our important role in the safety net be considered and prioritized, and we share many of the same concerns that the panelists did about the MCO Tax proposal, the length of time just not being able to meet our needs, thank you.

Good morning, Madam Chair and Members. Connie Delgado on behalf of the District Hospital Leadership Forum. These are the 33 district and municipal hospitals in the state. Really appreciate the comments that you all have made in regards to some of these very fragile hospitals. DHLF is supportive of the increased funding that would be generated by the tax. The managed care organizations due to the financial instability existing in healthcare, which was significantly exacerbated by the pandemic and the ongoing effects of underfunding safety net providers such as the hospitals providing emergency and other needed services must be prioritized when considering distribution of funding from the MCO tax and it's important that the distribution occurs sooner rather than later. A topic of the conversation today. Almost all California hospitals, especially these standalone facilities throughout the state, including those in the most rural and remote areas, need dedicated funding due to the decades of underfunding by government payers, primarily including the medical services. For these reasons, we are very much in support of the MCO Tax. Thank you.

Good morning, Madam Chair and Members of the Committee. I'm Seija Virtanen for the University of California. The University of California supports the governor's proposal to reinstate the MCO tax. We believe that the MCO Tax will support access, equality and equity in MediCal services. The University of California are designated public hospitals, and the important role of the public health systems and the safety net needs to be reflected in the ongoing MCO discussions by ensuring that a portion of the revenues be used to support public hospitals. Thank you very much for your time.

Madam Chair Members, Tim Madden, representing the California chapter of the American College of Emergency Physicians, and we're respectfully requesting for emergency physicians to be included in the provider rate increases as it relates to providing mental health services. Madam Chair, when you spoke to the Medical Association, you asked them about what are the barriers with the low reimbursement for treating medical patients? For emergency physicians, there are no barriers. We are required by state and federal law to treat any patient come in the emergency Department. As a result, 42% of the patients coming into emergency departments are MediCal enrollees. So how does this impact access? We don't have the ability to limit those patients in terms of seeing them or not. And our folks sign up for this understanding that. So what they do is they reduce coverage in emergency departments. So you may have an emergency department that would normally have three emergency physicians. Based on the medical enrollment, they may only be able to have one or two emergency physicians staffing in that emergency department. That equates to longer wait times, which equates to worse outcomes. And that's for everybody. So we appreciate your consideration and look forward to working with you.

Thank you.

Thank you. Madam Chair, Members of the Committee, David Gonzalez on behalf of America's physician groups. Our provider groups are responsible for the care of about 6 million Medi Cal beneficiaries. California has done a great job of expanding coverage, and now almost all Californians have coverage, but now we have to invest in our provider infrastructure, and so the MCO Tax provides that opportunity, and we're happy to be in support.

Nicette Short, on behalf of PEACH, which represents the hospital safety net, we support the MCO Tax and appreciate the ongoing conversations. In my previous written testimony, I had to highlight for you all that none of the funds that are currently in the MCO proposal go to save the safety net hospitals, but you all didn't need me to remind you of that. So we look forward to the ongoing conversations. We support the Senate plan that includes budget year funds to help save our safety net hospitals and look forward to those ongoing conversations and appreciate all of your advocacy.

Sherry Compatour with LA Care as the founding Member of the Coalition for Protect Access for Care. We're pleased to support the MCO tax. We also would like to see the tax funds used more quickly, as described by the Committee Member, and to go directly to medical providers. Thank you. Thank you.

Madam Chair and Members. Rand Martin here on behalf of Aveaana Healthcare. We appreciate the chair's willingness to explore this issue of private duty nursing further over the last few weeks. And we align ourselves with a lot of comments made today about access to health care for children with complex medical conditions. We do want to point out that unlike most of the other proposals, this one does generate as cost savings.

Thank you so much. Rand. Moderator, if you can queue up those wishing to provide a comment via the teleconference and please let me know how many we have in queue.

Certainly. And it is 1-0 to make a comment. Again, it's 1-0. Give me just a moment here. Four in queue right now.

If you could please keep your comments to 45 seconds, we can go ahead.

Thank you. Line 12, you're open.

Good morning. This is Diana Douglas, Health Access California. Health Access generally supports the administration's proposal for a larger and more immediate MCO tax to ensure continued support for medical safety net and ensure timely implementation of expansions, restoration of benefits, and counting reforms. We do have some key suggestions like spending the funds over three to four year period to make the most of resources and limit the possibility that the funds could be swept in the event of a more prolonged spending plan. We also encourage long term planning for continued renewal and stability of funds. We support the concept of a Fund of revenues raised from the MCO for medical improvements and for more dollars for that purpose, and urge that the limited resources be optimized to provide targeted investments in the program to have the big on access, quality and equity.

Thank you so much for your comment. Thank you.

And we can go to line 13. Please go ahead.

Good morning, Madam Chair and Subcommitee Members. I'm Bryce Docherty with TDG Strategies on behalf of the California Ambulatory Surgery Association, aka CASA. CASA is a statewide Association of outpatient ambulatory surgery centers whose Members are leaders in reducing costs in the healthcare system as they ensure patients are treated safely in outpatient settings instead of other costly alternative sites of service. An internal cost of survey of Members indicates that ASDs treat over a million medical beneficiaries per year and often incur significant loss as medical rates do not keep pace with the cost of providing that care. ASDs play a major role in the overall healthcare delivery system and save the system at patients significant cost. For example, UC Berkeley research has shown that every procedure performed in an ASD saves the Medicare program 40% and saves.

The thank you so much for your comments. Thank you so much. Next caller.

Next we go to line 14 please go ahead.

Good morning, chair and Members. Janice O'Malley with AFSCME California. We support the Governor's MCO tax proposal and want to also align our comments with Matt Lager from SCIU. But the current MCO tax construction leaves emergency medical services woefully underfunded. The chronic underfunding of these critical services created a crisis and attention of the private EMS workforce and the degradation of their wages and benefits. AFSME requests that 3% of the funds raised by the MCO tax be used to provide improved payments for 911 ground emergency medical transportation services for private ambulance providers, helping to close the funding gap between private providers and public EMS agencies.

Thank you so much for your comment. Thank you so much. Next caller.

And next we'll go to line eight. Please go ahead.

Hello, Madam Chair Members. Ronald Coleman Baeza on behalf of the California Pan-Ethnic Health Network CPN, to express support for the MCO tax proposal in the May revised. We generally support the proposal that requests a larger tax to support based rates increases in medical to at least 87.5% of Medicare, and we urge consideration to accelerate the spending plan three to four years. However, we also ask that we raise rates for CHWs with MCO Tech revenue as well. We think rates should be raised to 87.5% of the Medicare rate for non physician education and management services commensurate with other proposed provider rate increases. This is essential to ensure successful implementation of CHW benefit and to ensure CHWs are paid a living wage. While we understand that it's possible the Legislature may temporarily delay grants and stipend the CHWs as part of the

Moderator, please. Next call.

And none currently in queue. I will remind everybody it is 1-0.

If we could please limit it 30 seconds. Your comment. We only have a couple of minutes left before we have to break.

And currently nobody in queue.

So we have a couple of minutes. Let's move on to the vote only items. For those who didn't provide a public comment, please remember you can write it into the Budget Committee or visit our website. Now, moving on to the vote only items, we're going to be taking votes in three separate calendars. Calendar one will consist of items two through four, 6, 9, 11, 13, 14, 17 through 19, 21 through 25, 27 through 29, 31 through 34, 36, 37, 39, 40, 43 though 45, 47, 49, 52 through 69, 71 through 85, and 87 through 103. Could I get a motion to accept the staff recommendations for these items? Move from Senator Eggman, consultant, please call the roll.

Senators Menjivar, Menjivar aye. Eggman, Eggman aye. Grove, Grove aye. Roth, Roth aye.

We did. Those items are adopted on a four to zero vote calendar. Two will consist of items one, five, 7, 8, 10, 12, 15, 16, 26, 35, 38, 41, 46, and 48. Do we have a motion to accept those staff recommendations for these items. Moved by Senator Roth. Consultant, please call the roll.

Senators Menjivar, Menjivar aye. Eggman, Eggman aye. Grove, Grove, no. Roth, Roth aye.

Those items are adopted on a three to one vote. Our last vote would be on calendar three, which will consist of items 20, 30, 42, 50, 51, and 86. Could I get a motion to accept those recommendations on those items. Moved by Senator Eggman. Consultant can we get a roll call?

Senators Menjivar, Menjivar aye. Eggman, Eggman aye. Grove. Roth, Roth aye.

Thank you. Those items are adopted on a 3-0 vote. Thank you for every item. We are moving on the last item. Item 70. Consultant can I get a roll call on that?

So, Madam Chair, just briefly, I want to thank you for separating out this item. I think we have a huge issue. I'm going to support the Bill, but I want to make the comment that there are 10,000 people in the developmentally disability community that are going to lose their jobs because of the sub minimum wage issue. I realize we're going to backfill the employers, but I think this issue really needs to be addressed. I appreciate the chair separating this out and we'll move the motion or has it already been moved?

Yeah, no, it hasn't been moved. Senator Grove has moved item issue 70. Consultant can we get a roll call?

Senators Menjivar, Menjivar aye. Eggman, Eggman aye. Grove, Grove aye. Roth, Roth aye.

That item is adopted four to zero. Thank you, everyone, for your wonderful patience and cooperation. We have concluded today's hearing. Budget Subcommitee number three on Health and Human Services has ended. Clink. Clink.