Assembly Standing Committee on Health

Good afternoon and welcome to the Assembly Health Committee's informational hearing on the devastating impact of federal divestment in California's health care system. Before we begin, it feels very important to acknowledge the events of this past weekend. The federal dollars which once supported health care for working families are now being funneled into mass deportation operations.

Operations that resulted in tragic murders by federal agents of Renee Good, Alex Pretti in Minnesota, Silverio Villegas Gonzalez in Illinois and Keith Porter here in California by federal agents. This is where our health care funding is going. Now let me be direct so that we can be clear and clear eyed about what we're facing.

HR 1 cuts will result in about a trillion dollars from Medicaid nationwide being lost. For California, that means tens of billions of dollars every single year stripped from our health care safety net. Up to 2 million California stand to lose Medi-Cal coverage.

Hundreds of thousands of people will be priced out of buying their own coverage through covered California. And we have to acknowledge that in the face of rising costs and state budget challenges while facing these federal threats, that the state of California made a number of state budget cuts to medical that will limit coverage.

We also will be weakening our overall robust health care infrastructure in so doing. And we will be moving away from the ideals of universal health care coverage, which we embodied in Health Care for All policies. When people lose coverage, families delay care, medical debt rises, chronic conditions worsen, and people end up sicker and more expensive to treat.

In the past several months, we in the legislature with the speaker, members of the Health Committee and members throughout the legislature came together to discuss across the state of California, from Northern California to Southern California, in urban and rural communities alike, holding health of healthcare roundtable conversations with providers, labor leaders, community advocates and hospital administrators what we would do about this moment.

Much of what we've heard during those sessions in our statewide discussions will be captured here today during this informational hearing. I want to thank my colleagues for co-hosting these events throughout the state across California.

And I thank many of them for being here today, both members of the committee and other legislators who are committed and championing our opportunity to preserve healthcare and our healthcare infrastructure in this moment for their communities and California at large.

I wanna welcome as a part of that Assemblymember Ahrens, who will join the committee as a standing committee member. And across all of these conversations we've heard a consistent message that has emerged.

Federal policy changes are creating instability, raising health care costs, and California families are losing access to care. And people are scared. The damage goes even beyond coverage losses, our hospitals, and our clinics face tens of billions of dollars lost in revenue.

And we know our safety net providers, the ones serving our most vulnerable communities, will be hit first and hardest. But California cannot sit idle while Trump's Congress dismantles our health care system. We have a responsibility to act decisively, and we will.

California must fight to protect access, fight to defend affordable care, and stand up for families squeezed by reckless federal decisions. I look forward to hearing from my colleagues and the expert witnesses testifying today to help guide our path forward as we build a broad coalition and a serious legislative response to this federal tailspin. Thank you.

With that, we will have the first panel come forward. Members this first panel is designed to provide a reality check about the high stakes of this moment and put things in perspective. I want to thank members of this informational hearing for coming forward.

I want to welcome Assemblymember Rogers, who participated and was an anchor participant or anchor lead for our healthcare roundtable as well as Assemblymember Soria, who did as well. And thank you to our standing committee members as well as Assemblymember... well, thank you. With that - I just have your first name stuck in my head.

With that, we will move on to the first panel. Most of our panelists are using slides today, but background materials are available on Assembly Health website. You can access these by going to assembly.ca.gov, choose committees and click on Health Committee from the Health Committee's website, click on "Hearings" and "Info Hearings," all the while, all the materials will be posted here and we are honored to be joined by a number of panelists today who are sharing their information perspectives with us, many of whom have traveled a long way to be with us.

We request each of the panelists to stick to the allotted time so we can hear from everyone and have time for some dialogue. We plan to provide time for member questions after each panel and we will allow for public comments after all the panels having concluded.

And Assemblymember Jessica Caloza, thank you for anchoring one of the roundtables that we had as well. I will ask each panelist to introduce themselves as part of their testimony with Dr. Hernandez, Sandra Hernandez kicking us off. Thank you. Press one more time

Good morning. Good morning, Madam Chair, Mr. Vice Chair and members of the committee. I'm Dr. Sandra Hernandez and I'm the President CEO of the California Healthcare Foundation. For those of you who might not know of us, we are an independent, nonprofit, philanthropic organization working here in California. Our mission is quite simple.

We listen to Californians, we analyze data and we work with partners across the state to improve the health care system so that it works well for everyone in the state. We're meeting in an incredibly volatile time. The news coming out of Washington is daunting. But I want to be clear.

While the federal landscape has shifted, California has enormous power to mitigate the damage and to protect the health of the people of California. Regardless of federal policy, California has had a long tradition of taking care of its own. In California, Californians do not view health care as a luxury. It is seen as a fundamental necessity for all.

We see this in poll after poll. Californians want a system where people can get care when they need it, without facing significant financial barriers, including the fear of bankruptcy. These aren't just beliefs. We have actually created a legacy that we should be proud of and be prepared to defend today. First slide.

Because the work that's been done in this building and around California, we have made historic progress toward universal coverage. You can see here the dramatic decline in uninsured rates that have occurred. We built a Medi-Cal system that today covers half of the children in the state.

It covers 1 in 5 working Californians and it supports millions of seniors and people with disabilities. In essence, we built a system that prioritized inclusion. Next slide. I won't go through this in detail, but here you can see a full timeline of the coverage expansions that began pre ACA and that has continued up until recently. Next slide.

Today we're defending the health security of nearly 15 million Californians against the largest funding reduction in the history of the Medicaid program. The threats in HR1 come in different forms. First is the financial cliff. HR1 cuts federal funding for health care by $1 trillion nationally over the next decade.

For California, we estimate that this translates to billions of dollars in annual cuts. And as you are all aware, this is a hole in our budget that we simply don't fill with state reserves. Second is the administrative wall. The introduction of work requirements and six month eligibility redeterminations is often framed as a policy about work.

It is a policy about paperwork. We're looking at a scenario where otherwise eligible working parents lose their coverage simply because they aren't able to navigate a complex verification process in a timely way. Third, the attack on immigrant families. Starting October 1st of this year, HR 1 excludes huge populations of immigrant Californians from coverage.

But the damage, of course, starts sooner than that as we're already seeing the chilling effect, where families are terrified of deportation and family separation. They go underground, they avoid clinics, they skip appointments, even for their US citizen children who are otherwise eligible for service. And as a result, preventable health problems become emergencies.

It's bad for patients, it's bad for providers, and it's bad for taxpayers. The pain extends to the middle class as well. By failing to renew premium subsidies for the individual market, the bill will cause monthly premiums to skyrocket for 2 million Californians who buy their own coverage through Covered California, forcing many to drop coverage entirely.

Finally, I want to acknowledge that you've made hard decisions as well due to state budget constraints to date. That's including freezing Medi-Cal coverage for undocumented immigrants and imposing a $30 a month premium for those who stay on. Next slide. So where do we go from here?

I believe this crisis presents California with four distinct imperatives to help meet this moment, to not just defend what we have, but to adapt and to strengthen our system for the future. Number one, we should minimize the harm of work requirements. If we can't stop the federal mandate, we must minimize the friction.

The state should move aggressively to automate verification. We have data systems to know who is working, and we should not put the burden of proof on someone who is working two jobs or experiencing homelessness. We also, of course, need trusted messengers on the ground like community health workers to help people manage this new reporting burden.

Number two, we should make sure that the uninsured can get access to care. We must confront the reality that under HR 1, the number of uninsured Californians will rise. For these residents, our priority must shift to ensuring access to care until universal coverage is possible again.

To do this, we need to revisit the safety net strategies of the pre ACA era. Back then, we navigated a patchwork system where eligibility, covered services and payment models varied from county to county, resulting in different levels of access and care across the state. This is an opportunity to avoid that fragmentation of a system of care.

One big question today is whether the state or counties should lead the way. My advice is to study what worked in the pre ACA local programs and to use what we learn, what we learned to create a standardized, scalable framework that all counties in the state can implement.

This framework should emphasize what we know works prevention, comprehensive primary care, continuity of care, and administrative simplicity. Number three, we should rethink the future of Medi-Cal. We cannot simply patch the immediate holes created by HR 1. We also need to strengthen the Medi-Cal program for the long term.

The program is a vital lifeline, but it is also a massive, complex program that was built piece by piece over 60 years. While the current system has served us well, it requires significant structural reform to take us where we need to go for the next decade and beyond.

That is the work of the future of Medi-Cal commission, which had its first meeting last week. I have deep confidence in the experienced leaders serving on this commission, and I believe they will be valuable partners to this committee and the legislature, as it contemplates deliberations later this year.

Number four, we should use our regulatory authority to contain costs. California must get serious about making health care more affordable. Next slide, please. We estimate that 25 cents of every health care dollar is wasted on administrative complexity, on incompatible data systems, and therefore on illnesses that are ultimately preventable. We simply can't afford that anymore.

The Office of Health Care Affordability gives the state an incredible lever for change. As a member of that board, I'm committed to ensuring that every dollar the state, employers and consumers are spending is buying impactful health care. Next slide.

I also strongly believe that technologies like AI, data exchange, and telehealth can help us do all the things I mentioned much more efficiently and much more effectively. Technology should be central to any strategy going forward. In conclusion, I want to close with this thought. We are all in this together.

There is an urgent need for all stakeholders to set aside their unique perspectives and to come together for the well being of all Californians. California's government and health care system possess incredible power and capacity for ingenuity. We once again need to harness that strength together. The people of California are counting on us. Thank you.

Thank you, Dr. Hernandez. We'll move to LAO.

Good afternoon, committee. Jason Constantouros, LAO. Staff asked us today to walk through some of the key issues we think the legislature faces with regard to HR 1. Now, we did provide an initial assessment of what these issues are in a report we released last fall.

And potentially among your materials might be an infographic, a two page infographic that basically summarizes the report. And actually we'll be speaking mostly from the second page of that infographic if you'd like to follow along. So it looks like this.

One thing I also wanted to emphasize is that since we released our report in the fall, we've learned a bit more about HR 1, and we are still learning more about HR 1. And this is in large part because federal guidance is still forthcoming.

And because of that, exactly what flexibilities the legislature has will likely still evolve as more guidance comes out. With that said, we think there are really three key issue areas before the legislature. And I'll have to say are a lot of these areas will sound very similar to the issues that Dr. Hernandez just spoke through.

In terms of timing, the first sort of key issue is implementing HR 1. Now a lot of that implementation is really going to happen from the administration. And so the legislature, of course, plays a key role in oversight, and hearings like this are exactly the kinds of oversight activities that help with that.

Some implementation also may involve making certain policy decisions, however, and those are decisions where the legislature may want to have a greater role in weighing in on these decisions. And I have to say, even again here, our understanding is still evolving. One key policy decision we sort of raised was around Medi-Cal eligibility.

HR 1 grants states some flexibility to exempt additional people from some of the eligibility rules. It appears the administration is pursuing a lot of these exemptions already.

But the administration is also proposing some additional eligibility and benefit changes around certain immigrant groups, specifically immigrant groups who are scheduled to lose a lot of their federal matching as a result of HR 1. This is one key sort of policy decision that the legislature likely will want to weigh in the coming months.

Another key area we flagged in our analysis is around provider taxes. HR1 includes a lot of new rules around provider taxes, which is a key way to help the state helps pay for Medi-Cal. Now, the rules around provider taxes are somewhat complex.

In concept, at the heart of what sort of needed to be decided in the short term is really whether or not to have a more proportionate and large provider tax that effectively shifts more cost onto providers.

And then, ultimately, some of that cost shifted onto private healthcare consumers or whether to have smaller taxes that result in less costs to to private providers and consumers, but also less funding to the state that would need to be backfilled. And we gave some examples of how this might look.

For example, sort of somewhat large and proportionate MCO tax. We estimated that would cost about $30 per member per month and that would reflect about a 5% increase in premiums. So those would be costs that consumers potentially would face as a result of that action.

Again, I also want to reiterate here that there's been a lot of recent federal guidance on provider taxes and still emerging. And even yesterday we've had some discussions with the administration that provided additional information on some of the guidance that's come from the federal government. So, this is an area that's still evolving.

It's also we'd also emphasize that some of the rules around provider taxes are scheduled to happen in the future, and some of those rules will affect the overall size of the tax in the future. So, whatever is decided now could be somewhat more short term in nature.

Long term, provider taxes will still have to sort of decline over time. So that's one key area is around how to implement HR 1. A second key area, as Dr. Hernandez really noted, is really thinking about the size and scope of Medi-Cal in the future.

And the core issue here is that the state has a sort of structural fiscal deficit. Those of you on the budget committee have heard us talk about this before. HR 1 comes at the time when the state is facing these fiscal constraints.

As a result, the legislature may need to reconsider its Medi-Cal priorities and reconsider the size and the scope of now. Medi-Cal isn't a completely discretionary program. There are lots of federal rules that require minimum eligibility and benefits, and then there are some optional eligibility and benefits on top of that.

And so the legislature does have some levers around deciding who is eligible for the program, what benefits to offer. The legislature, also, the state has some flexibilities in determining in terms of managing utilization and to some extent also how much to pay for services. And these are all areas the legislature could explore.

The legislature did take some action in last year's budget around many of these areas already. It sort of covered the gamut of eligibility and provider rates and service utilization. But the legislature could explore these even further as needed to help sort of deal with the fiscal situation.

One other thing I wanted to note is a key way the legislature has helped control spending in Medi-Cal is by finding other financing sources instead of the general fund. The sort of two key sources in the past have been provider taxes and tobacco taxes.

And as we sort of just discussed, at least on the provider tax side, those have become increasingly less of a feasible option sort of long term. And so if the legislature were interested in financing approaches, they would potentially have to explore sort of new creative options there.

And so then I think that's sort of the final area of issues before the legislature. And that's really about connecting people to coverage who are disenrolled from Medi-Cal. And this area also poses a lot of barriers to the legislature.

The legislature does have levers it's turned to in the past to expand access to care for people who are uninsured. But there are some limitations that would that would need to be explored. As an example, as Dr. Hernandez noted, one of the core ways the state has connected people to health care is through county health programs.

A lot of these county health programs however, sort of ramped down over time. And that's because a lot of the core populations served by those programs were shifted to Medi-Cal. These are part of expansions under the Affordable Care Act and also undocumented populations too.

So to renew these kinds of programs would take a bit of programmatic and fiscal restructuring. Similarly, the state has also in some years sought to better connect people to private health insurance either through Covered California or through employer sponsored coverage. There are barriers here too. You'll hear about some of the barriers as part of other testimony today.

And even just as another example, some folks who are disenrolled from Medi-Cal will be dis enrolled because they do not work enough hours. That population therefore will sort of lack access to the same kind of access to employer sponsored health coverage as other people who work full time.

So given that, the legislature likely will sort of need to think of new and creative solutions kind of moving forward to sort of address the fiscal situation, but also kind of address the bigger policy issues kind of before it as a result of HR 1. Thank you.

Thank you so much. And now we are going to make sure that we never lose sight of what this all means for individuals with the testimony from Chaz Franklin, who is a Covered California enrollee.

Good afternoon everyone. My name is Chaz Franklin and I was asked to come and speak to you regarding the health care premiums. Before I begin I need to give you some background. I am 64 and live in Calusa with my family.

I am a veteran and I was an educator for 27 years, before retiring in August 2021 at the age of 58. I am the father of two and have been married for 27 years. My wife Jean is 63 and is also retired. Between us we earn about $6,000 in retirement a month.

At the time of my retirement, I was put into COBRA and then into Covered California. My family's premium at the time was $300. This was affordable and we were doing fine. On March 1, 2023 I took my first child off our health care. The rates jumped to 456, a 65% increase for three of us.

I called and complained and it was reduced to 301 for a year and then 262 for a year. My second child was taken off the insurance in 2024 and Covered California doubled our rates to 540. Absurd. Absolutely, but still manageable. Both Jean and I have health issues, but we could still afford this.

In August of 2025 I was sent a letter from Covered California stating that the premium for our healthcare was would rise to over $1900 a month for each of us. In January of 2026 I called Blue Shield and asked why our premium was going up from 540 to nearly $4,000 a month. They said the subsidies.

Excuse me, the subsidies were going away and that the new premiums reflect that. They referred me to a law center and I called them. That is why I'm here today. Here's the scoop. I would be paying almost $4,000 a month in healthcare premiums for my wife and I with a high deduct I might add. My mortgage is 1300 a month.

Health care costs three times more than my mortgage. Combine the premiums with my mortgage and the start of my month comes with a $5,200 cost. Remember, we make around 6,000 a month. Retirement is supposed to be about living comfortably and we do that. However, not anymore.

We have had to delve deeper into our retirement to pay for the cost of health care before Medicare at age 65. For me that's a year. For my wife that's 20 months. My premium cost for - before Medicare is $23,136. My wife costs will be $38,560. That's a $61,696 in healthcare premiums alone.

This amount is one third of what I owe for my house. Fortunately, and I say this with all the absurdity and morbid nature that comes with this, I was granted the serendipity of having my wife diagnosed with ALS in October of 2025. This immediately put her on Medicare in November of 2025.

Her total plan's premiums run around $400 a month, meaning this terminal disorder has saved me $1,534 a month in health care costs alone. We still must dig into our retirement until I'm eligible for Medicare and recognize not everyone may have a nest egg to fall back upon.

I come here to express my discontent and take umbrage that Congress, including California's representatives and healthcare bureaucrats sit idly and go. We are doing our best. I am convinced that they are more interested in petty bickering about taxes, immigration, etc. and lining their own pockets with money than they are about the health care for people like me who don't have employee based healthcare, Medicare or Medi-Cal. Thank you.

Thank you so much. I'll bring it back to the Committee for any comments or questions for this panel. Dr. Patel?

I'd like to first share my appreciation for the panelists in bringing forth this information, and certainly our resident, who has explained in very stark detail what these changes are doing to your ability to stay housed.

We know and have long talked about how increasing health care costs can impact a family's ability to stay housed, especially in their retirement years, after working on behalf of California for so many long years.

My question is one that comes out of a little bit of cynicism and suspicion: when we look at these premium increases, is there a way to actually calculate how much of that is directly related to HR 1 and how much may be something that insurance providers may be kicking up as a premium?

Is there some way to know that, or is this all - are we assuming that this is all directly related to HR1?

Because some of this sounds like it even predated HR 1.

Yeah. I think we would need to get back to the Committee. I'm not prepared to talk about the premium issues much. I do understand that we've—Covered California has done some modeling on the premium cost, so there might be some information on that. I just not—I don't have it in front of me, but.

And we'll hear from Covered California in the next panel, so.

That's correct.

Thank you. I think all of us are slightly perplexed at how when you have dependents come off of a plan, your premiums can go up. That, in itself, sounds like an internally structural problem.

Thank you. Assemblymember Addis. And then we'll go Carillo.

Thank you. First, I want to thank you, Madam Chair, for bringing this first to the people of California all around the state with the roundtables that you did and doing the listening sessions and now in our Health Policy Committee.

And it's an issue that we talked about quite a bit last year in the Health Budget Subcommittee prior to understanding what was going to happen with HR 1. We were really trying to prepare ourselves, and I want to thank the panelists, all three of you, really, for what you bring to this conversation.

And I heard, you know, California did do some things last year, trying our very best to protect the 94% of Californians who are currently covered and really put in as many delays and minimize the harm—did our best to minimize the harm that we knew was coming from the Federal Government. I'm glad we're going to hear from Covered California.

I know that, you know, the government, the Federal Government, basically shut down over these ACA subsidies and now is open again and really wrangling with this. I, for one, put a lot of the responsibility on what's happening to the Federal Government.

I know that California has her own struggles, but I would say the Federal Government is absolutely at fault when it comes to the ACA subsidies. I did have a question around standing up a network that really relies on the counties again.

And I don't know if LAO has the answer, if any of the panelists have this answer, but just around cost to be able to stand up a new network compared to the cost of not standing up a new network, because I'm imagining we're going to have a lot of conversations around how expensive it will be to try to get an indigent care model back in place.

But there's also a cost to not creating that model and that cost is going to come in uncompensated care that those with health insurance are going to end up paying for, that hospital users are going to end up paying for. And I'm wondering if anybody has of yet run those cost comparisons.

The cost of inaction versus funding what we morally know is the right thing to do is what I'm asking about.

We haven't released a complete analysis of the specific cost to counties and it is a little tricky to estimate because counties do have some flexibility to design their programs. There's a, there's a general statutory requirement that counties, you know, provide, you know, help, help with health care for low-income individuals, but their counties have, within that, have, have some flexibility to design their programs.

We have gotten some information from counties. I don't have it in front of me, unfortunately, today, but counties have spoken to us about some of the potential cost impacts. I would also say that counties historically covered these costs through something called realignment. There was a, there were—states had two realignments, one in the 90s and one in 2011, and I believe it was a 1991 realignment that they were funding these programs from, in part.

And when these programs ramped down, the state reallocated some of those realignment dollars and the state now benefits from some of that in support of CalWorks.

So, that's the kind of fiscal restructuring that might need to be considered if the state were to sort of renew its network of county health programs.

And I'll just, I'll just—I appreciate that. Thank you. I'll just add, I guess to put a finer point of what I'm trying to get at is we're going to have a lot of discussions this year from a budget perspective.

And I know that a lot of the feedback we're going to be given is going to be about how expensive it is to provide health care coverage to folks. And there's going to be a lot of concern about the level of that expense.

But I think what we all know to be true is that not having health coverage is very likely even more expensive from a societal perspective, from a hospital perspective, from a human perspective. I think your name is Mr. Franklin. You know, just talk to us about—his wife basically had to be diagnosed with an illness in order to have affordable health care.

There's a huge, huge cost to that, but we need to be able to put a dollar figure to that to have an informed conversation.

And so, I just hope as we get in, and I know the LAO has done a phenomenal job. This is not a criticism, but certainly, as we go into budget hearings, it would be important to me to know what is the cost of not providing care from a dollar perspective?

I think it's vital that we're able to include that. And I'll just say I was looking at some of the pages. I think this is the LAO document that you held up.

And there's things, you know, optional is prescription drugs, dental care, hospice, PT, OT, private duty nursing, anyone who has interacted with anybody who receives Medi-Cal services, dental care, hospice, numerous others, would tell you that the cost of not having care is greater than the cost of getting care. But we need to see those hard figures.

I think that's important for the conversation and it's going to be important, as a number of members have ideas around revenue generation, that we have a holistically informed conversation. So, I just—I'm so sorry, Mr. Franklin. It's something certainly we have been grappling with.

And I know grappling probably falls a little flat given the situation that you're in. California did backfill Covered California subsidies for lower income. We tried to stabilize some of those premiums for people knowing what was going on. It's a discussion we're going to continue to have during the budget hearings.

But I will, I will say I wholly blame the Federal Government for what's happening with the ACA subsidies and really encourage any of our federal representatives that are listening to take heart to your story, Mr. Franklin. It's one that's not uncommon to Californians right now.

Thank you, Madam Chair. Thank you for both of your presentations, Dr. Hernandez and Mr. Constance Taurus and Mr. Franklin, for sharing your personal experience. Dr. Hernandez, I believe that in your recommendations you said that looking at what worked, being ACA is one of your recommendations.

Can you give us a couple of examples, if you can, of what it is that worked so that we can start working on that?

Thank you. I didn't introduce myself in this way, but I was formerly the Director of Health in San Francisco and pre-ACA and pre-expansion of Medi-Cal, we aimed, as a county, to try to figure out how to provide care, not coverage, but care for everyone in the county.

We built a program that was described as Healthy San Francisco. Healthy San Francisco was a program by which you could argue was both a organized way of our safety net providers to come together to provide service to anybody who lived in San Francisco, assuming they were not eligible for Medicare or Medi-Cal or commercial insurance.

It was care at last resort. And it asked businesses—it required businesses of 20 or more employees to either provide coverage or to pay into a pool.

And that pool, along with some realignment dollars and also with the FQHC Dollars, because the FQHCs play a very integrable role and by the way, does across the state for all of our primary care. You'll hear that, I'm sure, later today.

And we essentially designed a program, and we built it on top of the chassis of the San Francisco Health Plan, which was the Medi Cal plan. So, we did not create a new bureaucracy to enroll people in that program. At its peak, there were about 60,000 San Franciscans on the program.

By the way, I should note that the business community did litigate that on...grounds, and San Francisco prevailed. And at the height of the program, there were about 60,000 residents of California that were getting care in a comprehensive safety net program. And I should note that we had small businesses at the table.

We had labor at the table; we had all the safety net providers. We had all the acute care hospitals, private and otherwise, at the table when we created Healthy San Francisco.

It's sort of the example I was alluding to in my remarks that if everybody comes together and does their part, you can do something that's quite comprehensive and that was relatively easy to implement. Now, San Francisco has an economic base that is different than other counties. So, I would note that.

But that's what I was alluding to, that kind of design. Those partners are already beginning to come together to talk about how they deal, because if you don't have insurance, what ends up happening is you end up in emergency rooms.

And a lot of the motivation for creating Healthy San Francisco, where emergency rooms that were under diversion, that is to say they were too full, an ambulance couldn't come to that hospital because the hospital had no capacity. And that's the kind of situation we're likely to see as people forego health insurance or lose it entirely.

I hope that's helpful.

It's very helpful. And we've had some conversations about that. And I think that we should be working in creating a healthy California, not just a healthy San Francisco. Thank you.

We'd be happy to help you with that, Assemblyman.

I'm going to have Assemblymember Soria and then Schiavo ask questions. We are scheduled slated to end this portion of the hearing at 2:20. Just keep that in mind.

Great. Thank you so much to the panel. Also, thank you, Mr. Franklin, for articulating your point very well and putting a face to the issue that many Californians are grappling with in this moment. And so, I appreciate, you know, your personal story. I did want to specifically ask—obviously, I represent an area that is very rural, Central Valley Assembly District 27.

And as was mentioned by Dr. Hernandez, this work requirement is going to become more of a paperwork requirement.

And so, when I think about what this is going to mean for my community, I'm thinking about the higher unemployment rates that we have in our region. So, how is that, you know, how are we going to be able to counter that with these additional requirements?

And then, you know, some of the communities are very rural and isolated and have language barriers or folks that have language barriers. And so, how—what are you anticipating that the Legislature should be doing in terms of policies to ensure that we are supporting these types of communities that have even greater access challenges today?

Even though obviously we've had a lot of progress in California, in my community, the access piece is still, you know, way behind other parts of the state, so that.

And then, I just want to make a point in terms of affordability, because I do agree that we do need to look at efficiencies, but I also want to make sure that I caution folks, as we're thinking about affordability in areas like mine, where we don't have economies of scale, affordability looks different than in more urban, dense communities.

And so, I want to make sure that we are thoughtful about, you know, as we're looking at ways to reduce healthcare costs that we don't inadvertently impact communities like mine, for example, Madera County, Madera Hospital, which is becoming very costly to continue to provide care because the fact that we're more rural, again, we don't have economies of scale.

And so, it is different than in a much more urban, urbanized area.

Yeah. I just wanted to offer two flexibilities in administering the eligibility requirements that might be helpful to you and the Committee as you're thinking about the potential impacts. One flexibility afforded to states is that high unemployment counties can be—someone from a high unemployment county can be exempt from the work requirement. That high unemployment is—there's a measure, it's based on sort of the national unemployment average, and then it's some amount of that.

And I don't have the specific list of counties that could be affected by that. When we looked at it, we estimated that that exemption could exempt a few 100,000 people.

It is somewhat dependent year by year, though, because the unemployment rate fluctuates quite a bit and the unemployment in California fluctuates more than the national average.

The other flexibility that might be worth digging more into is that to measure work requirements, the state could either, you know, sort of measure hours and it's work or school or community service.

But the state could also take an income-based approach to measuring compliance and that could help with, to some extent, with automation, depending on how that's sort of implemented. So, there are some flexibilities in place that might help address some of that. It might not preserve access for everybody.

There still would be a significant number of people affected by the policies, but it could help mitigate some of that.

And last question from Assemblymember Schiavo. Thank you.

Thank you so much. Thank you. Wonderful to have you here today. I'm so glad that Healthy San Francisco got a moment in the sun. I was there with you back way, Blue Ribbon Commission and all, and think that it was something very special that we built there.

And I was really happy to be a part of it as well and hope that that can be a model for the rest of the state where that can be applicable. But Dr. Hernandez, I appreciate the ideas and thoughts that you brought as well.

And being on the Office of Healthcare Affordability, I wonder if you can talk a little bit about how in this moment we think about the work that's happening there. Because I think obviously hospitals are being squeezed, not feeling, but actually being squeezed.

Clinics are being squeezed through these cuts that I agree we lay squarely on the feet of this Federal Administration in these painful cuts that we are now left trying to scramble and figure out. And I'll note that there are no Republican members here at this hearing.

And I just have to say that out loud, which is unfortunate because I think that we're going to need bipartisanship to find a path forward. But how can we think about that work that's happening and how that's going to impact hospitals in a really difficult time for them where we need to get a handle on costs?

I mean, the cost that Mr. Franklin is talking about is unbelievable, right, unsustainable, and literally going to put people into homelessness or without health care. So I would love for you to talk a little bit about that and before you speak, because I just want to not have to say anything else because I know we're wrapping up.

I also want to echo what our Budget Chair talked about around making sure that in our analysis, this is one of the things that I think is so painful and frustrating is that we always talk about how much something will cost, but we never talk about how much it will save in the long term.

And we have to really think holistically about, sure, we're going to save all this money kicking people off health care, but when they come through our emergency rooms, we're going to pay 5, 10 you know, the exact number, times as much when they're coming through our emergency rooms.

And so, are we really saving money at the end of the day? And I think we need real numbers to be able to have this kind of analysis. And I think, you know, to the, to Assemblymember Patel's point, everybody has skin in the game on this issue now.

And I feel like I'm saying that a lot on this Committee, but I feel like insurance companies don't have as much skin in the game as they should because they just raise their rates and just push people to pay it. And it's, you know, it's with no choice, right?

You don't have health care for your chronic issues, right? That's your choice. That's not a choice. That's someone with a gun to their head.

So, everyone's going to have to show up to this table that you were talking about that needs to be built and get real about creating a health care system that actually works for Californians in California. And I would love to hear some more thoughts on OKA.

Thank you. So, the Office of Healthcare Affordability has set a spending target. It is really bending the curve over a long period of time. So, I think it's just important that we keep that in mind in the sense that we won't get at a reduction in overall spending in the very, very near future. That's one point.

Point two is, and I say this part as a trained primary care clinician, if we want people to not be in hospitals, and I know nobody who really wants to be in an ER or an acute care hospital for any length of time, we really need to invest deeply in a primary care delivery system.

And right now, if you value where you pay, we do not value primary care. Our spend on primary care is very, very low.

And thus, you don't have people going into primary care and being able to deliver the kind of services that we would ideally do outside of the walls of the acute care hospital, which are just very, very expensive capital investments. So, there is a working group to try to figure out what an appropriate spend is there.

There's a working group to try to draw more primary care clinicians into our delivery system. There's a big effort to think about primary care teams that use health workers and other individuals that can help us leverage that. So, a big effort at improving our primary care access.

If you look and compare us to third world countries, their primary care system is better than ours in this country, in the sense of its accessibility and what we pay for services and our long-term investment there. So, that would be a huge piece. And then I mentioned data. We have an interoperability plan.

If you think about the fact that today, if you're seen at an ER one day and in a primary care hospital the next day and a week later, you're in an ambulance that takes you to another hospital, that hospital has no idea today what happened at the last two visits, what was ordered, what was prescribed, whether you got it, whether you took it or not.

That kind of friction is friction that patients and consumers suffer with because you repeat the same things. I was here then. Well, what did they do? What did the test results say? Did they get a CT?

I'm going to repeat the CT. Those are the kinds of, we describe it as inefficiencies, but they're inefficiencies that are largely borne by patients and consumers. We should be much more.

I mean, if you think about the economy of this state being based on technology and the notion that we don't have ready data interoperability, that would be an enormous benefit to patients in navigating our system and it would be an enormous cost saving to the expenditures that we have in the system.

So, those would be two very concrete things that we should be focused on if we're going to bend this cost curve in the near future or out in the distant years.

First, I do have health care. It's $2,300 a month. But in reference to what she said, my wife is on MyChart and MyChart got us to Enlo and got us to UC Davis. And it also got us to—because, because my wife, we've been playing the waiting game and I advocate. I got her through. We've got MyChart.

All of the doctors have been able to read her charts in one system. So, it's out there. And it just came up for her. I don't have that on mine, but my wife has MyChart. And so, doctors at different hospitals have been able to read the knowledge and the medical.

That's how we got our ALS diagnosis from the EMG, from two different doctors when we got our second opinion. So, that is out there.

Oh, go ahead.

I'm sorry, Madam Chair. I mean, it's a good example. His wife has MyChart and he doesn't. Everybody should have interoperability in the state. It should be a goal.

I want to thank this panel for coming forward, particularly Mr. Franklin for sharing your very personal story. Your story will help to shape what we do in the state of California. And I know that it's costly, often, when you have to come, come up and share those details.

So, I want to thank you for doing so, and certainly to my longtime mentor, Dr. Hernandez, thank you for coming here. And LAO, always thank you for your insights. We're going to move now to our next panel, which will provide some important state level updates about implementation of HR 1 and its projected impacts.

We'll also hear about the status of the safety net, what options are available to people across the state as they lose coverage, and how we might think as legislators about bolstering the safety net. We will begin with the Department of Healthcare Services leadership with Dr. Michelle Boss and Chief Deputy Director, Tyler Sadwith. Congratulations.

Thank you for being here today. And please go ahead.

We need you to press your button.

Thank you, Madam Chair. Michelle Boss, Director of the Department of Healthcare Services. Today, we will provide a brief overview of the HR 1 Medicaid provisions and the impacts to the Medi-Cal program.

In your committee materials, there's a slide deck that we will generally use for our presentation, but given the time constraints, we may not cover every single slide. Medi Cal serves nearly 15 million Californians, roughly 35% of the state, including 5.5 million children and teens. It supports older adults and individuals with disabilities. It is more than healthcare.

It is a lifeline for the communities we serve, providing vital access to medical, dental, long term care, preventive care, mental health care and support, substance use disorder treatment, and care for chronic conditions.

HR 1 makes sweeping changes to the Medi Cal program and will cause widespread harm by making massive reductions in in the tens of billions in federal funding and potentially cripple not just this healthcare safety net, but also the general healthcare infrastructure that all Californians depend on.

In particular, the provisions of HR 1 that apply to Medi Cal focus on restricting eligibility and access requirements. This includes the work and community engagement requirements, semiannual redeterminations for the Affordable Care Optional Expansion Group, restrictions on retroactive coverage, and new cost sharing requirements.

Noncitizen coverage limitations—this includes reductions in the federal matching rate that we receive for emergency services for individuals with unsatisfactory immigration status and restrictions on lawful immigrant eligibility.

State financing restrictions—this includes restrictions on some of our vital funding mechanisms such as provider taxes and state directed payments and a one-year ban on abortion providers receiving federal Medicaid dollars. The changes will impact our emergency rooms, public hospitals, rural hospitals, community health centers, ambulance providers, and the broader health care delivery system that serves every community.

Millions we—millions will be impacted and we estimate that up to 2 million individuals may lose coverage as a result of these provisions. As we continue to understand the federal policies, we will work towards implementation and review our data to continue to refine these numbers.

Provisions of HR 1 go into effect upon—some of them go into effect upon enactment of HR 1, which was July 4th of 2025, and others may not start until 2029. Most of the eligibility changes that we will discuss today go into effect January 1st, 2026, and the noncitizen changes going into effect October 1st, 2026.

As we work on implementation and in conversations with our stakeholders, partners, providers, we are guided by the following principles—automate to protect coverage. We want to maximize the use of data sources to confirm eligibility without burdening members.

Reduce paperwork, reduce that friction that was discussed earlier, streamline verifications and safeguard coverage stability. Communicate with clarity and connection. Implement an outreach and education campaign that is culturally relevant, linguistically accurate, and written in plain language to build trust and help members understand the changes.

Simplify the renewal experience. We want to modernize and streamline the Medi Cal renewal process with clearer member-friendly form and six-month renewal steps that are easier to navigate. Educate and train those who serve Medi Cal members.

We plan to deliver comprehensive training on all the HR 1 provisions for county eligibility workers, provide clear guidance, practical tools, and ongoing technical assistance so counties and our DHCS Coverage Ambassadors can confidently support our members. And then, finally, provide timely and transparent communication to our members.

We plan to share information on HR 1 changes early on so members can build awareness and anticipate changes to their coverage and have ample time to prepare to take action and meet the new requirements. This Thursday, we are planning to release an HR 1 implementation plan.

This plan includes the department's approach to mitigating the impact on Medi Cal members, minimizing coverage loss to the greatest extent possible. We will also be doing a public webinar next week on this implementation plan. This plan has been informed by ongoing work groups with our counties, managed care plans, providers, advocates, and community partners.

The changes that we will discuss in more detail today fundamentally undermine our capacity to provide care when people need it most, with consequences that extend far beyond Medi Cal. These proposals, again, will impact our broader health care delivery system that serves every community.

The challenges of HR 1 are extensive and will be felt for years through California's communities and healthcare delivery systems. We will continue to deliver the Medi Cal program with integrity and compassion for the Californians who depend on us and for their care and wellbeing.

I will now turn it over to Tyler Sadwith, our State Medicaid Director and Chief Deputy Director to review these provisions in more detail.

Thank you, Director, and thank you, Madam Chair, and good afternoon, Committee Members. My name is Tyler Sadwith. I'm the State Medicaid Director. I'd like to take this opportunity to very quickly walk through some of the sort of technical details regarding the most salient provisions of HR 1 and highlight their impact to Medi Cal.

As another panelist mentioned, HR 1 represents the largest cuts to federal eligibility and federal funding in the Medicaid program ever. We are doing everything we can, taking every step possible to minimize harm to members and providers, but we cannot avoid its impact entirely. Perhaps the most significant provision impacting members is work requirements and community engagement requirements.

This provision requires in effect The Affordable Care Act adult expansion population, of which 5 million of our 14 million members are enrolled in, to demonstrate compliance with a set number of hours of working or volunteering or being in an educational program or meeting other qualifying activities.

There are a certain number of exemptions and exceptions that I will walk through briefly. The punchline is that we estimate at full implementation up to 1.4 million members will lose coverage, based on as a result of this requirement. In budget year, we estimate up to 233,000 will lose coverage.

So, in effect, this applies to childless adults age 19 to 64. The requirement is that they either have demonstrated that they have worked for 80 hours in a month prior to their enrolling in Medi Cal or in any month during the look back period when they come up for redetermination.

They can also meet this requirement by performing community service for 80 hours a month, participating in a federally designated work program for 80 hours a month, or being enrolled half time in an educational program. As another panelist mentioned, we can also count this by income.

Congress established $580 a month as representing 80 hours of work at the federal minimum wage here in California, because our minimum wage is higher, it turns out people can meet that income compliance threshold by working less than 80 hours a month, and we plan to implement that.

We are taking every step that we can to automate this process and determine if people are exempt or compliant based on available administrative data.

And since the day the law passed, we have been taking steps to expand the federal, state, and private sector data sources available to us so that we can perform those exemptions and those determinations of compliance on an ex parte basis. This means that an individual will never have to manually report or submit information.

We know that when people have to manually report or submit information, based on the experience of several states that have implemented this Medicaid, that results in very high procedural disenrollment rates. The median disenrollment rate is 77% of that population that cannot be exempted or determined compliant on an ex parte basis.

So, our first guiding principle, as the Director mentioned, is to automate as much as possible, and that is what we are doing. Just to provide a snapshot of some of the exemptions. People that do not have to demonstrate compliance with the requirement.

There are eligibility group related exemptions, children under 19, foster youth and former foster youth, parents and other caretakers, individuals duly enrolled in Medicare and several others. I'm just going to breeze through this because our minutes are limited.

There are other exempted populations that really are enrolled in that Affordable Care Act Adult Expansion Group that are nonetheless exempt by law. These include individuals who are American Indian or Alaska Native veterans with a certain disability rating, individuals who are medically frail, individuals meeting CalWORKs work requirements, and so forth. Individuals participating in substance use disorder treatment.

I want to highlight the medically frail exemption here is something we are actively exploring.

We are working with Managed Care Plan Chief Medical Officers, the AMA, and clinicians representing a dozen disease organizations and medical societies to make sure we are building out the medically frail criteria as expansively as possible in a way that's defensible and auditable given federal guidance provided to date. We are using federal IRS data.

Equifax is a vendor that provides income data, looking at other vendors of income data for people that participate in the gig economy that might not be captured by the IRS or Equifax, EDD data, educational data.

Really just, you know, I think our slides that are available to the Committee show the steps we continue to take to make sure that we can, again, on the back end, using administrative data, exempt people to the maximum extent possible or deem them compliant so that they never have to go through the red tape.

One other major exemption was mentioned by another panelist which is living in a county with a high unemployment rate and by our estimates, that includes 22 counties representing 15% of the impacted population. One other major provision impacting Medi Cal members in the Affordable Care Act Adult Expansion Group is the increased frequency of redetermination.

Typically speaking, states have to redetermine eligibility once per year for all members to make sure they're still eligible to enrolled. HR 1 requires states to double that frequency for the Affordable Care Act Adult Expansion population to once every six months. So, this means that people may lose coverage as a result of procedural disenrollment, unfortunately.

And it also means that this works in concert with the work requirements policy that I just mentioned. There are several other eligibility related provisions of HR 1.

It reduces retroactive eligibility from three months, which is what we currently offer, to two months for most of Medi Cal members, except for the Affordable Care Act Adult Expansion Population, where retroactive coverage is limited to one month. HR 1 also establishes cost sharing requirements for the Affordable Care Act Adult Expansion Population.

There is no minimum amount established in the law and certain services like primary care, family planning, behavioral health, and FQHC visits are exempt from that. Again, we are taking all of the steps that the Director mentioned to use the guiding principles of automating to protect coverage wherever possible, communicating to members with clarity and intention, simplifying the renewal experience, educating and training those who engage in support members, and providing timely and transparent communication so that they're fully aware of how their eligibility may be impacted.

The implementation plan describing these efforts will be available on Thursday and we have a public all comer webinar next Thursday to walk through that and provide information. There are several provisions of HR 1 that impact individuals depending on their immigration status.

There's one significant provision that changes the scope of individuals who previously were fully eligible for federally funded full scope Medi Cal, but as a result of their immigration status, according to HR 1, they are now not eligible for full scope federally funded Medi Cal.

Here in California, that impacts up to 200,000 individuals and per the Governor's budget, this group will move into restricted scope Medi Cal. There's one other change related to immigration status. For individuals who are not eligible for fully funded full scope Medi Cal, the Federal Government does provide a match for emergency services and the match drops from a 90% rate to a 50% rate for those embers. I received a sign. We have one minute left.

I will say that there are some major impacts to state financing mechanisms that we rely on to fund the Medi Cal program, including healthcare related taxes like the MCO Tax, the Hospital Quality Assurance Fee. These do represent significant reductions and significant changes to the Medi Cal program.

I think there's—we'd be happy to provide information about these provisions and one final provision of HR 1 that I'd like to mention is the ban on abortion providers, a one-year ban. The Federal Government prohibits certain providers of family planning and reproductive health care from participating in the Medi Cal program.

Here, this impacts Planned Parenthood and 80% of Planned Parenthood members rely on Medi Cal. So, this is significant, and the Governor's budget notes several funding options to mitigate the impact of this provision.

Thank you, appreciate that, and I'm sure we will have an opportunity to ask some questions at the end. We'll move now to Jessica Altman with Covered California.

Good afternoon, Chair and Members. My name is Jessica Altman and I'm the Executive Director of Covered California. I want to thank you for this opportunity to be here and for hosting this critical public discussion today.

I did provide the Committee with slides as background, though I will not be walking through them sort of one by one in my remarks today. Covered California is the place where consumers can purchase quality comprehensive health insurance and get financial assistance to help pay their premiums and lower their out-of-pocket costs depending on their income.

An estimated 1 in 6 Californians has, at some point, been covered by a plan purchased through Covered California.

These are small business owners and employees, gig workers, early retirees like Mr. Franklin, who you heard from on the first panel, farmers, and other low and middle income Californians who have no other options for affordable coverage as they don't have the privilege of an employer offering stable benefits. As a marketplace under the Affordable Care Act, Covered California is subject to federal law and regulation and generally speaking, the tax credit structure is defined by the Federal Government and by Congress.

Unfortunately, recent federal policy changes through HR 1 and what is called the Marketplace Integrity and Affordability Rule, a new regulation, will have sweeping impacts and alongside the expiration of enhanced premium tax credits are expected to lead to substantial declines in marketplace coverage and a rise in the number of uninsured.

Of course, in addition to what we've just heard about in our Medi Cal program. Both HR 1 and the final federal rule impose policies that collectively will limit enrollment opportunities, add new administrative burden on consumers, limit eligibility, and increase consumer costs.

There are too many to highlight, but I want to highlight a few that help to illustrate the real impacts consumers will face. Under HR 1, many lawfully present immigrants, such as refugees and asylees, will no longer be eligible for any federal financial help through marketplaces starting in coverage year 2027.

These are lawfully present immigrants who have been eligible for marketplace tax credits since the inception of the Affordable Care Act, but who will no longer have access to crucial financial assistance that keeps their coverage affordable. We estimate over 112,000 of our current enrollees will be impacted by this change again going into effect next year.

In another example, under new federal rules, Covered California will be required to shorten our open enrollment period, the critical window consumers have to enroll, from 12 weeks to eight, starting next year in 2026 for the 2027 coverage year, giving people simply less time to enroll.

Gender affirming care is now no longer an essential health benefit under federal rules and in future years, consumers will face stricter enrollment verifications and lose access to automatic renewals, making it harder both to enroll and stay enrolled in their coverage.

While HR 1 made numerous policy changes, one thing it did not do was extend the enhanced premium tax credits which, as I sit here today, did expire as of December 31st, 2025. These tax credits dramatically improved affordability of coverage, further lowering premium cost for lower income consumers, and providing financial help to middle income consumers for the first time.

The result is record enrollment in California and across the country. In 2025, Covered California reached an all time record of nearly 2 million enrollees, and our state saw a record low 6.4% uninsured rate. Unfortunately, with the expiration of these enhanced tax credits, consumers are seeing much higher premium costs starting this month as premium billing has started throughout the month of January.

The enhanced premium tax credits accounts for two and a half billion dollars of premium assistance that California's consumers are now losing out on. We have estimated that enrollees will, on average, see their monthly premium costs nearly double, an increase of 97%.

I want to here create a distinction between with the word premium, which in the marketplace is sometimes used as the amount the insurance company charges, but often used as the amount the consumer pays reflective of the tax credit reducing that cost. It is that amount that is nearly doubling.

An average, of course, as we've heard today, does not capture every scenario. And some consumers, particularly middle-income consumers, like I believe Mr. Franklin, you heard from today, who are losing eligibility for tax credits altogether, are seeing even more extreme increases in their monthly costs.

Our estimates indicate that due to the enhanced tax credits alone, not to mention the HR 1 impacts and other changes, could result in as many as 400,000 of our enrollees dropping marketplace coverage due to lack of affordability.

We are now in the closing week of open enrollment, and we are closely tracking our data for 2026 coverage. To share what we know so far, new enrollment—these are people coming in to enroll during our open enrollment period— is down 32% compared to the same time in open enrollment last year.

We are seeing more consumers opt for bronze level coverage which does have a lower monthly premium but comes with a higher deductible. And it is still too early to tell how renewal enrollment is impacted for the many Californians hoping to stay covered.

But early data indicates higher rates of cancellations among those middle income consumers, which you can understand having heard Mr. Franklin's story today.

Discussion over the enhanced premium tax credit extension continues at the federal level and we have done as much contingency planning as we can to be ready if Congress and the President take action to extend them, including giving consumers more time to enroll and get the tax credits they are eligible for, if we are lucky enough to be in that situation.

However, there is absolutely no guarantee that that is going to happen, and so, we are urging consumers not to wait on Washington and to use this...