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

Good morning, everyone. We are going to call the first Budget Subcommittee on Health and Human Services to order. Before I begin, I want to thank Pro Tem McGuire for this position, and I look forward to working with this committee, its staff, and all of you on the many critical issues that we will address this year.

Today we will be covering the Department of Health Care Service items in the budget. I anticipate that this hearing will take less than two hours at this point. In order to meet this goal, I hope that the department will keep their comments quick in order to facilitate more time for questions and also input from the public.

We will solicit public comment after the completion of the presentation items within the agenda at which time the public may comment on any previous items. And so we will begin actually by not starting with the Opioid Settlement Allocation Fund at this time, but starting with the overview of the Department of Health Care Services.

Good morning, Chair. Apologies for being late. Michelle Baass, Director of the Department of Health Care Services, here to provide for Issue One an overview of the department's program and budget. The Department of Health Care Services administers the following programs.

Medi-Cal our largest program covering just under 15 million members in California, Behavioral Health--so this is community mental health and substance use disorder services--primary and rural health programs, such as the Indian Health Program, American Indian Maternal Support Services, and Tribal Emergency Preparedness Program, and a variety of other programs in the family health space, the Genetically Handicapped Persons Program, California Children's Services Program, and Every Woman Counts.

The 2025 budget, Governor's budget proposal for DHCS includes a total of 193.4 billion. This includes 192.1 billion in local assistance to support program costs and 1.3 billion to support state operations. Our budget includes a proposal for 4,821.5 positions.

Some of the major issues and proposals that are part of the Governor's Budget that I know will be part of today's later agenda and subsequent hearings: the Managed Care Organization Tax and Proposition 35, the Behavioral Health Community-Based Organized Network of Equitable Care and Treatment, our BH-CONNECT waiver which we just received federal approval in December of 2024 and this is a new 1115 waiver that is authorized from January 1st, 2025 to December 31st, 2029, and that the goal of this waiver is to really expand our community-based behavioral health continuum.

A key component of BH-CONNECT is the $1.9B in workforce dollars that are under the Department of Health Care Access and Information as they will be administering that program. That concludes the overview.

Thank you. Are there any comments from LAO or DOF?

Jason Constantouros, LAO, available for questions.

Isabella Alioto, Department of Finance. Nothing further to add, but available for questions as well.

Thank you so much. Seeing no questions from my colleagues, we will move actually back to the Opioid Settlement Fund allocation and have that presentation before we continue. Thank you so much for joining us this morning. Would you like to provide any comments on this particular request?

Lizbeth Castillo with the Department of Finance. No comment from me at the time.

Any questions? Senator Menjivar.

Thank you, Madam Chair. To the department, I saw maybe earlier this week in your weekly newsletter you announced a meeting that you had yesterday that talked about the expenditure report on the settlement from years 22-23 if I'm not mistaken. A couple questions. One: why a report expenditure so far back out? And then we've always asked how much we have in that fund. I'm wondering, given that you just did this report, if you have an up-to-date number on how much is in the Settlement Fund.

We can get back to you with that information.

Can you just share--because I didn't have the opportunity to join this hearing yesterday--could you share a little bit, some remarks or some, the gist of what you reported out?

Paula Fonacier Tang, Department of Finance. That, the annual expenditure report is something that DHCS puts together, but we're happy to share information about the proposal or the current amount of OSF revenues. I think as of 24-25, the state has received over 300 million in Opioid Settlement Funds and we anticipate to receive over 750 million overall, but that is--the settlements are paid out annually, and so, that's throughout our anticipated payments that are coming in year after year.

Okay. And has the department thought about or are there any other creative ways that we can utilize the fund for?

Our proposed usage of the funds is outlined as part of our Governor's Budget proposal.

Okay, thank you.

So DHCS is requesting expenditure authority from the Opioid Settlement Fund of 8.4 billion to support expansion of the Naloxone Treatment Program, is that correct? Okay. And are you aware that CDPH is also requesting a reduction in their expenditure for the same amount of money that would go for the California Harm Reduction Program?

Lizbeth Castillo, Department of Finance. Yes, we are aware of that.

Okay. So when you look at the data, it shows that according to DHCS, the harm reduction sites were responsible for--the harm reduction programs are responsible for about 57% of reported naloxone reversals in California as of February of this year. So why would we potentially take money from that program to give it to the Naloxone Reversal Program when that program seems to be, at least per data, doing a better job of saving lives?

Lizbeth Castillo again with Department of Finance. The administration has decided to reevaluate its expenditure plan of the Opioid Settlement Fund and determined that the Naloxone Distribution Project was an administration priority and the proposed funding would allow the state to purchase additional naloxone to distribute to communities in need of the resources.

Right, but the data shows that it's actually the California Harm Reduction Program that has the more significant impact on saving lives. So why would we take money from that program which is showing a benefit?

Perhaps I can also explain the difference between the Harm Reduction Program and the Naloxone Distribution Project. So the Naloxone Distribution Project is administered by the Department of Health Care Services, and it essentially allows the state to purchase naloxone at a reduced cost, and this naloxone is then distributed to eligible health entities and community organizations free of cost to then distribute to--to be distributed to communities in need of the medication.

The Harm Reduction Program is connected in a sense where it supports the staffing of California syringe services programs to distribute sterile syringes and naloxone, so essentially the Naloxone Distribution Project funds the purchasing of naloxone, and the Harm Reduction Program is administered by the Department of Public Health to support the staff distributing the naloxone. So essentially both are connected through the Opioid Settlement Fund.

Exactly, but you do need the staff on the ground that's actually going out to these individual sites to provide the naloxone, correct? And they get that with the Harm Reduction Program.

Correct. The Harm Reduction Program is one program that administers the naloxone.

On the ground.

And Chair, if I may, Paula Tang, Department of Finance. So the funding that we track from Opioid Settlement Funds is for the state-directed purposes, but we'd like to note that there is funding that goes directly to cities and counties, and according to that same expenditure report that Senator Menjivar had mentioned, majority of that funding for cities and counties are going towards harm reduction activities, and so for those reasons, the Governor's Budget proposal intends to focus on the provision of free naloxone.

Thank you. It just seems a little backwards to me when you have data that shows that there is a program that's actually working better to save lives, to remove funding from that to use it for another. And even though they may receive naloxone from that, there are a lot of other entities that get it as well. So before we go on, I would like to establish a quorum. Can we please call roll?

[Roll Call]. We have a quorum.

Thank you. And so staff actually is recommending that we reject this proposal from the Department of Health Care Services. Do I get a motion?

Second. Do I need to move?

Okay.

Oh, I need to move it. Move the motion.

Okay. Call roll.

[Roll Call].

Chair, if I may? For the record, that Administration does not support the committee's action and continues to support the Governor's Budget proposal.

Thank you so much for that. We will now move on to Issue Number Two with Medi-Cal Local Assistance Estimate. Thank you.

Excuse me. So, providing an overview of the Medi-Cal Local Assistance Estimate, for the current year, the November estimate projects 174.6 billion total funds, 37.6 billion General Fund for Medi-Cal. This represents an increase of about 13.7 billion total funds and 2.6 billion General Fund compared to the Budget Act of 2024.

The main drivers of the current year changes are 2.7 billion in increased costs related to members with unsatisfactory immigration status. This increase is primarily driven by higher than anticipated enrollment and an increased pharmacy cost. Five hundred and forty million in higher pharmacy expenditures--this is beyond the growth that I just mentioned for persons with unsatisfactory immigration status.

Similar to other state Medicaid programs, California's Medi-Cal Program has experienced a notable increase in overall pharmacy expenditures. 1.1 billion in increased costs related to redeterminations that are, that were part of the public health unwinding and those are smaller than estimated, and then one billion in reduced spending due to the MCO tax.

For the budget year, the estimate projects 188.1 billion total funds, 42.1 billion General Fund. This represents an increase of about 13.5 billion compared to our revised estimates for the current year. The main drivers of increased General Fund include 3.6 billion in increased costs due to the changes in the availability of the MCO tax and after the approval of Proposition 35, 215 million increase in pharmacy expenditures, and then just kind of a net number of about 270 million related to growth in average managed care rates, changes in projected enrollment, among other smaller items.

Thank you. Any input from the LAO or DOF?

Available for questions from the LAO.

Isabella Alioto, Department of Finance. I have nothing further to add. Thank you.

Thank you. Any questions? All right. I did have one question, just reading through my material. It says in 2025-26, the budget assumes annual Medi-Cal caseload of 14.5 million, a decrease in beneficiaries. Why is there an assumption of decrease in the future when what we've been seeing is a steady increase?

So as part of the Governor's Budget, we will be essentially sunsetting some of the federal flexibilities that were in place related to the redeterminations process for the public health emergency, and those will end at the end of June 30th, 2025, and so as a result, we anticipate some of those were kind of automated flexibilities and those will be sunsetted. And so as a result, some of just the kind of the redetermination process, we anticipate higher disenrollments.

Okay, thank you for that. All right, seeing no other questions, we can move on to Issue Number Three: Family Health Local Assistance Estimates.

Okay, so overview of the November 2024 Family Health Estimate: for the current year, the estimate projects about 269 million total funds, 230 million General Fund for state-only components of the California Children's Services Program, the Genetically Handicapped Persons Program, and the Every Woman Counts Program.

This represents a minor decrease of about 6.7 million compared to the Budget Act. The decrease is primarily driven by reduced claims in the Every Woman Counts Program. For the budget year, the budget--the estimate projects 271 million total funds, virtually, essentially flat compared to the current year projections.

To speak just a little bit about the different caseloads in the Family Health Estimate, the CCS or California Children's Services state only caseload is projected to increase in the current year and remain flat in the budget year. The Genetically Handicapped Persons Program is projected to decline modestly by about 4% compared to the current year.

And the number of members utilizing Every Woman Counts services is projected to decrease by about 22% in the current year. And this is primarily a result of individuals having access to full-scope Medi-Cal regardless of immigration status. One of the questions in the agenda was regarding CCS Compliance, Monitoring, and Oversight Program, wanting to provide an update on that.

The department has done some extensive work with the counties over the last three years to build out the CCS Monitoring and Oversight process to meet the requirements of AB 133 from 2022.

We've worked closely with the counties and stakeholders to develop the process, hosting various work group meetings from January 2022 through June 2023. We've worked in collaboration with the work group to draft the MOU to memorialize the agreement pertaining to monitoring oversight of its existing requirements for the CCS Program.

A draft MOU was made available in September 2023, updated in October 2023 to reflect the feedback that we'd received from our counties and other stakeholders, and was finalized in June of 2024. Counties are to return their signed MOUs to DHCS by June 30th of this calendar year for a July 1st implementation date.

We've previously pushed back the implementation date from January 1, 2024 to July 1, 2024, and then now to July 1, 2025. Counties, we recognize, need time to get their MOUs through their boards of supervisors, and so this delay was intended to support that process.

The department also provided counties with full annual funding allocated for CCS maintenance and operation administrative funding activities--excuse me--in 24-25, this is about $10M to fund readiness activities such as developing grievance policies and procedures, developing processes to prepare for reporting requirements, and providing new training developed for county CCS M&O.

As of today, five counties have returned their signed MOUs to the department, and again, the MOU really outlines county and state DHCS roles and responsibilities. Counties will be offered technical assistance training beginning this spring on the reporting templates that were released back in March of 2024, and all counties have submitted a copy of the respective proposed grievance processes for our review and approval.

I think I will just note that there's about ten million in dollars that was allocated to counties for CCS M&O, and this is related to the sunset of the Child Health and Disability Prevention Program, so using those dollars to support these activities now under CCS. Thank you.

Thank you. LAO?

Available for questions.

Department of Finance?

Department of Finance. Nothing to add.

Thank you. Questions?

Director, I know you just mentioned the last part; I think kind of answer one of the questions I had regarding how did we get to the ten million and how did we get to the methodology to assume that this money was going to cover the extra workload for the counties on CCS?

So I think we worked with the counties on kind of that that component of what was available under CH--the Child Health and Disability Prevention Program and kind of work through--and I think there's other kind of concerns raised just generally on CCS funding and kind of allocations and methodology, and so I know that we are engaged with the counties in that part of the conversation as well.

In this engagement with the counties, is the door open to see if there's going to be additional support coming down or are we evaluating the workload to see if this is sufficient enough to proceed with CCS in an adequate manner?

So I think kind of two pieces: there's just regular CCS Program operations and then this kind of new piece of M&O, which are really existing activities that are just formalized through this MOU process. And I think comprehensively, we are engaging in kind of trying to work through what is the workload, how are these workloads, assumptions built in, when were they kind of established, and are there further refinements that might be needed?

And then outside of the funding piece, I can imagine you've heard some of the counties' challenges around like service authorization requests or space for the Medical Therapy Program. Can you explain the department's role in undertaking some of these issues and a timeline to address some of them?

So on the space, really working with the Department of Education as they oversee special education, kind of the uses of that space. So we have had some conversations with them, but that is an ongoing kind of topic that definitely needs more engagement, and it's just we don't have direct authority in that space.

Do we think that's why the timeline was pushed back?

For the M&O? In terms of...yeah. That's just more operations of the CCS Program recognizing that local health jurisdictions need the space to do some of these activities or, you know, the providers, and so how do we ensure that they have the space at schools, for example, to do these activities?

Through the Chair, with her permission, I'd love to hear down the line when DHCS comes back to us. Just an update if possible, Madam Chair? Just on the CCS conversations and how we're streamlining or addressing some of those issues, Madam Chair, if that's possible? I have one more question, Madam Chair. Director, maybe a point of privilege here.

We did send a letter to your office on CCS. Some of the concerns that we're hearing from constituents who navigate the system is the website, the website perhaps not being user-friendly. What can we do to look at that and just streamline people's understanding what they're eligible for through that website?

So our teams are looking at that and hope--we will respond with a specific timeline for changes and a proposal. I don't have that available today, but we are, our communications team and program team are looking at this.

Thank you, Director.

Thank you, Senator Menjivar. Director, I want to continue to kind of piggyback on the line of questions from Senator Menjivar around CCS and the MOU and more specifically around the issue of staffing. So how does the funding allocated to county CCS programs compare to the funding requested by the counties based on their staffing needs?

I don't know that I have the specific differential in that space, but that gets to the way the formula was developed. It is a bit old, and I think that's one of the things that we are looking at in terms of how this should be calculated, given kind of the current understanding of the program. The formula is--I don't actually know how old it is, but it hasn't been updated in a while.

Okay. So if the formula hasn't been updated and we're basing the funds for staffing based on an updated formula, and we want the counties to sign an MOU that would require them to do certain things or to meet certain goals, but if they don't have the staffing that they need, why would they sign it and how would they be successful?

That's part of these conversations that we are having with them in terms of--many of the activities except the grievance process are already things that they're doing today, so the MOU is really just documenting those roles and responsibilities, and so I think there's kind of two pieces there, recognizing just basic program infrastructure and needs and that's the conversations that we're having with them. And then this MOU is really just a kind of a more of a memorialization of some of the activities that they undertake today and that we undertake as well.

So the MOU does not necessarily monitor the performance of the specific programs because performance is based on staffing, some of the other challenges that they have addressed that I'm not sure have been answered. So we're not looking at those things in the MOU?

Well, the MOU really does--it documents what each entity's responsibilities are, and so, you know, performance clearly is, would be: are they meeting their obligations as they are required under law today?

Right, but if they've been saying it's hard for us to meet those regulations because we need more staff or changes in, you know, equipment or other issues that they've addressed, how is it that they are going to be able to fulfill whatever requirements are in the MOU if we have not updated our staffing calculation formula to address current needs?

I think we're continuing to have the conversations to understand their needs. I think the teams have been working collaboratively to try to have a clear understanding and understand when the dollar requests are coming forward, those are based on an old formula that don't necessarily reflect, as I understand it, the updated requirements and the needs, and so the teams are trying to work to ensure that everyone is on the same page about what those requirements are so that we can accurately say this is what the funding level would need to look like.

Okay. So there's no surprise to you that only five counties have signed it and the vast majority of them have not signed? Since you're still working on the formula.

I mean, you know, this has been kind of, it's required under statute to move in this direction and so trying to really get folks in a place to be ready, we've been working for the last couple years on this.

Okay. All right. Well, I have heard significant concerns about the lack of addressing the needs of the individual counties to actually meet these performance metrics. However, they are being asked to sign a document that would tie them to doing something that they actually cannot do.

So I am hopeful that these conversations continue and actually kind of speed up to come to some resolution so that everyone feels comfortable in signing off on these MOUs and moving forward. Seeing no further questions, we can move on to Issue Number Four.

Good morning, Chair and members. Lindy Harrington, Assistant State Medicaid Director at the Department of Health Care Services, here to present on the value strategy for hospital payments in Medi-Cal Managed Care.

At the start of calendar year 2024, DHCS operated 11 Medi-Cal Managed Care supplemental payment programs that were specific to hospitals totaling nearly $14B of total funds annually. In most of these programs, the non-federal share is financed by fees or other contributions paid by hospitals rather than relying on state General Fund.

Building on previous increases for calendar year 23 and calendar year 24, we grew these supplemental payment programs by roughly $9.4B total fund for calendar year 2025, subject to federal approval to help sustain California's hospital and safety net systems.

In addition to the 24-25 budget--in addition, the 24-25 budget appropriated state General Fund for new programs to children's hospitals effective July 1 of 2024 and to Martin Luther King Jr. Community Hospital effective January 1 of 2026 with estimated payments of 230 million total fund and $25M total fund respectively.

Subject to federal approval, DHCS anticipates approximately $23B in Medi-Cal Managed Care supplemental payments to hospitals for calendar year 2025 service dates. The net benefit realized by hospital--by the hospital industry from these supplemental payments is estimated to be roughly $15B because of how they are typically financed using those fees and intergovernmental transfers.

Our proposal is that these hospital payments represent a tremendous investment into hospital care for Medi-Cal members with associated opportunities, challenges, and obligations. To ensure that they remain appropriate, approvable, and sustainable going forward, we must comprehensively review hospital state-directed payments to explore, identify, adopt, and maintain new approaches.

To meet these challenges and opportunities, DHCS requests 29 permanent positions and contract resources to develop, implement, and sustain a comprehensive value strategy for straight-directed payments to hospitals in the Medi-Cal Program's Managed Care delivery system.

The focus of the value strategy will be on achieving improved, sustainable levels of Medi-Cal reimbursement for hospital and health system services relative to other payers, advancing appropriate incentives for care delivery that support the economic and efficient provisioning of services, Medi-Cal members access to care and improved member health outcomes, aligning with Medi-Cal's Comprehensive Quality Strategy and leveraging state-directed payments to advance population health, quality of care, and health equity for Medi-Cal members, and the continued ability to certify these state-directed payments for federal approvability as federal rules are changing.

We anticipate taking a phased approach with developing and implementing the value strategy which we propose to publish by March 31st of 2026. Preliminary work during 2025 can help inform some changes for calendar year 2026, but broadly the value strategy will lay out milestones for transforming state-directed payments over a multi-year horizon to make sure that both DHCS and hospitals have sufficient runway and capacity to ensure smooth transition and innovation.

We have also proposed trailer bill language that outlines the goals of the strategy and makes necessary technical changes to state law to allow special funds contributed by hospitals to be used for the proposed purposes.

Thank you. LAO?

We have not raised concerns with this specific proposal and the overarching objective of the proposal, which appears to be to better streamline the many existing managed care payments to hospitals, this goal seems reasonable to us.

That said, we would note that the scope of the proposed comprehensive value strategy is fairly broad and you know, potentially could benefit from a little bit more enhanced legislative input and oversight, particularly given the number of positions sort of involved.

The Legislature could work collaboratively with administration over the coming months to maybe hone some of the goals of the--and specify the--further specify some of the goals of the strategy and also, you know, more establish some of the parameters of what would be reported in the report due at the end of March of next year and we'd be happy to also work with the committee to develop that if that was of interest.

Thank you. Department of Finance?

Department of Finance. Nothing to add.

Thank you. Any questions?

Two questions. I don't know if this is an assumption, but you know, we've been dealing with the seismic issue of hospitals, and in doing this program, could you say that the good unintended consequences is freeing up some ability for hospitals to then have the financial capacity to do their seismic upgrades if we're helping streamline the MCP's payments and so forth?

I don't think we can clearly say whether or not that would be how hospitals would be able to utilize some of these additional funds. We're really looking to ensure that we are providing sufficient resources to provide the access to the services that we need for Medi-Cal members.

One of the things that--for example--one of the things that we have looked at and in fact are making a change in this current year for a subset of our hospitals is looking at as we make those state-directed payments, how are we aligning the incentives to ensure that particular lines of service are remaining open?

So for example, we're making an adjustment so that for labor and delivery services, they get a higher supplemental payment than other days so that we can look at some of those acuity, and so that's part of the work that we want to be able to do is really focus on creating incentives for access to care and quality outcomes associated with these payments. So it's not necessarily directly looking at that, but it's how do we bring additional resources in to ensure hospitals have the capacity to provide the services.

And in the report we're going to be getting next March, you believe that will capture the outcomes? Did we see increase in quality of care or did we see an increase--

So the report that we'll be coming out with is more--it will not have outcomes at that stage because it's really aligning and setting up what is that multi-year vision for how, what are we looking to accomplish? How will we move forward? What are those phases look like and making changes to the directed payments?

These are large dollars and so it's difficult to make swift changes to how we issue those payments and we want to ensure that we're working collaboratively with our hospital partners so that we're not creating unintended consequences.

So we're thinking maybe in the next couple years we're going to see outcomes for this?

Okay. And we have the ability--we will be having--we don't have to come in three years, 'hey, we didn't collect that data.' Now we have to go back.

Correct.

Correct.

Okay.

Thank you so much for that presentation. I appreciate the comments from LAO and concur that from a legislative standpoint, we should be working with you all to help. It is a large number of positions and it, if done properly, can be amazing in terms of patient outcomes. So thank you for that. Okay, we will now move on to Issue Number Five.

So the department is requesting two permanent positions to implement SB 1120. This is healthcare coverage utilization review. These positions will be--really support our work with external stakeholders to develop and publish guidance for Medi-Cal Managed Care plans and dental managed care plans and support monitoring compliance with the provisions of, of the bill. Do you want me to do both?

Yeah, you can do both.

Okay. Sorry. And then the final BCP under this item is related to AB 3275. This is healthcare coverage claim reimbursement, and the department requests two positions to support the provisions such as developing and revising policy, publishing managed care plan guidance, tracking implementation of the processes, and conducting compliance monitoring.

Thank you. LAO?

So we have not raised concerns with these proposals. As your agenda notes, though, in the proposal before the Legislature, there is some information that the staff have requested, including a narrative summary and also additional backup information, which is pretty standard for a proposal, and we'd recommend that the committee continue to work with the department to obtain this back up prior to approving the positions to ensure they're justified.

Thank you. DOF?

Andrew Huitt, Department of Finance. Nothing to add.

Thank you. Any questions? So I appreciate the presentation, appreciate the comments from LAO. I do have question and concerns about the discrepancies between the Department of Finance analysis on the fiscal impact of these bills during the legislative process versus what we're now saying is needed for staffing and resource requests in order to fully implement these bills. Can you elaborate on the discrepancies?

Yes. Again, Andrew Huitt, Department of Finance. Both of the analyses for these bills were released in August, and upon further review by the administration, it was determined that additional resources would be required to implement the provisions of these bills. And that is, again, what's reflected in the Governor's Budget.

Interesting. Well, I, I believe that we will just hold this item open so that we can continue to have conversations and ensure that these this addition is necessary because it is different than what was originally anticipated. Senator Menjivar.

Sorry, Madam Chair. I guess what was found that you needed additional resources for? Because also, I don't think we have like a full description of what's going to go into it, so I'm just wondering what you did find.

I think I would need to defer to the Department of Health Care Services for the specifics of each of those pieces of legislation.

I'm happy to walk through our request. I don't have a comparison from what we've, just at my hands, what we previously or what was included in financial analysis versus our actual request. Would you like me to walk through?

Yes, but I also am wondering. So when we are going through the legislative process and you know there's a bill that will impact your specific department, do you not give input at that time as to how much staffing you would need, resources?

Yes, we provide that information to the Department of Finance.

Paula Tang, Department of Finance. I'd like to expand upon my what my colleague had mentioned. So the bill had been, when we provided the public analysis that you mentioned, that bill had been since amended before the final bill was passed. And so the public bill analyses reflect an earlier versions of the bill.

And so that was for both of them?

For... That would be for SB 1120.

Right. Because we're doing with SB 1120 and AB 3275.

That is confirmed for SB 1120. I'd like to defer that for the second bill to my colleague.

Good morning, Madam Chair. Nick Mills, Department of Finance. The finances analysis of AB 3275 did note that the costs for the Department of Health Care Services were minor and absorbable. But upon further review by the administration, it was determined that two positions were needed for policy development, planning, and compliance activities in order to implement the provisions of the bill.

So to Senator Menjivar's question, you reviewed it initially. What changed? So I understand with Senator, with SB 1120 there was an amendment that, you know, may have caused that extra position. But if you say the costs are minor and absorbable, then I think, what specifically changed in the bill to go from minor to absorbable to requiring two positions?

This analysis reflects a point in time, and you know, throughout the process we receive additional information and we continue to evaluate impacts.

Okay. Well, thank you for those. We will continue to evaluate this request, and at this point, we will move on to the last issue that we will be discussing today, which is issue number six, Prop . 35.

So AB 119 of 2023 authorized tax on managed care organizations effective April 1, 2023 through December 31, 2026 for the purpose of generating revenue to support the Medi-Cal program. And then subsequently, SB 136 from 2024 and then AB 160 of 2024 imposed additional tax obligations effective January 1, 2024.

And we've received federal approval for all of these kind of components of the MCO tax. Pursuant to the 2023 Budget Act, the department implemented targeted rate increases for primary care, maternal care, and non-specialty mental health services for the calendar year starting calendar year 2024.

And so we increased rates for those services to 87.5% of Medicare, and that includes eliminating the applicable AB 97 reductions that were in effect from about a decade ago or so and incorporating Proposition 56 Physician Services Supplemental Payments into the base rates.

The eligible provider types for these rate increases are physicians, physician assistants, nurse practitioners, podiatrists, certified nurse midwives, licensed midwives, doula providers, psychologists, licensed professional clinical counselors, licensed clinical social workers, and marriage and family therapists.

In addition, pursuant to AB 118, MCO tax revenues were used for a one time transfer of 150 million to the Distressed Hospital Loan Program at the Department of Health Care Access and Information and 50 million to the Small and Rural Hospital Relief Fund, also at the Department of Health Care Access and information.

The 2024 Budget Act and SB 159 authorized the use of MCO tax revenues for general support of coverage of services in the Medi-Cal program and some specific investments in the following areas, physician and non-physician professional services. So this is not just...

So this is primary preventive specialty care, maternal care, non-specialty mental health services, vaccine, vision, community health workers, emergency physician services, hearing aids and audiological services, ground emergency medical transportation, reproductive health, air emergency medical transportation, community based adult services, pediatric day health care, services provided in a congregate living health facility, non-emergency medical transportation, private duty nursing, non-hospital 340B payments to community clinics, and continuous coverage for children 0 to 4.

Proposition 35 was passed in November 2024 general election, and Prop 35 applies to the revenues generated by the MCO tax authorized by AB 119 of 2023. Each of the applicable revenue Prop 35 allocates 2 billion in the calendar year 2025 and calendar year 2026 to support the Medi-Cal program. The Governor's Budget reflects increased MCO tax revenues associated with the amendments from last year's SB 136 and AB 160 being used to continue to support the Medi-Cal program.

Compared to the 2024 Budget Act, support for the Medi-Cal program is estimated to increase by 1 billion, excuse me, in 2024 due to updated estimates of available tax revenues, but a decrease by 2.2 billion in 25-26 due to the implementation of Prop 35. Prop 35 establishes a stakeholder advisory committee to help inform the use of the funds pursuant to Prop. 35. Prop 35 requires the department to consult with the committee before proposing any new or modified payment methodologies.

Again, pursuant to the Proposition, we will present, once the committee is established, we will present to the committee proposals for each of the domains that are listed in Prop 35, except for, there's a workforce component that will be overseen by the Department of Health Care Access, but they will participate in the stakeholder advisory committee.

The proposal passage of Prop 35 made inoperative the specific investments authorized by SB 159 or the really what was authorized as part of the 24 Budget Act. But I would note some of the SB 159 domains are fully or partially overlap with what is with what is included in Prop 35.

And we're in the process, as we think about the proposals that we will take to the stakeholder advisory committee, going through the alignment between the domains and how those proposals will play out. For 25 and 26, Prop 35 allocates dollars in the following way. Again, 2 billion to support Medi-Cal, as I just noted.

691 million for primary care, 575 million for specialty care, 245 million for community and outpatient procedures, 90 million for abortion and family planning services, $50 million for services and supports for primary care, $355 million for emergency room facilities and physicians, $150 million for designated public hospitals, $50 million for ground emergency medical transportation, $300 million for behavioral health facility throughputs, $75 million for graduate medical education administered through UC, and $75 million for Medi-Cal workforce administered by HCAI.

Beginning in 2027, those pots are a little bit different, and MCO tax revue really goes on a formula basis. There are several accounts in 2027 that are not present in 25 or 26. This includes air ambulance, community health workers, affordable prescription drugs, improving mental health specific to inpatient psychiatric care, dental services, and a healthcare workforce loan repayment program.

Some of these buckets are really only funded if certain thresholds of funding is met. And so depending on our next MCO proposal, which would be effective for January 1, 2027, will depend on how those buckets may get funded. As the department implements Prop 35, we will be monitoring access and efficacy consistent with federal requirements under the new federal Ensuring Access to Medicaid Services final rule and the Managed Care Access Finance and Quality final rule. These two rules just came out last year.

The final rules will require DHCS to perform detailed new monitoring of Medi-Cal payment rates relative to Medicare and to submit evaluation plans for each state directed payment methodology and managed care. Fully isolating Proposition 35's impact on access and quality from other factors such as other initiatives like CalAIM, BH-Connect, legislation changes at the federal level. Really isolating the impact of Prop 35 is really is not feasible.

Thank you. LAO.

Thank you. We first want to emphasize kind of what's before the Committee at the moment from the administration. So the administration has provided sort of basic MCO tax spending plan. You can see the spending plan on page 25 of your agenda. And there's a lot going on on that figure.

But the sort of bottom line is it's really showing three things for the existing tax that has federal approval through the end of 2026. The first is it shows the total amount of revenue that's sort of available to the state. The second is that it shows how much of the revenue is going between General Fund offset and augmentations. And then the third thing is, within each group of augmentations, it shows how much money is going to each sort of bucket of money.

So you can see, for example, allocations for the hospital relief programs and the 2024 rate increases and also for rate increases in 25 and 26 and then beginning in 2027. This spending plan is based on the administration's interpretation of Proposition 35's rules. And based on an initial review, this plan seems reasonable to us.

We do not raise concerns with it. That said, we would also emphasize that a more detailed implementation plan that walks through, for example, the timing and the structure of the augmentations is still forthcoming. The administration hasn't developed that yet, and given where we are at the moment, that's to be expected.

The measure was enacted by voters late last year. It overturned the state's previous spending plan, which the department up until then had been focused on implementing. And then the measure itself includes stakeholder consultation rules that the department has to follow before beginning to implement the increases.

Given all that, we still think this is a good time for the Legislature to begin providing early oversight. We did release a post that walks through in a little more detail all the key issues we think the Legislature could focus its attention on. But at a high level, there are sort of two key areas we think the Legislature could focus on.

The first is on the implementation of the Medi-Cal provider rate increases and programmatic augmentations, particularly around the timing of when those will get rolled out and when the funds will start flowing to providers, particularly in the managed care system.

And also the structure of the augmentations, how the department will structure the rate increases and how the other sort of health program augmentations will work. And then the other key area we think the Legislature could focus on is some of the fiscal uncertainties involved with the MCO tax.

Some of these uncertainties are things this Committee has talked about last year and in previous years, as we've noted. For example, the next version of the MCO tax that begins in 2027, there's a good chance that that is significantly lower than sort of the existing version, depending on if certain federal rule changes come into effect.

And then in addition to that, within the measure, the rules differ in 25 and 26 and then beginning in 2027. And these issues create potential fiscal pressures to the General Fund, given the measures, the fact that the measure includes money to offset General Fund spending in Medi-Cal.

And it also has the risk of potentially upending some initial plans for the augmentations, depending how they're structured. And so we think it would be prudent for the Legislature to begin understanding how the department plans to manage these uncertainties and as it begins rolling out the augmentations. Thank you.

Thank you. Department of Finance.

Nick Mills, Department of Finance. Nothing further to add at this time, but available to answer questions.

Thank you. Any questions? So I want to thank you so much for the presentation. I do have a couple of questions. So as far as, you know, being able to implement the rate increase, which clearly the residents of California want based on their vote, we have to have this consultation with the stakeholder advisory committee. Has that committee, have all of the members of that committee to date been chosen?

No. So we are still waiting for one appointee from the governor and one appointee from the Senate, and so waiting for those appointments to begin the committee hearings or meetings.

Do we have any timeline from the appointment from the governor?

I don't know, but I know that everybody is working urgently to fill these seats.

Okay. Because the ability to create something that can be put into place is dependent on the stakeholder advisory committee being put in place, so everything is on hold until that is done. And so with the stakeholder advisory committee, how will DHCS approach consultation with them for the initial round of investments? Will you offer your own proposal for discussion or will the committee create something and you work with them? How do you envision that?

So we propose to actually come to the committee with some ideas and concepts, really to your point about urgently trying to get this done, and so thinking that that would be a way to really have more expedient conversations in terms of here's our thoughts on this.

Similar to what we did last year where we released a concept paper on how we were thinking about these dollars and how they would be used. Really coming to the committee with here are our thoughts and ideas and lots of considerations. As LAO noted, 2526 is different from 27. And so really trying to put parameters on how we can think about this, how we reduce the potential General Fund exposure in out years if these investments don't line up. So really coming with some of these thoughts to the committee to get input.

And along those lines, how are you thinking that the department is going to manage the transition between 25 and 26 investments to the investments in 27 and beyond, given the difference in the structure?

I mean, that is what we're urgently working on and trying to put this together and kind of a plan for how we will do that so that we can present it to the stakeholder committee, present the rationale for why some of these changes or why some of these proposals are designed the way they are because of that, because of the uncertainty with the next reauthorization of the MCO tax. So really trying to present kind of a comprehensive understanding of the scenarios that might be possible.

Thank you. Thank you so much for that. And seeing no and hearing no further questions, we will move to the public comment portion. Before we start public comment, I do want to make note that the the roll is open for the initial vote that we had if any Senator wants to come and add on. But now we will begin with our witness... I'm sorry, with our public comment. You will have one minute. You may begin. Thank you.

Thank you, Chair Weber Pierson, Members of the Committee. My name is Veronica Charles. I represent Maxim Healthcare Services. I oversee our federal and state policy. Maxim provides private duty nursing to over 21,000 patients via 21 offices here in California.

And we have been struggling to provide private duty nursing across the state because Medi-Cal rates are some of the lowest in the western United States. The Legislature and Governor Newsom recognized the need to invest in private duty nursing last year with a $60 million investment in the budget.

But the passage of Proposition 35 in November did nullify this increase, as we heard. Our patients and their families were relying on this funding to keep their families at home, keep their children out of the hospitals. And there are over 1000 kids in California who are currently awaiting private duty nursing services.

They're either living in hospitals, long term care for facilities, or sitting at home without the care that they need. Hospital stays are vastly more expensive, as we know, and medically fragile kids without continuous skilled nursing care at home are more likely to get sick. Investing in private duty nursing will save the state precious Medicaid dollars.

A study last year showed that a 40% reimbursement rate increase to these nurses will save California $175 million annually, and the state will see a return on their investment in just eight months. Our state's medically fragile kids urgently need this Committee to work to increase Medi-Cal rates for these nurses. Thank you for your support for our population. I appreciate your time.

Thank you.

Good morning. Christine Smith with Health Access California. Health Access supports maintaining funding for Medi-Cal programs and urges legislators to stand by their commitment for all communities. Health Access also supports investments in community health workers and promotoras. Raising these...

Raising wages for this group will advance health equity by making a real investment in the success of the new benefit. We also support eliminating share of cost and expansion of eligibility for Medi-Cal for medically needy older adults and persons with disabilities, permanently extending key unwinding flexibilities and multi-year continuous enrollment in Medi-Cal for children under five. Thank you.

Thank you.

Good morning. Ronald Coleman Baeza here on behalf of the California Pan-Ethnic Health Network, CPEHN. Last year, in SB159, this body allocated $5 million to wage to raise wages for community health workers, promotoras, and health representatives. This is a population of the health workforce that is culturally competent and works to reduce disparities and improve health outcomes. Mostly women, mostly people of color. Really doing great work around the state in communities. Really here to ask the Legislature to reestablish the rate increase for this population that was rendered inoperable, also with Prop 35.

Additionally with Prop 35, just want to say that we need smart investments as it relates to getting the biggest bang for our buck in the State of California. There should be a plan in place now to figure out what investments are going to be permanent, what investments are going to be temporary. We know the federal government has concerns around how the California has been establishing its MCO tax, and we really should be cautious and think about how we're allocating dollars just in case we actually do face that funding cliff in 2027.

We also should really be looking at how we move forward implementation of Prop 35 and think about the impact of Medi-Cal enrollees. While the voters definitely spoke on Prop 35, it wasn't clear that they were speaking about making sure that we were increasing provider rates and giving money directly to providers. It was a sign that they absolutely have strong support for Medi-Cal and the safety net for Californians. Thank you.

Good morning. Whitney Francis with Western Center on Law and Poverty. We appreciate the Legislature and administration's investments in Medi-Cal coverage expansions, which has dramatically dropped California's uninsured rate. We question the administration's savings of 1.1 billion for not continuing Medi-Cal unwinding flexibilities beyond June of this year, which is anticipated to terminate 450,000 low income Californians' Medi-Cal coverage, not because they're ineligible, but due to paperwork barriers.

Most of these people who have lost, who will lose their coverage will eventually re-enroll often at higher costs due to pent up demand, making this a false savings that only increases instability for families and puts strain on the county enrollment system. We urge the permanent extension of unwinding flexibilities.

We also urge the support of full funding and timely implementation of multi-year continuous Medi-Cal eligibility for children ages 0 through 5 to prevent gaps in health care coverage for California's youngest low income children, prioritizing a healthy start for one of the state's most vulnerable populations. Thank you. Thank you.

Brian Rutledge, the California Association for Adult Day Services. Wanted to thank this Committee for providing 8 million ongoing General Fund in last year's budget, but that funding got rescinded by Prop 35. There's 42,000 individual participants in the Community Based Adult Services program, CBAS. There's about 300 centers. And there is one need.

It is to close the gap between the Medi-Cal reimbursement rate, which is dramatically too low. The operating costs are much higher. The results of this gap is that centers regularly close. Since the Legislature voted on last year's budget, four centers out of the states' roughly 300 have closed.

So we desperately need a rate increase to stabilize the CBAS program. Our current request is for 74.8 million General Fund ongoing. What that would do would get us 50% of the way there to close that rates and cost gap. We recognize that this subcommittee did a lot for us last year, and we're hoping that we can be reconsidered as part of that revisiting Prop 35. Thank you so much.

Thank you.

Good morning, Madam Chair. Cori Ayala representing the Pediatric Day Healthcare Coalition. We're a coalition of 23 pediatric day healthcares providing daycare and respite care to severely disabled and medically fragile children. Every Member of this subcommittee has a facility in their district. There are only 23 statewide.

With the current Medi-Cal rate, we aren't able to recruit and retain nurses who have to care for these children. This has resulted in waiting lists, reduced care hours, and unfortunately, a closure in Southern California last year. Last year, the Legislature and governor approved an $8 million annual rate increase for these facilities. It was lost with Proposition 35 and we ask that you consider restoring that this budget year. Thank you.

Thank you.

Good morning, Madam Chair. Jack Anderson with CHEAC, representing our local health departments. Just following up on the discussion related to the CCS program monitoring and oversight initiative. CHEAC is requesting that the Legislature delay the upcoming implementation of this initiative.

We do want to thank you for the discussion this morning related to the M&O as it really gets to the heart of the issues that our county programs have been raising. On the MOUs, we do want to note that we are aware of several counties requesting to add provisions to the MOUs tying implementation to funding sufficiency.

But we are aware that DHCS has, unfortunately, rejected those requested revisions to date. You know, I think we can all agree that over time program responsibilities do not decrease. And with the M&O, we do anticipate additional workload demands to increase to support this new activities. Prior to the MOU going live, we would expect that the staffing standards would first be right sized and new activities would be accounted for in the program allocations.

Just to put a fine point on it, county CCS programs using the DHCS staffing standards are underfunded by DHCS by approximately 91 million and 115 million in fiscal years 23-24 and 24-25, respectively. CHEAC has appreciated the ongoing engagement with DHCS, but we unfortunately have not seen resolutions impacted to address the issues that have been raised today.

And we do stand ready to partner with the Legislature and administration to address these fundamental programmatic concerns. However, as we are just a few months out from implementation of the MOU, we are hard pressed, you know, would be hard pressed to see the majority of our counties sign on to the MOU that obligate counties to performance that are hindered by the insufficiency of the funding allocations. Thank you.

Madam Chair, Stuart Thompson on behalf of the California Medical Association. The first point we would like to raise is we are anticipating and really looking forward to the advisory council meeting. It does seem like the implementation is on pause until that meeting or until that council is seated.

We would point out that the council can meet without a full appointment. Boards meet with vacancies all the time. So they have currently have a quorum. And that is important because there is state plan amendments that are needed to be submitted to the federal government in order to implement these augmentations.

Those are reviewed on a quarterly basis and then are applied retroactively. So we believe that the longer that we wait to approve these spots to the federal government might mean that we're leaving federal matching dollars on the table. So we do believe that the meeting of this council to do quickly is really imperative.

We would also note that the rate increases from 23-24 to take certain primary care codes up to 87.5%, while those went into effect in 1124, we do have examples of some providers still not seeing those payments. So there is a long tail on these augmentations going forward.

And we have even seen that some providers have actually seen their payments lowered with the elimination of the Prop 56 supplemental payments. So the implementation of Prop 35 and the input for the advisory council is going to be incredibly important.

We really do look forward to working with DHCS on fine tuning some of these details to ensure that the dollars that we do move here really expand access into the Medi-Cal program. And like some of the previous commenters said, we really want to get our bang for the buck and make sure that the way that Prop 35 is implemented really enhances the care for the most needed here in California. Thank you for your time.

Good morning, Madam Chair. Dean Chalios with the California Association for Health Services at Home here in support of reinstatement of the private duty nursing funding that was approved in the last budget, negated as a result of the passage Proposition 35, and hopefully will be reinstated. You've heard from me many times on this issue, and so I won't go into the details. But simply stated, it's time to get these kids out of the hospital and get them treated at home with their families where they belong. Thank you.

Thank you.

Kelli L'Heureux, here with Resilient Advocacy, here for PHI Air Ambulance. We have five bases serving the Central Valley and rural north. Also here on behalf of the California Association of Air Medical Services, Cal-AAMS, a united voice for the critical care transport industry to improve the health outcome outcomes of those we serve. Approximately 70 emergency air ambulance helicopters and airplanes covering 164,000 square miles serve more than 39 million Californians.

We appreciate the Committee and the governor's commitment to improve our Medi-Cal reimbursement rate in last year's budget. A big improvement over the current rate which only covers about 20% of a transport. We pick up Californians no matter their insurance.

We appreciate the work with DHCS to implement the rate, but with the passage of Prop 35, it would now not begin until January 2027. We would appreciate being included if our rate could start January 1, 2025 to maintain that critical infrastructure in times, you know, when someone needs transport in the middle of the Central Valley in a vehicle accident between hospitals for critical care patients, but also to transport patients in the event of natural disasters. Thank you.

Thank you.

Good afternoon. My name is Doug Flanders. I'm with Air Methods. We're an air emergency services company. We operate as Mercy Air and SkyLife in California ,as well as we partner with a number of prominent hospitals and children hospitals to include the Children's Hospital of Orange County and in Rady's.

We have 26 locations in California and last year we did nearly 7,000 emergency transports of which over 40% were Medi-Cal, Medicaid patients. First, I want to thank you for including us in the budget for 25 and through 27 to be able to have a rate increase. And our request is that we stay in the budget to continue that Medi-Cal rate increase, for we are not included in the Prop 35 25 to 26 investments. Because we are in, if these rates become inoperable, we will then have no bridge funding to be able to get to 2027.

Without this increase, we're going to revert back to our 2001 rate. And with 2,600 Medi-Cal transports last year, this would have a devastating impact to our ability to retain air emergency services, especially in the rural parts of the state and with our most vulnerable population of children, as we work closely with those children hospitals. So thank you so much.

Madam Chair, Rand Martin on behalf of Aveanna Healthcare, one of the largest providers of private duty nursing in the State of California. We appreciate what the Legislature and the governor did last year in terms of increasing that rate. Excuse me.

Obviously, as has been reported, that that rate was nullified with the passage of Prop 35, we encourage you to reinstate that. I would like to point out that, if you put it in the 25-26 budget, we don't lose any time because we weren't going to get it until January 1st of 26 anyway.

So this would be good timing to restore that. We also appreciate the fact that you and the administration recognized the cost savings that this rate increase would provide to the state. Not often we get to come up here and tell the state how you can save some money and do good for people of California. Encourage you to keep faithful the original agreement as we go forward. Thank you.

Thank you.

My name is Sarah Weber, and I'm the harm reduction community organizer at the Sacramento LGBT Community Center. We oppose the reduction of funding for COPHRI, or the California Overdose Prevention and Harm Reduction Initiative. The center works to create a region where all LGBTQ people thrive.

We support health and wellness, advocate for equity and justice, and work to uplift our diverse and culturally rich LGBTQ community. A community that is disproportionately impacted by substance use disorder and overdose, with rates of substance...

Good morning everyone. We are going to call the first Budget Subcommitee on Health and Human Services to order. Before I begin, I want to thank pro tem Mcguire for this position and I look forward to working with this Committee, its staff and all of you on the many critical issues that we will address this year.

Today we will be covering the Department of Healthcare Service items and the budget. I anticipate that this hearing will take less than two hours at this point in order to meet this goal. I hope that the Department will keep their comments quick in order to facilitate more time for questions and also input from the public.

We will solicit public comment after the completion of the presentation items within the agenda at which time the public may comment on any previous items. And so we will begin actually from by not starting with the Opioid Settlement Allocation Fund at this time but starting with the overview of the Department of Healthcare Services.

Good morning Chair. Apologies for being late. Michelle Baass, Director of the Department of Health Care Services here to provide for issue an overview of the Department's program and budget. The Department of Healthcare Services administers the following programs.

Medi Cal our largest program covering just under 15 million Members in California Behavioral health so this is community mental health and substance use disorder services Primary and rural health programs such as the Indian Health Program, American Indian Maternal Support Services and Tribal Emergency Preparedness Program and a variety of other programs in the family health space.

The Genetically Handicapped Persons Program, California Children's Services Program and Every woman counts. The 2025 budget Governor's Budget proposal for DHCS includes a total of 193.4 billion. This includes $192.1 billion in Local Assistance to Support Program costs and $1.3 billion to support state operations. Our budget includes a proposal for 4821.5 positions.

Some of the major issues and proposals that are part of the Governor's Budget that I know will be part of today's later agenda and subsequen the Managed Care Organization tax and Proposition 35 the Behavioral Health Community based organized network of Equitable care and Treatment.

Our BHCONNECT waiver which we just received federal approval in December of 2024 and this is a new 1115 waiver that is authorized from January 1st, 2025 to December 31st, 2029 and that the goal of this waiver is to really expand our community based behavioral health continuum.

A key component of BHConnect is the $1.9 billion in workforce dollars that are under the Department of Healthcare Access and Information as they will be administering that program. That concludes the overview.

Thank you. Are there any comments from LAO or DOF?

Jason Constantouros, LAO, available for questions.

Isabella Elioto, Department of Finance. Nothing further to add, but available for questions as well. Thank you so much.

Seeing no questions from my colleagues, we will move actually back to the opioid sediment settlement Fund allocation and have that presentation before we continue. Thank you so much for joining us this morning. Would you like to provide any comments on this particular request?

Lizbeth Castillo with the Department of Finance. No comment from me at the time.

Any questions? Senator? Men thank you. Madam Chair to the Department. I saw maybe earlier this week in your weekly newsletter you announced a meeting that you had yesterday that talked about the expenditure report on the settlement from years 2223 if I'm not mistaken. Couple questions.

One, why a report expenditure so far back out and then do we've always asked how much we have in that Fund. I'm wondering, given that you just did this report, if you have an up to date number on how much is in the settlement Fund. We can get back to you with that information.

Could you just because I didn't have the opportunity to join this hearing yesterday, could you share a little bit, some remarks or some the gist of what you reported out.

Department of Finance that the annual expenditure report is something that DHCS puts together, but we're happy to share information about the proposal or the current amount of OSF revenues. I think as of 2425, the state has received over 300 million in opioid settlement funds and we anticipate to receive over 750 million overall.

But that is the settlements are paid out annually and so that's throughout our anticipated payments that are coming in year after year.

Okay. And has the Department thought about or are there any other creative ways that we can utilize the Fund for our.

Proposed usage of the funds is outlined as part of our Governor's Budget proposal. Okay, thank you.

So DHCS is requesting expenditure authority from the opioid settlement Fund of 8.4 billion to support expansion of the naloxone treatment program, Is that correct? Okay. And are you aware that CDPH is also requesting reduction in their expenditure for the same amount of money that would go for the California harm reduction program?

Lizbeth Castillo, Department of Finance yes, we are aware of that.

Okay. So when you look at the data, it shows that according to dhcs, the harm reduction sites were responsible for the harm reduction programs are responsible for about 57% of reported naloxone reversals. In California as of February of this year.

So why would we potentially take money from that program to give it to the naloxone reversal program when that program seems to be, at least per data, doing a better job of saving lives?

This is Beth Castillo again with Department of Finance. The Administration has decided to reevaluate its expenditure plan of the opioid settlement Fund and determine that the naloxone distribution project was an Administration priority and the proposed funding would allow the state to purchase additional naloxone to distribute to communities in need of the resources.

Right, but the data shows that it's actually the California harm reduction program that has the more significant impact on saving lives. So why would we take money from that program which is showing a benefit?

Perhaps I can also explain the difference between the harm reduction program and the naloxone distribution project. So the naloxone distribution project is administered by the Department of Healthcare Services, and it essentially allows the state to purchase naloxone at a reduced cost.

And this naloxone is then distributed to eligible health entities and community organizations free of cost to then distribute, to be distributed to communities in need of the medication. The harm reduction program is connected in a sense where it supports the staffing of California syringe services programs to distribute sterile syringes and naloxone.

So essentially, the naloxone distribution project funds the purchasing of naloxone, and the a harm reduction program is administered by the Department of Public Health to support the staff distributing the naloxone. So essentially both are connected through the OBH settlement Fund.

Exactly. But you do need the staff on the ground that's actually going out to these individual sites to provide the naloxone. Correct. And they get that with the harm reduction program.

Correct. The harm reduction program program is one program that administers the naloxone on the ground.

And Chair, if I may. Paula Tang, Department of Finance. So the funding that we track from opioid settlement funds is for the state directed purposes, but we'd like to note that there is funding that goes directly to cities and counties.

And according to that same expenditure report that Senator Mendevar had mentioned, majority of that funding for cinnamon counties are going towards harm reduction activities. And so for those reasons, the Governor's Budget proposal tends to focus on the provision of free naloxone.

Thank you. It just seems a little backwards to me when you have data that shows that there is a program that's actually working better to save lives, to remove funding from that, to use it for another. And even though they may receive naloxone from that, there are a lot of other entities that get it as well.

So before we go on, I would like to establish a quorum. Can we please call roll?

[Roll call]

Thank you. And so staff actually is recommending that we reject this proposal from the Department of Healthcare Services. Do I get a motion? Second.

Okay. I need to move it. Yes, move the motion.

Okay. Call roll.

[Roll call]

Chair. If I may, for the record, that Administration does not support the Committee's action and continues to support the Governor's Budget proposal.

Thank you so much for that. We will now move on to issue number two with Medi Cal local assistance estimate. Thank you.

Excuse me. So, providing an overview of the Medi Cal local assistance estimate for the current year. The November estimate projects 174.6 billion total funds. 37.6 billion General Fund for Medi Cal. This represents an increase of about 13.7 billion total funds and 2.6 billion General Fund compared to the Budget Act of 2024.

The main drivers of the current year changes are 2.7 billion in increased cost costs related to Members with unsatisfactory immigration status. This increase is primarily driven by higher than anticipated enrollment and an increased pharmacy costs.540 million in higher pharmacy expenditures. This is beyond the growth that I just mentioned for persons with unsatisfactory immigration status.

Similar to other state Medicaid programs, California's Medi Cal program has experienced a notable increase in Overall pharmacy expenditures. 1.1 billion in increased costs related to redeterminations that are. That were part of the public health unwinding and those are smaller than estimated. And then 1 billion in reduced spending due to the MCO tax.

For the budget year, the estimate projects 1,88.1 billion total funds, 42.1 billion General funds. This represents an increase of about 13.5 billion compared to our revised estimates for the current year.

The main drivers of increased General Fund include 3.6 billion in increased costs due to the changes in the availability of the MCO tax after the Approval of Proposition 35.215 million increase in pharmacy expenditures and then just kind of a net number of about 207 million related to growth in average managed care rates, changes in projected enrollment, among other smaller items.

Thank you. Any input from the LAO or DOF.

Available for questions from the lao.

Isabella Elioto, Department of Finance. Nothing further to add. Thank you. Thank you. Any questions? All right.

I did have one question. Just reading through my Material says in 202526 the budget assumes annual Medi Cal caseload of 14.5 million. A decrease in beneficiaries. Why is there an assumption of decrease in the future when what we've been seeing is a steady increase?

So as part of the Governor's Budget, we will be essentially sunsetting some of the federal flexibilities that were in place related to the redeterminations process for the public health emergency, and those will end at the end of June 302025.

And so as a result, we anticipate some of those were kind of automated flexibilities and those will be sunsetted. And so as a result, some of just the kind of the redetermination process, we anticipate higher disenrollments.

Okay, thank you for that. All right, seeing no other questions, we can move on to issue number three. Family health local assistance estimates.

Okay, so Overview of the November 2024 Family Health Estimates for the current year. The estimate projects about 269 million total funds, 230 million General Fund for state only components of the California Children's Services Program, the Genetically Handicapped Persons program and the Every Woman counts program.

This represents a minor decrease of about 6.7 million compared to the budget act. The decrease is primarily driven by reduced claims in the Every Woman counts program for the budget year. The budget. The estimate projects 271 million total funds virtually essentially flat compared to the current year projections.

To speak just a little bit about the different caseloads in the family health estimate, the CCS or California Children's Services state only caseload is projected to increase in the current year and remain flat in the budget year. The genetically Handicapped persons program is projected to decline modestly by about 4% compared to the current year.

And the number of Members utilizing every woman count services is projected to decrease by about 22% in the current year. And this is primarily a result of individuals having access to full scope Medi Cal regardless of immigration status. One of the questions in the agenda was regarding CCM compliance monitoring and oversight program.

Wanting to provide an update on that, the Department has done some extensive work with the counties over the last three years to build out the CCS monitoring and oversight process to meet the requirements of AB 133 from 2022.

We've worked closely with the counties and stakeholders to develop the process, hosting various work group meetings from January 2022 through June 2023. We've worked in collaboration with the work group to draft the MOU to memorialize the agreement pertaining to monitoring oversight of its existing requirements for the CCS program.

A draft MOU was made available in September 2023, updated in October 2023 to reflect the feedback that we'd received from our counties and other stakeholders, and was finalized in June of 2024. Counties are to return their signed MOUs to DHCS by June 30th of this calendar year for a July 1st implementation date.

We've previously pushed back the implementation date from January 12024 to July 12020-24, and then now to July 12025. Counties, we recognize, need time to get their MOUs through their boards of supervisors, and so this delay was intended to support that process.

The Department also provided counties with full annual funding allocated for CCS maintenance and operation administrative funding activities. Excuse me. In 2425, this is about $10 million to Fund readiness activities such as developing grievance policies and procedures, developing processes to prepare for reporting requirements, and providing new training developed for county CCS.

As of today, five counties have returned their signed MOUs to the Department. And again, the MOU really outlines county and state DHCS roles and responsibilities. Counties will be offered technical assistance training beginning this spring on the reporting templates that were released back in March of 2024.

And all counties have submitted a copy of their respective proposed grievance processes for our review and approval. Okay, well, just note that there's about 10 million in dollars that was allocated to counties for CCS M&O. And this is related to the sunset of the Child Health and Disability Prevention Program.

So using those dollars to support these activities now under ccs.

Thank you.

Thank you. Lao. Available for questions. Department of Finance. Department of Finance. Nothing to add. Thank you. Questions.

Director, I know you just mentioned the last part. I think kind of answer one of the questions I had regarding how did we get to the 10 million and how do we the methodology to assume that this money was going to cover the extra workload for the counties on ccs?

So I think we worked with the counties on kind of that. That component of what was available under ch, Child Health and Disability Prevention Program and kind of work through. And I think there's other kind of concerns raised just generally on CCS funding and kind of allocations and methodology.

And so I know that we are engaged with the counties in that part of the conversation as well in this.

Engagement with the counties. Is the door open to see if there's going to be additional Support coming down or are we evaluating the workload to see if this is a efficient enough to proceed with CCS in an adequate manner?

So I think kind of two pieces. There's just regular CCS program operations and then this kind of new piece of M and O, which are really existing activities that are just formalized through this MOU process. And I think comprehensively we are engaging in kind of trying to work through what is the workload?

How are these workloads, assumptions built in? When were they kind of established and are there further refinements that might be needed?

And then outside of the funding piece, I can imagine you've heard some of the county's challenges around like service authorization requests or space for the medical therapy program. Can you explain the department's role in undertaking some of these issues and a timeline to address some of them?

So on the space, really working with the Department of Education as they oversee special education, kind of the uses of that space. So we have had had some conversations with them, but that is an ongoing kind of topic that definitely needs more engagement. And it's just we don't have direct authority in that space.

Do we think that's why the timeline. Was pushed back for the M and O in terms of. Yeah, okay. That's just more operations of the CCS program.

Recognizing that local health jurisdictions need the space to do some of these activities or, you know, the providers and so how do we ensure that they have the space at schools, for example, to.

Do these activities through the Chair, with her permission. I'd love to hear down the line when DHCS comes back to us. Just an update if possible, Madam Chair. Just on the CCS conversations and how we're streamlining or addressing some of those issues, Madam Chair, if that's possible. I have one more question, Madam Chair.

Director, maybe a point of privilege here. We did send a letter to your office on ccs. Some of the concerns that we're hearing from constituents who navigate the system is the websites, perhaps the website perhaps not being user friendly.

What can we do to look at that and just streamline people's understanding what they're eligible for through that website?

So our teams are looking at that and hope we will respond with a specific timeline for changes in a proposal. I don't have that available today, but we are, our communications team and program team are looking at this.

Thank you, Director.

Thank you, Senator Menjavar. Director, I want to continue to kind of piggyback on the line of questions from Senator Menjavar around CCS and the MOU and more specifically around the issue of staffing. So how does the funding allocated to county CCS programs compare to the funding requested by the counties based on their staffing needs?

I don't know that I have the specific differential in that space, but that gets to the way the formula was developed. It is a bit old, and I think that's one of the things that we are looking at in terms of how this should be calculated, given kind of the current understanding of the program. The formula is.

I don't actually know how old it is, but it hasn't been updated in a while.

Okay.

So if the formula hasn't been updated and we're basing the funds for staffing based on an updated formula, and we want the counties to sign an MOU that would require them to do certain things or to meet certain goals, but if they don't have the staffing that they need, why would they sign it and how would they be successful?

That's part of these conversations that we are having with them in terms of many of the activities except the grievance process are already things that they're doing today. So the MOU is really just documenting those roles and responsibilities. And so I think there's kind of two pieces there, recognizing just basic program infrastructure and needs.

And that's the conversations that we're having with them. And then this MOU is really just a kind of a more of a memorialization of some of the activities that they undertake today and that we undertake as well.

So the MOU does not necessarily monitor the performance of the specific programs because performance is based on staffing. Some of the other challenges that they have addressed that I'm not sure have been answered. So we're not looking at those things in the MOU.

Well, the MOU really does. It documents what each entity's responsibilities are. And so, you know, performance clearly is. Would be. Are they meeting their obligations as they are required under law today.

Right. But if they've been saying it's hard for us to meet those regulations because we need more staff or changes in equipment or other issues that they've addressed, how is it that they are going to be able to fulfill whatever requirements are in the MOU if we have not updated our staffing calculation formula to address current needs?

I think we're continuing to have the conversations to understand their needs. I think the teams have been working collaboratively to try to have a clear understanding and understand when the dollar requests are coming forward. Those are based on an old formula that don't necessarily reflect, as I understand it, the updated requirements and the needs.

And so the teams are trying to work to ensure that everyone is on the same page about what those requirements are so that we can accurately this is what the funding level would need to look like.

Okay, so there's no surprise to you that only five counties have signed it and the vast majority of them have not signed. Since you're still working on the formula.

I mean, you know, this has been kind of. It's required under statute to move in this direction and so trying to really get folks in a place to be ready. We've been working for the last couple years on this. Okay.

All right. Well, I have heard significant concerns about the lack of addressing the needs of the individual counties to actually meet these performance metrics. However, they are being asked to sign a document that would tie them to doing something that they actually cannot do.

So I am hopeful that these conversations continue and actually kind of speak to come to some resolution so that everyone feels comfortable in signing off on these MOUs and moving forward. Seeing no further questions, we can move on to issue number four.

Good morning Terran Members. Lindy Harrington, Assistant State Medicaid Director at the Department of Healthcare Services, here to present on the value strategy for hospital PM in Medi Cal managed care.

At the start of calendar year 2024, DHCS operated 11 medi Cal managed care supplemental payment programs that were specific to hospitals totaling nearly $14 billion of total funds annually. In most of these programs, the non federal share is financed by fees or other contributions paid by hospitals rather than relying on State General Fund.

Building on previous increases for calendar year 23 and calendar year 24, we gre supplemental payment programs by roughly $9.4 billion total Fund for calendar year 2025, subject to federal approval to help sustain California's hospital and safety net systems in addition to the 2425 budget.

In addition, the 2425 budget appropriated state General Fund for new programs to children's hospitals effective July 1st of 2024 and to Martin Luther King Jr. Community Hospital effective January 1st of 2026 with estimated payments of two Fund and $25 million total Fund respectively.

Subject to federal approval, DHCS anticipates approximately $23 billion in MEDI Cal managed care supplemental payments to hospitals for calendar year 2025 service dates. The net benefit realized by hospital by the hospital industry from these supplemental payments is estimated to be roughly $15 billion because of how they are typically financed using those fees, fees and intergovernmental transfers.

Our proposal is that these hospital payments represent a tremendous investment into hospital care for Medi Cal Members with associated opportunities, challenges and obligations to ensure that they remain appropriate, approvable and sustainable. Going forward, we must comprehensively review hospital state directed payments to explore, identify, adopt and maintain new approaches to meet these challenges and opportunities.

DHCS requests 29 permanent positions and contract resources to develop, implement and sustain a comprehensive Value Strategy for straight directed payments to hospitals in the Medi Cal Program's managed care delivery system.

The focus of the Value Strategy will be on achieving improved, sustainable levels of Medi Cal reimbursement for hospital and health system services relative to other payers advancing appropriate incentives for care delivery that support the economic and efficient provisioning of services Medi Cal Members access to care and improved Member health outcomes aligning with Medi Cal's Comprehensive Quality Strategy and leveraging state directed payments to advance population, health, quality of care and health equity for Medi Cal Members and the continued ability to certify these state directed payments for Federal approvability.

As Federal rules are changing, we anticipate taking a phased approach with developing and implementing the Value Strategy which we propose to publish by March 31st of 2026.

Preliminary work during 2025 can help inform some changes for calendar year 2026, but broadly the Value Strategy will lay out milestones for transforming state directed payments over a multi year horizon to make sure that both DHCs and hospitals have sufficient Runway and capacity to ensure smooth transition and innovation.

We have also proposed trailer Bill Language that outlines the goals of the strategy and makes necessary necessary technical changes to state law to allow special funds contributed by hospitals to be used for the proposed purposes.

Thank you Aleo.

We have not raised concerns with this specific proposal and the overarching objective of the proposal, which appears to be to better streamline the many existing managed care payments to hospitals. This goal seems reasonable to us.

That said, we would note that the scope of the proposed Comprehensive Value Strategy is fairly broad and you know, potentially could benefit from a little bit more enhanced legislative input and oversight, particularly given the number of positions sort of involved.

The Legislature could work collaboratively with the Administration over the coming months to maybe hone some of the goals of the and specify the further specify some of the goals of the strategy and also, you know, more establish some of the parameters of what would be reported in the report due at the end of March of next year.

And we'd be happy to also work with the Committee to develop that if that was of interest.

Thank you. Department of Finance. Cinma, Department of Finance. Nothing to add. Thank you. Any questions?

Two questions. I don't know if this is an. Assumption, but you know, we've been dealing. With the seismic issue of hospitals. And in doing this program, could you say that the good unintended consequences freeing. Up some ability for hospitals to then. Have the financial capacity to do their seismic upgrades. If we're helping streamline the MCP's payments.

And so forth.

I don't think we can clearly say whether or not that would be how hospitals would be able to utilize some of these additional funds. We're really looking to ensure that we are providing sufficient resources to provide the access to the services that we need for Medi Cal Members.

One of the things that, for example, one of the things that we have looked at and in fact are making a change in this current year for a subset of our hospitals is looking at as we make those state directed payments, how are we aligning the incentives to ensure that particular lines of service are remaining open.

So for example, we're making an adjustment so that for labor and delivery services, they get a higher supplemental payment than other days so that we can look at some of those acuity.

And so that's part of the work that we want to be able to do is really focus on creating incentives for access to care and quality outcomes associated with these payments. So it's not necessarily directly looking at that, but it's how do we bring additional resources in to ensure hospitals have the capacity to provide the services.

And in the report we're going to. Be getting next March, you believe that will capture the the outcomes. Did we see increase in quality of. Care or did we see an increase?

So the report that we'll be coming out with is more it will not have outcomes at that stage because it's really aligning and setting up what is that multi year vision for how, what are we looking to accomplish? How will we move forward? What are those phases look like and making changes to the directed payments.

These are large dollars and so it's difficult to make swift changes changes to how we issue those payments. And we want to ensure that we're working collaboratively with our hospital partners so that we're not creating unintended consequences.

We're thinking maybe in the next couple. Years we're going to see outcomes for this Correct. Okay. And we have the ability we will be having. We don't have to come in three years. Hey, we didn't collect that data. Now we have to go back. Correct. Okay.

Thank you so much for that presentation. I appreciate the comments from Lao and concur that from a legislative standpoint, we should be working with you all to help. It is a large number of positions and it, if done properly, can be amazing in terms of patient outcomes. So thank you for that. Okay.

We will now move on to issue number five.

The Department is requesting two permanent positions to implement SB 1120. This is Healthcare Coverage Utilization Review. These positions will be really support our work with external stakeholders to develop and publish guidance for medi Cal managed care plans and dental managed care plans and support monitoring compliance with the provisions of the Bill.

Do you want me to do both? Yeah, you can do both. Okay. Sorry. And then the final bcp under this item is related to AB3275. This is healthcare coverage claim reimbursement.

And the Department requests two positions to support the provisions, such as developing and revising policy, publishing, managed care plan guidance, tracking implementation of the processes in conducting compliance monitoring.

Thank you, Lio. So we have not raised concerns with these proposals. As your agenda notes, though in the proposal before the Legislature, there is some information that the staff have requested, including a narrative summary and also additional backup information, which is pretty standard for a proposal.

And we'd recommend that the Committee continue to work with the Department to obtain this backup prior to approving the positions to ensure they're justified.

Thank you, DOF.

Andrew Hewitt, Department of Finance. Nothing to add.

Thank you. Any questions? So I appreciate the presentation. Appreciate the comments from Lao. I do have questions and concerns about the discrepancies between the Department of Finance analysis on the fiscal impact of. Of these bills during the legislative process versus what we're now saying is needed for staffing and resource requests in order to fully implement these bills.

Can you elaborate on the discrepancies?

Yes. Again, Andrew Huitt with the Department of Finance. Both of the analyses for these bills were released in August and upon further review by the Administration, it was determined that additional resources would be required to implement the provisions of these bills. And that is again, what's reflected in the Governor's Budget.

Interesting. Well, I. I believe that we will just hold this item open so that we can continue to have conversations and ensure that these. This addition is necessary because it is different than what was originally anticipated. Senator Mentavar.

Sorry, Manager. I guess what was found that you needed additional resources for because I get also I don't think we have like a full description of what's going to go into it. So I'm just wondering what you did find.

I think I needed to defer to the Department of of Healthcare Services for the specifics on each of those pieces of legislation.

I'm happy to walk through our request. I don't have a comparison from what we've just at my hands what we previously or what was included in financial analysis versus our actual request. Would you like me to walk through?

Yes. But I also am wondering, so when we are going through the legislative process and you know there's a Bill that will impact your specific Department, do you not give input at that time as to how much staffing you would need? Resources?

Yes, we provide that information to the Department of Finance.

Paula Tang, Department of Finance I'd like to expand upon what my colleague had mentioned. So the Bill had been when we. Provided the public analysis that you mentioned, that Bill had been since amended before the final Bill was passed. And so the public Bill analyses reflect an earlier versions of the Bill.

And so that was for both of them. For that that would be for SB 1120, right?

Because we're doing with SB 1120 and AB 3275.

That is confirmed for SB 1120. I'd like to defer that for the. Second Bill to my colleague.

Good morning, Madam Chair. Nick Mills, Department of Finance the finances analysis of AB3275 did note that the costs for the Department of Health Care Services were minor and absorbable. But upon further review by the Administration, it was determined that two positions were needed for policy development, planning and compliance.

Activities in order to implement the provisions of the Bill.

So to Senator Mengavar's question, you reviewed it initially. What changed? So I understand with Senator, with SB 1120 there was an amendment that, you know, may have caused that extra position.

But if you say the costs are minor and absorbable, then I think what specifically changed in the Bill to go from minor to absorbable to requiring two positions?

This analysis reflects a point in time. And throughout the process we receive additional information and we continue to evaluate impacts.

Well, thank you for those. We will continue to evaluate this request and at this point we will move on to the last issue that we will be discussing today, which is issue number six, Prop . 35.

So AB119 of 2023 authorized a tax on managed care organizations effective April 12023 through December 312026 for the purpose of generating revenue to support the Medi Cal program and then subsequently SB136 from 2024 and then AB160 of 2024 imposed additional tax obligations effective January 12024 and we've received federal approval for all of these kind of components of the MCO tax.

Pursuant to the 2023 Budget act, the Department implemented targeted rate increases for primary care, maternal care and non specialty mental health services for the calendar year starting calendar year 2024 and so we increased rates for those services to 87.5% of Medicare and that includes eliminating the applicable AB 97 reductions that were in fact from about a decade ago or SO and incorporating Proposition 56 Physician Services Supplemental payments into the base rates.

The eligible provider types for these rate increases are physicians, physician assistants, nurse practitioners, podiatrists, certified nurse midwives, licensed midwives, Doula Providers, psychologists, licensed professional clinical counselors, licensed clinical social workers, and marriage and family therapists.

In addition, pursuant to AB118, MCO tax revenues were used for a one time transfer of 150 million to the distressed Hospital Loan Program at the Department of Healthcare access and information and 50 million to the small and Rural Hospital Relief Fund also at the Department of Healthcare Access and information.

The 2024 Budget act and SB159 authorized the use of MCO tax revenues for General support of coverage of services in the Medi Cal program and some specific investments in the following physician and non physician professional services. So this is not just so.

This is primary preventive specialty care, maternal care, non specialty mental health services, vaccine, vision, community health workers, emergency physician services, hearing aids and audiological services, ground emergency medical transportation, reproductive health, air emergency medical transportation, community based adult services, pediatric day health care services provided in a congregate living health facility, non emergency medical transportation, private duty nursing, non hospital 340b payments to community clinics and continuous coverage for children.

0 to 4 Proposition 35 was passed in November 2024 General Election and Prop . 35 applies to the revenues generated by the MCO tax authorized by AB119 of 2023. Each of the applicable revenue Prop . 35 allocates 2 billion in the calendar year 2025 and calendar year 2026 to support the MEDI Cal program.

The Governor's Budget reflects increased MCO tax revenues associated with the amendments from last year's SB 136 and AB 160 being used to continue to support the Medi Cal program.

Compared to the 2024 Budget act, support for the Medi Cal program is estimated to increase by 1 billion excuse me in 2024 due to updated estimates of available tax revenues, but a decrease by 2.2 billion in 25-26 due to the implementation of Prop 35.

Prop 35 establishes a stakeholder Advisory Committee to help inform the use of the funds pursuant to Prop 35. Prop 35 requires the Department to consult with the Committee before proposing any new or modified payment methodologies.

Again, pursuant to the Proposition we will present once the Committee is established, we will present to the Committee proposals for each of the domains that are listed in Prop 35, except for there's the workforce component that will be overseen by the Department of Healthcare Access, but they will participate in the stakeholder Advisory Committee, the passage of Prop 35 made inoperative the specific investments authorized by SB159 or really what was authorized as part of the 24 budget act.

But I would note some of the SB159 domains are fully or partially overlap with what is included in Prop 35 and we're in the process as we think about the proposals that we will take to the Stakeholder Advisory Committee going through through the alignment between the domains and how those proposals will play out for 25 and 26.

Prop 35 Allocates Dollars in the following way again 2 billion to support Medi Cal.

As I just noted, 691 million for primary care, 575 million for specialty care, 245 million for community and outpatient procedures, 90 million for abortion and family planning services, 50 million for services and supports for primary care 355 million for emergency room facilities and physicians 150 million for designated public hospitals, 50 million for ground emergency medical transportation, 300 million for behavioral health facility throughputs, 75 million for graduate medical education administered through UC and 75 million for Medi Cal workforce administered by HCAI beginning in 2027.

Those pots are a little bit different and MCO tax revenue really goes on a formula basis. There are several accounts in 2027 that are not present in 25 or 26. This includes air ambulance, community health workers, affordable prescription drugs, improving mental health specific to inpatient psychiatric care, dental services, and a healthcare workforce loan repayment program.

Some of these buckets are really only funded if certain thresholds of funding is met and so depending on our next MCO proposal, which would be effective for January 12027 will depend on how those buckets may get funded. As the Department implements Prop 35, we will be monitoring access and efficacy consistent with federal requirements.

Under the new federal Ensuring access to Medicaid services Final rule and the managed care access finance and quality final rule. These two rules just came out last year.

The final rules will require DHCs to perform detailed new monitoring of medi Cal payment rates relative to Medicare and to submit evaluation plans for each state directed payment methodology and managed care.

Fully isolating Proposition 35's impact on access and quality from other factors such as other initiatives like Calaim BH connect legislation changes at the federal level, really isolating the impact of Prop 35 is really is not feasible.

Thank you, LAO. Thank you. We first want to emphasize kind of what's before the Committee at the moment from the Administration. So the Administration has provided a sort of basic MCO tax spending plan. You can see the spending plan on page 25 of your agenda. And there's a lot going on on that figure.

But the sort of bottom line is it's really showing three things for the existing tax that has federal approval through the end of 2026. The first is it shows the total amount of revenue that's sort of available to the state.

The second is that it shows how much of the revenue is going between General Fund offset and augmentations. And then the third thing is within each group of augmentations, it shows how much money is going to each sort of bucket of money.

So you can see, for example, allocations for the hospital relief programs and the 2024 rate increases and also for rate increases in 25 and 26 and then beginning in 2027. This spending plan is based on the Administration interpretation of Proposition 35's rules and based on an initial review. This plan seems reasonable to us.

We do not raise concerns with it. That said, we would also emphasize that a more detailed implementation plan that walks through, for example, the timing and the structure of the augmentations is still forthcoming. The Administration hasn't developed that yet, and given where we are at the moment, that's to be expected.

The measure was enacted by voters late last year. It overturned the state's previous spending plan, which the Department up until then had been focused on implementing. And then the measure itself includes stakeholder consultation rules that the administrative Department has to follow before beginning to implement the increases.

Given all that, we still think this is a good time for the Legislature to begin providing early oversight. We did release a post that walks through a little more detail all the key issues we think the Legislature could focus its attention on.

But at a high level, there are sort of two key areas we think the Legislature could focus on.

The first is on the implementation of the medi Cal provider rate increases and programmatic augmentations, particularly around the timing of when those will get rolled out and when the funds will start flowing to providers, particularly in the managed care system.

And also the structure of the augment, how the Department will structure the rate increases and how the other sort of health program augmentations will work. And then the other key area we think the Legislature could focus on is some of the fiscal uncertainties involved with the MCO tax.

Some of these uncertainties are things this Committee has talked about last year and in previous years, as we've noted. For example, the next version of the MCO tax that begins in 2027, there's a good chance that that is significantly lower than sort of the existing version, depending on if certain federal rule changes come into effect.

And then in addition to that, within the measure, the rules differ in 25 and 26 and then beginning in 2027. And these issues create potential fiscal pressures to the General Fund, given the measures, the fact that the measure includes money to offset General Fund spending in medi Cal.

And it also has the risk of potentially upending some initial plans for the augmentations, depending how they're structured. And so we think it would be prudent for the Legislature to be understanding how the Department plans to manage these uncertainties as it begins rolling out the augmentations.

Thank you. Thank you. Department of Finance.

McMills, Department of Finance. Nothing further to add at this time, but available to answer questions.

Thank you. Any questions? So I want to thank you so much for the presentation. I do have a couple of questions. So as far as, you know, being able to implement the rate increase, which clearly the residents of California want based on their vote, we have to have this consultation with the stakeholder Advisory Committee. Has that Committee.

Have all of the Members of that Committee to date been chosen?

No. So we are still waiting for one appointee from the Governor and one appointee from the Senate and so waiting for those appointments to begin the Committee hearings or meetings.

Do we have any timeline from the appointment from the Governor?

I don't know, but I know that everybody is working urgently to fill these seats.

Okay. Because the ability to create something that can be put into place is dependent on the stakeholder advice Advisory Committee being put in place. So everything is on hold until that is done. And so with the stakeholder Advisory Committee, how will dhcs approach consultation with them for the initial round of investments?

Will you offer your own proposal for discussion, or will the Committee create something and you work with them? How do you envision that.

So we propose to actually come to the Committee with some ideas and concepts, really to your point, about urgently trying to get this done and so thinking that that would be a way to really have more expedient conversations in terms of.

Here's our thoughts on this, similar to what we did last year where we released a concept paper on how we were thinking about these dollars and how they would be used. Really coming to the Committee with here are our thoughts and ideas and lots of considerations. As The Elio Noted2526 is different from 27.

And so really trying to put parameters on how we can think about this, how we reduce the potential General Fund exposure in out years if these investments don't line up. So really coming with some of these thoughts to the Committee to get input.

And along those lines, how are you thinking that the Department is going to manage the transition between 25 and 26 investments to the investments in 27 and beyond, given the difference in the structure?

I mean, that is what we're urgently working on and trying to put this together and kind of a plan for how we will do that so that we can present it to the stakeholder Committee, present the rationale for why some of these changes or why some of these proposals are designed the way they are because of that, because of the uncertainty with the next reauthorization of the MCO tax.

So really trying to present kind of a comprehensive understanding of the scenarios that might be possible.

Thank you. Thank you so much for that. And seeing no. And hearing no further questions, we will move to the public comment portion. Before we start public comment, I do want to make note that the. The roll is open for the initial vote that we had if any Senator wants to come and add on.

But now we will begin with our witness. I'm sorry, with our public comment. You will have one minute, which may begin.

Thank you. Thank you. Chair Weber-Pierson, Members of the Committee, my name is Veronica Charles. I represent Maxim Healthcare Services. I oversee our federal and state policy. Maxim provides private duty nursing over 21,000 patients via 21 offices here in California.

And we have been struggling to provide private duty nursing across the state because medi Cal rates are some of the lowest in the western United States. The Legislature and Governor Newsom recognized the need to invest in private duty nursing last year with a $60 million investment in the budget.

But the passage of Proposition 35 in November did nullify this increase. As we heard, our patients and their families were relying on this funding to keep their families at home, keep their children out of the hospitals and There are over 1000 kids in California who are currently awaiting private duty nursing services.

They're either living in hospitals long term care facilities or sitting at home without the care that they need. Hospital stays are vastly more expensive as we know, and medically fragile kids without continuous skilled nursing care at home are more likely to get sick. Investing in private duty nursing will save the state precious Medicaid dollars.

A study last year showed that a 40% reimbursement rate increase to these nurses will save California $175 million annually and the state will see a return on their investment in just eight months. Our state's medically fragile kids urgently need this Committee to work to increase medical rates for these nurses. Thank you for your support for our population.

I appreciate your time. Thank you.

Good morning. Christine Smith with Health Access. California Health Access supports maintaining funding for Medi Cal programs and urges legislators to stand by their commitment for all communities. Health Access also supports investors investments in community health workers and promotors raising these.

Raising wages for this group will advance health equity by making a real investment in the success of the new benefit. We also support eliminating share of cost and expansion of eligibility for Medi Cal for medically needy older adults and persons with disabilities.

Permanently extending key unwinding flexibilities and multi year continuous enrollment in Medi Cal for children under five. Thank you. Thank you.

Good morning. Ronald Coleman Baeza here on behalf of the California Pan Ethnic Health Network. CPEN last year in SB159 this body allocated $5 million to wage to raise wages for community health workers, promotores and health representatives. This is a population of the health workforce that is culturally competent and works to reduce disparities and improve health outcomes.

Mostly women, mostly people, people of color. Really doing great work around the state in communities. Really here to ask the Legislature to reestablish the rate increase for this population that was rendered inoperable. Also with Prop 35. Additionally with Prop 35.

Just want to say that we need smart investments as it relates to getting the biggest bang for our buck in the State of California. There should be a plan in place now to figure out what investments are going to be permanent, what investments are going to be temporary.

We know the Federal Government has concerns around how the California has been establishing its MCO tax and we really should be cautious and think about how we're allocating dollars just in case we actually do face that funding cliff in 2027.

We also should really be looking at how we move Forward implementation of Prop 35 and think about the impact to Medi Cal Enrollees. While the voters definitely spoke on Prop 35, it wasn't clear that they were speaking about making sure that we were increasing provider rates and giving money directly to providers.

It was a sign that they absolutely have strong support for Medi Cal and the safety net for Californians. Thank you. Thank you.

Good morning. Whitney Francis with the Western center on Law and Poverty. We appreciate the Legislature and administration's investments. In Medi Cal coverage expansions which has. Dramatically dropped California's uninsured rate. We question the administration's savings of 1.1. Billion for not continuing Medi Cal unwinding.

Flexibilities beyond June of this year which is anticipated to terminate 450,000 low income Californians medi Cal coverage not because they're. Ineligible but due to paperwork barriers. Most of these people who have lost. Who will lost loser coverage will eventually re enroll often at higher costs due. To pent up demand making this a.

False savings that only increases instability for families and puts strain on the county enrollment system. We urge the permanent extension of unwinding flexibilities. We also urge the support of full funding and timely implementation of multi year. Continuous medical eligibility for children ages 0. Through 5 to prevent gaps in health. Care coverage for California's youngest low income children.

Prioritizing a healthy start for one of the state's most vulnerable populations. Thank you. Thank you.

Brian Rutledge. The California Association for Adult Day Services wanted to thank this Committee for providing 8 million ongoing General Fund in last year's budget. But that funding got rescinded by Prop 35. There's 42,000 individual participants in the Community Based Adult Services program CBAs. There's about 300 centers and there is one need.

It is to close the gap between the Medi Cal reimbursement rate which is dramatically too low. The operating costs are much higher. The results of this gap is that centers regularly close. Since the Legislature voted on last year's budget, four centers out of the states, roughly 300 have closed.

So we desperately need a rate increase to stabilize the CBAS program. Our current request is for 74.8 million General Fund ongoing. What that would do would get us. 50% of the way there to close that rates and cost gap.

We recognize that this Subcommitee did a lot for us last year and we're hoping that we can be reconsidered as part of that revisiting Prop 35. Thank you so much.

Thank you. Good morning Madam Chair. Corey Ayala representing the Pediatric Day Healthcare Coalition. We're a coalition of 23. Pediatric day healthcare is providing daycare and respite care to severely disabled and medically fragile children. Every Member of this Subcommitee has a facility in their district. There are only 23 statewide.

With the current medi Cal rate, we aren't able to recruit and retain nurses who have to care for these children. This has resulted in waiting lists, reduced care hours and unfortunately, a closure in Southern California last year. Year. Last year the Legislature and Governor approved an $8 million annual rate increase for these facilities.

It was lost with Proposition 35 and we ask that you consider restoring that this budget year. Thank you.

Thank you.

Good morning, Madam Chair. Jack Anderson with CHIAC representing our local health departments. Just following up on the discussion related to the CCS program Monitoring and Oversight Initiative. CHIAC is requesting that the legislation delay the upcoming implementation of this initiative.

We do want to thank you for the discussion this morning related to the MNO as it really gets to the heart of the issues that our county programs have been raising on the MOUs. We do want to note that we are aware of several counties requesting to add provisions to the MOUs tying implementation to funding sufficiency.

But we are aware that DHCS has unfortunately rejected those requested revisions to date. You know, I think we can all agree that over time program response responsibilities do not decrease. And with the M and O, we do anticipate additional workload demands to increase to support this new activities.

Prior to the MOU going live, we would expect that the staffing standards would first be right sized and new activities would be accounted for in the program allocations.

Just to put a fine point on it, county CCS programs using the DHCS staffing standards are underfunded by DHCs by approximately 91 million and 115 million in fiscal years 2324 and 2425 respectively. CHEC has appreciated the ongoing engagement with DHCs, but we unfortunately have not seen resolutions impacted to address the issues that have been raised today.

And we do stand ready to partner with the Legislature and Administration to address these fundamental programmatic concerns.

However, as we are just a few months out from implementation of the MOU, we are hard pressed, you know, would be hard pressed to see the majority of our county sign on to the MOU that obligate counties to performance that are hindered by the insufficiency of the funding allocations. Thank you.

Thank you, Madam Chair. Stuart Thompson, on behalf of the California Medical Association, the first point we would like to raise is we are anticipating and really looking forward to the Advisory Council meeting. It does seem like the implementation is on pause until that meeting or until that council is seated.

We would point out that the council can meet without a full appointment. Boards meet with vacancies all the time. So they have current habit quorum. And that is important because there is state plan amendments that are needed to be submitted to the Federal Government in order to implement these augmentations.

Those are reviewed on a quarterly basis and then are applied retroactively. So we believe that the longer that we wait to approve these spots to the Federal Government might mean that we're leaving federal matching dollars on the table. So we do believe that the meeting of this council to do quickly is really imperative.

We would also note that the rate increases from 2324 to take certain primary care codes up to 87.5% while those went into effect in 1124. We do have examples of some providers still not seeing those payments. So there is a long tail on these augmentations going forward.

And we have even seen that some providers have actually seen their payments lowered with the elimination of the Prop 56 supplemental payments. So the implementation of Prop 35 and the input for the Advisory Council is going to be incredibly important.

We really do look forward to working with DHCs on fine tuning some of these details to ensure that the dollars that we do move here really expand access into the medical program.

And like some of the previous commenters said, we really want to get our bang for the buck and make sure that the way that Prop 35 is implemented really enhances the care for the most needed here in California. Thank, thank you for your time.

Good morning Madam Chair. Dean Chalius with the California Association for Health Services at Home here in support of reinstatement of the private duty nursing. Funding that was approved in the last budget negated as a result of the. Passage Proposition 35 and hopefully will be reinstated.

You've heard from me many times on this issue and so I won't go into the details but simply stated, it's time to get these kids out of. The hospital and get them treated at. Home with their families where they belong. Thank you.

Thank you. Kelly Larew here with resilient advocacy here. For PHI Air Ambulance. We have five bases serving the Central Valley and rural North. Also here on behalf of the California Association of Air Medical Services, Calaims, a united voice for the critical care transport industry to improve the health outcome outcomes of those we serve.

Approximately 70 emergency air ambulance helicopters and airplanes covering 164,000 square miles serve more than 39 million Californians we appreciate the Committee and the governor's commitment to improve our medical reimbursement rate in last year's budget, a big improvement over the current rate, which only covers about 20% of a transport we pick up Californians no matter their insurance.

We appreciate the work with DHCs to. Implement the rate, but with the passage of Prop 35, it would now not begin until January 2027.

We would appreciate being included if our rate could start January 12025 to maintain that critical infrastructure in times, you know, when someone needs transport in the middle of the Central Valley in a vehicle accident between hospitals for critical care patients, but also to transport patients in the event of natural disasters.

Thank you. Thank you.

Good afternoon. My name is Doug Flanders. I'm with Air Methods. We're an air emergency services company. We operate as Mercy Air and Skylife in California as well as we partner with a number of prominent hospitals and children hospitals to include the Children's Hospital of Orange County and in rady's. We have 26 locations in California.

And last year we did nearly 7,000 emergency transports, of which over 40% were Medi Cal Medicaid patients. First, I want to thank you for including us in the budget for 25 and through 27 to be able to have a rate increase. And our request is that we stay in the budget to continue that medi Cal rate increase.

For we are not included in the Prop 3525 to 26 investments. We because we are in. If these rates are become inoperable, we will then have no bridge funding to be able to get to 2027. Without this increase, we're going to revert back to our 2001 rate.

And with 2,600 medical transports last year, this would have a devastating impact to our ability to retain air emergency services, especially in the rural parts of the state and with our most vulnerable population of children as we work closely with those children hospitals. So thank you so.

Madam Chair, Rand Martin on behalf of Aveanna Healthcare, one of the largest providers of private duty nursing in the State of California. We appreciate what the Legislature and the Governor did last year in terms of increasing that rate. Excuse me. Obviously, as has been reported, that rate was nullified with the passage of Prop 35. We encourage you to reinstate that. I would like to point out that if you put it in the 25-26 budget, we don't lose any time because we weren't going to get it until January 1st of 26 anyway.

So this would be good timing to restore that. We also appreciate the fact that you and the Administration recognized the cost savings that this rate increase would provide to the state. Not often we get to come up here and tell the state how you can save some money and do good for people of California. Encourage you to keep faith with the original agreement as we go forward. Thank you.

Thank you.

My name is Sarah Weber, and I'm the Harm Reduction Community Organizer at the Sacramento LGBT Community Center. We oppose the reduction of funding for COPHRI, or the California Overdose Prevention and Harm Reduction Initiative. The Center works to create a region where all LGBTQ people thrive. We support health and wellness, advocate for equity and justice, and work to uplift our diverse and culturally rich LGBTQ community.

A community that is disproportionately impacted by substance use disorder and overdose, with rates of substance use disorder up to three times that of the general population. LGBTQ people who use drugs are impacted by multiple dimensions of discrimination, facing homophobia and transphobia along with stigma against substance use. Harm reduction organizations are there for our community when they have nowhere else to turn.

The Center distributes Narcan and fentanyl test strips from the state's Naloxone Distribution Program and our COPHRI funded partners provide in Sacramento provide low barrier resources that prevent fatal overdose and the spread of diseases like HIV. Together, our efforts have contributed to hundreds of overdose reversals.

Sacramento County saw over 400 fatal overdoses in 2023, and a cut to COPHRI funding means more preventable deaths. As you consider this year's health budget, we encourage you to reinstate this funding and protect our most vulnerable community members.

Thank you.

Good morning. Elle Chen on behalf of the Drug Policy Alliance. Here to support the pending vote to return 8.4 million from CDPH's Overdose Prevention and Harm Reduction Initiative, COPHRI, to be diverted from DHCS Naloxone Distribution Program. Naloxone distribution is important but insufficient to fully address the overdose crisis. COPHRI supports syringe service programs to offer naloxone with training but also supports staff to connect people to drug treatment, provide HIV and hepatitis prevention and screening, and other healthcare services.

As the Chair uplifted, syringe service programs and harm reduction program are the most effective entities at preventing overdose fatalities, accounting for 57 of the overdose fatalities reported to DHCS's naloxone distribution projects. We must build upon these exceptional programs and not cut them. Investing in harm reduction pays dividends and saves lives. Thank you.

Thank you.

Good morning. I'd like to start with a thank you to the Committee for recommending the rejection of the proposed cuts to our harm reduction programs. I'm Allie Evers from Up North Harm Reduction in Shasta County. Our two person team provides home delivery services to a county that is approximately 4,000 square miles.

Under COPHRI funding, we deliver Narcan, harm reduction supplies, survival supplies, and provide syringe pickup to our most rural communities that don't have other options for receiving these life saving services. Over the last seven months, we've reached over 1300 people, provided 16 referrals to street service medicine doctors, and provided over 4800 doses of Narcan, plus the adjoining education to our community. We like to say we are in the spaces and places where no one else is.

We see the people no one else sees and provide the supplies needed for people to keep each other alive and safe. Initial reports for 2024 show a reduction in overdose deaths in our county by 46%. I can't help but connect the work we do directly to this number.

We are honored to do what we do and see the people we see serving alongside the other outstanding harm reduction programs in California. In conclusion, I'd like to thank you again for rejecting the proposed reduction to funding. Our programs all continue to save lives when our programs survive. Thank you for seeing the importance in that.

Thank you.

Good morning. My name is Tong, and I work in harm reduction for a trans led organization focusing on queer, trans, black, indigenous, and people of color communities in Sacramento. From COPHRI funding within the month of February, my program distribute more than 2,000 clean needles and over 100 doses of naloxone to community along with other harm reduction services. With the budget cut there will be a huge impact on people whose voice are often ignored.

I want to ask you when was the last time you talked to an unhoused person or queer trans people of color and actually listen to what they need? For that, I urge you to trust us, people who do direct services, and also through the data that we have been showing that the work we're doing is helping our community to be safer. I want to thank the Committee to voting to protect the move of this opioid settlement funds from COPHRI so we can continue to provide a safe life saving services. Thank you.

Thank you.

Hello, my name is Sarah Whipple. I'm a co-director of the Yuba Harm Reduction Collective, which is a COPHRI funded organization and the only harm reduction program serving Nevada County, California. I just want to thank you for continuing COPHRI funding and uplift some of the impacts that that vote will have.

When YHRC started in 2020 as a volunteer operation, Nevada County had the highest rate of fatal overdose in the state. Through COPHRI funding we were able to hire outreach workers and delivery drivers to get thousands of doses of Naloxone into the community. And because of that funding, Nevada County is no longer first or even in the top 10 counties for fatal overdose in California. This funding saves lives and I know that firsthand because it saved mine.

When I was 23, I overdosed on fentanyl. But I survived because a COPHRI funded program had given my friend free naloxone and taught him how to use it, and he used it to save my life. My story is not unique. Since 2018, Californians have saved 190,000 lives using naloxone that they received from a harm reduction program. Thank you so much for voting to continue COPHRI funds. It will allow us to continue saving lives. Thank you.

Thank you.

Laura Thomas with the San Francisco AIDS Foundation, also COPHRI funded. And I want to thank the Chair for your questions and your leadership on this and thank Committee staff as well for their analysis. And just echo back the extent to which COPHRI funded programs are, as you pointed out, the ones that are doing the work on the ground and distributing the naloxone. Without these programs, naloxone would be sitting in boxes on the shelf and not be used to save lives. So thank you for your leadership and thank you for your support for this important program. Thank you.

Thank you.

Good morning. Molly Maula on behalf of Planned Parenthood Affiliates of California. We look forward to the implementation of Prop 35. I want to echo what you've already heard today, which is that we urge the Department to move forward with convening the stakeholder advisory committee as soon as possible to avoid any delay in the effective date of the Medi-Cal provider rate increases and investments.

We are concerned that any delays in convening the committee and submitting the state plan amendment after the March 31 or after March 31 will result in the state foregoing federal matching dollars for the first quarter of the year. Given the federal landscape, we want to make sure we're taking advantage of the opportunity to draw down additional resources where we can and support the Medi-Cal program and access to care for those patients. Thank you.

Thank you.

Good morning, Madam Chair. Norlyn Asprec on behalf of Prime Home Health in strong support of issue 7, private duty nursing reimbursement rate increase. This investment was supported by the Legislature and Administration last year and was included in last year's budget agreement, but unfortunately this was undone with the passage of Prop 35.

Prime Home Health requests the Committee to support this critical investment again in this year's budget. As my colleagues have shared, many kids are in hospitals because they're not able to receive the care in their homes. This investment in private duty nursing would keep children in their homes and promote a better quality of life. Increasing this reimbursement rate for private duty nursing to 40% would result in a cost savings to the state. Thank you.

Thank you.

Good morning, Madam Chair. Dennis Cuevas-Romero on behalf of the California Primary Care Association Advocates. We'll echo some of the comments from my colleagues about the need to have the Department submit the SPA, considering the federal administration issues and convening the stakeholder advisory committee, particularly for federally qualified health centers and community clinics.

Really urge the Department to make sure that provider care provider rate increases are not subject to reconciliation as intended by Proposition 35 to make sure that nearly 8 million patients that Community Health Centers serve are able to get further increased access and quality care at our Community Health Centers. Thank you.

Thank you.

Mark Farouk on behalf of the California Hospital Association. First, thank you, Madam Chair and to the Department for the discussion related to Prop 35 implementation. Just echo the previous comments made with my colleagues to move expeditiously with putting this plan together. I would note a couple of things that have been mentioned. The state plan amendments.

I believe the first deadline is coming up at the end of March. And I would also note that I believe the Advisory Committee is subject to a 10 day public notice requirement, which will add potentially further, although understanding there needs to be public notice and time to organize such meeting. But this timeline has to be accounted for in those meetings. Thank you.

Thank you.

Kelly Brooks here on behalf of the California Association of Public Hospitals and Health Systems. We would concur with the testimony of the previous speakers about the need to act urgently and concerns about the timeline with CMS. We also want to highlight the importance of the $150 million bucket for public hospitals, which is particularly important in light of our continued structural deficit and the risk of proposed federal Medicaid cuts. We look forward to continuing to engage with each of you and thank you for the hearing today.

Thank you.

Good morning, Chair and Members. Beth Malinowski with SEIU California. Just want to appreciate us having this hearing today in relation to actions that are happening right now at the federal level, recognizing just earlier this week kind of initial actions being taken that could potentially really undermine our state's Medicaid system.

Certainly want to acknowledge the work SEIU is doing alongside Health Access and the Fight for Health Coalition. Doing everything we can the federal level to make sure we're maintaining our Medicaid program as we know it today, and certainly look forward to working with all of you and the Administration down the road as we maneuver these waters.

I'm going to leave with the Sergeants and the letters we've submitted to Congress about what we all know is at stake right now in terms of stabilizing our Medicaid program, Medi-Cal. Additionally, we'll just comment similar to other stakeholders, looking forward to engaging with DHCS and HCAI as well on the Prop 35 efforts going forward. Thank you.

Thank you.

Good morning, Madam Chair. My name is Shane Henson. I'm a public policy advocate and legal aid attorney with Inner City Law Center. ICLC is a nonprofit located in Skid Row, Los Angeles dedicated to providing free legal services to homeless and at risk homeless folks throughout LA County.

Today I want to highlight the importance of the Bringing Families Home Program, or BFH. Today or yesterday, your officers should have received a letter from our partners including homeless service providers, philanthropists, and legal aids throughout LA County opposed the elimination of this essential program. Madam Chair, I understand this is a healthcare hearing, but I'm from LA. I was hoping just to briefly comment just on this program even though it's not related directly to the Committee, some business today.

You have 20 seconds.

Thank you so much. Established in 2016, the BFH program aims to assist families who are dealing with twin crises, the specter of homelessness and the separation of their families. The BFH program provides holistic wraparound services to families interacting with the welfare system to help them achieve housing stability and reunite with their families.

BFH provides numerous services to participating families including rental assistance, housing navigation, legal services, and more. Unfortunately, the Governor's proposed budget eliminates the BFH program. We ask you to restore the funding to this humane, cost saving, and vital program for low income families facing the loss of their home and the separation of their family. Thank you.

Good Morning, Chair Weber Pierson. Chloe King on behalf of the Children's Specialty Care Coalition, commenting on issue 6 in regards to Prop 35, which we are strongly in support of. The rate stabilization provided under Prop 35 is essential to addressing the acute and growing workforce crisis within the pediatric specialty physician network.

In addition to the codes referenced in the original 2025 plan from last year, we urge DHCS and the stakeholder advisory committee to prioritize pediatric inpatient patient codes to help bolster this ailing system of care. We also want to underscore the importance of expeditiously submitting the state plan amendment to CMS by the end of March so federal funds are not left on the table.

Lastly, we also strongly recommend broad geographic representation on the committee with physician expertise, including much needed representation from the LA area, given Medi-Cal population size and it's highly delegated market. Thank you so much.

Thank you.

Good morning, Madam Chair. Bryce Docherty on behalf of the California Orthotic and Prosthetic Association. Seeking Prop 35 MCO tax investment and TRI's for orthotic and prosthetic devices and Medi-Cal program. Orthotists and prosthetists are Medi-Cal providers that fit, furnish, and fabricate, customize devices that restore or replace function resulting from limb loss and congenial limb indifferences.

Research shows that patients who have received timely orthotic and prosthetic care had a lower total healthcare cost than comparison to untreated groups. Patients who received lower extremity orthotic services or spinal orthotic treatment had 18 month episode costs that were $2,000 lower than comparable patients who did not receive orthotic treatment.

There are 5.6 million people living with limb loss and limb indifference in the United States and more than 3.4 million born with a form of limb indifference. As you know, Dr. Weber, among those living with limb loss, approximately 90% of those are caused by diabetes, peripheral vascular disease, and trauma.

Almost 200,000 amputees amputations occur in the United States each year. In 2009, hospital costs associated with amputation totaled more than $8.3 billion. Thank you for your attention to this important subject, and we look forward to working with you, the Committee, the Department, the advisory committee, and all stakeholders as the MCO tax unfolds. Thank you.

Thank you.

Good morning, Madam Chair, Dr. Weber. My name is Ron Ordona. I'm a nurse practitioner, and we are a group of nurses who operate a congregate living health facility here in the city. Many of our residents are those with catastrophic events. They have trachs, they're on a ventilator machine to be able to live.

They are taken care of 24/7 in a six bed residential homes. We offer 24 hours, seven days a week of medical care to people who are not able to go home. They don't necessarily need to be in the hospital, but they cannot be taken care of in a skilled nursing facility because they are in that middle type of care.

Many of our residents either do not have the capacity to pay for this kind of care or they cannot go home because the level of care is just something that their family cannot be able to care for. Although we have sent people home with trachs because we train the family so they can be able to take care of that kind of care at home. I'm here because we want to thank you for including budgets for the CLHFs last year in the budget.

Unfortunately, the passage of Proposition 35 deleted our hopes for the first rate adjustment in over 40 years. I respectfully share with you that our daily reimbursement rate of $490 has not been increased even $1 since the care model began in 1983. We just cannot wait one more year for that help. We also ask that CLHFs be carved into CalAIM program.