Assembly Budget Subcommittee No. 1 on Health

Good morning. I am going to call this hearing to order. This is Assembly Budget Subcommittee One on Health. Today we will be reviewing the Governor's proposals from his May Revise. There will be a slight change to what's on the agenda.

Given the fact that we have a significant number of issues and there are a lot of people here, and you may be here for one specific issue. We will take public comment after each issue is completed instead of waiting until the very end of of the hearing. At this point we can call roll.

[Roll call]

Okay, we're going to start our hearing today with the Department of Healthcare Services. On the panel will be a representative from the Department of Healthcare Finances, a representative from the Department of Finance, sorry, a representative from the Department of Healthcare Services, representative from the Department of Finance, and a representative from the Legislative Analyst Office.

You may come up. And I want to begin by thanking everyone for coming. I hope that we can have a very thorough, in-depth, and honest conversation today about the MCO tax and our Medi-Cal rates. I don't think last week, when we had it last May, it was as open and honest as it should have been. And so with that, I will let you begin.

Good morning, Madam Chair Member or Madam Chair. Michelle Baass, Director of the Department of Health Care Services.

Given the state's significant fiscal challenge that we are facing a General Fund shortfall of $27.6 billion in 24-25 and 28.4 billion in 25-26, the Administration is proposing options to reduce General Fund expenditures and options to achieve General Fund savings.

The Department has an expenditure of General Fund of about 36 billion and represents a significant portion of the state's General Fund expenditures. These decisions and proposals are difficult and not put forward lightly.

We recognize that these are proposals and that the Administration and Legislature will work together over the coming weeks to achieve a balanced budget to serve California.

In terms of the Medi-Cal Managed Care Organization tax, as part of the May Revision, the Department proposes modifications to the MCO tax, effective April 1st, 2024, to more comprehensively account for Medicare revenue and determining the maximum aggregate tax allowable while meeting federal requirements.

The May Revision assumes 689.0 million in net General Fund, reduced General Fund spending in 24-25, 950 million in 25-26, and 1.3 billion in 2627 related to this modification.

Again, we are proposing to revise our MCO tax model to now include revenue from Medicare Managed Care in our model, increasing the allowable tax size and the total amount of revenue generated from the tax. Our current MCO tax model excludes Medicare plan revenue as part of the revenues in this required demonstration.

This allows us to increase our tax on Medi-Cal managed care plans. There is no impact to commercial plans as we are only proposing to increase the tax on Medi-Cal lives.

Additionally, the May Revision continues to include 727 million total funds, 291 million from the Medi-Cal Provider Payment Reserve Fund for increasing rates for primary care, non-specialty mental health services, and maternity care, to at least 87.5% of the Medicare rates effective this was effective January 1st, 2024.

Finally, the May Revision further proposes to use MCO tax revenues previously proposed at Governor's Budget to support additional targeted rate increases, investments that were proposed to start in 2025 and transfer those dollars to the Medicare Provider Payment Reserve Fund for later use to support the existing cost in the Medi-Cal program.

This includes the reduction of the MCO graduate medical education and workforce pool funding that was proposed at Governor's Budget to begin, respectively in 2024 and 2025 and the elimination of the MCO tax targeted rate increases that were proposed to be effective January 1, 2025.

So, phase two of the rate increases. As discussed previously in the Subcommittee, the Governor's January budget included the early action on a budget agreement to increase the MCO tax revenues to an additional 1.5 billion in revenues.

We've submitted that application to CMS at the end of March and continue in discussions with CMS on that particular amendment. As requested as part of the agenda, just to provide a brief overview of what was proposed at Governor's Budget related to 2025 rate increases, proposing total annual spend once goes live about 2.7 billion in the Medi-Cal Provider Payment Reserve Fund with about 975 million for primary care, specialty care, maternity care, and non-specialty mental health services, 100 million for emergency Department physician services, 80 million with regard to adjustments for equity, 245 million for community hospital outpatient services, 255 million for Emergency Department facility services, 90 million for abortion services, 50 million for ground emergency medical transportation services, 150 million for our designated public hospitals, and approximately 50 million for services and supports at our federally qualified health centers.

With that happy to answer questions.

Thank you. So, though those last numbers that you just ran through, they are still in play.

Those were part of the Governor's Budget proposal and as part of May Revision, we are proposing to eliminate the 2025 rate increases and investments.

What about everything else you talked about? The adjustment for equity, the ER/

All of that is, those are all phase two of the rate increases that were to be effective January 1, 2025, and under the May Revision, those are proposed to be eliminated.

So, when you all were here last week, and we were talking about Medi-Cal reimbursement rates being horrifically low, actually embarrassing low, embarrassingly low here in the State of California.

And we were told that essentially providers or MDs would be made whole or DOs or whatever, with the 2025, and that there was a plan, plan in place to accomplish that. How are we going to do that now that you have pulled that money from the MCO tax or that it's being proposed to, being pulled back into?

Recognizing the state's fiscal situation? This was a proposal to achieve General Fund savings and reduce expenditures. And so, you know, we will continue to work with our providers and our plans to look at other ways to achieve access and quality care.

So, a couple of things with this. Recognizing that we are in a budget deficit, a significant budget deficit, the MCO tax was a deal, an arrangement that stakeholders, the Governor's Office, not as much as the legislative input as there should have been. But, you know, we were at the table at some point.

You know, we worked on, because we understand that we have a crisis in our healthcare system.

Members of the Legislature took, some of them took very hard votes to, one, support the MCO tax, and two, to go back and ask for more money with the early action plan, with the understanding that this would go back into our Medi-Cal system to help our providers, help our hospitals, doors to stay open, especially in our rural and underserved communities, help our labor and delivery units to stay open.

What is your message to my colleagues, some of who are quite upset and feel like this process has not been very honest.

So, I would begin. This is the May Revision proposal, recognizing that we have weeks of conversation to enact a final budget agreement and just recognizing also the significant state fiscal situation we're in. There had to be some choices. But understanding that there are still many conversations to continue.

In your conversations about our healthcare system here in California, what is the plan if we take, you know, Medi-Cal reimbursement rates, increasing them off the table, what is the plan to help our hospitals and our providers? How are we going to retain providers here in California?

How are we going to keep these doors open and ultimately allow for people to have hospitals to go to or clinics to go to, to receive the care that they need? I had a meeting early this morning about Ridgecrest from the Navy. Right?

And so now there, the people who have Tricare there have to drive 85 miles through a deserted area to get to their closest labor and delivery unit. And if you don't have Tricare, you've got to drive about 120 miles. That's not safe for anybody in labor.

So, what is the plan? As you all are talking about cutting these things, understanding where we are right now. You know, we've talked about hospitals closing. We've talked about services being taken back from various hospitals and clinics. We've talked about labor and delivery units closing, pediatric wards closing. I mean, we've talked about all of these things.

So, we know it's happening. This was one part of the solution to that issue, and we're taking that away. So, in your conversations, it's saying, okay, we're going to take this away to help our budget. What is the solution?

Again, I think these are difficult decisions, and I don't know that we have a solution that can replace what we were proposing as part of the, part two of the rate increases in 2025, given just the state's fiscal situation in terms of rate increases.

And so, you know, wanting to work with our providers again in our plans to think about how are there other ways we can support them to achieve kind of the access that we need for the Medi-Cal program, but recognizing that this was a key component of that plan.

Okay, so since we don't have a plan, what do we think will happen if we continue down this road? Have we thought about that?

I think, you know, we are required to maintain network adequacy services and supports by the Federal Government. And so, I think, you know, working to achieve that, it's going to be something that we're going to have to work together over the course of the coming weeks and months to address if there are access issues where they might be and what are other ways to achieve, ways to improve that.

So clearly, we know there are access issues. So, let's talk about some of the issues that we have now. What is the solution now for people who were going to deliver at Ridgecrest and now have to drive 85 or 120 miles to deliver their babies? What is the solution that we have talked about since we understand that this is a current issue, not a hypothetical one?

I mean, I think this is part of the discussion in terms of these are proposals and, you know, what is finally enacted as part of the, excuse me, the June budget. I think, you know, coming to conversations about how to address the issues that you are raising.

LAO, did you have anything you wanted to add?

Yeah. Jason Constantouros, LAO. So, you have two proposals really in this item.

The first is increasing the tax, and the second is changes in how the state would use the tax, primarily to use it to offset General Fund spending instead of supporting many of the augmentations that were proposed in January. On the first proposal to increase the tax, you know, generally, that seems reasonable, but as with any increase in the MCO tax, we recommend the Legislature get additional information from the Administration, including the proposed new tax rates, the multi-year plan, the new multi-year plan, and an updated analysis demonstrating the tax increase would meet federal rules.

And the Administration has indicated that it intends to get this solution enacted relatively soon so that it can submit it to the Federal Government in time for it to start on April 1st. So, we'd recommend directing the Administration to get the Legislature that information relatively quickly so that it can fully assess that proposal.

On the second part of the proposal, which is to rescind many of the augmentations, which is what you were asking questions about earlier, you know, this is one that raises difficult tradeoffs for the Legislature. On the one hand, it was reasonable for the Legislature to explore changes to the package.

When the package was enacted in last year's budget, the full magnitude of the budget problem wasn't yet known. And also, many of the, you know, there were some fiscal uncertainties with the Governor's proposal that we raised. Having a smaller set of augmentations could help manage some of those fiscal uncertainties.

On the other hand, this is a key area of interest for the Legislature. As we discussed last week, there are documented access issues in Medi-Cal, and rate increases are associated with improvements to access care. So, this is an area the Legislature could explore and think of alternatives, and we recommend to start doing that.

As the Legislature thinks of alternatives, we recommend keeping a couple of principles in mind. The first would be to focus on rate increases where the increase is relatively known and simple and not sort of conceptual in nature. So, if you remember, some of the Administration's proposals were on the more conceptual side. They were still determining key details.

Others were easier to understand and could be implemented more quickly. So, you know, for example, setting rates as a percent of Medicare, say 80% of Medicare, for example, a lot of the Administration's proposal focused on that or applying an inflationary adjustment. Those are things that potentially could be achieved relatively quickly.

Some of the more complex aspects, like changing the payment methodology, having prospective payment systems for hospitals, those would be examples of things that are more complex and where the effects are less certain. We'd also note that the Administration is proposing a new augmentation in the MCO tax package, which would be a supplemental payment for children's hospitals.

So, there are some augmentations, but they are new. More information is still forthcoming. That would be the kind of augmentation the Legislature would want to get more information on as it assesses that and weighs that against other potential augmentations. In addition to that, we recommend that. Oh, I. Sorry, I got my notes now.

We also recommend the Legislature focus on rates that are particularly low or have not been increased in many years. That would be a reasonable place to prioritize augmentations. We discussed last week some rates that historically have been low relative to Medicare. There are other rates that the Administration has found have been relatively high compared to Medicare.

And so, it'd be reasonable to target rate increases where they're particularly low or where they haven't been increased in many years. And then finally, we do recommend that the Legislature keep the budget problem in mind as it weighs alternatives.

If the Legislature does pursue a greater amount of augmentations in the MCO tax package than what's before you in the May Revision, that would result in sort of a smaller budget solution. And so that would entail looking elsewhere in the budget to find those solutions. Thank you.

Thank you. So, can you just go down for me which rates in the MCO tax will be maintained?

So, the rates that began January 1, 2024 and these are the rates for primary care, maternity care, and non-specialty mental health services, bringing those rates to 87.5% of Medicare. And again, those started January 1, 2024.

Okay. Now, last week, or actually before, when we were having conversations around the, you know, the adjustment for equity, there was discussion that there was an idea, but it would come out with May Revise, but since it's been pulled back, my question to you is, do you have that idea? Like, do you know what you had planned, or was that not?

So based on, you know, we submitted our proposal Governor's Budget and received significant feedback from stakeholders with regard to our equity enhancement, our equity rate add on. And the feedback was definitely not consistent.

Lots of concerns about how complicated it was and how broad it was and maybe not being able to achieve the kind of the goals of what we were trying to achieve with that equity enhancement.

And so, you know, as we've been thinking about it, and if something were to have moved forward, we would have probably have defined a more narrow set of services by which we would have applied this equity enhancement, and also not.

We had this equity index that included multiple factors such as health, professional shortage areas, geographic areas, healthy places index to simplify that as well, to just be a little bit more clear and concise with regard how these equity payments would be distributed.

Okay. And along that same line last week, you had stated that there was a plan for making all providers whole. So do you have that language or?

I don't recall saying that all providers would be made whole. So that the. I don't recall saying.

Well, someone said that all, like physicians and not everyone in the healthcare space, but all specialties would be made whole within the Medicare system.

We indicated that we would be proposing to bring, they would all be coming in, and they would all be included in the proposal, and that they would. We would be bringing their rates to between 80 and 100% of the time.

Right. And that's what I meant by made whole.

Okay.

So, was that an actual written plan, or was that still theoretical?

That was part of our Governor's Budget release. We had a 20-page policy paper that outlined all of those details, and so that's included in the policy paper.

Okay, thank you. Now to the Department of Finance. You know, what was the basis of determining what was going to end up ultimately getting cut in our space?

And what you were going to actually fund or add? Because you've got some things that are not yet started, but you've chosen to add in this budget, which I was surprised about, given the fact that before we had to go through and cut some things that hadn't been actually started.

So what was the thought process behind what you were going to remove and what you were going to maintain or add?

Yeah. Aditya Voleti, Department of Finance. So, none of these solutions, I just want to reiterate that none of these solutions were taken easily or lightly, but the overall goal was to maintain core programs and base benefits in Medi-Cal, and to maintain essential health benefits.

And that's sort of where that's like, the overall goal was to sort of maintain benefits and eligibility. And we also, you know, like the new thing that was proposed, the 115 million annually to support directive payments for children's hospitals, was so that we could provide care to the states like sickest children. So to try and maintain core benefits and eligibility.

Did the issue of having core benefits, but no providers or hospitals to go to ever come into the discussion?

Megan Sabbah, Department of Finance. To kind of reiterate what my colleague Aditya Voleti just noted, we really were focused on maintaining core benefits with this package. We certainly recognize that these are tough decisions, and these are difficult solutions. And we look forward to further conversations with the Legislature as we move through the negotiation process.

I look forward to further conversations as well. I'm not sure how many more conversations we need to have about some of the crisis that we have within our healthcare space. I mean, we kind of talked about it a lot.

And so I was just wondering if any of the discussions that we have had about the shortages, the closures, the issues that we have on the ground, workforce shortages, if any of those things came into the thought as you were trying to preserve these core services, which is important, but again, if you don't have providers to go to, what have we done?

Certainly appreciate your comments and I will take them back. I will say that we definitely looked at the package as a whole and its impact on providers and patients, and we didn't take any of these decisions lightly.

I'm going to turn it over to my colleague, Assemblymember Bonta.

I'll just build on the question around more broadly workforce, and particularly as it relates to the clawbacks and the MCO related to the behavioral health components. It seems like there's just a general notion that there's going to be some backfilling that's happening with Prop 1 dollars.

Is that at all impacting the cutbacks on the workforce components that were pulled from MCO?

For Proposition 1, no relation to any of the kind of the MCO proposals that were proposed as part of May Revision. We do have Proposition 1 BCPs and local assistants that we can speak to now or later, but no relation to the MCO.

And for the-- Again, I find it highly problematic that we are completely eliminating the reimbursement rates that we were counting on to be able to support so many healthcare workers. Was there any other kind of formula that was used to figure out whether or not we could not do a complete clawback of that amount and do a relative lesser percentage?

Yeah, I think I would just reiterate that we looked at everything as a whole and just tried to maintain the core benefits and eligibility that have already been implemented when we release this proposal and are looking forward to are welcome further discussion from the Legislature on other alternatives or other priorities.

Did you all go into depth so far, sorry I missed it, around the children and youth behavioral health initiative at all? Okay, great.

So some questions around that. The school-linked partnership and capacity grants was something that was--

Do we want to move to the next item?

Okay. All right. Yeah, I'm good then.

Thank you, Assemblymember Bonta. Before I open it up to a public comment, just want to piggyback on what Assemblymember Bonta said.

So as you all finance were going through this, there was no other models, no other thought process to say, well, maybe if we, you know, slightly trim the MCO tax so we can maintain services, but also do like providers reimbursement rates to a larger group. Maybe not everybody. Like, there was no thought. It was just, we're going to come in and just slice the whole thing.

Megan Sabbah, Department of Finance. I don't know that I would characterize our processes as not putting thought into it. The reality is that we had a limited amount of time to really look at the package, try and put forward something that protects core benefits and really do look forward to further conversations as we move through negotiations.

We certainly hear you and we appreciate the gravity of the situation here.

Okay. So, no, you didn't do what the LAO had kind of suggested to look at. Okay. What are some of the other core services that we could increase besides maternity care, behavioral health and primary care? It was just kind of like an all or none approach. That's what I'm hearing. Okay.

All right, well, at this point, we will open it up to public comment on issue one only. We will give you one minute per speaker. Thank you.

Good morning, Madam Chair, Members. Dennis Cuevas-Romero with the California Primary Care Association Advocates, statewide association, representing FQHCs and free clinics, community clinics, deeply disappointed in the cuts. This was an opportunity for a historic investment in Medi-Cal. It is really challenging with some of the conversations that we've had this past year. I will just say, you know, in the January proposal, about 60% of the MCO revenues were already going to the general fund. So this is particularly challenging.

The other thing I'll mention, right, that this is one of the most revenue that we've received through the MCO tax, primarily because it was going to fund provider rate increases. And that was at least our understanding of the reason why there was an increased revenue increase. So it is unfortunate, and we're hoping that the Administration reconsiders. Thank you.

Good morning. Kelly Rellaru, with Resilient Advocacy here on behalf of two clients, one being the California Optometric Association. We understand, but don't necessarily agree with the sweep of the 2025 rate package. We were included in that, but pivoting, we are hopeful that DHCS can include us as a provider that can bill under the 2024 package.

We provide a lot of those services, primary care, including pink eye as an example, so there won't be more pink eyes. So it'll be a net neutral if we were included as being able to bill under that package.

Also here, on behalf of the Air Ambulance Community, there was a fee on all moving violations in the state that was ended. So that special fund that provided an augmented rate is now expended. And so the rate provided to all Medi-Cal transports is only about 20% of the cost. So especially in the rural north, we're hopeful that that capacity can be maintained in the face of, you know, summer fires or landslides over the fall and winter. Thank you.

Thank you.

Madam Chair and Members, Rand Martin, on behalf of Aveanna Healthcare and pinch hitting for the California Association for Health Services At Home.

With all due respect to the very difficult situation we find ourselves in, it should be obvious to anyone that if you're spending $662 a day to take care of a child with complex medical conditions in their home, instead of paying seven to $10,000 a day in a hospital, that you're going to save a whole lot of money.

It's perplexing to us that given the severity of the situation that we're scrounging in couch cushions for additional savings, that we can't go ahead and realize the $175 million that this change in the rate for PDN would achieve for the State of California, money that could be used for other services that are also being cut. I encourage you to look at this again. Thank you.

Thank you very much. Vanessa Cajina on behalf of the California Academy of Family Physicians, in opposition to the reallocation of the MCO tax following this year. De-investing in primary care, particularly primary care physicians who tend to stay in the community, is a huge cut to the knees of where we are trying to go with Medi-Cal reform and health equity.

Also on behalf of the California Pan Ethnic Health Network, the shift of the MCO without having an equity metric yet appreciate the Chair's comments on that and we'll oppose that too.

Madam Chair and Committee Members, Norlyn Asprec, representing Prime Home Health and Team Select, both providers of private duty nursing services, just echo the comments of my colleague Rand Martin. Just want the Committee to consider the proposal for a PDN rate increase that would generate a cost savings of $175 million.

I understand that this is a difficult budget time, but for consideration of this request, 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 this state.

We understand that this is a very difficult budget year, but we are deeply disappointed of the sweep of the MCO funds and the promise to increase Medi-Cal provider rates as part of that deal.

A decision to sweep those funds means that district hospitals will have to look at tough decisions like potentially cutting services at a time when we would prefer to expand and increase the access to care for millions of Medi-Cal beneficiaries. For these reasons, we respectfully ask that you reject this proposal. Thank you.

Thank you.

Good morning. Molly Robson with Planned Parenthood Affiliates of California on behalf of the seven Planned Parenthood affiliates that operate over 100 health centers in the state. We are, of course, very disappointed to see the cuts to provider rates in MCO this, as you know, would have been a huge investment in the Medi-Cal system, specifically 90 million next year for sexual and reproductive healthcare.

The sweeping of these funds, in addition to other actions on sexual and reproductive health rates, deeply affect California's safety net's ability to meet the needs of patients and address health equity needs. Thank you.

Nissette Short, representing Peach. I just want to echo a lot of the comments you've heard already. We're opposed to the redirection of the MCO funding. Our safety net hospitals are already struggling and our patients are already challenged to achieve health equity. And we think this will make that even more challenging.

And we urge the Legislature and the Governor to reject this proposal.

Thank you, Madam Chair and Members. Sarah Bridge, on behalf of Maxim Healthcare Services, one of the largest providers of private duty nursing care in the state, echo the comments made by the other private duty nursing providers, but just really want to express our concern that a rate increase has not been included in the budget for private duty nursing care.

Particularly want to echo the comments around the augmentations for the children's hospitals. This is really about getting sick kids out of hospitals and saves the states thousands of dollars per day as a child sits in the hospital otherwise. Thank you.

Good morning, Chair and Members. Beth Malinowski with SEIU California, as many this morning, deeply concerned with the proposal that's before you. Appreciate the many difficult decisions you'll be making in the coming weeks. When we think about the commit to maintain Medi-Cal coverage, we have to connect that coverage to true access.

And that only happens if we have the workforce to do that. We're still sitting in a workforce shortfall for 500,000 workers. This MCO funds were going to be critical to helping us achieve some significant movement in that space. And with that, we ask you to reject these funds.

As you really consider, how do we make sure we bring forward a true promise to access? By making sure the funding we need to not only stand up our healthcare workforce, support our residents in training, and also commit to our public hospitals. So thank you.

Thank you, Madam Chair, Members, Tim Madden, representing the California Chapter of the American College of Emergency Physicians. We're also opposed to the shift in the MCO funds. As you all understand, emergency physicians are in a unique situation where they see all patients that come into the emergency department.

It doesn't matter if they're uninsured, commercially insured or Medi-Cal. We see more Medi-Cal patients than any other physician specialty for about 42% of all of our visits, with some of our hospitals seeing as many as 75% of all their patients are Medi-Cal. We worry with the shift in funds, it will be taking money out of the system and actually leading to more people coming into the emergency department.

For emergency physicians, those funds are really important because it allows us to more adequately staff emergency departments. So with this shift, we're worried with a lower coverage by emergency physicians, increased volume is going to lead to wait times for everybody. The emergency department doesn't have a space just for Medi-Cal patients.

It is for all of us to use. So with that, we appreciate the director's comments that this is a proposal and that there will be discussions moving forward, and we would ask for you to keep us in mind as those conversations occur. Thank you.

Thank you.

Thank you. Madam Chair and Committee Members, Mark Farouk with the California Hospital Association, echoing the comments of my colleagues as well as Committee Members today regarding the MCO tax proposal, the sweeping of those funds. Deeply disappointed in what that means for patient access.

Madam Chair, as you articulated, I think we would echo the comments that you made about the crisis facing patient access, whether it be hospitals and other providers, would ask that you reject this proposal.

And also would go back in time to also note, last year with the Legislature, those of you on this Committee helping create the Distressed Hospital Loan Program. And much of the talk around that program was to build a financial bridge for hospitals to get them to a place to where they could see adjustments to Medi-Cal reimbursement rates through the MCO tax.

Given this sweep, that really calls into question the long term financial sustainability of those particular hospitals and others that may be at risk. Thank you.

Thank you, Chair and Members. Kathy Mossburg on behalf of the Local Health Plans of California. We want to also echo the comments of our prior colleagues on urging you to reject this proposal. These were dollars that we certainly know are needed for all the reasons you've stated here earlier in this Committee hearing.

But we know we have problems with specialty care. We know we have problems with maternity care. That was exactly what these dollars were supposed to go to create greater access to those services. So thank you for your time today. We really urge you to reject.

Madam Chair, Members of the Committee. Brandon Marchy with the California Medical Association. We are extremely disappointed about the governor's May Revision proposal, specifically the clawback of the MCO tax dollars. Under the budget deal that was made last year, 60% of the MCO went to the general fund. That is an unprecedented amount.

MCO was three times what we have seen historically, far and away the largest that we have seen and the largest allocation to the general fund. For comparison, in 2009, the general fund relief was 157 million. In 2016, it was 1.2 billion.

The current tax proposal would see an average annual of $5.5 billion, not including the Medicare proposal that has been put forward today and discussed today. The justification for a much higher tax than had been adopted historically was that a significant portion of its revenue would be spent on rates and other new investments in the Medi-Cal system.

The May Revise is fundamentally at odds with the term sheet that was shared during last year's budget negotiation in which the agreement was that this funding would be invested to improve access to care in the Medi-Cal system.

We request and urge the Legislature to reject the MCO cuts in the May Revision to increase access to care and reduce inequities. And additionally, we would also urge the Legislature to reinstate the $75 million annually in GME funds that would quickly put residents to work providing care throughout California and keep them in those underserved and rural communities. Thank you.

Thank you.

Ryan Spencer on behalf of the American College of OB/GYNs, the California Podiatric Medical Association and the California Radiological Society, in opposition to the governor's proposal to claw back the MCO tax revenues. There's a reason why this agreement was made last year and that's just going to continue to get worse for the reasons that the chair stated and for all the previous speakers.

And so I do look forward to the negotiations you guys will have and hearing what comes out of that. But hopefully brighter minds will prevail and we can restore this tax. Thank you.

Thank you.

Thank you, Madam Chair and Members. Ryan Pierini, on behalf of the California Ambulatory Surgery Association. I want to quickly align our comments with provider groups already previously stated and stand willing and ready to work with you Chair, Committee Members and the Administration on finding alternative solutions and protecting those rate increases that are vital to provide access throughout California to primary and specialty care services. Thank you.

Madam Chair, Members of the Committee, Terry McHale, with Aaron Read & Associates, representing the California Optometric Association. Obviously fully cognizant of the situation we find ourselves in, but appreciate very much, Madam Chair, that your willingness to be more precise in the way we handle this situation.

Optometry provides 85% of the eye care in the State of California for Medi-Cal patients. We're willing to be collaborative. We look forward to continuing discussion. We can be as efficacious as any other provider and we are much more cost effective. Thank you very much.

Good morning. Katie Layton, on behalf of the Children's Specialty Care Coalition, representing over 3000 pediatric specialty physicians. We do want to testify in strong opposition to the sweep of the MCO tax revenue. Low Medi-Cal rates have contributed to a severe pediatric specialty physician shortage.

As a result, too many children and youth with complex conditions are waiting weeks or months for for an appointment. Last year, a study was commissioned by the National Academies of Science and Medicine, resulting in a report called the "Future Pediatric Subspecialty Physician Workforce."

A key finding of this expert analysis is that rate parity with Medicare within pediatrics is needed to address this dire physician shortage. All of the pipeline issues that we're seeing and the targeted rate increases made possible by the MCO tax would bring us closer to that goal.

And so we urge you to reject the governor's proposal to sweep these funds. Also, we're encouraged to see some support in the May Revise for children's hospitals, but really want to support the whole network.

Kelly Brooks on behalf of the California Association of Public Hospitals and Health Systems. Also here in opposition, just a reminder that statewide public hospitals provide 35% of Medi-Cal and uninsured hospital care.

Due to the low rates in Medi-Cal and historical underfunding of these systems, public hospitals are facing a $4 billion deficit while also stretching to meet an unprecedented demand for services and fulfill their essential role in serving their communities.

We understand the state's budget challenges and the difficult decisions that are going to need to be made by the Legislature and the Administration over the next few weeks. But we urge you to reject the MCO tax proposal. Thank you.

Thank you.

Madam Chair, Members. Nick Brokaw from Sacramento Advocates on behalf of the California Academy of Audiology, representing the state's licensed audiologists. Here echoing the comments of others with our concerns and opposition to the redirection of the MCO tax funds. Two key points from our perspective.

One is, of course, the access issues impacting so many providers in the state impacting deaf and hard of hearing adults. But the other piece to this is the impact this will have on our Hearing Aid Coverage for Children program.

The funding for the Medi-Cal reimbursement rates are inextricably linked to the funding we have in place for the Hearing Aid Coverage for Children program. So access to ensuring that providers are able to provide those services to children is very much at stake in this issue, too. Thank you.

Good morning, Chair, Members. Janice O'Malley with AFSCME California, also unfortunately opposed to the cuts to the MCO tax. We represent many members in the private ambulance EMS space, and the $50 million that was included in last year's budget action would have supported a meaningful increase to Medi-Cal reimbursement rates that haven't been seen in many years.

So we would appreciate the Legislature's work on helping to support the MCO tax as it was agreed upon last year. Thank you.

Thank you. Thank you for all who came and gave public comments.

I'm actually going to see if my colleague who is joining us today, Assemblymember Dr. Wood, who has a lot of historical knowledge and has been at the table for many of these conversations, if he has any comments or questions for, for our panel before we move on to issue two.

Thank you, Dr. Weber, for the opportunity to be here. Much appreciated. Question for the panel. So the one time expenditures in the MCO, specifically the Small and Rural Hospital Relief Program, Distressed Hospital Loan Program, are those being swept as well?

Those are maintained.

They are maintained. Okay. And through the chair, just a comment or a couple you don't mind? I think it's hard to, unless you're a provider in the room, to really appreciate the challenges of serving our Medi-Cal population. I served our Medi-Cal population for many years. Rates have always been a huge challenge.

Going back to Prop 56, we were told as providers, we're told, if you want to get more money for increased rates, look for a mechanism going back to Prop-- So Prop 56 passed, and at some point, I can't remember what year, Governor Brown swept some of the money because he could, you know, fast forward to where we are today.

Providers, a broad coalition of providers negotiated this very elaborate and extensive opportunity to finally get some rate increases to protect our ability to serve a very vulnerable population. And here we are again.

The Governor is sweeping it because he can. You know, I elected to serve the Medi-Cal recipients in my practice. I was reimbursed less than a third of what my usual fees were. It actually cost me money to serve these people, and I happily did it as many as I could.

I paid money out of my own pocket for the privilege of taking care of people who needed care. Not everybody can do that. Not every provider group can do that. But a lot of provider groups have been-- All they're struggling for is the opportunity to maybe we can break even.

Maybe we don't have to continue to lose money to take care of a population that really, really needs care. So this is a probably a little more emotional than I expected. This is a deep hit. This is a really deep hit.

And it feels like, it feels like this population doesn't matter anymore and it feels like our hospitals don't matter anymore. And for all the things we worked on collectively over the years and we're going to hear more of them, I'm shocked, kind of almost beyond words. And I usually have a lot of words. So I'm happy--

Thank you for the opportunity to be here today. I look forward to further discussions here. But, you know, this coalition came together with the belief that there would be an opportunity for relief, to be able to better serve people.

And this is now the second time, second governor who has taken an opportunity to sweep money because they can. How do you expect us as providers to serve populations that need our care and not reimburse us even to the point where we can break even? How do you expect that is my question back to the Administration.

You know, I have-- we worked well together. Director Baass, I appreciate you. I understand the difficult situation you're in. It's more, I guess it's more of a rhetorical question, but it is really, really troubling the depths of these cuts. So thank you. Thank you. Thank you, Madam Chair.

Thank you so much for those words. And, you know, I definitely echo your sentiment. And as you're going back and talking with the Governor and the rest of the finance team and the rest of the departments, you know, the question again is, yes, what do you tell these providers, but also more so what do you tell the patients when they have nowhere to go? And we already see that happening.

And as I asked earlier, we also have no plan in place to deal with the fact that they would have nowhere to go. So on one end, you've done all this work to maintain these services, but then they have nowhere to go to get access to those services.

And at the end of the day, we've still created and widened the disparity when all we've talked about over the last couple of years is equity and closing these gaps. But this plan actually does the opposite.

And so, as you're going back and you're relaying how this hearing went with your colleagues and the administration, I really hope that you take into account all of the things that you've been hearing in these hearings and in the policy hearings for the last few years about the challenges within the healthcare space, the challenges within our Medi-Cal system and start to take some of those into account as we try to fix this proposal.

And with that, we'll move to issue two.

And I think, you know, for me and my colleagues, those who are here, but also those who are watching or their staff that's watching as we're going through and really trying to get an understanding, a better understanding of why these particular programs were selected for a reduction.

It would be nice for you to go through and just briefly discuss what the program is and why there was a decision to have a reduction or an elimination. So you can start.

The May revision includes several proposed actions to reduce General Fund costs in light again of the state's overall General Fund situation, and I'll go in the order listed in the agenda of the items.

With regard to the Children and Youth Behavioral Health Initiative, the May revision proposes a reduction of a total of $337.1 million to the children and youth Behavioral Health Initiative.

These adjustments are a right sizing of funding allocations and will not hinder our ability or commitment to advance this groundbreaking behavioral health programs and supports in schools and communities and in a digital environment.

To date, the Department has awarded $248 million in children and youth behavioral health grants to 424 organizations across all 58 counties to improve access to evidence based and community defined practices and programs.

We have also distributed 1$10 million in CYBHI funds to to all 58 county offices of education and local education agencies to support social emotional, learning and well being and mindfulness in schools.

With regard to the behavioral health services and supports platform, we are proposing a one time reduction in funding of $140 million for the platforms and this is essentially a right sizing of the budget for the delivery of this platform.

The way we have structured our contract is it's based on utilization and uptake and so this is year one of the platform and so we are right sizing the expenditures to fit in line with the expected utilization of the platforms.

This reduction again is based on current usage levels which the platforms went live in January, which are low. Given again that this just started in the early rollout stages, we anticipate the utilization of these apps will continue to ramp up through the initial contract period of June 30 2027.

We will continue to collaborate with these platform teams as well as other statewide providers to drive adoption in the out years as we continue to support the platform. With regard to the school linked capacity grants both at the community colleges and the CSUs and UCs.

For the community colleges, it's a proposed reduction of 30 million in 23-24 and $70 million in 24-25 and then for the CSUs and UC's a reduction of $50 million in the budget year of 24-25. We are committed to collaborate, oh, do you want me to stop? I'm sorry. Keep going.

We are committed to collaborating with our higher education partners and particularly with implementation of the fee schedule, which we are planning to go live with our community colleges in the fall of 2024 and with our UCs and CSUs in January 2025.

So continuing the technical assistance and support to implement the fee schedule with our higher education institutes and then the final.

I'm sorry.

Sure of course.

So with your community colleges grants this year, you say 30 million reduction next year 70 million. And the reason for that, I'm sorry, I may have missed that.

This was also just in terms of the kind of the state's fiscal situation, looking at other opportunities for-we are continuing with the technical assistance to get them on board with the fee schedule beginning this fall.

And so recognizing kind of a focus in that area with regard to the fee schedule allows our higher edge institutions to be able to Bill and draw down dollars, both from Medi-Cal and commercial plans to cover the services that they provide at schools.

And so with this reduction, are you anticipating-what will be the outcome for that?

These were capacity grants to build some of the abilities to do some of this work, but we will continue with the TA in terms of providing assistance to our higher educations to get ready for the fee schedule and implementation.

In what year?

So for our community colleges, the fall of this year and then for our CSUs and UCs beginning in January of 2025.

But you've cut their funding. What is the actual funding cut?

The funding is for just capacity building. So maybe a workforce or infrastructure needed to maybe do some of this work. But we will continue with our technical assistance and support from the Department and our vendors to get them ready. This was just actual dollars going to the higher ed education institutes to be ready.

So this would effectively create a situation where the higher ed institutions don't have the on-the-ground capacity by way of individuals systems to actually be able to accept the additional work but the state is going to be providing technical assistance to them.

Correct.

That seems pretty backwards.

So I don't understand how is that again going to work if they don't have the support on the ground to actually.

So we will be providing the Department as well as our vendor, who will operate the fee schedule, will be providing technical assistance to these institutions to get them ready.

But these would be the dollars that are proposed to be cut are some of the kind of the infrastructure dollars that may have been proposed or needed at the time. But just recognizing, again, the state's fiscal situation, this is an area that was proposed for elimination.

What's included in the infrastructure.

These were to generally sometimes funding workforce prior to the fee schedule being implemented, which would then come in and be the ongoing support, similar to some of the capacity grants that we have under path for CalAIM, where it is some of those one time dollars that might be needed to support that initial startup until the fee schedule is available to them support the ongoing needs.

It might look different from entity to entity depending on what the needs are, though.

But it is potentially workforce.

That's an option .

That's an option, potentially, yes.

So if you don't have the workforce, how is this program going to go into effect? I'm really very.

So the fee schedule would provide the ongoing dollars for the workforce, but in some instances, the time for those dollars to actually get to the institution, to be able to support the workforce in an ongoing manner may take longer than.

So there's just a few months that need to be covered and sometimes capacity grants are used to cover those initial months until the ongoing dollars are available.

So then if the money's not there, then what you're stating is that the universities or the colleges would have to support it. Like who's going to essentially support it during those first couple of months while we're waiting for the money to kick in? Like how, what's the plan?

So I think what might happen is that it might take a little bit longer for the infrastructure to build up instead, so there wouldn't be an increased cost to the entities. So Michelle talked a little bit about what we've seen in our path cited grants. And I know we've talked about that to you all before.

And so what we've seen is that what we have seen is in places where we provided grants and funding, then there's been opportunity for infrastructure to be built out earlier. And so there's been implementation and an earlier, quicker phased implementation.

And so with the state providing technical assistance, we still will be able to provide that infrastructure assistance to the schools and the entities. But it may be that implementation is a little bit slower than was intended originally.

So looking at the community colleges, they're being reduced in, you know, this year and next year's budget. So are you stating that they're going to have an even longer time for implementation? Like, how is that going to impact the programs there?

Well, they, we are planning for them to be able to go live in the fall of 2024, and it will be on a rolling basis based on community college to use the fee schedule.

And so dependent on each community college situation when they opt to go in and using that fee schedule to again bring in the ongoing revenue to support the workforce or the services that are being provided on site.

Okay. Okay, you can keep going.

And then the last item under the Children and Youth Behavioral Health Initiative is a reduction in funding of $47.1 million. Regarding our grants for evidence based and community defined practices. During the summer, we will be releasing guidance about funding reimbursement options for both evidence based practices and community defined practices within the Medi Cal program.

So providing kind of a guide for our providers and counties and other entities on how to Bill Medi Cal for some of these items.

And this is a new resource that we are planning to provide, really recognizing the importance of community defined practices and really explaining how to use the Medi Cal codes and what codes to Bill to provide some of that ongoing funding sources.

When this program or the evidence based program grant program was first developed, there was the goal with round six being just evidence based and community defined practices. However, the previous five rounds, the previous rounds of this have included those as well. And so really we've built out quite a bit of infrastructure.

I think I mentioned at the beginning about $248 million in grants to 424 organizations. And this does include evidence based and community defined practices as well.

Okay.

Just a question, back to the the overall concept of major reductions with the community colleges versus over two years, versus no reductions for CSUs and UCs in this year and $50 million for the next, for the 24-25 year. Back to, I guess the overall question around equity.

Community colleges have less, they have less operating capital to be able to divert towards essentially kind of building their own infrastructure to support the behavioral health programs, the school based clinics that are so desperately needed, very different than perhaps a UC might be situated to be able to do so.

I actually think that the CSUs are probably more in line in terms of available resources to the community colleges than our UC's. So essentially what I'm hearing is that we are still, in theory on paper, allowing there to be opportunities to have a strong place based health provision network around behavioral health in place.

But we are not giving the institutions the startup resources that they need to be able to actually focus on implementation of those in the short term, which effectively means that they will probably not do those programs.

So how are we kind of squaring the fact that we are still wanting to make sure that we're moving forward with a very historic initiative to ensure that we were providing particularly youth behavioral health components to our neediest students, students that are living in their cars, students that are working two jobs in order to be able to take one class and not funding them this year or next year for that programming.

So I guess the fiscal question is, why are we proposing cuts in this year and next year for community colleges and not for the CSU's? UC's? Was there any kind of equity analysis overlay conducted in thinking about the distribution of even those two categories of funding?

And what were the opportunity costs that you all identified in terms of, particularly the community colleges? And I'll say also CSUs, in terms of actually being able to implement these programs?

Nate Williams with Department of Finance. So the cuts that were made for both the community colleges and the UC's and CSUs were actually the full amounts that were allotted to those. So the difference, we had originally proposed 100 million for Community Colleges and 50 million for UC's and CSUs.

And the reason why it's coming out of the budget year is because of the later implementation for the CSUs and UC's. That's when the planned expenditures were. And so that's why it's reflecting 50 million in the budget year.

And then the earlier kind of the earlier adoption for the community colleges is why we had a planned expenditure of 30 million in the current year and then 70 million in the budget year.

So, in plain speak, essentially, we're eliminating this program.

Yes. Correct. For the. For the community colleges and the UC's and CSUs. Yeah.

So why are we listing it as a reduction instead of an elimination?

So the budget does maintain $400 million for K-12 for the exact same program. So as far as the partnership and capacity grants, the K-12 does still have 400 million allocated for it.

Right. But here, you know, you separated it out by Community Colleges and CSUs as a reduction. That means that you've reduced it. So there's some money still left for that particular program. But what you've just said is that the money that was allocated is gone. So it's not a reduction.

There's nothing left for the Community College portion or the CSU/UC portion, right?

Yes, that's correct.

Okay. So to me, it seems like an elimination of this program that you have listed as a separate thing. It's not listed as 1, it is 2 separate items. So to me, it's an elimination.

I mean, yes. Yes, that is true. I guess we were looking at the program holistically when we were kind of developing the language for this, but, yes, you are correct.

Okay, thank you. Any other questions? Okay. Oh, go ahead.

I have some questions about a different portion of the.

Okay, keep going.

I think that concluded the Children and Youth Behavioral Health initiative.

Oh, so I do have a question about the platform. Alright, so what are the sunk costs for the platform right now? How much have we already put into development of these platforms?

I would have to get back to you. I don't know if the Department of Finance has that information.

And this is like specifically for bright life kids and Soluna for teens and students, just for the general awareness of the public. These were touted as ways to be able to provide online behavioral health programming and supports for children and adolescents, primarily.

Correct.

So that they would have the critical support that they need as they are considering suicide, dealing at incredibly significant rates with rates of depression that we've never seen in the State of California and all of those terrible things. What are the sunk costs for the platform?

Yes. So the past year expenditures over budget years 21-22 and then 22 and 23 are approximately $33 million. And then we also have another proposed for the current year of $110 million. So you're looking roughly $143 million.

So we've spent $143 million on building out these platforms.

Correct.

Okay, and the rationale for essentially reducing the funding associated, what did you say? What's the reduction?

$140 million.

You're reducing by another-you're reducing by $140 million.

Correct.

And the rationale for the reduction is that there hasn't been utilization.

Yes. So the projections that we had originally included in the Governor's Budget included kind of a faster ramp up period.

And so as we're getting more updated numbers, we recognize that that funding will actually not be needed because that funding was originally designed to pay for the actual utilization of the service and not kind of the sunk cost or the startup cost to get it going.

So we felt like that was a very reasonable way that we could find some General Fund savings.

What were the barriers to the ramp up and utilization?

So I will say also it's just the way that ultimately the contract was structured. Instead of x number of dollars divided by x number of years, it was based on utilization. And so year one utilization is less than what we will project in year 2, 3 and 4 utilization.

And so as a result of the way the contract is structured, we didn't need the full amount in year one as kind of originally budgeted. And so that is the rationale for kind of the right sizing of the spend for budget year and the reduction of the $140 million.

Okay. Thank you for that information.

You can continue. Oh, I'm sorry, LAO.

Thank you, Chair, members. Ryan Miller from the Legislative Analyst's Office, if I may. I think we wanted to just provide some general comments on these types of reductions that I think will allow us to be relatively brief on these types of items in the rest of the hearing.

The CYBHI proposals that you're hearing right now, these are reductions that are proposed to what were one time or temporary items. Likewise, the mayor revision includes a number of similar proposals that were initially proposed for delay and there are now reductions. In general, we find that these proposals are reasonable.

However, the assessment is not so much about the merit of the individual items, the individual programs. I think as this discussion illustrates, there are clearly consequences from a lot of these decisions.

But given the significant fiscal situation the state is facing, it's our office's assessment that by focusing on these temporary and one-time items, we believe that the Legislature will put the state in a better position.

Or I should say that the may revision proposal puts the state in a better fiscal position going forward to maintain core services in health programs, human service programs across the state budget and so I would just conclude and say that in our judgment, these four proposals are reasonable in light of the state budget condition.

Thank you. You can continue.

Okay, so the next item on the list is the reduction to the Naloxone distribution program or project and the medication assistant treatment reduction. The May revision proposes $57.3 million General Fund reduction from local assistance in 24-25 and ongoing.

This reflects a reduction of $35 million from the NDP or the narcotic distribution project program and reverses funding that was allocated in the 2022 to 23 budget related to the Medication Assistant Treatment Expansion program.

With regard to the NDP reduction, with the recent announcement of CalRX and the state's new partnership that allows the state to purchase CaLRX branded over the counter naloxone for $24, almost half the current marketplace. The proposed reduction in may revise is really reflecting that reduced price and cost to procure or to purchase Naloxone.

And so it will not have an impact to the NDP program.

It's just really reflecting that we can purchase more with less stock as a result of the announcement a couple weeks ago and then with the proposal related to the Medication Assisted Treatment Program, this was a proposal that was added in 22-23 and this project supports startup activities or enhancement efforts throughout California with increase increasing the available sites for MAT and with this reduction it would just.

It would reduce kind of the startup dollars for new sites.

Hmm, are we seeing a decrease in our fentanyl deaths?

No, it's still-overdose problem is still a significant problem in California.

But we're reducing funding for these. treatment centers.

For startup activities, for treatment centers? Yes. Again, to the point of just recognizing the state's fiscal situation.

So if someone doesn't have the funds for. Well, let me ask you this. Do we have enough treatment centers? Is that the thought process? We've looked and every area is pretty much saturated and able to deal with the number of individuals who will need to have those services.

Are we saturated up and down the state with these treatment centers?

I don't know that we've completed an assessment to determine, you know, if we are saturated or if there are areas of the state that, that still need these sites.

Are these funds highly uptake? Like, are they noticing, like as soon as you're releasing them, like people are grabbing them so that they can open up these treatment centers or is it being unutilized?

We award these dollars every since they started in 22-23 we award these dollars. There are also some federal, state opioid response dollars, federal dollars that are used to support medication assistant treatment kind of expansion and use across the state. But this is the General Fund portion of those dollars.

So there's a need.

Yeah. No, my question is, you know, sometimes we start a program and the funds are unused. Right. So my question is, are there unused funds or are these actually funds that are utilized?

Yes, these dollars are utilized completely. Yes.

As soon as you bring them out, people take them and they open up these treatment centers because we have an issue with fentanyl.

Yes, these dollars are used.

Okay, so you've put two things in. One, the naloxone distribution project, which you've stated we're not going to have a decrease in that because we're able to now produce our own, which is great. But you've also put the medication assisted treatment, so you've lumped them together. So if you removed the amount for naloxone, what would have been left for the medication assistant treatment?

That's $22 million General Fund.

Is there a schedule for where these new sites would have been opened?

$22 million, every year?

Correct.

So this would be essentially stopping the program beginning in the budget year, so it would no longer have these kind of capacity grants. And so we don't know what would have been awarded in the budget year.

I'm talking about locations. Where would these sites have opened?

Oh where we've already awarded?

No, if we were to maintain money for new sites, where would these sites be opening?

It's based on an application process. So I don't know that we know. Where they would go

Not have applications pending.

Not for budget year? No, not for new money in the budget year.

Will these with the infrastructure development program be at all backfilled by Prop one?

No,

Still completely different.

This is a state administered program. Locals can use their dollars potentially for Prop one for similar work, but not at the state level.

Was the rationale that essentially because of Prop one being in place, this would be a reasonable expense for us to not invest in the infrastructure? From a state perspective.

That's not come up at all, no relation to Prop one under this program.

Okay

The next item is the Behavioral Health Continuum Infrastructure Program, or BCHIP. The May revision proposes to essentially eliminate round six of the BCHIP original funding. This round has not been released and no awards have been made.

I would note that yesterday the Governor announced the program guidance for the $3.3 billion in Proposition one bond chip, around $1 that will go out for application this summer. And so let's see if there are any questions on that one.

Take the question that I just asked.

So these dollars, the Proposition $1, are very similar in terms of what round six would have been used to build out the behavioral health continuum infrastructure across the State of California. And so these same purpose or same usage of the dollars in the same program.

Okay. The next item is the behavioral health bridge housing dollars. The May revision proposes to reduce funding by 132.5 million or 50% in 24-25 and 27, sorry, 207.5 million in 25-26.

But augmenting it with Behavioral Health Services Act funding in 2025 resulting in a net reduction of 117.5 million in budget year plus one.

Okay, so just noting that this program provides funding to counties and tribal entities to address the immediate housing needs of people experiencing homelessness, often used as rental subsidies, operating subsidies, really, that bridge in dollars until permanent infrastructure might be available. Okay, next item is the reduction in the Equity and Practice Transformation Payment Program to providers.

The May revision proposes to eliminate dollars that are beyond the 140 million that was appropriated in the Budget Act of 2022. This results in 280 million in reduction in General Fund cost, including 43.8 million in 24-25.

As a result of this reduction in funding cohort one, which was announced in January, we will need to revise the program and milestones that were set back in the original creation of this program to reflect a reduction in funding for cohort one.

And this project really was to support the delivery system transformation, specifically targeting primary care practices that provide primary care pediatrics, family medicine, internal medicine, primary care, OB/GYN services, and behavioral health services that are integrated in a primary care setting.

The next item is to eliminate the final year of the Health Enrollment Navigators project and some of the one time spending with the health enrollment navigators for clinics.

The May revision proposes to eliminate 18 million General Fund, which is the remaining fund for the Health Enrollment Navigators program, and an additional 8 million in remaining funding for the Health Enrollment Navigators for Clinics Project in 24-25.

This program began in July of 22 and provides funding to counties and community based organizations to serve hard to reach potentially eligible Medi-Cal populations. The county and CBO groups perform activities related to outreach, application assistance, enrollment, and assistance with accessing and utilizing healthcare services, and then assistance, retention, and redeterminations.

So with this, the Health Enrollment Navigator program would no longer exist.

That is correct.

Again, Finance, when you guys say reduction, it makes it seem like the program is still there. So we are essentially now eliminating this program. You can keep going.

The next item is to eliminate adult acupuncture. The May revision proposes to eliminate this optional benefit in Medi-Cal with reduced General Fund cost of 5.4 million and 24-25 and 13 million ongoing. We will be proposing trailer bill language to implement this. This benefit was also eliminated in 2009 and restored in 2016.

Okay, so this is an elimination.

It's an elimination.

What has been the uptake for this program? Have there been a lot of patients in Medi-Cal that actually utilize this?

I don't have the uptake, but with 5.0 million in expenditures and 13 million annual expenditures, it probably would be a low uptake benefit.

Okay, thank you. You can keep going.

The next item is to eliminate free clinics augmentation. This was for 2 million ongoing General Fund savings.

This program was or this funding was implemented as part of the 2021 Budget Act and provides funding to support free and charitable clinics that are tax exempt organizations that do not qualify as Medi-Cal providers. The funds are distributed to the California Association of Free and Charitable Clinics and that association allocates those dollars to the appropriate clinics.

How much of this money that the state allocates do these clinics need to keep their doors open?

We don't have that information. They're not Medi-Cal providers. This was an augmentation as part of the 2021 budget.

Okay. And this again is being eliminated.

Correct. This was just an augmentation that was just implemented in 2021. It was not there before. But this funding would be eliminated. Correct.

Okay.

The next item is to freeze Medi-Cal County administrative, not implementing a cost of living adjustment for our county admin, 20.4 million General Fund savings in 2024 and ongoing. This was done previously in difficult budget situations in 2008-9, 9-10, 10-11, 11-12, 12-13, 13-14, 14-15, 15-16, 16-17 and 17-18, and is being proposed to be implemented again.

Okay.

The next item is to eliminate the Indian Health Grant Program. This is a reduction of 23 million in General Fund costs beginning in 24-25.

This program provides grant funds to support the delivery of prevention oriented primary care services that are responsive to the needs of American Indian patients that are provided in a primary care setting, including financial support to improve staffing, recruitment and retention of primary care providers in our Indian Health Centers.

This program was eliminated in 2009-10 again as a result of the state's fiscal situation and was restored in the 22-23 budget.

So it was eliminated in-

2009-10 during one of the state's fiscal crisis.

And we took over 10 years to bring it back?

It was restored in 22-23.

So over 10 years.

Go ahead.

Yeah, I represent a lot of, I have a lot of tribes in my district. These kinds of programs are really important prevention based programs to help prevent future costs. This is one of those. I have to classify this as pennywise and pound foolish and the fact that it took so long to reinstate it, I guess.

And then they went for one year. And now it's gone. It's really challenging oftentimes to reach some of our indigenous people where they live. They live in very difficult to access areas. Getting them to the Doctor is a challenge. Getting treatment is a challenge, and these are essentially preventive services.

In the end, these kinds of things cost the system more money. And I just can't understand why the concept of that is so difficult for Department of Finance and others to understand.

I would kind of echo that comment for sure and also include anything related to the health enrollment navigators and the health enrollment navigators for clinics. These are frontline operating on a shoestring already, CBO's and clinics that are seeking to support the hardest to reach people, individuals.

So in a time when we are making very draconian cuts around access, as we just talked about related to the MCO tax, what we need more of are people who are going to be able to navigate for those individuals who are going to have even more of a challenge finding the resources that they need.

And I understand that kind of the bottom line is it makes sense for the state's fiscal position, but these kinds of cuts are when they are focused on prevention and addressing the needs of the highest, highest risk individuals.

What we're essentially doing is deferring spending more money later on down as the conditions that they are not getting support for become more acute. So while it pencils out in terms of the bottom line for this budget year, it creates more of more expense down the road.

So is there any kind of assessment around the costs associated with these kinds of cuts over the course of several years? And I also have a question for some of these programs. Cutting this year makes sense.

Cutting next year maybe make sense, but cutting 3 and 4 or five years out beyond this budget don't make any sense at all. Why are we allowing ourselves to do that?

Ty Ulrey, Department of Finance. Really appreciate your comments and agree largely with the things that you have to say. Just for some table setting. Reminder, the Administration, the May revision constitutes the administration's proposal to resolve the $44.9 billion General Fund deficit.

That's $44.9 billion on top of the $32 billion in solution that was included in the 2023 Budget act. And just as a reminder, this isn't a problem that we're expecting to go away anytime, particularly soon. So we could be having more difficult conversations about, you know, solutions that will carry into the 2025-26 budget year.

So, you know, we don't take any of these solutions decisions lightly. We definitely understand if the Legislature may want to pursue alternatives. The administration's happy to work with the Legislature on, you know, researching those alternatives. But again, these solution decisions aren't made lightly.

And broadly speaking, our goal is to identify budget solutions that allow us to maintain core programming and services, such as the Medi-Cal base benefits. So, you know, that's kind of where we're at, and that's broadly speaking, again, what we're bringing into this conversation in these decisions.

I appreciate that response, but it certainly isn't responsive to my question. At the end of the day, there has to be some additional analysis that considers the impact of not providing the core service.

If we are eliminating access and we are eliminating the opportunity for people to, or limiting access, we are eliminating the opportunity for people to actually navigate towards that access by cutting these programs, then what we are doing is raising the cost of care for those individuals in this fiscal year and in future fiscal years.

So my question is, I know that this is a very challenging thing. I know that the Administration is taking this very seriously. No decision is made lightly.

My question is, are there any considerations around the opportunity costs and the additional healthcare costs that we're forcing on our system by any one of these individual cuts, specifically the ones, as we've indicated, related to navigators and the Indian Health Grant Program?

Yeah, we certainly take that into consideration.

But what's the analysis like? Can you share? I don't want the top line, I hear taking it into consideration. We are taking these, we're not making these decisions lightly.

What I'm asking for is more of the double down into the specific analysis and whether it considers the cost of care that's implicated, the higher cost of care that's implicated with these reductions around navigation.

Megan Sabbah, Department of Finance. Thank you for your questions. I don't know that we have the information here today with us to speak to the level of programmatic detail that you're asking.

But we certainly hear you and do want to note that as we move through this process of identifying available monies for solutions, we did take into consideration overall cost and programmatic effect to the extent that we could in the time that we had with the available information.

So if there's further detail that you want on a specific program, we're happy to follow up with you. But again, just to reiterate, we really did not take any of these decisions.

Please don't say that again. I appreciate that. Noted. We can just apply it to all of the other things that we're talking about.

I think at some point, if we are really, as a Legislature, engaged in conversation around what any of these cuts are, we're going to need more information than we've taken these, we've taken these issues seriously and we've applied consideration.

I'm asking for specific information about the essential kind of the program effects of these particular cuts and whether or not there's been an analysis done around that. And what I'm hearing is no.

And so as a follow up, I would really appreciate, particularly around programs related to community health workers navigation services, frontline supports, where we are reducing access overall in the health system, how we are analyzing the extent to which those reductions in navigation of care for primary care, preventive care services are going to impact our overall cost of care for those same high risk, high need constituents.

So along those same lines. So let me just ask you a question, because sometimes you'll look at a patient population and you'll say, you know what? They're doing really good in terms of diabetes, high blood pressure, you know, strokes, maternal morbidity, mortality, and they may not need as much preventative care.

So where do you think Native Americans or Indians fall in that scope? Are they doing well, or are they one of those groups that have higher risk, higher outcomes, higher morbidity, higher mortality? Did we talk about that?

Ty Ulrey, Department of Finance. We see this population as being particularly vulnerable. If the Legislature would like to discuss alternatives for this budget solution, we're happy to work with you on those ideas.

So I think one of the issues, and I think it kind of piggybacked off of actually what everyone has been saying up here, is the reasons why certain programs were looked at, because it talks about our values as a state.

If you can sit here and tell me that Native Americans, Indians are a high risk population, yet we are going to completely eliminate their Health Grant Program, that's very problematic for me. That's problematic because it states kind of what Doctor Wood was saying at the beginning, is that we don't care about certain populations, certain groups of individuals.

To say, I know that you're at high risk, even if I'm not in the healthcare profession, I just know that you are a vulnerable community, that your health outcomes are worse that you are, you have been placed way out in the boondocks, away from major hospitals, away from specialty providers, and we know this.

And yet when we have the opportunity to go and look and see, okay, where is it that we can cut, reduce in these very, very challenging times. You know, it's hard for us to understand, and we're just trying to understand the thought process behind it. Someone said, no, we didn't go through and just kind of slash things.

We thought about it. It doesn't really seem that way when we're asking what is the thought process behind this reduction?

So we're reducing Indian Health Grant, but then at the same time we're saying, okay, well, we're going to, you know, increase or add doing things like pharmacogenetic testing, increase that by almost 6.5 million this year and 11.5 million ongoing. This is a brand new program, right.

So not that that's not important as well, but when you're looking at things, how are you weighing what is necessary versus what is nice but maybe not necessary in a tough budget year?

And it's just, it seems like certain individuals, certain groups continue to be on the chopping block first, despite our knowledge that they need more of our help and more of our assistance.

Thank you, Doctor Weber. Thank you, Miss Bonta. You know, I guess there's kind of a rule of thumb that prevention dollars have like a six to one return. And that's kind of the point we're getting at here partly.

I mean, we thought enough of this program to reinstate it after many, many years, in 22-23 and it gets money for a year and now it's going to get. I don't. The question was, was the program eliminated in those years or was it just not funded?

I believe the program was eliminated, although I know that there is federal law regarding this. I did some quick research, but it was eliminated in 20, I think, just no funding provided. Starting in 2009-10. And then as part of a Governor's Budget, BCP, we proposed to restore it in 22-23. Excuse me.

So we thought enough to restore it. We saw the value and now we're saying, well, I guess that's not the case. I guess what I would love to see, look, I'm leaving at the end of this year, and the Legislature and I have been talking about this ad nauseam for years.

When you're looking at budgets to look at prevention, we spend billions with a B on the treatment of diabetes in this state, yet we spend a few million on prevention. Nearly half of our population is either diabetic or pre diabetic.

We thought enough about this that we are actually going to make our own insulin to treat a disease that can be prevented for the most part. Yet we don't.

Yet, here's an opportunity with a population that has a high incidence of diabetes in just one disease category that this population is vulnerable to, and we're going to cut that grant program for people in general that are really hard to reach. Really hard to reach.

I encourage you to come to see, come with me and see some, one of the clinics and maybe, just maybe, you can understand why we feel the way we do here. When it comes to these kinds of cuts, especially around prevention, nobody seems to think forward. It's a line item.

It's a line item to you guys is what it feels like. To us. It's a line item. We're gonna cut this out. But you're not thinking about the downstream costs. Five years, ten years from now, if we could invest in that and be diligent about it, how much could we save? Nobody studies that.

Cause it's a line item. It's a vulnerable population.

Will Owens with the Legislative Analyst Office. Just echoing comments from the Members. So generally this, you know, this proposal we found does definitely have equity considerations and that American Indians generally have some of the largest health disparities in the state when compared to the general population.

Specifically that limiting funding for this program could exacerbate many of the stark disparities in health outcomes that already exist. And so the Legislature may consider looking for other areas of the budget in order to meet health equity goals. And our office is prepared to work with the community to find those. Thank you.

Many of the people in the Finance Department have a background in finance, I guess. Who are you consulting with when you're making some of these decisions in the healthcare space?

Megan Sabbah, Department of Finance so when we are developing budget proposals in the Governor's Budget and May Revision, we largely consult with the departments that promulgate these programs. We also work with stakeholders, local health jurisdictions. We work with as many folks as we can as we move through the process.

And then really when we move into the negotiation process, we really start engaging with members and other stakeholders that we're hearing feedback from on the proposals once they're public.

Just out of curiosity, when you all are huddling up and deciding, okay, we're going to eliminate this program, in that room at that time do you have anyone that has any kind of experience within the healthcare profession that may kind of trigger like, you know, this is a very vulnerable population, this is going to have significant, not only financial but health, devastating impacts if we remove this.

I'm just wondering like how some of these, how you came to some of these decisions, especially at a time when everybody is talking about equity.

We certainly understand and hear your concerns and it does not fall on deaf ears. I know that that is tiresome to hear for some of you, but we are facing a very, very serious budget shortfall. This was very difficult to identify money that was available to solve for that shortfall.

These are the proposals that we were able to identify, and we are more than happy to consider any alternatives that the Legislature has to address the shortfall. But this is the proposal that we do have in the May Revision right now.

Okay. Michelle?

Okay, so I think the last item on the reduction list, I'll. Sarah?

Yeah. Sarah Brooks with the Department of Healthcare Services. I apologize I didn't introduce myself before. The final proposal is to eliminate the Major Risk Medical Insurance Program known as MRMIP.

The May Revision proposes to eliminate MRMIP and redirect 78.9 million from the Healthcare Services Fines and Penalties Fund, which supports MRMIP to pay for existing Medi-Cal costs. The Department will be proposing trailer bill language.

MRMIP was created as a high-risk insurance pool to secure adequate health care coverage, excuse me, for individuals who are being excluded from the purchasing health insurance due to preexisting conditions. Since the establishment of the ACA, there is essentially no longer a need for the program. Services are delivered through licensed health insurance plans.

MRMIP's subscribers participant in the payment for the cost of their coverage by paying monthly premiums and annual deductibles and copayments for purposes of the program. To be eligible for MRMIP, you must be a resident of the State of California.

You cannot be eligible for Medicare Part A and Part B unless eligible solely due to end state renal disease. You cannot be eligible to purchase any health care or health insurance for continuation of benefits under a COBRA or Cal-COBRA, and you must have been denied coverage within the past 12 months. The program itself is relatively small.

Right now, there are 413 individuals currently in the program. With the implementation of the Affordable Care Act, enrollment in MRMIP has declined significantly. Originally much larger size in the program and new enrollment in the program is essentially nonexistent at this time.

These individuals can be covered under other aspects of the market such as Medicare and Covered California at this time.

Thank you.

Okay, the next item, now we're in the fund shift area with regard to Proposition 56 backfill. So, in recent years, Proposition 56 revenues have not been sufficient to fully cover the cost of the Prop 56 supplemental payments.

The May Revision proposes to use 145.4 million from the MCO tax to support the Medi-Cal family planning, women's health, and physician services supplemental Proposition 56 payments in 24-25 and then 64 million General Fund in 24-25 to fully fund the dental services Proposition 56 supplemental payments. Then the next oh, sorry.

So, I'm sorry. So you're reducing the amount of funds to backfill Prop 56.

So, it's just, there's less Prop 56 dollars available and based on also increased utilization in those services. We did not have enough Proposition 56 funds to maintain those supplemental payments. So, we're using MCO tax revenue and also General Fund. So, there is no reduction into that level of supplemental payment.

Okay.

The next item is quality sanctions penalty. We are proposing to use. There's about $1 million in quality sanction penalties that we have received or have implemented with our Medi-Cal managed care plans and proposing to use that to offset General Fund costs in the Medi-Cal program. The next item is related to home and community-based services.

This is just really reflecting the ability to use those dollars until the end of the calendar year 2024 for our Home and Community-Based Services Spending Plan that was implemented as part of the American Rescue Plan in 2021 related to COVID.

And this is, is really just kind of the recognition of those dollars being used to support other funds that might have been used in its place. And then the last item in the chart.

With regard to revenue, the May Revision proposes to increase directed payments to public hospitals through programs such as the Enhanced Payment Program and the quality incentive pool. This is really an opportunity to draw down non-state revenue, state revenue, and provide additional revenue to our public hospitals.

And as a result of this, of this financing mechanism, proposing to implement an administrative fee on the intergovernmental transfer to achieve 37 million in General Fund reimbursements in 24-25 and that full year, 74 million starting in 24-25 and ongoing.

So, this is really related to the way we finance our, some of the supplemental payments for our hospitals and others. Other programs have an administrative fee, so this would be a new fee to them, but they would still get a net benefit out of this program.

Okay. Thank you. Before we go to public comment, I was wondering if you could comment on under the new trailer bill proposals, Senate Bill 525 delay.

As the Governor noted. Andrew Duffy, sorry, Department of Finance. As the Governor noted in his press conference, we are hoping to have additional information to share in the coming weeks prior to closing out the final budget agreement.

When do you think we'll have that language?

We may have to follow up with your office on that.

Megan Sabbah, Department of Finance so we don't yet have a timeline on SB 525 language. We will note that departments are continuing to assess the bill's requirements and identify any necessary amendments.

The Bill was passed with the commitment that there would be trigger legislation adopted before the budget year, and we are working to intently with stakeholders and legislators on fulfilling those commitments.

We expect a bill to be considered by the Legislature very soon and note that any funding for the Bill, SB 525, and many other bills from last year must be part of the broader budget discussion.

So, you are planning on having this 525 delay be a part of the budget process or trailer language within the budget, or is this going to go through policy?

Well, any appropriation as part of the associated with the Bill does need to be part of the budget discussion.

So, we'll have the information soon considering the fact that we have to pass the budget in like a month.

We are hopeful. Like I said, I don't have a specific date or a narrower timeline. Unfortunately, this is all the information that we have today.

Okay. At this point, we will open it up for public comment on item number two. Each individual will have one minute.

Good morning. Jack Anderson with the County Health Executive Association of California. Thank you. Good morning. Jack Anderson with the County Health Executives Association of California, representing our local health departments. I just wanted to provide comment on the CHDP transition.

CHEAC, along with a coalition including Los Angeles County and others, appreciates that the Governor's May Revision provides 24 million of the roughly 34 million of the Child Health and Disability Prevention budget to establish the standalone Health Care Program for Children in Foster Care, or HCPCFC. This does reflect an increase since January.

However, we continue to request that the full 34 million CHDP budget be used to support this transition and that the Administration delay indefinitely the CCS monitoring and oversight initiative until one they address the current funding deficits in the core CCS program and to find a more suitable funding source to fund the additional workload required to implement the CCS monitoring oversight initiative.

We also continue to request flexibility for local jurisdictions to to staff their programs as local needs inform thank you.

Thank you.

Stacie Hiramoto with REMHDCO, the Racial and Ethnic Mental Health Disparities Coalition also representing the California Reducing Disparities Project Community Partners.

I really want to thank the Members for your questions and really thank you for appreciating prevention and how these decisions are made because we are here to raise concerns about the cuts to CYBHI, the Children and Youth Behavioral Health Initiative, because that initiative was going to be a potential major funding source for programs that utilize CDEPs or community-defined evidence practices.

CDEPs have been proven to reduce disparities for BIPOC and LGBTQ populations. They are cost effective and the types of approaches or programs that people in BIPOC and LGBTQ communities prefer over mainstream mental health programs that are not culturally appropriate.

A recent study done by Loyola Maramont demonstrated that CDEPs are not only effective in keeping people healthy or even improving health, but for every dollar spent, it saved the California taxpayers between four and $5.

Thank you.

Thank you.

Hello, Cristopher Bunnell with Director of San Joaquin Pride Center and grantee of the Children Youth Behavioral Health Initiative, along with California Reducing Disparities Project out of Stockton, California. Elimination, the eliminations that are proposed perpetuate health disparities and I do appreciate the kind of questions that have been proposed and making sure that we're protecting the most vulnerable.

CYBHI is a community-defined evidence practice that has allowed my organization to serve our role in most underserved LGBT and Latin communities. With the elimination, we would need to be pulling back into our main metropolitan areas instead of going for rural counties.

Every dollar spent in prevention and early intervention are cost effective, from $1 spent to savings of $5. As been stated, the Department of Finance is open to finding other areas of reductions eliminations it is disheartening to hear that these were the first of the proposals to go after.

I'm hoping to continue to hear other areas that we would go ahead and reduce.

Thank you.

Thank you.

Yata Hay, I'm an actual Navajo Native American. I think if y'all are going to take money from us, you should actually hear from us. But when it comes to the trust from the government and Native Americans, we don't trust y'all. And if you are going to take money from anything you shouldn't take, we should be the last person on that as we've been stripped. We are literally an endangered species in our own homeland.

And so, if you're going to defund anything, I think there's a million other items on the list that you can defund other than that, especially when it comes to health services. Because when you saw from the pandemic, we had it the worst. More than anybody. We are literally about to be in an extinct species in our own homeland.

And so, if you are going to defund anything, take away any resources, we should be the very last one on that. So, I say, as my Native American folks would say to you, from my heart to all y'all. Thank you for listening.

Thank you.

Good morning. Linda Wei with Western Center on Law and Poverty. We're deeply disappointed that sheriff cost reform was not included in the May Revision. We think the proposal to eliminate MRMIP could actually fund share of cost reform.

This would not only help tens of thousands of seniors and people with disabilities, but also those losing MRMIP coverage with no other affordable health coverage option. We're also deeply disappointed with the multi-year continuous eligibility for children was not included in the budget and concerned with cuts to enrollment navigators.

Both help people keep their coverage at a time when people are being terminated due to paperwork reasons, despite every effort to contact the county. And finally, we appreciate the Committee's comments on cuts to Indian Health Grants. Thank you.

Thank you.

Good morning. Nora Lynn with Children Now. Related to CHDP HCPCFC, our coalition continues to seek the entire $34 million budget that was provided to CHDP to stand up HCPCFC. We appreciate that the May Revision figure gets us closer to this amount.

We do continue to have concerns about the adequacy of this funding to carry out all existing and new administrative-related activities for standalone HCPCFC, and this requests continued engagement with the Administration to ensure standalone HCPCFC receives adequate resources, and the programs are transitioned in a smooth and seamless manner.

We continue to urge that DHCS provide local jurisdictions flexibility in utilizing their HCPCFC administrative allocations to staff and structure their programs that best meet local needs of foster children and youth populations. Thank you.

Thank you.

Good morning. Ronald Coleman Baeza here on behalf of the California Pan-Ethnic Health Network, CPEHN. We are very frustrated that we are solely talking about cuts given the governor's intransigence to have a conversation about revenue.

We should be talking about revenue solutions in a year with an ever-growing deficit where we cannot meet obligations for the programs and services that low-income communities and communities of color desperately need. We are opposed to the cut related to Children and Youth Behavioral Health Initiatives, specifically as it relates to the community-defined evidence practices.

I align my comments with my colleague from REHMDCO. We are also opposed to the equity in practice transformation cuts. We are also opposed to the Indian Health Grant Program cuts and very much appreciate the comments by the chair. We are opposed to the cuts to health enrollment navigators as well.

We are disappointed that continuous coverage for children was not in the May Revise also share of costs. Also disappointed to see the elimination of MRMIP. Yes, we do have the ACA, but undocumented Californians cannot buy into Covered California right now. But we do think that we would be open to using the MRMIP funds for the share of cost moving forward. Thank you.

Thank you.

Thank you very much. Vanessa Cajina on behalf of the California Academy of Family Physicians, in opposition to the Equity and Practice Transformation Grant reduction. We already have a number of primary care providers who have invested in technology to help their patients in primary care and to meet their patients where they are.

With rolling this back, we think that this would be an operational nightmare for a number of our practices, and for that reason, we have to oppose this and appreciate your time.

Thank you.

Hello, Members of the Budget Health Subcommittee. My name is Tana Opliger. I'm with Californians United for Responsible Budget, or CURB. According to the DOF's May Revise report, we're looking at $2.5 billion in cuts to healthcare programs across departments this budget year, including vital programs like Youth Behavioral Health Initiatives and the Native American Health Grant Program.

Meanwhile, over in Sub Six prisons and jails are seeing cuts of only $160 million. So, I think we need to be asking, why are health cuts more than 20 times the amount of corrections cuts?

Are we planning to fill prisons with the young people who will no longer be able to receive behavioral health care because of these cuts, or with the people who will no longer be able to receive substance abuse treatment because of these cuts? CDCR currently maintains 15,000 and growing excess prison beds.

Meanwhile, as you know, the need for healthcare is ever growing. Vital health care programs could be saved if the state follows LAO's recommendation of closing five prisons.

Thank you.

Thank you.

Thank you.

Thank you. Appreciate it.

Hi again. Beth Malinowski, with SEIU of California. I just want to make a brief remark and align my comments with those of CHEAC and Children Now. Appreciate some of the movement we've seen in the May Revision from DHCS as relates to CHB transition and standing up HCPCFC's standalone program.

Would like to again see that full allocation 34 million go towards standing up that program, guaranteeing that foster youth see no loss in service. Thank you.

Thank you.

Nicole Wordelman, on behalf of the Children's Partnership. Deeply disappointed that continuous coverage for children zero to five was not included as part of the May Revision. We are hopeful that the Legislature will direct DHCS to go ahead and submit a federal waiver regardless. Very concerned about the prospect of a new federal administration.

We also are in opposition to cuts to the CYBHI, Equity and Practice Transformation Grants, and reduced funding for navigators. Thank you.

Thank you.

Chair and Members, Kathy Mossberg with the First Five Association. Would associate our comments with those made by Nicole Wordelman. Totally agree. If we could just get this waiver requested from the feds before we see potentially a difficult administration come in, that would be great.

Then we can work on administering, I'm sorry, Medi-Cal continuous eligibility for those zero to five. Apologize. We were just. We were concerned it wasn't in this proposal. We urge this Legislature to continue to work on this and to put this in before the final budget. Thank you.

Thank you.

Good morning. Yasmine Peled, on behalf of Justice in Aging. I'll align my comments with those of my colleague from the Western Center on Law and Poverty. Were very disappointed that the Medi-Cal share of cost reform was not planned to be implemented in 2025.

The deal in the 2022 budget year was to reform this program that's really inequitable and causes a lot of harm to people that are basically forced to live on $600 a month in order to get Medi-Cal services. And I don't think anyone here thinks that you can actually live on $600 a month in California.

So, we would urge the Legislature to look at all opportunities to actually implement that program reform on time, like looking at the MRMIP funds. And we're also opposed to the proposed elimination of the Indian Hiealth Grants. California has the third largest population of older Native Americans in the country. Thank you.

Thank you.

Madam Chair and Members, Dennis Cuevas-Romero with the California Primary Care Association Advocates. Opposed to the cuts of the Health Enrollment Navigator program, particularly for the clinics, appreciate the department's collaboration and work in getting that money out. As you mentioned, Madam Chair, you know, coverage doesn't equal access, and this is critical, particularly at this time.

We'll also mention we're opposed to the cuts to the Equity and Practice Transformation Grants. About a third of the grantees are health centers that have, are relying on this to provide better quality and access to care. So, appreciate further consideration. Thank you.

Thank you.

Hi, my name is Jordan Armstrong. I'm a freshman at UC Davis, and while I don't have the qualifications to go into depth about these topics, there are a multitude of people in this room who have the qualifications and those who are the Assembly Members here who have the qualifications, and they have showed that through the critical questions that they have asked you.

And I am only here to ask you or to implore you to listen to those voices in the room and listen to the voices who have spoken today. Because from what I've seen in the proposed budget cuts, there's a lot of myopical thinking and topics that need critical thinking. So please listen and try to understand what they are saying and take that into consideration when you are thinking about revising these proposed budget cuts. Thank you.

Thank you.

Hello, Madam Chair and Members of the Committee. My name is Emily McClintick and I am with the Public Health Institute. We are a nonprofit organization that supports and builds the capacity of community-based organizations across the State of California. I'm here to advocate in support of maintaining critical funding for the Children and Youth Behavioral Health Initiative.

28 community-based organizations have already been selected to receive these grant dollars to implement local-level, youth-led campaign projects as a part of the CYBHI. These funds are now eliminated through this proposal. Our team has already put in hundreds and hundreds of hours to launch the local-level component of this project, and the CBOs have been hiring and training staff, solidifying work plans, assembling their youth advisory groups, and progressing on track.

These important projects are already in motion, working with youth, parents, caregivers, and community service providers to address mental and behavioral health and to prevent a future mental health crisis in our state. Please help us to follow through with supporting youth mental health and behavioral health across California by maintaining these important fundings. Thank you.

Thank you.

Thank you, Madam Chair Members. Cathy Senderling-McDonald, on behalf of the Alameda County Board of Supervisors. Aligning those comments with CHEAC and Children Now regarding the CHDP transition and urging the provision of the full funding for the HCPCFC program and also ensuring that CCS oversight, when it occurs, is done so with separate funding that's dedicated for that at a later time. Thank you.

Thank you. And with that, we will now move to our third issue, issue number three, Department of Public Health. And you may begin whenever you're ready.

Thank you. Good morning, Madam Chair. Brandon Nunes. I'm the Chief Deputy Director for Operations at the Department. Happy to kind of run through. Looks like we're going to run through the budget solutions today. So happy to kind of start there.

The first issue on our list today, issue 254, is a Fund shift related to skilled nursing facility staffing audits we're proposing in the Governor's Budget. We had actually shifted $4 million from General Fund over to our skilled nursing facility special Fund. That was a one time Fund shift for the budget year.

In the May revision, we're essentially proposing to make that an ongoing shift to the skilled nursing facility fund. I'll pause there if there's any questions on that one. Okay, the next issue, I'll lump the next three together, issues 247, 48 and 49. This is related to both the reversion of our public health future of public health funding.

In the current year, there's a proposed reversion of $52.5 million. And then in the ongoing for 24-25 and beyond, there's $100 million proposed reduction for state operations. And then the local assistance funding that was provided to local health jurisdictions of 200 million is also proposed for elimination.

Can you please describe a little bit more the intention of the program?

Sure. So this goes back to funding that was put in the budget in 22-23.

We worked very close when the Legislature put that funding in, we worked very closely with a number of different stakeholders, local health jurisdictions, union groups, SEIU, et cetera, along with the Department, to kind of come up with a plan for how that $300 million would be spent.

And we focused on from that plan and how the funding was allocated. We focused on six core areas. Workforce development was obviously a large area that was focus for at the both the state and local level. So we look to expand and enhance the public health workforce to ensure adequate capacity and specialized skills across various health domains.

Of course, coming off of COVID we looked at emergency preparedness and response. So another focus of the funding was to strengthen systems to rapidly identify and respond to public health threats. It and data science. We obviously were coming off of COVID with a lot of different legacy systems, etcetera.

And so we took a look at our IT and data science infrastructure. And again, another focus of this funding was to modernize IT infrastructure and improve data collection, data sharing and analysis community partnerships is obviously important between the state and local health jurisdictions as well. So, as well as our CBOs.

And so looking to use this funding to forge and sustain partnerships across various sectors to amplify the impact of public health programs and various initiatives, we also looked and communication was also important during the pandemic.

So we looked at ways to enhance our communication efforts, both how we communicate with local health jurisdictions, but also how we communicate with the public on public health issues. And then finally we looked at community health improvement, focusing on systemic public health improvements through community engagement and targeted intervention to address social determinants of health.

So when the group got together, back when the funding was originally put in, we used these six principles as kind of a guiding factor, and then allocated the 200 million to the local health jurisdictions. And then we focused on certain areas with the 100 million for state operations. I hope that helps kind of provide some framework.

Can I make some comments about that? This actually goes back even further. There was a request before and then that was put off so that more money could come forward as this 300 million you're talking about. There has been workforce that has been hired.

My understanding is, so that means that this workforce will now be forced to go away or local jurisdictions will have to pay for it. Is that the intent?

There will be some decisions that have to be made on workforce at the.

State level, which means that jobs will go away. That's usually what that phrase means.

I know at the state level we're looking at vacancies within our Department to see if we can't shift some of these into. But at the local level, there were about 13 to 1400 positions that we're looking to be hired.

So that will likely go away. So I guess my bigger overall questions are going to be, so we just went through COVID. Our local public health program programs were devastated. They were actually underfunded for years going into it. They weren't prepared. Nobody was prepared. So now we've got rapid, we had some rapid response.

We had some, we recognized we had some huge IT problems. A lot of local jurisdictions in my district were working off of Excel spreadsheets and we're looking at contact tracing. So I know that the Cal connect programs is supposed to be cut as well. And forging some of those community partnerships.

I start thinking about some of our harder to reach communities, like our Native American communities who suffered really disproportionately in this crisis. So just today, pictures here. Press Democrat Santa Rosa Mendocino county reports hot rise in Syphilis and HIV cases. Times of San Diego.

After a five year respite, San Diego County sees third case of measles in 2024, about 200 people exposed to measles at UC Davis. Hepatitis A is spreading among the homeless population. And May 10, just a couple of days ago, potential measles exposures at two Eureka locations in my district. Are we not anticipating we have Avian flu.

We have a variety of things, yet we are going to decimate our community, public health programs further going backwards, are we? Do you have a crystal ball that says we're not going to have any more things happening?

No.

In any world. Does this make. I'm curious what the LAO thinks about this. Does this make sense in the real world or we want to go backward? What happens if there is another COVID? Then we have gone backwards. We are then even less prepared because a lot of these opportunities have passed us by of anything.

I'm frustrated, see if I live my life in perpetual frustration these days. But this one really hurts. It just doesn't make any sense from my perspective. You know, some of our locals were starting to use the Cal Connect program as a way to trace other, other things other than COVID. It's a really valuable tool.

One of my public health departments consists of one person and one nurse. That's not a lot of infrastructure for a county that made 80,000 people. We're not LA, we're not Oakland, we're not some of these other areas.

And so the amount of infrastructure funding is pretty minimal to help build up some of our programs and things like the IT could be really, really valuable. You know, Humboldt County has a very low vaccination rate for measles. I'm a little concerned that that exposure might lead to a measles outbreak there.

And we have the ability to use Cal connect now to help with some of the tracing of that. But when you eliminate it, it happens. Two years from now, we're not going to have that. And so we're back to excel spreadsheets again and phone calls and such.

So it kind of goes to the point of when we're looking at, when we're looking at things to cut. This is a big line item, but is anybody thinking about what the future means? Like I said, do you have a crystal ball that says we're not going to have another pandemic? COVID's still out there.

There's looking at a potential, another uptick, you know, that showed up just recently. Help me understand how this decision was arrived. This decision for these cuts was arrived at.

Help me articulate and I don't want to hear, well, we're in a tough budget year because I know we're in a tough budget year, but articulate that the amount of money we spent on COVID response and we're still spending was pretty dramatic. We could have been better at our surveillance potentially.

We could have been hopefully better at identifying this early on. And it just feels like with these cuts, we're just going to go backwards and pretend like none of this ever happened, put our head back in the sand and hope that we don't have another pandemic.

So help me understand how decisions like this make sense other than the fiscal piece of it, because I don't see it. I don't see it at all.

Good morning. Nick Mills, Department of Finance. The administration's proposal does maintain funding for the base level of services that existed for state and local health departments before these additional investments were made.

Base level funding, it was inadequate. The purpose of this funding was to build up infrastructure. The base funding was inadequate. That's why this came to be. That's why we fought so hard for this. The base hit funding was inadequate to begin with.

I would also note that the May revision maintains base funding for for critical infrastructure such as $26.9 million and 24-25 for maintenance and operations for the Sapphire system to continue to receive and process lab data for over 80 reportable health conditions.

Additionally, the May revision does maintain $61.8 million in 24-25 and $54.9 million annually thereafter for the maintenance of IT operations for disease surveillance readiness, which allows the Department to develop and deliver IT systems to support response to COVID-19 and other future disease outbreaks.

But none of these decisions were made lightly and reflect tough and difficult choices to balance the budget as required.

Yeah, well, I. Can you describe the disease surveillance program?

Is this on? Okay. Christine Cherdboonmuang, Department of Finance. I actually wanted to also address your earlier comment about Cal Connect and just wanted to correct for the record that Cal Connect is not being discontinued.

It was not allocated General Fund in budget year, but the Department has identified to start with $11 million in federal funds in budget year and another $11 million in budget year one to contribute to the cost of the program. And we are looking into additional federal funds.

The Department has identified about $134 million in federal funds to continue the maintenance and operations and development of four different disease surveillance and registry programs. And we are aware of other federal funds out there. So we are just, you know, in the process of exploring all of the available funds.

We don't want to leave those federal funds on the table and want them to be utilized to continue these programs.

Well, I apologize. We're, some of what we have is pretty scant on details, and so I wasn't quite aware of that. And I think we're trying to piece together some of the details. So I appreciate that. That at least we're looking for funding for Cal Connect. I believe it was $30 million to maintain the program.

There's additional federal funding. That is a tool that locals use. So that is separate. That is separate from the disease surveillance program you're talking about? Correct.

Which disease surveillance program are you talking about?

The one you were talking about? About surveillance readiness response, I believe.

Oh, yes. That appropriation is for a combination of programs that was authorized in 2022 and is an annual appropriation of $61.8 million, of which we are reducing. So we're reverting savings of $3.8 million in current year.

In working with the Department, we actually withdrew any cuts in budget year and are just doing $6.9 million in cuts annually after that and out years starting in fiscal year 25-26 to address some of the concerns about the impact on current contracts and other things that have already been planned for a budget year.

Okay, well, thank you. And I just want to one, I guess, kind of a final question to our presenter. Do you feel comfortable with these budget cuts, the way they're going and the investments that were going to be made for public health that will be ready for a pandemic or some major health event?

Do you feel comfortable that cutting these hundreds of millions of dollars from public health infrastructure will still leave us ready to be on top of our game to respond to the next pandemic or series of things that are happening? As I read off, that was just today. Those were just today's headlines. So all public health related.

All public health. So you feel like these cuts are still going to leave us in a really strong position to rebuild our infrastructure for public health?

I think sitting in the chair of the Chief Deputy for operations, I think that's definitely a conversation that we'd like to have with our Director. I think, though, it's plain that obviously the reductions will have an impact on our preparedness. That's something that we're going to have to balance in light of the budget situation that we're in.

But we're also going to have to take a look at opportunities such as the federal funds the Department of Finance mentioned to see if there's ways to bridge some of those until we get into a potentially better situation, but there's no doubt that it's going to have an impact to our preparedness.

So we will not be as prepared because we're not going to be investing in our public health infrastructure

But we'll be working on ways to try to mitigate that. Again, looking at other federal funding sources, et cetera.

Okay

LAO.

Yes. Will Owens with Legislative Analyst Office so, specifically on the proposal to reduce, or rather eliminate the future of public health funding, so generally, our office has recommended that the Legislature looks to recent one time and temporary initiatives to prevent cuts to core services.

However, this funding solution does deviate from other proposed solutions in that it does in fact impact core public health services. As Doctor Wooden mentioned this $300 million, $100 for the state and $200 for local health jurisdictions. This is funding that was meant to bring public health funding up to a baseline level to meet minimum service.

This comes after, as found in the working group report, after decades of declining and or stagnant funding for public health systems, as well as kind of a patchwork funding approach, pooling federal dollars and other special dollars, kind of creating an inflexible system that made it difficult to respond to emerging public health needs.

So given the kind of programmatic and planning efforts that have already been underway that have been funded by the future of public health dollars, in particular, there have been a number of increases in the public health workforce at the state and local level.

A reduction in funding could lead to serious disruption in the public health system following the first year of funding for the future of public health. For fiscal year 2022-23 approximately 66% of local hires were already made.

So a reduction in fund now could severely disrupt the public health workforce and leave the state vulnerable to another crisis and struggling to meet just baseline current public health needs.

The Legislature in particular may consider looking to other areas in the budget to preserve this core service funding level, and our office is available to assist in identifying alternatives.

Thank you. I think we all stand corrected here because, you know, we were thinking about how is this going to help prepare us for the future, but what we're asking for is to actually just be prepared for today.

So ask this of the previous panel and hopefully you all have some other answers as to the thought process when you're again taking into consideration where you're going to cut, reduce, eliminate what that would mean.

So what is the assessment that you all have in terms of the consequences of eliminating this funding on the state's preparedness to, to deal with current issues and potentially future public health threats like our next pandemic so when you were at your table deciding what you were going to cut, what are we going to do?

Because I'm sure you all thought about it like you had to think about that when you made this decision. So how, what are you, what are your proposals on how we deal with what is currently here, as Doctor Wood said, and what is unfortunately going to come, just given the way the world moves today.

Okay, so clearly that wasn't thought the Governor came out with the smarter plan when we were supposedly coming out of COVID How does this proposal align with his smarter plan?

A little bit of a different funding stream, if you will. A lot of this was a lot of the $300 million that we've been talking about was to focus on areas where we didn't have funding and kind of building up that capacity, et cetera, that we just kind of talked about.

The smarter plan was really addressed with COVID resources that were provided to the Department. I think some of the funding that we received is for the most part, gone in 23-24 I think, with some reversion items there. But we did have some funding for Safire and other systems that were ongoing.

And so some of those resources for particularly COVID and other emergency response preparedness are still there, funded through kind of a COVID funding stream.

Yeah, but I think one of the foundations of the smarter plan was to ensure that we are prepared for things in the future. And so, you know, understanding COVID is still around, but the next thing will come.

And so, you know, as a provider, I was actually impressed when he came out with this, because it's not just focused on COVID. It's a recognition that we as a state need to be prepared for what we're dealing with today, but also for the next pandemic.

And so how are these cuts helping prepare us for the next pandemic and the one after that? And the one after that?

Yeah, I think this funding is used, and obviously we'll have conversations as we go through the budget process on kind of where we ultimately make reductions.

I think this would have kind of augmented some of those efforts, particularly in where we put funding resources related to kind of enhancing some of our emergency preparedness in our regional public health office.

We established a regional public health office with these funds that help kind of build those relationships between us and the local health jurisdictions, and particularly on communications. So it's clear that some of this would have gone to enhance those efforts.

And just, I know Doctor Wood asked about this before, but I just want to make sure that I understand. So the positions that have been hired based on these funding, now that the proposal is to eliminate the funding, what is happening with those positions?

Where is the money going to go come from to continue to Fund those positions.

Say, at the state level that we're, you know, it's definitely something that we're going to have to look at. We do have vacancies in other areas of the Department. We have about 5000 positions Department wide. This is roughly 400 of those positions. And about 80% of those roughly are filled. So 320 or so positions are filled.

So we'll definitely be needing to look at opportunities to transfer folks into maybe some other areas of the Department. We also have some other federal funds that we may look at how we're prioritizing those federal funds and be able to utilize and pay for some of these resources with those federal dollars as well.

Still kind of early on, but those are some of the immediate Low hanging fruit type things we're looking at.

Okay, so you, so you have vacancies in other areas. So we couldn't take some of those vacancies and keep these current positions since you don't have people working. Yeah.

And I think really it's, you know, we have a lot of different centers, divisions and offices, a lot of different programs. Right. And so it's not really, that's going to be part of the challenge here. It's not also a one to one kind of match.

We have a lot of people, for instance, 1200 or so in our Center for healthcare quality. Most of those are health facility evaluator nurses. It's not going to be a clean fit to move folks over into a nurse evaluator position.

So we're going to have to look at some of the General classifications, look at, again, some of the federal funding that we might be able to use to backfill some of these, like we're talking about with the federal systems like Cal Connect, et cetera.

But we're still kind of early on on how the shuffling is going to work.

Yeah, I guess if you have a vacancy in one area, let's say you have 100 slots and only 50 of those are filled. You just take those 50 other slots and say, okay, we're going to take these and we're going to make this one whole over here.

You mean shifting over to this? Yeah, it's difficult because again, this was a General Fund. Right. Which provided us flexibility to do the things that you're mentioning. Some of these slots may be funded with special funds that have very specific purposes behind how those special funds are used.

And so by statute, we can't really use it to backfill these positions for the most part. There may be, again, some generalist classifications that it might fit to move people into, but it won't be a one to one.

Okay. Again, I think we are completely off with this one.

If we start to go backwards and revert back to the initial funding that we had, which was clearly inadequate, as Doctor Wood pointed out, but also the LAO pointed out, we will be putting the residents in California at significant risk in terms of the next public health crisis.

And if we're looking at finance from a financial standpoint, the cost when the next big virus or whatever hits is going to be astronomical to try to get us back to that point, in addition to treating and caring for all of the individuals that we could have prevented from getting whatever the next virus is.

You know, when you go back and you reevaluate this proposal again, I think you should not only think about, you know, the lives of the people that you would be impacting, whether it's jobs or, you know, creating another major public health crisis up and down the state, but also just the amount of money that we would have to spend urgently when that next pandemic comes.

Yeah, just one more comment, because this is money that's meant to get these public health departments back to baseline, just functional. Essentially, there are just a lot of emerging public health diseases in this state that constantly need to have surveillance.

And so without even the basic level of funding, to not know what's going on in a community and be able to track that and protect residents, the amount of money that potentially is spent on the treatment for these conditions, that may lead even to morbidity, people may die.

This is, almost, in my mind, kind of a poster child for prevention and not. And not spending money in a prevention. This is basic disease surveillance. And to think that we want to repeat history and not be ready for the next or even the current emerging challenges, the rise of STD's in this state is alarming.

It's absolutely alarming. And those lead to significant medical costs and that there are often people who don't access medical care until it's much later in the process. So, you know, this whole concept, I hate this phrase I keep using as pennywise and pound foolish. It just doesn't make. It doesn't make sense.

And so I'm sorry to be so animated about this, but this is fundamental, basic stuff. Baseline, baseline funding to protect people in the public, to let them know when there's been an exposure of something. Thank you, Madam Chair.

Thank you. Did you have anything else to present?

There are a few more items here, if you want me to run through those. So our next item is item 250, an elimination of the Office of Oral Health General Fund backfill. At Governor's Budget, we had a backfill of $4.6 million to make up some of the difference in funding shortages in Prop 56.

That was a one time reduction at the time, or, sorry, one time backfill at the time. The May revision proposes to eliminate that particular General Fund backfill and just live within the Prop 56 funding that's provided.

So it's an elimination and not a reduction?

It is a reduction because there is still roughly 24 or so $1.0 million left from the Prop 56 oral health funding that's provided.

This is eliminate Office of Oral Health General Fund backfill. So you have backfill?

We do. So to get us, and I don't know if you want to, but to get us to. I may get this wrong, but to get us to the $30 million that is required in property, there was a back of the profit, the six shortage.

So Department of Finance at the time provided an additional $4.6 million to get us whole. Essentially, that is what is coming out. So it is. It's a reduction, not a full elimination of the program? I don't know.