Senate Standing Committee on Budget and Fiscal Review

The Senate Committee on Budget and Fiscal Review will come to order. We will begin as a Subcommitee. When we do have 10 Members, I will ask for a roll call. We're holding our Committee hearing in 1021 O Street room 1200 in the swing space.

Once again, would all Members please report so that we can have a full Committee when we move ahead? Public comment will be heard after the presentation and discussion.

I'll also note for the record that since we were unable to have public comment at first hearing on the governor's budget on January 21st, I invite Members of the public to make comments at this or other full budget hearings in February on any part of the Governor's proposal.

I know that many of the people that were not able to testify at that first hearing were interested in HR1, so that is appropriate for comments on this. The oversight hearing today is about the impacts of HR1 on California safety.

We received a communication from the counties in the last day that estimate that there's a $9.5 billion cost HR1 to California counties. I heard from one of the hospitals in my district who really yesterday who lined out the impacts that will happen to hospitals on this.

But in the first panel where he'll hear from the legislative analysts, the Department of Finance and two experts about the fisc and programmatic impacts of HR1 on MEDI CAL and CalFresh programs. On the second panel we will hear from the departments, counties and advocates in more depth about the interpretation.

With a focus on changes to program eligibility and ways to preserve access. HR1 represents the most sweeping disruption to SNAP and Medicaid in the history of these federal entitlement programs. In HR1, on one hand, there was $1 trillion of tax benefit given to the highest 1% of income earners in the country.

On the other hand, to help pay for it, millions of Americans will lose medical care and food assistance. And so we are discussing today the impact on California and what steps we might take or explore in implementing that.

The costs are not just lost federal funding, but they're increases in hunger povert and poor health outcomes for years to come. I look forward to hearing about how the state can mitigate these impacts and work to prevent people falling through the cracks that HR1 created.

This will not be the only time that we discuss the impact of HR1 on these programs. But the Senate Budget Subcommitee Number 3 will convene a second hearing on March 5th to discuss various county and safety impacts to HR1. And I encourage those with an interest in this issue to attend and participate in those Hearings as well.

Before we begin, I'm going to offer the Vice Chair a chance to make any opening comments.

Thank you, Mr. Chair. I appreciate that. Certainly the challenges are significant, more so in subsequent years than the current budget year or the budget we're considering this year. But it's important to remember a couple of things. Number one, we still have a structural deficit of our own budget to fill, and that existed before HR1.

And we can't lose sight of that and needs to be part of our solution for 26-27. It's also, I think, important, not by way of any excuse, but just to acknowledge the current challenge as well as things that will arise in the future. At the federal level, we have a 37 or $38 trillion debt.

How that's going to be settled, I have not much of an idea. But it is a significant challenge for our elected officials in Washington, D.C. and something also that can affect us. So I look forward also to hearing the testimony today.

Thank you, Mr. Vice Chair. While you were speaking, we achieved decorum. So will you please call the roll?

[Roll Call]

We have a quorum. And just one last thing, because I'm going to invite the first panel to come up. I have to step out of the hearing at 11:15, and Senator Niello graciously said he would pick up the slack as I told him I have to go to the Bill signing of the Bill he opposed.

So I'm really glad that he is picking up the slack by keeping the Committee going when that happens. You're welcome. You're welcome is on the Record. We'll now begin with our first panel.

We have Ryan Woolsey from the Legislative Analyst Office, Sabrina Adams from the Department of Finance, Miranda Dietz from the UC Berkeley labor center on the first panel. And did I leave one of you out? That's presenting Gina. Okay. And Gina, who are you with?

Gina Plata-Nino with the Food Research and Action Center.

Perfect. Sorry, you're not on my notes here. So each of you will get five minutes and we will have questions of the Committee afterwards before moving the next panel. But we do need to try to move along today because we don't have all the time in the world at the end.

But having said that, welcome to the Committee. We'll go in the order of Ryan, Sabrina, Miranda and then the Food Center. So welcome to the Committee.

Thank you Mr. Chair and Members, Good morning. Ryan Woolsey with the Legislative Analyst Office. We've been asked this morning to provide a high level overview of the impacts of HR1 on Medi Cal and CalFresh. I'll be speaking from a handout that's been distributed to you starting on page two with some very high level background.

Medi Cal and CalFresh are among the largest health and human services programs administered by the state. They provide health coverage and food assistance to millions of Californians with combined annual spending in the hundreds of billions of dollars.

HR1 makes significant changes to both Medi Cal and CalFresh in three main areas and I'll walk through each of these in turn. The first is work requirements.

Turning to page three, HR1 expands work requirements in both MEDI CAL and CalFresh by requiring part time work or participating in other qualifying activities focusing on able bodied working age adults that don't have certain challenges that would make a part time requirement difficult, such as disabilities or caring for younger children. In Medi Cal.

The requirement is new and applies to the childless adult population. An estimated 3.5 million people are expected to be subject to this requirement and we estimate that 1 to 2 million of these may end up being disenrolled from coverage.

Turning to page four, Federal law already required work participation for able bodied adults without dependents in CalFresh, but until recently the state had a waiver from this requirement that applied to all counties.

HR1 expands this CalFresh work requirement in California by applying it to adults age 55 through 64 and to those caring for dependents age 14 and older. It eliminates exemptions for former foster youth, veterans and homeless individuals and it tightens rules for waivers from the requirement, effectively ending California's statewide waiver.

With these changes, over 800,000 individuals are anticipated to be subject to this work requirement and over 600,000 may lose food assistance on other eligibility changes. Turning to page 5, HR1 makes certain non citizen groups including asylees, refugees and others ineligible for assistance in Medi cal and CalFresh.

An estimated 200,000 people in Medi cal and 72,000 people in CalFresh are expected to lose benefits as a result of this change in MEDI CAL. HR1 increases the frequency of renewals for the childless adult population from once annually to twice annually.

It also requires the state to impose a share of cost for certain services for the childless adult population in Medi Cal subject to a minimum income floor. The last group of changes in HR1 relate to program financing.

Turning to page 6, HR1 in Medi Cal tightens rules for health care provider taxes that are used to help pay for the Medi Cal program in California. This will primarily mean a reduction in the size of the the state's managed care organization tax and a fee on private hospitals.

We estimate that this will result in ongoing annual costs of a few billion dollars a year. HR1 also reduces the federal share of cost for emergency services provided in Medi Cal to undocumented immigrants from 90% to 50%. This is estimated to result in costs $658 million General Fund in 2026-27.

Turning to page 7 for CalFresh financing changes, HR1 reduces the federal share for administrative costs from 50% to 25%. This shifts approximately $480 million a year in costs to the state and another $190 million a year in costs to the counties.

Then on page 8, HR1 imposes a share of benefit costs in CalFresh depending on the state's payment error rate. If the state's payment error rate remains at its most recent level of about 11%, the state would be subject to the highest level of share of cost under HR1 of about $2 billion a year.

In conclusion, I'll highlight a few issues for legislative consideration. First, the state faces significant structural budget deficits, and in light of these, it will not be possible to backfill lost federal funds and lost benefits from HR1, absent significant other budget actions.

There are other resources available to individuals who were affected by HR1, but these are limited and will not be able to fully replace Medi Cal and CalFresh.

There are three areas that we think are key to supporting successful implementation of HR1.1 is to focus on automation and data sharing, to reduce manual processes and limit unnecessary interactions with enrollees. This means may help to lessen the risk that people who remain eligible for benefits are not inadvertently or incorrectly disenrolled because of administrative burden.

It's also important to consider how best to support initial and ongoing county responsibilities, since counties are on the front lines of implementing HR1.

And finally, we recommend that the Legislature take steps to ensure that implementation of HR1 aligns with its priorities by enacting key decisions in statute and adopting mechanisms to ensure ongoing legislative oversight, especially in cases where federal guidance is still forthcoming. That concludes our comments and my colleague and I are able to take questions when the time comes.

Thank you very much. We appreciate your comments. We'll move to the Department of Finance.

Good morning, Chair Laird, Members of the Committee Sabrina Adams with the Department of Finance here to present today on the fiscal impacts of HR1 on the MEDI CAL and CalFresh programs.

Also noting that the Department of Healthcare Services and Department of Social Services are here to speak to the programmatic impacts of HR1 as well as some of the mitigation efforts as the state moves to implement these new federal requirements.

So to begin across Health and Human services, the Governor's budget includes an additional 1.4 billion General Fund in fiscal year 26-27 in response to HR1 and an estimate and also includes a 2.4 billion reduction in federal funds and further federal Fund reductions are estimated to grow to over 12 billion by fiscal year 2029-30.

So breaking down this 1.4 billion General Fund a little bit further, MEDI Cal accounts for a NET increase of 1.1 billion of these new General Fund costs and the main drivers of these new MEDI Cal costs are a reduced federal match for emergency services for certain populations as well as lower support for the MEDI CAL program from the Hospital Quality Assurance Fee.

Because California's submission was not deep deemed approvable by the federal Government, The Governor's budget also requests administrative resources totaling approximately 24 million General Fund over four years to address new DHCs workload and requirements for CalFresh.

The governor's budget reflects a net increase of 300 million General Fund in the budget year and this is primarily driven by the updated administrative cost sharing provision that reduces the federal share for this program from 50% down to 25%.

These resources that are included in the Governor's budget build upon one time resources that were included in the 2025 Budget Act. So after HR1 was passed, the Administration and the Legislature took action to provide resources for the Department of Healthcare Services and Department of Social Services to begin some of the early implementation and mitigation efforts of HR1.

So within the 2025 Budget act for MEDI CAL there's 4.5 million total funds one time for the Department to plan and begin the implementation. And for CalFresh, the 2025 Budget act provides approximately 87 million to respond to HR1.

Within these CalFresh resources there's approximately 55 million to support to improve the CalFresh payment error rate and an additional 20 million for the CAL Food program to help mitigate some of the immediate impacts of HR1. And as mentioned, these two departments will expand on how they're utilizing these resources in the following panel.

And so lastly, as the LAO had discussed in their presentation, there are various provisions of HR1 that become operative in future years for Medi Cal.

Full implementation of all HR1 provisions are anticipated by fiscal year 2029-30 and the governor's budget estimates a decrease of 14.2 billion total funds in Medi Cal as well as caseload disenrollment of up to 2 million individuals by fiscal year 2930.

The two biggest drivers of the projected decreases in Medi Cal funding and caseload are are driven by the federal work and community engagement requirements as well as six month redeterminations for specified populations. There are also some additional changes for the Medi Cal program which the LAO had outlined in their presentation as well.

Additionally, California's MCO tax does not comply with the HR1 requirement that prohibits the state from taxing Medicaid providers at higher rates than non Medicaid providers. And so a future MCO tax under the current federal law as well as California's Proposition 35 would make a future MCO tax relatively insignificant.

So to put this into further perspective, the last MCO tax provided over 20.4 billion across four fiscal years, which comes out to approximately $7 billion annually on average to support the Medi Cal program. And these are costs that would have otherwise been borne by the General Fund.

However, effective January 2027, the total size of any future MCO tax would likely be around 75 million due to the HR1 rules as well as California's Proposition 35 limitations. And lastly for CalFresh, the major HR1 cost drivers for this program are the administrative and benefit cost sharing provisions.

As mentioned previously in the Governor's budget, there are additional General Fund There are additional General funds as a result of the change in CalFresh administrative costs which reduces the federal share from 50% down to 25% effective October 21st. And lastly, the other HR1 cost driver for CalFresh is the benefit cost sharing provision.

Beginning July 2027, states are required to pay a percentage of the CalFresh benefits, which was previously 100% federally funded dependent on the state's CalFresh payment error rate. That concludes my remarks and I'm happy to answer any questions at the appropriate time.

Thank you very much. We're doing questions at the end, so we'll move to Miranda Dietz from the UC Berkeley Labor Center. Welcome to the Committee.

Thank you so much. Good morning. My name is Miranda Dietz. I'm the Director of the Healthcare Program at the UC Berkeley Labor Center.

At the labor center, we research issues that matter to workers, including health insurance and Medi Cal, which is an important source of health care coverage for for millions of California's low wage workers and their families.

Today I want to share our projections for how many people will lose full scope Medi Cal coverage by 2028 as a result of the changes imposed both by HR1 and the MEDI Cal changes passed in last year's budget. Let's see if I can advance this slides. There we go. Thank you. Sorry about that.

So, as you've heard, HR1 makes a number of changes to Medi Cal. There are three that have a major impact on how many people are enrolled. Number one, the work requirements for the new adult population, sometimes called the expansion population. These are the mostly childless adults who gained coverage in Medicaid thanks to the Affordable Care Act.

There's the more frequent eligibility ready determinations for that same group. And then third, there's a set of lawfully present immigrants, refugees, asylees and others who because of HR1, will no longer be eligible for federally funded Medicaid and who the Governor's budget proposes be moved to restricted scope Medi Cal.

The 25-26 state budget also included a number of changes to Medi Cal. And the two that have a significant impact on how many people are enrolled are number one, the enrollment freeze for undocumented adults and number two, instituting a $30 per month premium for adults who have unsatisfactory immigration status.

This is a group that includes not just undocumented enrollees, but also lawfully present immigrants such as green card holders who've had them for less than five years combined. We project that these policies will result in up to 3 million Californians losing full scope Medi Cal by 2028.

I should note these are projections and there's considerable uncertainty around the impacts of these policies. Though our estimates are largely in line with what others are projecting, the way in which these policies are implemented will certainly have an impact.

But I want to highlight that there are also policy choices the state could make that would minimize the impact of HR1. So for each of these three policies that I highlighted as part of HR1, the state has a choice for work requirements and more frequent eligibility redeterminations. HR1 requires these apply to the federally funded new adult population.

The state could decide to apply these burdensome new requirements only to the federally funded Medi Cal population regulations. Currently, the Administration has stated that they plan to also apply these to state funded enrollees, namely to those with unsatisfactory immigration status.

Similarly, the Governor's budget included the intention to move refugees, asylees and other lawfully present immigrants who will lose their Federal funding to restricted scope Medi Cal. The state could instead move them to state funded full scope Medi California.

If the state made these choices to limit the impact of H R1, we project that 570,000 Californians would keep their Medi Cal coverage. Next I want to turn to who we project will lose coverage and why. There are really two main reasons that people will lose coverage, Red tape and immigration status.

Fundamentally, HR1's work requirements and more frequent redeterminations are going to result in people losing Medi Cal not because they're not eligible for Medi Cal. Rather, it's these burdensome bureaucratic requirements that lead them to losing coverage even though they remain eligible. And this is particularly true for folks who are ages 50 to 64.

The six month redeterminations mean it's just twice as likely twice twice as many chances for folks to lose their coverage for procedural reasons. The other reason folks are going to lose coverage is because of their immigration status.

People who've lived, worked and paid taxes in California, often for years, will lose access to the comprehensive Medi Cal benefits that until recently were available to all low income Californians, regardless of their immigration status. Many of those who lose coverage will be workers.

That's because 2/3 of the adults currently enrolled in Medi Cal are working either full time or part time. Most of the rest should qualify for an exemption, whether because they're medically frail, are a caregiver or are enrolled in school. And yet we know from the example of other states that many will lose coverage despite their eligibility.

What will happen to find folks who lose coverage? Some who are working or have a worker in their family may be offered job based coverage, but that comes with costs. However, many Medi Cal recipients, even those who are working, don't have the option of job based coverage.

Some work too few hours, others are at small businesses or that don't offer coverage or are self employed. There's covered California and the individual market. But as we understand it, these folks who lose Medi Cal will not be eligible for subsidies making that coverage unaffordable for these low income Californians.

Most of the people who lose Medi Cal will become uninsured. And we know that being uninsured means reduced access to care, reduced financial security. When people are uninsured, they're much less likely to get the care they need. When people are uninsured, they live sicker, die younger, and are one ER visit away from financial ruin.

There's significant research on the impact of the Medi Cal expansion that shows us that health insurance and Medi Cal matters. It improves people's access to care. It reduces mortality and improves health outcomes.

In conclusion, HR1 and the state changes to to Medi Cal could lead to up to 3 million Californians losing Medi Cal coverage in the coming years. But the state does have choices to limit HR1's red tape and immigrant exclusions and protect coverage for our state funded Medi Cal populations.

Thank you. Thank you very much. Appreciate your comments. We'll now move to Gina Platanino from the Food Research and Action Center. Welcome to the Committee.

Thank you. Good morning. Thank you for giving me the opportunity to come and talk to you on why investing and protecting access to CalFresh is sound fiscal Policy My name is Dina Platanino and I serve as the Director of SNAP Policy and Advocacy at a national organization that focuses on eradicating poverty related poverty hunger.

I am an expert on food security issues, particularly Cal Fresh and snap. Having worked as an attorney for many years on this this issue and serving in the previous Administration as a Senior Policy Advisor on Nutrition and Agriculture for the Domestic Policy Council at the White House. I want to talk today about two main things.

First, I want to talk about the impact of the safety net in our local economies. CalFresh is more than a food program. It is one of the strongest stabilizers for households and local economies. When these benefits are cut, as my colleagues have shared, the consequences ripple across entire communities. First, hunger and homelessness will rise.

Research shows that food insecurity is one of the strongest predictors of housing instability. When families lose CalFresh, they shift limited dollars from rent to food, putting them at higher risk of eviction, shelter entry and street homelessness. Cities and counties already overwhelmed will feel this immediately. Second, local economies will shrink.

CalFresh brings in more than two $12 billion a year to California communities. Every dollar generates up to $1.8 in economic activity, and under HR1, if the state doesn't act, California will lose millions of dollars each year. Third, health costs will rise. CalFresh improves health, reduces hospitalization, lowers rates of diabetes complications, and decreases mental health crisis.

When people lose benefits, we see more ER visits, more uncontrolled chronic illnesses, and more depression and anxiety. Those costs fall directly on Medi Cal County hospitals and city emergency services.

Finally, local governments will be forced to fill the gaps as the colleagues have shared, and food banks, cities, churches and nonprofits cannot replace federal food assistance at this scale. When CalFresh is cut, it is communities, cities and individuals that feel the impact directly. I want to focus the last two Minutes, specifically on the time limits.

These time limits, according to various estimates, California estimates that they will impact almost a million people. These are some of the poorest individuals in the state. Many work already. Many live unrecognized health conditions. Many cycle through unstable hours or gig jobs, and many lack transportation, stable housing or the documents needed to prove the exemptions.

They will lose food not because they refuse to work, but because the rules do not match the reality of the jobs available to them. Time limits do not increase employment. The theory behind time limits is appealing. If people risk losing food, then they work a set number of hours. They will work more.

But decades of evidence, 30 years of research, has shown that that is not what happens. Multiple state and national studies have shown that all it does is that it creates no meaningful effect on employment or earnings. Even when researchers control for local labor markets, demographics, motivation and other factors, the findings do not change. Employment remains flat.

The jobs simply do not appear because food is taken away. For many affected Californians, work looks like unstable gig hours, inconsistent shift work, seasonal jobs, temporary placements, age discrimination for job security seekers over 50, transportation challenges, untreated health conditions. None of these barriers get solved by taking food away. Time limits cut food, not poverty.

They do that incredibly effectively. They reduce SNAP participation. Stay after sites will see 20 to 30% of targeted adults fold off SNAP after time limits return. In some states, caseloads will drop by half. But these drops do not reflect new jobs. They reflect lost foods. Time limits harm health and increase costs.

Food is health care, and when time limits remove food assistance. Physical unhealthy days rise significantly. People experience unhealthy weight loss. Signs of malnutrition not improve health. Exercise drops because people reduce activity to conserve energy. Chronic diseases like diabetes and heart disease worsen and food insecurity increases depression, anxiety and suicidal idea.

Research on veterans show that food insecurity more than doubles the risk of suicidal thoughts. National mortality studies show that adults facing food insecurity have significantly higher rates of early death. And even though SNAP is federally funding, the consequences are not. States and counties pay for ER visits, hospitalizations, crisis services and Medicaid costs that grow when hunger grows.

Time limit shift costs, not reduce them. SNAP regional directors in terms of time limits have said that they are one of the most complicated, which is something that people need to take into account.

As we look at payment error rates, states must first identify who is subject to time limits, track hours in unstable jobs, verify medical exemptions, process appeals and recertifications, and manage churn and higher error rates and the people targeted by time limits often have the hardest time navigating these systems.

People without houses, transportation, ID Internet or phones, people who need the most support end up facing the steepest administrative hurdles.

As you consider the fiscal implications, I urge you to please look at and ensure that administrative access is included, that enough resources go in because everything you do for CalFresh will reduce the health care impacts that will come out of Medi Cal. Thank you.

Thank you very much. We appreciate your comments. We're going to move to questions. Let me ask Members. I'm going to ask a few. To begin. Does anybody want to be added to the list? Sierra to Richardson, Manjuvar, everybody on this side. Okay, great. Then let me ask a few level setting questions.

Start with the Legislative Analyst and the Department of Finance. Even though you sort of addressed this, what's the estimate on procedural disenrollments? Not changes in eligibility, but the fact that the process is so hard that people will step away from the program. Do you have estimates on that for Medi Cal and, and snap?

Hi, Jason Constantouros. LAO. So we don't have exact estimates of the sort of breakout in disenrollments from procedural versus just sort of not meeting the work requirements. But those who have sort of studied this have. There's a sort of wide variety of different assumptions.

For example, some assumptions have have estimated as many as half of disenrollments could come from the sort of procedural issue. But there's a lot of uncertainty and as you can imagine, the really key uncertainty is that it's highly dependent on how it's sort of implemented at the state.

And so that makes sort of pinpointing that effect really uncertain. But as much as half has been sort of estimated in various studies.

Does the Department of Finance have anything to add to that?

I would just note that the governor's budget for Medi Cal estimates an impact of up to 522,000 individuals will be disenrolled as a result of the work and community engagement requirements and six month redeterminations. But would also note that the Department of Healthcare Services is working to maximize efforts so that individuals are not procedurally disenrolled.

And let me follow up with what my next question was going to be. Anyway, I wanted to understand what the budget reflects in terms of these. So it's right now you're reflecting an estimated 522,000 caseload reduction because of the.

Process changes so that that estimate for disenrollment impact is associated with those two federal policies. I think I would defer to the Department of Health Care Services, as they talk a bit more about sort of their policy and program implementation efforts in the later panel to sort of provide more details.

We'll do that. But what I'm trying to understand to set the context for the discussion, the budget accepts that there will be a level of disenrollments in the figures that are recommended in the Jan.10 budget. Is that correct?

There are estimated disenrollment impacts as a result of those two federal policies?

Well, we know there's estimated impacts. The budget reflects them.

There are associated decreases in federal funds associated with these two policy changes and.

The budget reflects that. That's what I'm trying to get at. Yes. Okay. Thank you. And then do you expect, and I don't know, maybe start with finance. Do you expect significant regional variations in what the impacts are across California?

I don't have that with me.

I did see Ms. Dietz nodding. So does that mean you might have something to say on this?

Yes, we are working on regional estimates of the impact, particularly on the work requirements. There is an exemption for counties that have high unemployment rates and so we expect that that will that along with the differential Medicaid enrollment in different counties, there will be significant regional variation.

And you're working on this. So you might have something to offer at some point that you can send to Committee Members on your work. Absolutely, yes. Great. And does the legislative analyst have anything to add to those two comments?

No, that, that that was reflected, I would point out is that there, there is an exemption for counties that have relatively high unemployment. So you on that just from that exemption alone you're going to expect to see regional variation. And then counties do have different demographics and so very similar answer.

Okay, thank you. And then my last question, just sort of global is what the likely impacts are on the overall health system. So we're talking about this loss. What's the impact on the overall health system? And I don't know who wants to take a stab at that first? Well, we have one person moving to the MIC and a couple moving away.

Some previous analysis that my colleague did looking at the impact of the reduced federal funding as part of HR1 estimated that a $20 billion decrease in federal funding, which is sort of the out year projection, would result in around 200,000 fewer jobs in California, 134,000 of those directly in health care and the rest in other services.

Sort of the induced impact. Those are not necessarily people getting fired. It's sort of lower job growth than could be expected otherwise. So there's Certainly a jobs impact. And then in terms of where that will be concentrated, again, in many ways it's too early to tell, but we expect that that would be concentrated in the safety net.

So safety net hospitals and clinics who are disproportionately caring for folks who are enrolled in Medi Cal today. Thank you.

Does LAO have anything to add.

Would just say, We're still working with stakeholders. There have been a variety of sort of fiscal estimates that have come out from various stakeholders. We're still working with stakeholders to understand these estimates, but there have been some studies that have tried to get at some of the broader impacts.

For example, there are some recent studies that try to estimate the effects on hospitals and they found they've projected that hospitals would face lower margins, higher uncompensated care costs. For example, this would be from having fewer people in the Medi Cal program and then having more uninsured people accessing services.

But again, there's a lot involved in these sort of projections. So we're still working with stakeholders to better understand that. But there are some emerging studies that do suggest that particularly safety net providers would face higher costs, lower sort of margins as a result of fewer people being in Medi Cal.

Thank you very much. We're going to move to our list of Senators. First is Senator Seyarto. And Senator Menjivar is on deck.

Thank you for allowing me to ask some questions here and get some clarifications about how we're going to go for forward in the future. You know, our Medi Cal program, and this is prefaced on the fact that the Medicare program since 2018-19 has gone from $93 billion to a current estimate of about $222 billion.

That's a huge increase, and that's something that is not sustainable if we're going to keep increasing that amount in just the Medi Cal part of it. Is there a plan, is there analysis being done as to why this program has been increasing by that amount in that span of time?

And what are we going to do to slow this down? Because the only answer is to come up with more money. And we're already doing structural deficits. So anybody want to tackle that one? No. No. The Laos. There he is. Okay. He's hidden by this.

Sorry about that. So it is something we've been digging, trying to dig into more. You know, there are Medi Cal is a complicated program with lots of delivery systems, so it is hard to get a global perspective on what all the cost drivers are.

Some of the Cost drivers have been from policy changes at the state affecting the General Fund in particular has been those, you know, expansions to comprehensive coverage for undocumented individuals. And that's because most of that cost falls on the General Fund.

There isn't as much federal cost sharing as there is sort of for other areas of Medi Cal. There also has been sort of regular program growth. This is because some reimbursement rates in medi Cal are adjusted for inflation as well as other factors. This would be, you know, rates to managed care plans, pharmacy related costs.

So it's something we're still digging into, but both policy changes and sort of underlying trends in the program seem to be drivers. And then the Legislature did take some steps to try to slow this growth.

In last year's budget, there were a number of budget solutions, many targeted to sort of the UIs populate the undocumented immigrant population as well as to pharmacy spending. And in our most recent outlook, we did find find that those were having an effect on slowing the growth in Medi Cal.

We still projected growth, and on net, we think it's still possible there would be overall growth in Medi Cal. But we project those would have a pretty notable impact on slowing that otherwise would have been considerable growth.

Okay, thank you very much. So, you know, we have a lot of criticism for the feds for cutting our medi Cal budget. Has the amount that the Federal Government is putting into medi Cal increased or decreased over the last year?

You know, we might have to get back to you on whether the actual amount of federal funding has increased unless the finance has that evidence readily available over time. In the last 10 years or so, there has been sort of changes in federal cost sharing.

You know, for example, when we did the Affordable Care act, much of the expanded eligibility was really borne by the Federal Government. So there have been, you know, over the last decade or so there have been major sort of changes in federal funding for Medi Cal.

In terms of the year to year though I don't have that readily available, but perhaps my counterparts at finance might.

Laura Ayala Department of Finance Overall, because we get on average about a 35% federal Fund share across Medi California, the Federal Fund Dollars that we have been drawing down, they have been increasing year over year because overall the program has been increasing, including increased enrollment. Of course, because of HR1 and other policies.

There are targeted reductions specifically in federal Fund matches and then other like provider taxes, where we're getting significantly less federal funding, which is what we're dealing with this year in terms of much less federal Fund match for certain populations.

So the number I think is around $18 billion more this year than we had last year from the Federal Government.

That's correct. The Medi Cal estimate projects an increase of $18 billion.

And. Yeah, so. And the total amount is from. It's now like 139 instead of $121 billion. So what I'm kind of getting at, because that's probably an accurate figure, what I'm probably getting at here is that this is the same as our state budget.

We're spending more than we're taking in and we have no plan to decrease the amount of spending other than to add programs and add benefits that cost even more money, putting more stress on that. And that's not a good way to balance a budget.

To clarify, the governor's budget does not add any significant new spending. As mentioned before, the governor's budget maintains mostly a workload budget and to attempt to address those cost increases.

In addition to all of the solutions and the cuts that were included in the 2025 Budget act, we've also, the Administration has also said that we plan on working closely with the Legislature for may revision to help address the out year deficits that we're facing as well.

So if the, if the budget doesn't include any more new spending than the $18 billion that the Federal Government is putting in should cover it.

No, it's again, it's workload spending. So there are Cost increases. And as we know, there's inflation. This is seen in the Medi Cal program, but this is not new benefit.

Okay, thank you. There's also some concern that the state keeps or the Federal Government is shifting costs down on the state. And I'm going to speak as a voice for the counties and cities. The state does that to the counties and cities all the time.

In our efforts to try to minimize some of the financial impacts that we are suffering, we do that constantly. And so to criticize the Federal Government for trying to right size their ship is I think a little hypocritical because we do that too.

Why has the growth in the Medi Cal program more than doubled in seven years in costs? Do we know that? I think we might have covered. You covered that a little earlier. So .

Yeah, correct It's a mix of policy changes and then also, you know, just underlying cost growth. Then I'd also emphasize that some of the. If you're looking on a total funds basis instead of just the General Fund, some of the cost growth has been borne by other Fund sources. We expanded the state's MCO tax.

For example, there was Prop 56 that provided more funding to Medi Cal. So there's been other Non General Fund sources that have that have also increased in the Medi Cal program.

All right, thank you. I'm just going to cover one more area because I want to give my colleagues an opportunity to ask their questions as well. I want to cover the work requirements for able bodied childless adults. Why do we not want people? Because these work requirements aren't just part time, 20 hours a week of work.

They could be part time school, which is nine units if you're going to a college or junior college. Or they could be community service, which I can think of many community service groups that go out into our communities and do things every week that somebody could be part of.

We have a community cleanup, a beautification Committee that works in Wildemar. Every week, every Saturday they get together and do that. These are able bodied people.

And please, please stop picking on the 50 to 64 year olds like they're not able bodied because I am beyond that and I think there's a lot of people beyond that, including almost everybody up here that would argue that we're plenty able bodied.

So the people that are able bodied, why is it such a difficult lift to get them out of a house where they will be permanently on whatever assistance it is that they need at the time into the world where they can open up some opportunities to not be so dependent anymore.

Because if you don't get them out of the house, they're going to stay dependent forever and we're going to keep adding to those costs that were describing before. In other words, the costs are just going to keep going up. They're not going to go down.

The only way they go down is when people get old and pass away. If we're just going to keep adding to it, this program is going to continue to be out of control in its costs and we can't afford that.

We can tax people more to pay for it, but then they'll just move out of the state like they're doing. So back to my work requirement, why is that? Why is having somebody go out and do 20 hours of community service such a huge lift for able bodied people even if they're 50 to 64 years old?

I'll take that as a hypothetical question. We can respond to how the Department is implementing and the Department of Healthcare Services will be up here later to talk about the programmatic implementation of that. But why? It's a heavy lift. I can't. For a person to get out of their house. That's not something I can speak to.

Okay, thanks.

If I may. So it's the first time that we're seeing it for the most part, except for one state that had already piloted this within the healthcare aspect. But we have 30 years of evidence within the Calfresh, the SNAP program to show that most individuals who are time limited are working.

It's just the communication part that is difficult. We talk about the volunteer part. Volunteering is a part of privilege that ensures that most individuals who are doing undergrads, high school students, telling an individual who doesn't have the resources enough to eat to on top of that working maybe 19.5 hours to work, you know, to go volunteer on top of that.

Also want to flag that the new requirements also allow for individuals who are parents, caretakers with children 14 and up to also make sure that they can document that. So single parents will be detrimentally impacted, particularly in summer hours where they have to make sure that their kids are being taken care of.

So it really is a matter of 30 years of research that has shown that people are working, the gig economy is real. And the last thing I'll add is that SNAP is not a permanent program. It's a cyclical program.

People enter SNAP because they have lost their jobs, their wages have been reduced or they have a caretaker, a person that they have to caretake for. They're in the program from either six months to 24 months. Right. And making this program more difficult when recession, when employment opportunities are not there.

It makes people have to choose between paying for rent, paying for other resources that are incredibly important. And lastly, it does increase administrative costs. That is the biggest issue, the part that it takes on the counties and the states to operate this, and from individuals having to prove that they are working for many other reasons.

Okay, you know what? I lied. I have to ask the other question.

If you could try to be brief, I let you go because you're the only one on your side of the aisle that's asked to ask questions. So I've let you go.

All right. Thank you. The MCO tax that you had mentioned, it got rejected. You said our version of whatever it is we were trying to do got rejected. What part of it was so different than what other states do that did not have their MCO tax rejected from the Federal Government? Why did ours get rejected?

To clarify, the current MCO tax has been approved through the end of the term, the original term that we had requested approval for, which is December of 2026. And what we're referring to is future MCO taxes. And HR1 applies those requirements to everyone, to all states. So we're talking about future MCO taxes.

So other states are getting it probably in the future that we're not because of the way ours is structured.

We haven't structured in any certain way for the future. We haven't applied.

All right. And our error rate at 11%, we can't get that down. Save us 2 billion bucks.

I'll defer to my social services counterparts for that.

Department of Finance. The state current error rate for the CalFresh program is about 11%. As mentioned by my colleague, though the 2025 Budget act did include resources that. The Department of Social Services can speak more to that are intended to support. Various initiatives to bring down that error rate.

So we don't need to go into that right now. But if we could get a report back to this Committee, maybe that tells us what that error rate is and how we can get it back down. It'll save us $2 billion if we have to invest a couple 100,000,000 into fixing whatever it is that's causing that.

I'd rather do that than just pay out $2 billion. So that's the end of my questions.

Thank you. Thank you very much. We're going to move to Senator Menjivar and Senator Richardson is on deck.

Thank you, Mr. Chair. I agree with Senator Seyarto. That it isn't sustainable. And I definitely think to LAO's point in the report, if we don't increase revenues, we, we won't be able to continue to support these programs. So another plug for revenue conversations.

But I also want to address a comment that was meant that we cost shift a lot to counties and that we shouldn't be hypocritical if the Federal Government is doing that to us. I would agree with that only if the cost shift wasn't due to the 170 to 191 billion dollars that DHCS got.

And as a result of that, a lot of these programs are being cut. I would agree that we'd be doing the same if we were cost shifting to the county just to create a paramilitary kidnapping task force in the United States.

And then the county would be okay to be mad at us for cost shifting, for creating the putting the National Guard onto our streets and kidnapping people. But we're not doing that. So I think this is different cost shift. The Federal Government was not balancing a budget. It was looking to triple a massive influx in dhs.

And by doing that, that's how they cut programs and funding to our state. So just a really, really different point there and why we're doing cost shift. Even though I still also think our cost shift to the county is really detrimental and going to be really impacting our counties.

And I know, and I've mentioned this, that I'm looking forward to see how we're going to be supporting our counties because they're going to be seeing the brunt of of all this impact. So to that I'll start. I have four questions I'd like to ask.

The first one is Miranda, you mentioned this LAO recommended state oversight directions since the federal direction doesn't really exist and you recommended that we should focus on that. I'm wondering if you have any suggestions or policy ideas in that space. What would you recommend in terms of oversight or red tape that you talked about?

Yeah, so there's a number of implementation questions for the work requirements and the six month redeterminations and ways.

The goal, and I think DHCS has expressed this as their goal as well, is to get as many people as possible to go through sort of automatic checks so that the state can say, yep, you're eligible or yep, you're exempt from this and people can keep their medi cal.

One of the points to make though is that the state has this decision to make about whether these burdensome red tape work requirements apply to the state Funded folks. That's a choice that's not required by the Federal Government.

And given that these, the main effect of these work requirements and six month redeterminations is for folks who are eligible or should be eligible or should be exempt, losing their coverage begs the question of whether these policies make sense to apply to populations where they're not required.

And la, I don't know if you had any thoughts on policy oversight or implementation. Oversight, yeah.

So it is a little, you know, providing very concrete guidance is a little difficult because we're still learning more on the federal guidance front. But sort of in the abstract and in theory, I think what we would recommend is, you know, trying to adopt your priorities and statute.

There already is some trailer Bill on HR1 so that there already will be some statutory changes that are needed. There also might be cases where the Administration might need some flexibility because of changing federal guidance.

And in cases like that, we think you could also explore other oversight mechanisms like TLBC notification or reporting requirements, more data reporting, things like that that also ensure that you still have some oversight over things particularly as they, if they raise notable sort of policy considerations. Okay, thank you.

My next question is regarding the removal of full scope to refugees, VAWA recipients, assailees. We've offered this care since the 1960s. Back in the day this was a population that was seeing vulnerable population, something that's been offered for going on over 50 years.

I'm wondering is this a population that's just grown exponentially, that the funding is just, you know, just not meeting the growth? Has it been studied or. I'm trying to get a little bit more insider explanation as to adhering to removing full scope from them. Maybe DOF if you can.

I'm not sure we have that breakout for that population growth, but I can turn to my colleague to see if she has any additional details.

Hi, Laura Yalla, Department of Finance. I came up here to defer to the Department of Healthcare Services because we don't have that data. I don't know that we can speak to how that population has grown. We know approximately the current number that will be impacted, but 400,000. Yeah, but I don't know how that has changed since this.

I'd love for the second panel if that can be addressed to see if it has grown. It's maintained about the same.

Is this going to be like the expansion population that we did last year where it was a freeze and those on it are going to be able to continue or those that currently have it are losing it and no Longer can sign up.

For. You're talking about the 200,000 individuals. Those will be transitioned into restricted scope when the Federal Government removes the federal funding.

So it's both a removal of health insurance and no one can sign up moving forward across categories. Correct? Correct. Okay. And they will have what kind of health insurance it would be?

Restricted scope services. So emergency care and pregnancy related care.

Does our current UIS population have that? Right now those are signed up.

Yeah. The current population is eligible for full scope services until the freeze and then nobody will be able to enroll into full scope only into restricted scope medical.

Do we know how much to cover? 200,000 people in California would be approximately. 1 billion General Fund ongoing. Okay, thank you so much. My next question is regarding the verification and the technology. You know I've been hearing places like one generation in my district to help seniors and so forth.

The lack of access to technology and if a two step verification is implemented, the difficulties for senior to verify. I know that there is some funding about in the governor's budget. 4 million for navigators to assist with Medi Cal Eligibility enrollment and retention.

Is that meant for incidents like that or where is that money going to assist people to stay on these programs? I think the Department of Healthcare Services can provide more details on that. Okay, so I'll wait for that and then my last one.

Gina, you talked about catfish and so forth but you know the Governor is also proposing a baseline of $8 million for food banks. Usually it's sat around 60 million to 81 million since COVID If we are.

If people are falling off of Calfresh and we are also further influxing our food banks, what do we anticipate to see and where can these food banks get additional support if not from us?

Yeah, it's important to note that you know, food banks were created in the 80s as a response to other cuts and there was a million emergency response. Right. Food banks were always supposed to be a disaster response. Unfortunately with the pandemic they have become the to go to to individuals. So it's not enough.

They are working incredibly hard. A million may seem like a lot, but I just also want to caution that for every meal that food banks are providing, Snap provides nine, CalFresh provides nine. So it's incredibly dramatically the impact.

So as you're seeing people who are getting cut off SNAP coming into the program, you're going to need more resources and not just for food, but for staff capacity in order to be able to manage this.

Are there any other federal grants that exist to supplement for Food or anything like that. Snap. Just snap, right?

Yeah, SNAP and other federal nutrition programs like wic, school meals, which will also be impacted by some of these cuts as well.

Well, okay, thank you, Mr. Chair.

Thank you very much. We'll move to Senator Richardson and Senator Durazzo is on deck.

Thank you, Mr. Chairman. I have about two or three questions and then a very brief statement. Mr. Woolsey, you mentioned on page 10 of your presentation that other resources might be available to help with the impacts of HR1.

Did you mean those to be funding additional resources or were they the three items that were noted here in your report?

So what we were referring to there is on the health side, counties do have a pre existing responsibility to provide what is called indigent care, very basic care for those without coverage. This is something that continues to be a requirement. However, it's limited in the sense that it's not as expansive as current Medi Cal coverage.

And a lot of the funding that counties were receiving to support this through realignment has since been redirected, especially since the Affordable Care Act. So there's limitations in that way.

On the food side, one of the things we had in mind was the food banks and they of course are limited in terms of the funding that they receive. Receive. There is the state funding that was mentioned through CAL Food. There's also some federal funding that food banks receive through the Emergency Food Assistance Program and others.

It's our understanding that the majority of funding for food banks is from private donations. But as was said before, we expect that these alternatives are not going to be able to fully backfill the loss of Medi Cal and Calfresh.

Thank you. And Ms. Adams, you briefly went over that. The MCO tax, if I understood you correctly, you said it equated to about $7 billion per year. I think it was in the 20s over a four year period or something.

So I think you said the average was 7 billion, but then you clarified what you expected the reduction to to be. And then I was surprised that a few minutes later your colleague said that, well, we really haven't applied for future MCO.

So my question is one, could you clarify again from 7 billion to what I thought it was 700 and something million.

But if you could clarify that answer and then if the gentle lady next to you could also clarify if you're saying we haven't applied and we don't have a projected loss, that seems contrary to everything that I've been hearing about a huge reduction in mco.

So if you guys could just go over that, it would be really helpful.

To clarify the numbers that my colleague Ms. Adams mentioned is the current funding that we receive. So it was a three year program, but we spread it out across four fiscal years. But if you divide it by three years, the number that. The amount of General Fund support that we received was approximately 7 billion. Nearly 7 billion.

Okay.

For future federal. For future submissions to the Federal Government of the MCO tax, once the federal requirements are implemented due to HR1, any new program will have to comply with those new requirements.

And so we estimate that the maximum we could likely get under the new HR1 requirements is for provider taxes is 75 million total revenue and the equivalent of the nearly 7 billion General Fund support that we get, it would be approximately 6 million. And that is both due to HR1 requirements and Prop 35 limitations.

But that's for the next MCO tax that when we submit, if we submit one for federal approval, not the current program.

So. And I do have an mba, but I'm sorry, I'm not quite following you. You're saying you anticipate we're going to go from 7 billion to 6 billion?

7 billion to 6 million. Yeah. Due to HR1.

And that's what I thought I heard. Okay. And again, the requirements are what we've already been talking about, that they would have to meet.

There are specific provider taxes. Provider tax requirements implemented by HR1. Yeah. Certain limits.

Okay. And then my. Thank you. Then my last. I just had two questions. I'd like to make a statement. You know, back in, I believe it was 1996, we had what was called the Welfare to Work program. And there was much discussion, discussion about how were people going to receive services.

All of a sudden people are, you know, going to have to go to work. There was a limited period of time. So I did look that up because I've heard people talk about it. And there's. There was. In 1996, there was a reduction of 50%, a dramatic caseload decline.

Welfare rolls 50 fell off by over 50% from 1994 to 2004. So to say that these kinds of changes aren't going to be impactful. I see some people might have left, but clearly we've been there before and we have seen that. And I just wanted to speak to why some of those declines might happen.

One, it's one thing to say someone get off your couch and go, go to work. Well, first of all, you have to have transportation to go to work. And not everyone has gainful transportation and transportation costs money. Number two, the person, an individual here said, well, you can go to school.

Well, you know, look at how much it costs to take nine units to go to school. It costs money again. And it gets to the point where sometimes the cost of the transportation, the units and all of that begins to not really balance out for the number of what you may be getting.

And then there was also an article that I read and it talked about, well, why did people survive with welfare to work. And part of the cuts were that there was this economic boom. And right now, frankly, we don't have an economic boom, to my knowledge, for entry level workers. In fact, it's the contrary.

CEOs have predicted that we're going to lose 50% of jobs of what entry level people could make. So to say to someone, it kind of reminds me of a Martin Luther King speech of, you know, pull yourself up by your bootstraps, but you know, heaven forbid you need to give me some boots to put on.

So to say that people are going to have these jobs when we know, and I've said this a couple times, I took my mom to Denny's and a little robot came and brought us our food. Open the shelves and you grab your food out.

So to assume that the jobs are going to be there, the money for the units are going to be there to go to college and you're going to have money for transportation.

All you know, I think is what causes these challenges and we as Members should be sensitive to of why these impacts we anticipate are going to happen. Thank you Mr. Chairman.

Thank you very much. Senator Durazo and Senator Smallwood-Cuevas on deck.

Thank you very much. I just, I know we've got to get to the nitty gritty of all the numbers because they add up, but really what we're talking about today is California as a donor state. Don't forget that we're a donor state.

And we're looking at millions of hard working residents lose their access to health care, to medicine, to clinic visits and to put food on the table. All of that in exchange for $4 trillion in tax cuts for the same CEOs who rely on the labor of the people.

And we're paying for the Ayes to terrorize our families and our communities. That's what's going on here. We're looking at balancing the budget on the backs of the same people who are the backbone of our state's economy. That's what we're really looking at.

Let's imagine a 62 year old housekeeper, she spent decades keeping one of California's top industries, hospitality, to serve their guests. She becomes ill and can't work 80 hours that month. She loses access to Medi Cal, can't get health care. The only place for her to receive care is in the emergency room.

Now we just shifted insurance premium costs to the county hospital system for an expensive emergency room Bill. With these cuts, we can't provide preventative care, which means more emergency room bills down the line and harder for everyone to get to true emergency care.

The Same housekeeper turned 63 and could no longer work after decades of backbreaking labor that the toll takes on her body. Now with HR1, she can no longer access nutrition assistance and starts to go with less food.

All of this to pay for tax cuts for the same corporate CEOs who gain their fortunes from this workforce and to pay paramilitary force terrorizing our communities. Now I have a few questions for the Administration.

Counties estimate estimate 6 to $9.5 billion in new annual county costs because of HR1, largely driven by people losing Medi Cal coverage and turning to county indigent care. So who is expected to absorb these costs if counties lack sufficient realignment funding?

And who's that directed to?

I think for the Administration. As the Administration has stated before, it's something that we're still looking into and working with counties on. We have heard a variety of different numbers and we. I can.

I think from the Administration standpoint, just to reiterate, we can't backfill or provide funding for every dollar in new cost, but we are in discussions with counties and we hope to work collaboratively with them to see how to best provide services to Californians and similar.

What are you thinking about the infrastructure that the counties are going to need to provide indigent care programs? Since the funding for these programs was used to expand Medi Cal and implement the Affordable Care act, we don't have.

Any proposals in the governor's budget, but happy to continue discussions with the Legislature on that. Okay.

And also Department of Finance, what are the estimated dollar impacts of the 2025 cuts to the undocumented Medi Cal expansion and the proposal to remove full scope Medi Cal, including increased emergency Department and inpatient costs, higher county indigent care spending, increased uncompensated care for hospitals and clinics, and costs associated with untreated chronic illnesses and delayed preventative care?

What do you say to that?

That analysis is not something the Department of Finance is able to conduct, but perhaps my colleagues from the UC Berkeley labor center can provide any insight into research on that.

We don't have research on that at this time.

Okay. How many Californians are expected to lose their full scope coverage?

Our projections are that up to 3 million Californians would lose. This is inclusive of both citizens unlawfully present immigrants, undocumented immigrants, everybody. All of the impacts of both HR1 and the state budget changes would be up to 3 million people losing coverage.

And then given that the Administration reaffirmed the 2025 cost to the undocumented Medi Cal expansion, what alternative budget options did the Department of Finance consider to avoid the proposed reductions in immigrant health coverage?

I'm sorry, I missed the first part of your question. What was the first part?

Given that the Administration reaffirmed the last cuts to undocumented Medi Cal expansion, what alternate budget options did you consider?

I can't speak to any to the deliberative process. The governor's budget reflects ultimately the administration's decisions on how to address the budget deficit and the structural deficit in the out years. But happy to continue discussions with the Legislature on alternative ideas.

Okay. Because obviously we're dealing with cuts here, which means there's another way of addressing those issues, which is Generate revenue from other sources. So basically what you're saying is because of the proposal, the budget proposal presented by the Governor, no other alternate revenue sources were considered.

The Governor has stated that he is not interested in entertaining or pursuing any additional revenue increases. So if the Legislature would like to propose something, we're happy to hear any ideas. But the Governor has stated multiple times that he's not interested in pursuing any new taxes or revenue proposals. Okay, so 3 million people.

That's it. We're being asked to allow 3 million people to lose their health coverage.

I think the one thing that, from the administration's standpoint that we'd like to flag is that the revenues have been increasing. Even the Administration or the Department of Finance specifically updates revenues on a monthly basis, and monthly revenues are up even compared to the time of the governor's budget. And it's not. We.

The Department of Finance does not see it as a revenue problem because we are. We have been getting increased revenues. It's a structurally imbalanced budget that we have to address, and we see it as an expenditure problem. So that is the administration's perspective.

Okay, because the problem is that it's really on the backs. There's a very different picture here with the worst impact being on immigrant. The immigrant population. That's the problem. It's not that there is a deficit and that's a problem. But how do you address that?

By just pointing out one part of our population and one part of our community that contributes so much to the economy in every single way. And we're finding that out, unfortunately, because of the raids. How the economy where the raids have taken place is suffering enormously.

The small businesses are suffering, the clinics, the hospital, everywhere there's impact because of what is taking place. So you have that going on, and then we're cutting their access to health care. And then we say, well, we don't have a choice here. I think that's a wrong message to send from a state like California. Thank you, Mr.

Chair.

Thank you very much. We'll move to Senator Smallwood-Cuevas and Senator Gomez Reyes is on deck.

Thank you, Mr. Chair. And very much appreciating the discussion. I just want to remind us, I think we had some comments made earlier about how we got here on HR1. And I want to be clear because I think it's important for Californians to know that HR1 was primarily a tax Bill.

And it made permanent the 2017 Tax Cuts and it added new tax reductions which resulted in 4.5 trillion in federal revenue losses. Across 10 years. Let me repeat. The Trump Administration pushed HR1 as a tax Bill to reinforce 2017 tax cuts, and it added new tax reductions that equaled nearly 4.5 trillion.

Now, where did the tax benefit go? More than half of the tax benefits went to the top 10% of earners, with about 1 trillion going to the top 1%. So the Administration, the federal Administration, took this money out of the General pot that helped to Fund our health care system, and it gave it to the top 1%.

So now we've got to figure out what do we do to backfill that here in the state of California. In addition, HR1 imposed these work requirements. And I appreciate my good colleague from Englewood who talked about the 1996 welfare reforms that devastated black and brown communities.

Since 1996, when mothers were kicked off of welfare reform, they had to go to work. So that's why everybody's working right now. So we're implementing these work eligibility requirements, which will require us to hire more people to check, fact check something we already know.

People on Medi Cal are working, costing us again, more millions of dollars that we have to backfill. In addition, HR1 restricts eligible communities that have had access to Medicaid and in our state medical for decades, refugee asylum seekers, humanitarian immigrants, they now don't have access or restricted access to care.

And, and then we are removing millions of undocumented families because the Trump Administration gave $4.5 trillion in federal revenues to the top 10% earners and 1 trillion of that to the top 1%. So I just want to say this is how we got here.

And it is so disingenuous to infer that we're getting more Medicaid investment in the state of California through this Bill. How disingenuous. Over almost 50% of our folks in my district need Medi California.

And my good friend who raised this erroneous hypothesis about what the Administration is giving us, I found he almost has a third of his constituents on Medi Cal. We've got to make sure that people have adequate health care. And I do appreciate the Administration saying revenues are up.

And any other time that might be worth something, it might be relevant, but not when Donald Trump has taken $4.5 trillion and given it to the top earners and given 1 trillion of that to just 1%. I'm sorry, we've got to look at revenues. This is not business as usual.

This is not touting that revenues are up because we have a AI bubble that hasn't burst yet. And thank you to the Lao for raising the precarious nature of our revenues. We cannot be left to cut 3 million people off of their health care. We just came out of COVID. We.

Know 3 million people without health care puts all of our residents at risk. Look at the measles outbreak that's happening right now in other parts of the country. Do you think measles cares that someone is undocumented when they walk into a grocery store or they walk into a restaurant, or they walk into any community space?

I want to say that we've got to come to some new realizations here about the moment that we're in. And this moment doesn't end in 2026. Unfortunately, we're in this situation for a few more years. And so we've got to have, yes, a structural solution, but it needs to be an urgent and immediate solution now.

We can't wait. So my questions that I have have to do with these work requirements because I want to just say, when welfare reform was done in the 90s. The. Boom was the service economy. So we had seen the deindustrializations of places like my district where the good union, manufacturing, we make stuff, jobs disappeared.

Then there was welfare reform and everyone had to go to work. And guess where they went to work? Low wage, bad jobs. And my community is suffering now from low wage, bad jobs through this service economy immersion that has left these welfare reform recipients and mothers still in poverty today.

So those 1996 welfare reform folks, they're still in the safety net. So work requirements, we know based on that, really.

And I want to appreciate all of you for the details and the research that you shared with us and the data, because what it showed me is that work requirements decrease coverage, which we know people are just going to fall off because they can't get all of this paperwork done.

And certainly how does our system come online to deal with the amount of errors that we know will happen? So we know coverage is going to decrease, people are going to lose coverage, but we also know it does not increase work because let's be honest, there are not enough good jobs out there.

If there were, we wouldn't have so many people in the safety net. So do any of the studies that you all have looked at, and maybe I missed it in all of the information that was shared, but do any of these studies show that there is sustained employment gains from Medicaid work requirements?

The studies that have looked at the relationship sort of find the reverse, that having Medicaid is helpful for people being able to get and maintain a job. So it's sort of reverse causation. Having Medicaid helps people get coverage. Sorry, Having Medicaid helps people get a job and maintain that job.

Okay, so then you don't have health care. Then what is the causation is what.

These are more correlation. But the hypothesis to test would be yes, that if you don't have that Medicaid coverage, it would be harder to maintain a job and find a job.

Okay, so the point I want to make here is that folks are going to lose their care because of all of the bureaucracy that is going to come around all of this eligibility that lightly means they're probably going to lose their employment.

So this is then counter, this is, this is again probably folks who are working who are on Medicaid, Medi Cal who are now doing what we have asked them to do.

Now we're going to go through, they have to prove eligibility and all of this paperwork and they could lose their coverage which as you're saying, could lead to them losing their employment. So I want to just reiterate, we're creating ripple effect problems here that are not addressing anything but again, costing California more money and hurting Californians.

My next question, I want to ask the LAO this question. Our short term General Fund savings rely on coverage loss. And that's a nice way of saying people are going to be dying because they don't have health care. And it shifts the long term cost to emergency care.

The county indigent health systems and providers we know are already strained. In fact, our county is scrambling now to figure out how they are going to raise revenues which unfortunately some of the solutions are again going to hurt local residents that are being thought about.

So my question is downstream costs like hospital closures and county indigent health spending, how does that account in the overall estimates of what this costs will cost the state long term?

So the thing to keep in mind is that certainly as you're saying, there are significant downstream impacts from all of these changes that are going on. But whenever you're doing an estimate, it's important to think about what's the perspective that that estimate is taking.

And most of the estimates we're talking about today are in relation to the state budget and won't capture a lot of the impacts that you're talking about. Those impacts are difficult to estimate. They're often further down the road. But that doesn't mean they aren't real.

But yeah, a lot of the estimates we're talking about today and that we've cited are single year or the next five years or so state budget numbers.

So and that also again deeper and deeper fiscal crisis. Prolonging the fiscal crisis we're in because we know these costs are out there. We have to begin to calculate and measure the long term effects. My next question has to do with with SNAP. Ms. Plato Nino SNAP work requirements will not increase work but they will increase hunger.

And we see that what are the nutritional and health consequences of losing food assistance? And I'm concerned because we have a lot of food insecurity already in our district. Skid row is in my district. What does this look like?

Just want to clarify that SNAP has had work requirements since the 70s. What happened in 96 and what's happening now is called time limits. Right. Which means that people can only get SNAP for three months in a three year period. And it's important to make that distinction because people are working, they just can't document. Right.

So it's inputting that documentation. We have planned plenty of research 30 years that we've been dealing with this of individuals being cut off that shows that there will be physical and unhealthy days rise significantly. And these are various studies that I'm happy to provide by universities across the country who have done that.

Like I said, people experience unhealthy weight loss, signs of malnutrition and not improve health. Research on like I said on veterans shows that it doubles the risk of suicidal thoughts. And it's important to know that HR1 takes away the exemption where veterans used to be exempted and now will fall back to this. Right.

And we do know that national mortality studies show that those facing food insecurity have a significantly higher rates of early death. And even though.

So we're also going to see, you're talking a lot about CalFresh, you're going to see increased ER visits because we also have plenty of studies that people on SNAP are less likely to long term hospitalized. They also save around 2,000 to $3,000 in healthcare costs in terms of prescriptions.

They don't have to choose between what we call food and medicine meaning when you are hungry, delayed gratification, meaning I need to eat now versus the medicine that I need to take which also increases healthcare costs.

We do know that increases of depression, anxiety and like I said and in suicidal ideation we have so many various studies that can really talk about that. It really doesn't increase employment or anything but it just makes people a lot more ill and it does increase a lot of more health care costs.

Thank you for that very sad and scary reality. And I want to add the children because we know when kids come to school hungry, they can't learn. And we know what impact that has on our future, particularly in communities where we have half or a third of our residents in need of these benefits and care.

My last point and question that I have is, you know, given that Medi Cal covers nearly a third of Californians, I'm curious, what analysis do we have in terms of the fiscal impacts of these cuts on the racial makeup and linguistic makeup of these folks most impacted and the disparities that will emerge in this projected coverage loss?

And I don't know who wants to answer that question. I also want to add to that, I think was UC Berkeley who talked about the 134,000 jobs that will be lost and the lower, the extended or lower job growth that will exist, particularly in these clinics and and other safety net healthcare centers.

I'm curious, what is the racial and gender demographics of those who will be most impacted by this loss of coverage? So maybe folks can answer that question.

That's a great question about the racial and gender sort of the demographics of those of the job loss. I don't have that data.

In terms of the impact of the loss of Medi Cal, we project that about 1.2 million of those 3 million folks losing MEDI Cal would be folks with unsatisfactory immigration status who are disproportionately Latino and otherwise don't have particular breakdowns by race or gender for those losses.

Department of Finance or lao? The Department of Finance doesn't have a breakout by gender or race. Our projection of the individuals, so our total. The administration's total projection of Disenrollment due to HR1 is about 2.6 million by 2930, so 2.6 million less individuals.

And of that we project that approximately 281,000 individuals would disenroll who have unsatisfactory immigration status.

Well, I want to say this coming from an organization that dealt with civil rights, I want to tell you, is disparate treatment. These are going to be disparate outcomes. Overwhelmingly these are people of color, black and Latino, in the health care sector. Overwhelmingly these are women of color. And I sit in BNP Committee.

Every year there's a conversation about the shortages of individuals who want to work in the health care field and what a crisis we're looking at in terms of workforce shortages. This is an Administration that we know from the highest office. Its leader is discriminatory. Against Latinos, against black people.

It's very, very, very obvious that this is a white supremacy agenda in this elected office. And it is not surprising that who is going to be disproportionately impacted, who's going to experience disparate treatment, are the very people who are the majority of California. We are people of color majority.

We are the moral majority of the 21st century and we cannot do this president's racist work for him. We must protect people of color, our majority. We cannot allow disparate outcomes on our watch.

And therefore we have got to figure out a way to deal with the 4.5 trillion in federal tax revenue that has been given to the 10% of earners. The top 10% and the 1 trillion that is going to the top 1%. Revenues has got to be part of this solution to stop this racist attack on California.

Thank you very much. Just before I go to Senator Gomez Reyes with Senator Caboldan on deck, let me just say we have three more on the list. We have another panel, we have questions of the other panel and then we have public comment. So pardon. I'm going to be in the Rules Committee at 1:30.

I don't know where you'll be, but we have got to discipline ourselves a little more. We will move to Senator Gomez Reyes.

Thank you, Mr. Chair. Many of the questions have already been asked. The sentiments have been shared. I did want to begin with just a few perhaps rhetorical questions, but questions that need answers on the record too. California has been a donor state for years and years. Is California still a donor state to the Federal Government?

Yes. Ann Hollingshead with the Legislative Analyst Office. So, the term donor state generally refers to a situation where a state remits more in federal taxes to the government than it receives back in expenditures.

It's difficult because doing a nationwide study on this question, right, where you're sort of itemizing each state's individual budget and each state's balance of payments is difficult and therefore, lagged significantly. There are, you know, there are studies on this, but they're sort of a few years out of date.

So, it's difficult to answer the question that you said now. So, it's difficult to answer the question in the, in the sort of now terms. But, but the most recent information we have does suggest that the state continues to remit more in federal taxes than it receives in federal expenditures.

Thank you. Did you identify yourself?

Yes. Ann Hollingshead, Legislative Analyst Office.

Thank you so much. Something that has been talked about a lot is that we're talking about people when we're talking about medical coverage or CalFresh or we're talking about any benefit that is going to be reduced.

We're talking about Californians who are going to not receive these benefits, as opposed to just a budget item. We're talking about Californians and almost always, we're talking about Californians who are paying taxes. When we talk about benefits to immigrants, we know immigrants are paying taxes and finally, they received medical coverage.

That was a long-fought battle, and it was a great victory. And now, those benefits are being taken away.

The one other thing that has been mentioned, and I appreciate that my colleagues have continued to mention it, is that under HR 1, 2.5 trillion, depending on how we look at it, to 4.5 trillion accounts for tax cuts to the highest 10% of income earners and 1 trillion specifically to the top 1%.

This is a big loss in benefits that would be provided to all of Americans, more specifically, to the share that Californians should receive. We've talked about the structural deficit. Absolutely, we need to deal with this. But as has been mentioned, it's a structural deficit that has been created over the years.

The taxes have still been paid by Californians. It has been a problem we have created. The Administration, the Legislature, we have created it, but the taxpayers have continued to pay their taxes. And yet, when we talk about balancing this structural deficit, we're balancing it on the backs of the very people who have continued to pay their taxes.

And mainly because we have certain projects we want to continue to fund. The fact that up to 3 million Californians are going to lose medical coverage should, under any circumstance, be something that we should look at and say, this cannot be accepted. And when we say something can't be accepted, we have to look at options.

We can't say we can only do it this way, but we can't look at any other option. We have to look at options. Otherwise, we know that those 3 million Californians are going to now be without medical coverage.

And we've already heard what the trickle down, to use that phrase, what that's going to happen, how that's going to affect the health, the life expectancy, the employment, the suicide rate, how that's going to affect Californians.

One of the things that has been talked about over this period of time has been the fact that we need to get more people to work. We have a lot of people who are working, but they are working for employers who pay unsustainable wages and then somehow provide no medical coverage.

And not only do they not provide medical coverage, they help their employees fill out the form so they can get free medical coverage from the state of California. That's a problem.

If our workers are working for an employer who benefits, who profits billions of dollars because of the labor of those workers, then we have to find a way for those employers to provide at least minimal coverage. Those are options. Those are the things we need to look at.

We're all smart enough to know that there have to be options. If we don't want to tax people, we find other options. We have to find those options. I just want—I don't have a question, but I do want to reiterate something that others have said over the years, and that is that our budget represents our moral values.

And if we are here to protect the people who have elected us, then we are here to make sure they have a roof over their head, that they have medical coverage so that they're not going into the emergency rooms, overloading our counties, because counties, we know, are responsible for providing indigent health care and the burden on them, I don't know how they're going to do it.

What was done at the federal level was intentional against many states, especially some states like California. What we are now doing to our counties, we've got to make sure it is not intentional. But we do know that they are responsible for providing indigent health services.

We also know that food banks and other community organizations, as was noted in the LAO report, and I'm just reading what is written, food banks and other community organizations provide additional food assistance, but their capacity is limited by the funding they receive from federal, state, and private sources.

Well, we know the federal sources are going to run dry. The state is saying we have no options. We have to look at options. We absolutely have to look at options.

Again, I want to close by stating something that is so important and I want us to remember, and that is that our budget is a representation of our moral values.

And if the Federal Government is telling us that they have no options for us because they've given the money away, as has been mentioned, to ICE to come and terrorize their communities, or as tax breaks to those who really don't need any more tax breaks, they're making plenty of money, then we, the state of California, have to look at options so that we then don't overburden our counties, who are then going to be looking to us in other ways.

Thank you.

Thank you very much. We're going to move to Senator Cabaldon and Senator Niello's on deck.

Thank you, Mr. Chair. We began the hearing with some remarks that could only really be described as a bizarro description of the situation that we're in. That was that the Federal Government had to enact HR 1 because of the deficit and the deficit is something we should all be deeply concerned about.

It has significant implications in terms of our ability to meet the nation's needs. And so, the Federal Government was doing the responsible thing by tackling the deficit, whereas California has had a workload increase of $18 million in our Medi-Cal program. And that's an example of runaway spending. But it's actually the opposite in the world.

HR 1 didn't tackle the deficit. It wasn't necessary to tackle the deficit as the largest expansion in the deficit that we've seen in generations.

If you would, if the state of California said, hey, guess what, people of California, we are going to increase spending by 18% and we're going to increase our deficit, which we're not allowed to have, but if we had one, we're going to increase our deficit by a third.

And also, 3 million Californians are also—are going to lose their health coverage. California would be in revolt. Arkansas would be in revolt in the same.

Any democratic society would be in—how could you be so badly managed that you could increase spending by that much money, increase the permanent deficit on us and future generations by that much money, and still strip away basic healthcare and food from so many people? Like, how does that add up?

Well, it adds up for the reasons that have been noted already, that even though this 18% in federal spending is twice as much as the $18 million workload on a percentage basis—workload increase in Medi Cal that we heard about earlier, twice as much. But it's 65—63%—decrease in corporate taxes.

63. That's what is driving HR 1 and animus towards people, but fundamentally, a set of tax measures that drive up spending and reduce revenues by a massive amount, forcing this "cost shift" from corporations and billionaires to states and counties and ultimately, to people. And the beneficiaries have been noted earlier.

But HR 1 increases the federal deficit by a trillion dollars which might sound like a familiar number because we've heard $1 trillion a couple of times during this hearing because it's the exact amount of money that is going to the top 1% in tax cuts. $1 trillion to the top 1%, $1 trillion dollar deficit, along with 10 million people losing their health care.

That's so much—that's so far beyond a bum deal. That's criminal.

And that's what we're grappling with here, and the irony, you know, along with my colleague, the Senator from San Bernardino, is joining me on the new Committee that's responsible for technology and AI that the tech related billionaires, they've all been saying look, don't worry about job loss because what we really need is a universal basic income because you're not going to have to work.

But don't worry, there will be—we'll cover your, you know, your rent and your food and your health care and, and cost of living through other means like a universal basic income system. But instead, we're taking food and health care coverage away from these very folks that we're talking about.

Except they're the poorest among us, this time. Until next time, it'll be the slightly less poorest among us and then the slightly less poor until it's all of us. And instead, giving those dollars away in tax cuts to the top 1% who say that they're for universal basic income. So, that's the story about what's going on here.

It is not a question of who's the more fiscally responsible government. We don't have a trillion dollar deficit or anything like it. Instead, we have a $30 billion structural deficit which is real.

And I want to encourage the conversation that my colleagues are sparking about revenues in the vein of what the Senator from San Bernardino has talked about, in terms of options. And we need to look at all of those. We need to have all the options on the table.

I do also want to say though that there are—I've been on this Committee since I was elected—there are not $30 billion worth of revenue options out there. We will not solve the structural deficit solely, or even mainly, by tax and revenue measures. As the Senator from San Bernardo noted—I'm agreeing with you about everything.

But you know, without hurting the very people that we represent, workers and families, there's a limit on the, on the amount can be solved only by revenue. So, we need the full range of options and none of those allow us to say, and therefore we don't, we can't consider any real cuts.

We are going to have to consider all of it as we go forward. So, I would encourage you from Finance and LAO keep challenging us and we will keep challenging you to come up with and take seriously the full spectrum of options that we're going to need to be able to grapple with this challenge.

Just a couple of smaller notes. I'm hopeful, I'm not going to ask because we don't have time, but I'm hopeful the Department of Finance and the Governor's Office, as we work to find solutions to the red tape coverage loss through a variety of mechanisms—and I know we'll take that up in our next panel more specifically—that the Administration won't take the view that if we find a way that costs $5 million to stop the coverage loss, that the Administration won't come back to us and say, well that's going to cost $268 million in because we had already banked, we had already banked the savings from everybody losing their health care due to red tape.

Let's please not play that game about already taking for granted some of the most, most, most manipulative, cynical cuts here, which is let's just nag people to death until they lose their food and their, and their health care.

And then, if some—if we find way solutions together, we just can't start scoring those in the budget or in the May Revise as well. We'd lost $273 million of savings because we solved this problem for the folks that would have otherwise lost their coverage.

Second, I just want to point out that 35 counties in California don't at all provide direct indigent health care. They're in the CMSP program. They're almost entirely represented by the Senator from Healdsburg, the Senator from Jackson and myself. But the Chair of our Committee represents one and a couple of other Senators have one or two.

So, as we look at the impacts on counties, we need to be sure that we're looking at the impacts on the ecosystems of health care in those counties.

The county-operated systems, but also hospitals, clinics, local and regional health plans are also critical and in terms of the damage and the harm that they're facing, but also in being part of the solution. So, really appreciate the panel very much. Looking forward to the next one and thank you for the opportunity to make a few comments, Mr. Chair.

Thank you very much. We're going to go to Senator Niello and Senator Archuleta has asked to make a brief comment afterwards to bring us home. So, Senator Niello.

Thank you, Mr. Chair. I will try to be brief, although, you know, I've always said before that phrase is followed by an endless stream of words. I'll try not to follow that rule. A news flash, by the way, recently, California is no longer a donor state. In recent years, we have become a recipient state.

That's been news that's been disseminated in the last year or so. And with regard to Federal Government trends in Medi-Cal spending, this was discussed before, but there's been a 15% increase from the current budget year to the proposed '26-'27 year, increasing from 121 billion to 139 billion.

And from over a two-year period, it has increased by 31 billion billion. So, the historic figures, while perspectively, we're looking at significant challenges, I don't deny that at all. I think it's important to point that out. Now, I have one question.

I had a couple, but I'm only going to ask one and then one more comment that hasn't been discussed. Our cost for SNAP is going to increase significantly if we don't do something about our error, our processing error rate, which is currently about 11%, which, at that level, according to the LAO's report, will increase our expenses by about $2 billion.

Question, why do we have such a high error rate? And secondly, what are we going to do about it to avoid that 2 billion?

Lourdes Morales with the Department of Finance. So, you're correct. The current error rate at this point is about 11%. So, sort of under the terms of HR 1, at that percent, we would be at the sort of maximum sort of penalty which is about $2 billion in out years, however.

By the way, is your mic on?

I can speak a little closer.

Okay, thank you. I apologize for interrupting, but I just want to make it clear, we have had this error rate which is subject to cost penalties, and the Federal Government just hasn't been exercising it. Is that correct?

I'll have the Department sort of speak a little bit more about the history sort of the error rate in the next panel, but what I will say.

I just wanted to clarify that I'm not as much interested in the history as I am interested in the future. Why and what are we going to do about it?

So, the sort of penalty rate will ultimately be dependent on our error rate in the federal fiscal year we are in at this moment.

And so, as I mentioned earlier in this panel, there were resources provided as part of the 25 Budget Act for the Department of Social Services to initiate various efforts to bring down the error rate. And so, they can speak more to those sort of specific provisions. But that sort of work that is underway at this point.

Okay, with regard to that other issue, you can get back to me. But clearly, this is a pretty important issue and it has been, seems to me, a fairly well-established trend.

So, we have a lot of work to do to reform a number of years of past behavior in order to make up for it in the future and avoid that additional $2 billion. Now.

If I could just make one additional comment, I will say the state's error rate is not very different from sort of the national error rate, just to sort of provide some historical context there.

So, misery loves company. We love everybody. I understand—legitimate point—but doesn't deny the relevance of the question that I asked.

So, thank you for that. One point that I want to discuss, that hasn't been discussed, and that is the shape of our economy and the fact that the lack of a job, the unemployment rate is certainly a driver of demand for health and human services.

And it has been said that the best poverty program is a good job and we unfortunately have a very weak employment economy.

There was an article in the Mercury News either earlier this week or last week that was written by George Avalos about pointing out the fact that while we are the fourth or fifth largest economy in the world, we also, in the country, have the highest unemployment rate.

And a lot of it is, as this article points out, our own doing. Three quotes from experts on this from that article. First, over the past few decades, California has built an edifice of hiring costs and regulations that discourage employers.

I might add that our lack of paying down our unemployment insurance debt to the Federal Government from the pandemic is certainly not a job encouragement policy. Second quote, California will continue to rank low in job growth until it begins to address the core impediments to hiring.

Last quote, the conclusion of the article at the end, serious work is needed to restore competitiveness. This is not a time for boasting about how big our economy is. If our unemployment rate was closer to normal, it would be half of what it is.

That would be potentially millions of people that do not currently have a job and probably qualify for these services, who would have a job and perhaps not qualify for, not need these services.

So, I'd just like to point out, as we really haven't discussed, but it is a pretty important part of it, and that is an employed economy reduces the demand on health and human services.

In the process of having Senator Archuleta close us out, I'm going to turn the gavel over to Senator Niello as I'm going off to the Bill signing. And unfortunately, you'll probably still be going when I'm done. But we still have the next panel, questions of the panel, and public comment.

So, let's move to Mr. Archuleta to bring us home and then we'll move on.

Thank you, Mr. Chair. I'd like to go ahead and thank every one of the panelists that are here. You know the old saying, don't kill the messenger. Well, I believe you're the messengers, the messengers from the state of California where we stand.

Well, we're the messengers as well because we're trying to give you a message about our communities, about our districts, about how we feel, the people we represent. And the impact of HR 1 is devastating, no doubt, here in California. We talk about trillions like it's millions, but that impact has cut quite a bit into California's budget. No doubt.

But we have to figure out, and we've heard it time and time again, we are a state that is so blessed with so much, but yet, we don't acknowledge those who give so much, the minority generations that we see the, you know, across the spectrum.

We heard our Senator mention about minorities, the black and brown who have given so much to our state, and yet, here we're turning our backs to a degree, not because the state, but because HR 1.

So, I think the message is how are we going to backfill and do it in such a way that we are not punitive, as HR 1 is to those who are undocumented, those who need help, because without them, look what it's doing to our communities.

If you turn the clock back before this Administration took office, people were free to walk the streets of Compton Watts and Willowbrook and East Los Angeles and Pomona and Pacoima and everywhere else and not fear about being picked up off the street and not fear about being separated from their families and yet, as a nation, we're funding that type of work because of ICE.

And we hear it time and time again in our communities across California. So, your message to us is we have to act. But our message to you is to please be sensitive to what our constituents are saying. And the Governor has been supportive for our veterans. We just signed a Bill yesterday and—supporting our veterans.

But we have work yet to be done. And I will say this, I am proud of California. We will get up off our knee and show the world that California not only is the fourth largest economy in the world, but it deserves that distinction.

Because we're going to go ahead and hold hands and we're going to go ahead and make things work. We're not going to turn our back on on our minorities. We're not going to turn back on the immigrants that have given so much to our country. And we're going to find a way, but that is up to you.

Help us find a way to make sure we don't hurt this population. And when it comes to cutting education, we can't. We have to educate everyone. We talked about Medi-Cal and Medicare. It's so important.

We also talked about the, the children that received that first meal in the morning and maybe a second meal during the day might be their last. And so, cutting—we've got to be careful. We've got to continue to provide service for those who have given so much.

So, take the message as we've received it that we are going to continue to work together as legislators to help our communities. And we'd just like to thank you all for being here. And that is my message. Thank you. Mr. Chair.

Yes. Senator Menjivar.

Thank you. I appreciate you indulging here, Mr. Vice Chair. I just wanted to note because we've been some focus on the error rate. I think it's important for everyone to know that the average error rate in the United States is 10.9, very similar to our error rate.

In fact, HR 1 is going to scoop in close to 90% of the states under the error rate. I think there's approximately six—only six states that are not going to be caught up in the HR 1 error rate new limitations. The highest—the state with the highest error rate, sitting at 25, is the state of Alaska.

But their Senator got a sweet deal to be exempted from HR 1. So, of course, she was excited to sign that Bill. So, let's really fax our facts. We are not above national average. We're sitting at—most red states are going to be caught up in this HR 1 implication as well.

So, we are not an anomaly in this in this area.

Thank you for that clarification. And I didn't intend to make it comparative. It was pointed out in the answer when I responded that if misery loves company, we've got a lot of friends out there. But the point is that we need to do something about the error rate, as does everybody else. At any rate.

Thank you all very much for this panel talking about the impacts of HR1. We will now move to our second panel, possible efforts to Preserve Access to Health Care and food. The presentations will be by a larger group this time.

Michelle Baass, Director of the Department of Healthcare Services Jennifer Troia, Director of the Department of Social Services Carlos Marquez, Executive Director of the County Welfare Directors Association Linda Nguy, Associate Director of Policy Advocacy with the Western Center on Law and Poverty Ronald Coleman Baeza. I hope I'm pronouncing these names correctly.

Managing Director of Policy for the California Pan Ethnic Health Network and Josh Wright, Director of Government Relations for the California association of Food Banks. So I suppose we will go in that order, beginning with Michelle Baass. Am I pronouncing that name? Thank you.

Thank you, Mr. Vice Chair, Members of the Committee. Michelle Baass, Director of the Department of Healthcare Services as discussed in the previous panel, HR1 makes devastating changes to the Medi Cal program and will potentially cripple the healthcare safety net that many of our Medi Cal Members and all Californians depend on.

HR1, enacted on July 4, 2025 mandates new eligibility and enrollment requirements for Medicaid programs nationwide. California must comply with these federal changes, which include community engagement and work reporting requirements for certain adults, changes to eligibility criteria for certain groups of noncitizens, six month renewal requirements for specific groups, and cost sharing provisions.

These requirements are significant under HR1, the work and community engagement provision, which requires adults eligible as part of the new adult group, which this is the Affordable Care act optional expansion group to demonstrate work participation.

It's estimated this will result in 233,000 individuals in Medi Cal losing coverage by June 1, 2027 rising to 1.4 million Members by June 12028.

Six month eligibility checks, which require the state to conduct eligibility redeterminations every six months rather than annually for the adult expansion group will lead to an estimated 289,000 Members losing coverage by June 2027, ultimately rising to 400,000 individuals.

As we work to implement the provisions of HR1, we are guided by the following principles to mitigate the harms imposed by these new federal requirements. We will automate to protect coverage. We will use state, federal and other data sources to verify eligibility whenever possible. Regulatory Reducing paperwork and preventing coverage loss due to administrative issues.

We will communicate with clarity and connection deliver clear, plain language information in all required languages, ensuring messages are culturally appropriate and easy for Members, families and caregivers to understand. Simplify the Renewal Experience we will streamline the Medi Cal renewal processes with clearer forms and simplified systems.

Six Month Renewal Steps to Help Members Stay Enrolled we will educate and train those who serve our Medi Cal Members, provide counties and our Coverage Ambassadors our community partners who share information to help MEDI Cal Members navigate coverage with training, practical tools and ongoing support to assist Members effectively, and we will provide timely and transparent communication to our Members.

We plan to share updates through multiple channels so Members have sufficient time to prepare for and comply with the new requirements. The Department will use texting for critical updates, distribute culturally appropriate tools, and engage our Coverage Ambassadors.

Our goal is to make this transition as smooth as possible by providing clear information, reducing administrative burdens, and working closely with our Members, counties, health plans and community partners. On January 29th of this year, we released our HR1 Implementation Plan, which outlines California's strategy for implementing the MEDI Cal program Updates required under HR1.

No other state has released such a plan. California is a leader in planning ahead for the changes to the Medicaid program and ensuring systems eligibility workers, partners and Members are aware of what these changes mean for them.

The Implementation Plan provides detailed guidance on how DHCs will implement these changes while working to minimize disruption and maintain coverage continuity. To familiarize our Implementation Plan with our partners and the General public, we held two all comer webinars last week with attendance of over 200,000 individuals.

We posted the recordings on our website and we are really doubling down our efforts to outreach and outreach early to our community and critical implementation partners. Additionally, DHCS is committed to educating and training those who serve our MEDI Cal Members.

We are designing and delivering comprehensive trainings, flowcharts, and other tools to help support our county operational planning and staff development. Currently, the Department is holding monthly work group meetings with county staff to share updates about HR1 and engage in dialogue about implementation related to the new eligibility requirements.

After implementation of these provisions, we plan to conduct county visits to help ensure consistent implementation and provide continuing technical assistance across the state. As discussed and noted in the governor's budget, HR1 changes MEDI CAL eligibility requirements for DHCs and our county eligibility workers.

We are working with our counties to evaluate the needed support for county implementation of these provisions. We also recognize the importance of partnerships with other stakeholders, including our managed care plans, providers, advocates and community based organizations again to prepare and implement these changes.

Through a collaborative and multi phased approach, DHCS and stakeholders will ensure that Members are properly equipped with the information and support they need to adapt to the upcoming changes. This multiphase approach includes two parts. Phase one is building awareness and preparation for these changes.

For example, just last week we launched our Text Campaign Outreach campaign to raise awareness to the Medi Cal Members who may be impacted by the work and community engagement requirements. These messages are Translated into all 19 threshold languages and written in plain people first language.

For phase two, we will shift the communication style to a call to action, creating messaging that has urgency and having our implementation partners share broadly with the community. The implementation plan lists multiple channels we anticipate using to elicit stakeholder feedback and share important information related to HR1.

Additionally, the governor's budget includes 4 million for clinic navigators to help assist reaching out to help eligible individuals apply and successfully complete the healthcare coverage enrollment process, retain coverage, navigate the healthcare system and gain timely access to medical care through community based care management.

The scenario that Senator Menjewar is a perfect example of how these clinic navigator dollars could be used. Additionally, the Department plans to build upon the excess of our Coverage Ambassador program that was launched during the Public Health Emergency Unwinding and Redetermination process.

Coverage Ambassadors are people in our communities who help our Members understand coverage, understand how to navigate the coverage. We provide toolkits, webinars, social media content and informational documents to help our ambassadors. To date, we have over six individuals signed up to be Coverage Ambassadors.

I will now turn it over to Tyler Sadwith, Chief Deputy Director and State Medicaid Director to get into further details on our mitigation strategies.

Thank you and good morning to the Committee. My name is Tyler Sadwith. I'm the State Medicaid Director. The Department of Healthcare Services is committed to maximizing the use of state, federal and third party data sources to confirm eligibility without burdening Members and to avoid red tape.

As Director Baass mentioned, using administrative data to automatically confirm eligibility is one of our guiding principles and it is a key strategy to minimize coverage loss due to HR1 and MEDI CAL.

One statistic from the few states that have implemented work requirements in Medicaid underscores how critical this strategy is based on the experience of these states among the population of Medicaid Members who were subject to work requirements and who the state could not automatically verify.

These individuals had to manually report information and the average disenrollment rate for this cohort was 77%. Accordingly, wherever possible, the Department will leverage available electronic data sources to identify individuals who meet exemption criteria and individuals who are not exempt but who are already in compliance with the new rules.

This process, referred to as ex parte, is the most powerful tool to maximize coverage retention in Medi Cal and reduce red tape on Medi Cal applicants and Members. The electronic data sources will provide exemption related information, income and wage information so that people can be exempt or deemed compliant.

On the back end, we are able to exempt some individuals using Medi Cal Eligibility data, such as an aid code.

For other individuals, we will leverage a comprehensive set of data sources including our Medi CAL claims data, CalFresh and CalWorks data from CalSAS state wage data from the California Employment Development Department, income data from the IRS and vendors such as Equifax, vendors with income data from the Gig economy, data from the Veterans Affairs, Higher Education, the State Department of Rehabilitation, and other agencies.

In addition, the Department is evaluating which diagnosis, drug and procedure codes can be used to establish medical frailty, which is one of the exemptions passed in the law. We are taking a comprehensive approach to developing the medical frailty criteria, which is a key lever to ensuring coverage retention.

We have undertaken a robust stakeholder engagement strategy, soliciting feedback on the draft criteria from the chief Medical Officers of all Medi Cal managed care plans, the American Medical association, and external Clinicians affiliated with nearly a dozen medical societies and disease specific organizations representing a broad range of clinical specialties.

This comprehensive approach is intended to ensure individuals do not lose Medi Cal as a result of HR1. As the Director mentioned, we are streamlining the Medi Cal Renewal form to assist the Medi Cal Members and consumers with keeping their Medi Cal and making the experience easy for them.

We're looking to connect with Members in a variety of ways that meet their needs and their preferences, including mail, phone calls, text messages, and a Member facing app that will support them with the application and renewal process. One group of Members that may be at high risk of losing coverage due to HR1 are individuals experiencing homelessness.

The Department is partnering with counties, Medi Cal managed care plans and community based organizations to address the challenges that individuals experiencing homelessness will have in verifying eligibility for Medi Cal and maintaining access to calaim services like Enhanced Care Management, community Supports, behavioral healthcare, and Essential health services.

Three initiatives that provide face to face interaction and outreach to Medi Cal Members experiencing homelessness include Enhanced Care Management, Community Supports, and Street Medicine. Enhanced Care Management, or ecm, deploys community based care teams to engage homeless individuals, often directly on the street, to help them navigate the medi cal eligibility process, gather documentation, and maintain continuity and coverage.

Care managers assist in Enrollment, renewal, and tracking eligibility milestones. There are 14 populations of focus for ECM, and the population of focus that represents greatest utilization out of all 14 is adults experiencing homelessness. ECM continues to grow quarter over quarter, year after year, as we collaborate closely with plans to CBOs and providers on uptake.

UCM provides key linkages to medical care, behavioral health care, and community supports. Two community supports focused on housing, including housing transition, navigation Services and housing tenancy and sustaining Services, account for two of the top three most utilized community supports. Last month we launched Transitional Rent, the newest community support for the behavioral health population of focus.

And like ecm, community supports grow consistently quarter over quarter and year over year. We are pleased to report that community supports are cost effective. They are working as intended. They are providing upstream preventive supports that treat the whole person in lieu of more costly, more intensive services.

Analysis from an actuarial firm shows community supports are reducing utilization of emergency care, inpatient hospital stays, and nursing facility stays representing net health care savings. Finally, Street Medicine delivers health and social services directly in environments where individuals live, eliminating barriers posed by traditional settings, and they include help to support Members with completing medi Cal applications and renewals.

The Department has many efforts underway through performance based opportunities in BHConnect and other technical assistance to increase uptake for ECM and community supports for this population. As part of HR1, we are partnering closely with the Department of Social Services to align implementation approaches with CalFresh. We are committed to close collaboration with CDSS and counties.

Our shared goal is to safeguard access and equity while navigating the changing federal landscape. This coordination ensures that policy changes are aligned, operational impacts are minimized, and Members experience a streamlined process. We are collaborating to expand the use of electronic and administrative verifications across programs.

This includes exploring shared data sources and automated processes to reduce duplication, enhance efficiency and eligibility determinations, and minimize the burden on counties and Members.

Because California has an integrated eligibility system with CalFresh and CalWorks, Medi Cal is able to use that data already in calsas to exempt individuals and we're able to use income and job information from CalFresh for the purposes of Medi Cal redeterminations. Thank you for your time. Happy to answer questions after the panel.

That sounds like a good segue to the Department of Social Services. And I would point out that we have five more presentations and we certainly want to hear everything that you have to tell us regarding preserving access, but if you could keep it rhetorically, economic would be most appreciated.

Will do. Good morning. I'm Jennifer Troia. I'm the Director of the Department of Social Services. This hearing has already emphasized a great deal that HR1 makes extremely significant changes to federal funding and eligibility for both Medi CAL and CalFresh. Our Department oversees the Administration of CalFresh or the SNAP program.

Although it's been said I think it's important to emphasize again that CalFresh is one of the most effective tools that we have to combat poverty and food insecurity. Each month the program serves over 5.3 million low income individuals across California.

It allows them to not only address food needs, but also free up limited resources in their budget for other essentials such as housing and medication. As you've also heard, HR1 is expected to cut federal funding for SNAP or CalFresh in California by at least 2.3 to $4.3 billion annually.

As we approach the implementation of HR1, we have a priority of protecting benefits for Californians as much as we can and we are grounded in a few key principles. First, we're working to mitigate harm whenever possible and provide clear communications for clients and counties.

Second, as much as possible, we're making evidence based decisions by using data and research to inform our choices, monitor progress and make adjustments. And finally, we're committed to engaging transparently. This means actively seeking insight from partners including the counties that administer CalFresh, people with lived experience, and others representing a variety of perspectives.

In addition to the changes to eligibility for noncitizens, one of the biggest impacts, which we've already been discussing quite a bit this morning of HR1 on CalFresh is the changes to the CalFresh time limits, especially for people who are considered able bodied adults without dependents or ABODs.

Prior to HR1 and when California was not under a waiver, people who were considered ABODs were limited to three months of benefits in a 36 month period unless they were exempt or they met work or community engagement requirements. HR1 significantly expands who is subject to this time limit of three months of benefits in a 36 month period.

It increases the age group subject to the rule from 18 to 54 instead of 18 to 64. It lowers the age of who is considered to be a dependent child for purposes of the parent's exemption from having a child under 18 to a child under 14 under 14.

It eliminates exemptions for people who are homeless, adults under the age of 24 who were in foster care, and for veterans. In the other direction, it does add an exemption for American Indians. Other exemptions that remain include being pregnant, medically certified as physically or mentally unfit to work, or participating in the Office of Refugee resettlements trainings program.

HR1 also significantly narrowed the criteria for federal waivers of the application of the time limit. We released key policy guidance to counties regarding implementation of all of these new rules at the end of 2025 Statewide implementation of these changes related to the ABOD rule will begin on June 1, 2026.

That means that starting June 1, counties must screen new applicants and existing recipients for an exemption before applying the time limit. This timeline reflects the time that is necessary to automate our eligibility system and to train our eligibility workforce to ensure consistent statewide implementation.

Individuals who are not exempt must work or engage in a qualifying activity to maintain benefits for more than three months and document that to the county.

After accounting for individuals who we already know are exempt from the ABOD time limits because of data we already possess, we estimate that there are 609,000 people who will newly be subject to the time limit rules because of HR1. Combined with an approximately 346,000 individuals who would have already been considered ABODs prior to HR1.

This means that approximately 955,000 people will be subject to the time limit policy and could be at risk of losing benefits if they're not exempt or meeting the work requirements. In the face of this complex program change, we are actively partnering with counties.

The CALSAWS Automation System advocates community based organizations and other state agencies to prioritize solutions that minimize harm to vulnerable recipients. First, we're working to ensure that everyone who meets the criteria for an exemption receives that exemption.

In addition to identifying individuals who we already know qualify for an exemption, we are looking for other ways similar to what the Department of Healthcare Services described to maximize existing data to maintain benefits.

For example, we're exploring whether the in Home Supportive Services wage and provider information could be an additional source of information that we have access to and can utilize for that purpose.

For those who are subject to the rule and who are not already known to be exempt, the counties must conduct an exemption screening before the time limit can be applied. This will occur at the time of application or for existing recipients at their next recertification.

What I want to emphasize is that this means the majority of exemption screenings will occur over a 12 month long period, which spreads out the workload and allows time to be dedicated to this activity at an existing touchpoint.

Second, we're working to connect people to qualifying activities and to minimize administrative burdens so that eligible people can maintain benefits. For example, we are expanding our CalFresh employment and training programs and providing technical assistance to counties that don't currently offer those programs.

We're participating in a joint California Health and Human Services Agency and California labor and Workforce Development Agency workgroup to improve local cross system collaboration and facilitate workforce workforce connections. Given the work requirements and renewal changes for Medi Cal, CDSs and DHCs are closely collaborating, as you've heard from DHCS as well.

To minimize administrative hurdles and maximize benefit retention whenever possible, we're looking to streamline requirements across the programs. Finally, in terms of communication and engagement, we've launched an extensive partner engagement series, county office hours and policy training opportunities. The Department is also developing and sharing specific resources and tools to support our policy approach.

For example, we're developing an ABOD Outreach toolkit. We're creating a County Resource Toolkit to streamline exemption screening and better connect clients to qualifying activities. In addition, we're exploring with dhcs the possibility of client tested joint communication materials to help clients understand the similarities and the key differences between CalFresh and Medi Cal's program requirements.

Previous speakers also outlined the basics of how HR1 shifts administrative costs from the Federal Government to the state and counties and how a state's payment error rate or PER determines the timing and amount of any state costs related to paying for a portion of CalFresh benefits, which again have historically been funded 100% by the Federal Government.

Given this potential significant fiscal impact on the state connected with the perfect, CDSS has embarked on a multi year Accuracy Improvement Initiative which is grounded in data and informed by communities, counties and partners. We've been conducting a statewide analysis of the most significant error drivers to help us identify and implement strategies to lower our per.

As a reminder, the PER includes both under and overpayments and it can be things that are in error because of the county, the county's error, or the error on the part of the client.

As an example, early in our analysis it became clear that households not reporting an income source change account for 27% of the dollar value of payment errors. Eliminating this type of error could reduce our payment error rate significantly.

That early analysis has led to investments related to income verification including first, a new consent based verification tool that we will roll out to be especially helpful for people who are engaged in non traditional employment like gig work to make it easier to report that work second, expanded use of income verification sources like the work number to reduce the burden of providing verification of application and recertification and to indicate possible income received that may be over the threshold and third, automation of a payment verification system match, which provides income information from the Social Security Administration and the Employment Development Department.