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

We're ready. Great. Good morning. Alright, y'all. Okay, so here we go. I got to catch an earlier flight today. We're going to do this. You're going to get me out of here, right? Very important topics. Going to give them their time due. A little crunch today.

We are hearing from four different departments today, but we're gonna do a little special out of order to be mindful and accommodate a stakeholder proposal that we need translation. We did not? Okay. But we're still doing it first. Great.

So we're gonna start with issue number 26 on proposal for investment before we turn to HCAI. So if we can have the Let California Kids Hear and Children Now or come present their proposal for large group coverage of hearing aids. After this proposal, we're gonna take public comment on this topic. Hi. Hold on. Stand on.

Okay. Thank you so much for having us today and being such an incredible champion over the years for us. It means everything. My name is Michelle Marciniak with Let California Kids, and I'm a mom. For eight years bipartisan efforts have received unanimous support yet have been pulled back, blocked, vetoed, and the administration's program has not functioned as hoped.

With the federal pathway no longer viable, we need a path forward for California's kids. You've heard from our doctors, but today I wanted you to hear from the kids. With that said, I'd like to introduce Marie.

Chair and Members. My name is Marie. I've been boarding Southwest flights to Sacramento since I was in first grade. And these are some of my fellow advocates who have been coming here since they were babies, held by their moms in public comment, rolled into the room in their strollers.

Most of our crew is in school today or at IEP meetings or audiology appointments. Year after year, we ask for the same thing, equal access to sound. Research shows that children with access to sound by three to six months of age can develop at the same rate as their peers.

I'm now in ninth grade in the business magnet program, where we're learning how to evaluate market failures, return on investment, and how government regulation works. I wanna walk through a few numbers and ask a few questions. When we started this journey, only 15 states covered pediatric hearing aids. Today, 35 states do. Why is this so complicated in California?

Since newborn hearing screening was adopted in 1998, only 9% of plans cover medically necessary hearing aids. As Dr. Daniela Carvalho at Rady Children's Hospital has said, we do a beautiful job screening, but fail miserably at treatment. Is that a market failure?

And while we all choose different ways to communicate, the choice of whether a child gets access to sound shouldn't be dictated by our family's health plan. And in Southern California, why are children in the largest closed system being fit with adult hearing aids that are not appropriate for children and don't connect to classroom speakers, which gives them access to instruction?

Since 2021, California has allocated three... No, $30 million to HACCP. Less than 300 kids have been served. About 20,000 children are still waiting. What is the return on this taxpayer investment? And why is Maximus' fixed fee three times higher than the dollars allocated to for children?

Pediatric hearing aid hearing loss is low incidence, but without early access, cost can reach $1.9 million per child. So why are we identifying children early, but allowing health plans to shift the cost of treatment to taxpayers? One of the first pictures my mom took of me here in Sacramento was with my oversized turquoise backpack in front of the California for all sign, right next to the governor's office.

Governor, after all these years of trying to fix this, why aren't we included in California for all? California invests in programs like Talk, Read, Sing, but those benefits aren't accessible to infants and toddlers like us without access to sound. We wanna hear our moms and dads say I love you and go to school with our brothers and sisters.

Our plea is simple. Don't let the process stop children from hearing this year. As Dr. Dylan Chan at UCSF Benioff Children's Hospital testified in 2019, this is a developmental emergency that has been unfolding for years in California. It's not only devastating for families, but it is costly to society. And I'd like to turn it over to my mom to share a cost saving proposal that will serve more children.

Michelle, you don't have much time. Okay?

Great. This is not new spending. It's a smarter use of existing dollars to serve more children and it also reduces general fund exposure. This is a clear path forward and it's aligned with the legislature's intent. And they've all wanted to say something.

It's time for the California kids hear.

You guys want to do it one more time? Ready?

I got that.

Perfect. Thank you.

Michelle, what's different with this proposal than the ones from previous years?

Yes. So in previous, in previous years, we included everyone, including the kids in the exchange. And it's the reason why it was vetoed. Because if you include the kids in the exchange, that triggers an $11 million defrayal cost according to CHBRP. So we're saying let's do large group market, get the majority of the kids across the finish line this year, and we will continue to work at the federal level on the exchange in the coming years.

Do you have a number of how many kids would be covered if we, if we do this in the large?

We think it's somewhere between like 70% of the kids will move across it. It's anywhere between 70 to 80%. We have asked the health committees for an updated CHBRP report. I don't know if that has been requested. But the best we can guess is that it's 70-80% of the kids we get them across the finish line.

Okay. And do you know how much money is being put under HACCP a year?

It shifts every year. When we started, it was 10 million for the kids. 6 million for the vendor. It's flipped where there's more money for the vendor now and less for the kids. And so basically, the analysis that is that we've done is there's been 30 million, and we have a chart we can share. But there's been 30 million allocated.

23 million of that has gone to fixed, a fixed administrative costs. The rest, about 7 million, was allocated for kids but went unspent. We were in a call with the Department of Healthcare Services a few weeks ago and at that time 250 hearing aids have been dispensed. And that is evaluated through the TARs. So the TARs paid. So there has been 250 TARs paid as of a few weeks ago.

Thank you so much. Thank you. We'll take public comment on this issue.

Hi. My name is Johanna Wonderly. I've been following this issue since 2019. It's time to let California kids hear.

Kim Stone, Stone Advocacy, on behalf of the California Children's Hospital Association in enthusiastic support. Thank you.

Hi. My name is Kasey Cain. I am a parent of a deaf and hard of hearing child. I'm an educational audiologist, and I am the current board president for California Hands and Voices. We've been fighting this fight for eight years, and it's time to let California kids hear. Thank you.

Hi. My name is Caprice. My daughter, Avery, is up here, and we've been coming here since 2019. And, it's time to let California kids here.

Thank you.

My name is Ronda Rufsvold. I'm the executive director of a local school for kids who are deaf and hard of hearing. Wearing a little little mini shirt because we see the little kids. They're in school right now. But I'm in support of this.

I'm also a teacher of the deaf and hard of hearing from background. So for the last 20 years, I've seen the impact of kids getting hearing aids and kids not getting hearing aids. Thank you.

Nora Angeles with Children Now. We align ourselves with the testimony from Michelle and Let California Kids Hear. And we urge you policy makers to take strong action to address the persistent developmental emergency around access to sound. Thank you.

Katie Van Deynze with Health Access California in strong support of ensuring there's timely access to hearing aid and sudden services. Thank you.

Good morning. I'm Paul Wonderly. Four of these kids are mine all impacted by this, and so I'm in full support. Let California kids hear.

Is this the family vacation?

Pretty much.

Thank you so much. I just want to share the resiliency from this group is so strong. I know that it's been eight long years. I've been with you on four years of that eight year long hurdle. I just want to say I'm really grateful that you continue to come back and have not given up on this matter, even though we continue to fail you year and year again.

But I am very hopeful that maybe one day we'll get CMS to approve our request, at least for the, for the individual and for the individual plans on the exchange. So thank you so much for coming. I hope that we don't get to a point where you're Michelle's age and you're still here testifying on these things and we fix this sooner rather than later.

We recently told her, Marie, I'm gonna be like 80 years old and I'm gonna be like, it's our year, honey. So really hoping that's not the case. But we just, we feel so touched by the strong leadership that we have had for the last eight years and with you for the last four years. This is a bipartisan issue. Everyone has backed us. You guys have always been with us and it means everything. So thank you. Thank you so much

Thank you all. Bye. Okay. He liked it up here. So what one additional addition, additional addition. One additional thing before we move on to HCAI. Department of Finance would like the floor. Did you bring kids with you? Okay.

Victoria Rapley, Department of Finance. As we begin today's hearing, which covers four departments and 26 issues, the administration would like to provide some introductory remarks to contextualize our discussions. As noted in previous hearings, both the administration and the legislature must address the broader issue of balancing the structural deficit so that we can sustain the state's vital programs that support millions of Californians. This means making difficult decisions to address the over 20,000,000,000 budget deficit that is projected throughout the multi year.

We understand and share concerns related to federal changes.

However, any conversation around mitigating HR 1 or federal policy more globally must balance addressing this deficit and limiting new costs, so that we can responsibly support our core programs going forward. Furthermore, we would note that the hearing agenda includes numerous proposals for investment. To the extent these are legislative priorities, we can provide technical assistance on the proposals.

Though, no, any proposals will have to be considered as part of the overall budget framework. Given the projected significant outyear deficits. We understand these discussions must take place and we look forward to working with the legislator to develop a sustainable fiscal plan that serves all Californians.

Thank you. First time here?

No.

I don't remember your face. I apologize. It's only the second. Second time.

Okay. So I'm not there yet. Yes. Okay. Great.

Thank you so much for that. Moving to HCAI with our first issue.

Good morning, madam chair. Elizabeth Landsberg. HCAI, the Department of Healthcare Access and Information and that was a hard act to follow, with those kids. I've been asked to provide a high level overview of HCAI's mission and programs.

Our mission is to expand access to quality, equitable, affordable Healthcare for all Californians by supporting high value delivery systems, resilient health facilities and workforces, and actionable health information and strategies. We have five main program areas. We are a leader in collecting data and disseminating information about California's Healthcare infrastructure and publishing information about Healthcare outcomes. This work encompasses the Healthcare payments data program or HPD. The state's all payer claims database which we have a budget proposal to fund ongoing.

HCAI is the building department for hospitals and skilled nursing facilities, monitoring the construction, renovation, and seismic safety of these facilities which I'll talk more about. We also have health workforce program seeking to build a healthcare workforce to serve medical members, to serve in medically underserved areas, and to reflect the Californians that it serves. You're familiar with our basic, workforce programs. We also support programs that ensure Californians have access to reproductive healthcare including abortion services.

On the finance side, HCAI has our Cal mortgage program which offers loan insurance to non profit and public health facilities.

We administer the distressed hospital loan program as well as the small and rural hospital relief program. We on the, HCAI has a number of programs aimed at improving healthcare affordability, including the office of healthcare affordability, the Cal Rx program, and the hospital fair billing program. And, most recently, last fall, we developed California's application for the rural health transformation program, which we'll discuss, later in the agenda. Question two. Should I move on, madam chair?

Question two asks for an update on the CalRx program. So I will start with our biosimilar insulin initiative. So CalRx as partnered with Civica RX, a non profit pharmaceutical company to develop both short and long acting types of insulin. The 2022 budget included 50,000,000 to support development of the insulin products. And under our contract, we have those Max prices locked in.

So, $55 for the five pack of pens and $30 for the, ten milliliter insulin. Uninsured Californians or those with high deductibles today commonly pay $300 per vial and 500 for a five pack. This year in January, we launched CalRx's first branded insulin glargine pens. That's a long acting at the $55 for a five pack. And this initiative introduces competition into a historically high cost insulin market dominated by a few manufacturers.

And so we are here to interrupt that very broken pharmaceutical market. The Naloxone Access Initiative. Two years ago in May 2024, we contracted, for the manufacture and distribution of Naloxone nasal spray, a medication that blocks the effects of opioids and can reverse, an overdose. Our initial price was $24 for a twin pack, which was more than a 40% saving over the price the state was paying. We've now lowered that to $19 per twin pack.

And in April of 2025, CalRx announced that our naloxone is now available to all Californians at the same low price. So we are doing direct to consumer. We are also the primary supplier for Department of Healthcare Services Naloxone distribution program, which supplies over 2,000,000 boxes of Naloxone per year free of charge to qualifying entities, community based organizations, fire departments, hospitals, and the like.

Since the NDP began in October 2018, they've distributed over 8,000,000 boxes, which have been used to reverse more than 224,000 overdoses. As of, March 2026, CalRx's Naloxone access initiative helped save the NDP, almost $50,000,000.

We are now working on the school albuterol initiative. So, last year's budget included, authority for up to 5,600,000 to support CalRx partnerships, with CDPH office of school health. And we are planning to launch a centralized ordering system to provide California schools with two albuterol inhalers and 25 spacers so it can be used by multiple kids who are in respiratory distress and may not have their own inhalers. K through 12? Yes.

Yes. K through 12 schools. So we're, collaborating with the school nurses on a training program, and that should start going out, soon. I'll keep going. So we've been asked to provide an update on the reproductive health care grant program.

So, proposition 35 Health Care Act includes 90,000,000 for reproductive health care services support. So the first 90,000,000, in 2025, HCAI administered two contracts and all of those funds have been fully expended. And we're currently working on the contract for the 90,000,000 from Prop 35 for 2026. It's confusing because they're all 90,000,000. This legislature, in early action, did 90,000,000 general fund to provide grants to reproductive health care provider planned parenthood affiliates, and we have executed that contract.

And that provides funding for family planning services. Almost 62,000,000 of that 90,000,000 has been paid on the grant, and we are preparing to process a last payment for the remainder. And then last, we also executed a contract for 56,000,000 from the abortion access fund for abortion services to ensure access to abortion, And most of those funds have been expended of the 56,000,000. Approximately 16,000,000 remains. And I wasn't gonna go through the the 2022, 2023, programs.

You just wanted the update on the funds. Is that correct? Yes. Okay. Next, I've been asked to provide an update on the office of health care affordability.

OCA was funded, and created four years ago by the legislature in the budget and pleased to provide an update. It was established to slow the growth of health care spending while maintaining, or we hope actually improving equity and quality and access. We have three core work streams, spending growth, high value system performance, and review of market consolidation. And so these three efforts have been shown, research has been clear that these together can help support a more affordable and sustainable health care system.

On the spending target side, the board did adopt in April 2024, the first health care spending targets, those apply to all health care entities, hospitals, health plans, physician organizations.

The target chosen by the board was 3.5%, this year coming down to 3% by 2029. And a spending target sets a limit on how much health care spending should grow each year. Because we heard for many months from consumers who were unable to access health care services at the hospital or faced very high hospital bills in their area, We did a meeting in Monterey, California and did months of analysis to try to understand hospital spending costs.

We did identify seven high cost hospitals who were charging prices at twice the average of other hospitals in California. And based on that, the health care affordability board did decide to establish hospitals as a sector and to have a lower spending target on those high cost hospitals.

So that target is 1.8% this year coming down to 1.6 by 2029. So in order to understand the health care spending in California, we're collecting new data and publishing reports on that. And then we're using that data also to measure the health plans against these spending growth targets. So last June, we released our first baseline report with health care spending trends from 2022, '23. And this summer, we plan plan to publish a report with the 2024, spending data.

OCA, as I mentioned, has a number of initiatives to improve the quality and value of California's health care system, including increasing investment in primary care and changing the way care is paid for to really emphasize quality. So we set standards and goals for alternative payment models. Those were approved by the board, in June 2024, and these are intended to support greater adoption of, value approaches that promote equitable high quality and cost efficient care.

We also develop benchmarks for primary care because when we spend more on primary and early intervention preventive care, we see improved health equity, improved health outcomes, and lower overall spending. So we developed a definition for primary care.

The board set a benchmark, and that is a ten year benchmark. And we're starting to collect data both on the APMs, and on primary care. We also adopted equity and quality measures, set so that we can measure equity and quality at the same time we're measuring cost. The third main component of OCA seeks to, have oversight of market consolidation because we know market consolidation is one of the cost drivers throughout the country.

And so we have new authority to review proposed mergers and acquisitions of health care entities.

So two years ago, there's a requirement that before there's a merger acquisition involving a health care entity, they have to file a notice with us. We review those notices if we're concerned that there will be a negative impact to access or affordability. We can do a deeper cost to market impact review. So in two years of that program, we've reviewed 40, transactions and done two full cost to market impact reviews. One that was recently published and the other that is in flight.

In November, we also published an investigative study of hospital market competition in Monterey County, finding that the exceptionally high hospital prices in the region are due primarily to their market power rather than high operating costs or superior quality of care. OCA is currently developing, enforcement processes for entities who exceed the spending target with consideration for health system performance measures. So this year is the first enforceable year of the targets. So a lot of our Board Meetings have focused on discussing

What do you mean or this?

This 2026. So we'll be measuring the growth from '25 to '26. '25 was a baseline year, and '26 is the first enforceable year. So we're having a lot of conversations with the board and our public meetings about the enforcement process. And there was a question specifically about the impact of HR 1 and how we're thinking about that.

So OCA has publicly discussed the impacts of HR 1 with the health care affordability board, which has the decision making authority over the targets. And the consensus from the board at this time was not to adjust the spending targets. We know that HR 1 will impact health care entities differently depending on a range of factors including payer mix. And if the spending targets were increased across the board, this could result in higher costs for commercial market consumers undermining the goal of healthcare spending.

The goal that healthcare spending should not grow faster than household income.

Additionally, because OCA will report and enforce targets separately by market, this allows for evaluating the impacts of various factors such as state and federal policy decisions impacting spending trends. So we have the ability to look by market and by entity at what the factors were that if there were entities that exceeded the target and really under try to understand what those factors were. So that has been the discussion to date.

And then last, madam chair, I was asked to provide an update on hospital compliance with the Alquist Act. So this framework has been in place, starting in 1971 and really guided by lessons learned from past earthquakes, including the Sylmar earthquake where a number of hospitals collapsed, the '94 earthquake, in Northridge.

So this overall framework has been in place, for many decades. California has made substantial progress toward compliance, particularly in strengthening the structural, safety of hospital facilities. So we think of the structural facilities, the bones of the building, and then the nonstructural facilities like, are these panels gonna fall off the walls? Is the electrical system adequately braced? Are the pipes adequately braced to actually be able to provide health care?

So we'll talk a little bit about both structural and nonstructural. So there are, a little over 410 general acute hospitals in California with 3,500 hospital buildings. About more than 80% of these hospitals have fully complied with structural standards. So more than four in five hospitals in California are fully compliant with structural standards, meaning we believe that they are safe to provide care after the big earthquake comes in California.

A total of 649 buildings remain in the SPC two category, meaning that we do not believe they are at risk of collapse, but we don't think they would be able to provide services after the big earthquake.

And 18 buildings remain in the highest risk category of SPC one. They are subject to a 2025 deadline due to collapse risk, and the state is actively working with these facilities to resolve the remaining high risk buildings. In addition to the structural safety, hospitals must continue to upgrade nonstructural systems that are essential to maintaining operations during and after an earthquake, including electrical systems, backup power, HVAC, and critical utilities. About half of hospital buildings remain in the lower performance categories for these systems.

And there are some hospitals that are fully compliant with the 2030, seismic requirements.

All hospitals are required to submit seismic compliance plans to HCAI, and approximately 90% of hospitals have done so. So these plans identify whether hospital buildings will be retrofitted, replaced, or removed from service along with a timeline for completion. I also wanna note that HCAI administers the small and rural hospital relief program. This legislature created that program a number of years ago.

There are funds available for us to assist hospitals, small rural critical access, and distressed hospitals in helping them both design, their approach to coming into compliance and actually funding construction.

We have, to date spent, granted 16,000,000, in grants. And we are ready and stand, able and anxious to work with additional hospitals to get those dollars out and help them to comply. Compliance plans indicate that there are approximately a 100 hospital facilities that don't facilities that don't expect to meet the 2030, deadline. These are about 40 or under review for AB 869 review.

So under AB 869, small rural critical access hospitals have the ability to come in and ask for an extension, and we do a case by case basis.

They submit a compliance plan with milestones that we review and work with them on and we can grant, extensions for that subset of hospitals. We do also have 60 hospitals who don't qualify for current statutory criteria. And at the same time, a significant number of hospitals are actively advancing projects to come into compliance with the 2030 requirements. I know that was a lot of information, madam chair.

Yes. It was. It's overview. You don't have anything to add. Right?

Jason Constanturos, Salio. I just also wanted to note if you're tracking initiatives at HCAI, another initiative that could be worth tracking is the sort of diaper access initiative. This was adopted last year's budget. There's another round of funding for it in this year's budget as was agreed to as part of last year's multi year. And so if you're trying to sort of do basic oversight, that's sort of another Initiative in that.

Thank you. Okay. So you've addressed some of the additional questions I had but on the workforce programs director, I'm interested to know the geographic breakdown of where the individuals are getting some of the support. Just wanna know where we're getting them and is it helping with meeting the needs in terms of providers in hard to reach areas?

Absolutely. Madam chair, thank you for the question. So we do have a research data center at HCAI that's looking at that data by geographic region, and that's really critically important to us. So we do determine which are HPSAs, which are the health plan or the health performance?

Profession.

Health profession shortage areas, which are those MSAs, the medical shortage areas. And so we absolutely have that as a scoring criteria for all of our programs. Folks who get a loan repayment or scholarship have to agree to a service agreement to serve in a medically underserved area. Anytime we do something like the Song Brown residency or nursing training programs, we do look at geographic reach.

We have full supply and demand models built out for the nursing workforce and behavioral health, licensed workforces, as well as some work on the non licensed side. We're working on primary care supply and demand models. We built ourselves the oral health and maternal health. So geographic region and profession is really important to us to use our state dollars and as targeted a fashion as possible.

So yeah. So the research shows that we are being targeted and we have people in rural areas that have been, awarded the support?

Yes. There is still plenty of work to do. You know, I certainly don't wanna suggest that we have met the needs of rural or other medically underserved areas but it is a important criteria that we always look at with our programs. You'll hear more about the rural health transformation program and how we're focusing there as well.

Is that something we proactively do? You know, we award these years. For next year, we get to look at where we didn't get to award any and put them into the back of our mind as we award next year's.

Libby, if you wanna come up. Libby Abbott, our deputy director for our health programs, I wanna give her the opportunity to add. So it is an application criteria. It is something we score on. When Libby and I are reviewing the proposed awards from her team.

We always get a map and look at the counties, but what do you wanna add?

Good morning. Elizabeth or Director Landsberg. Red is good. Still lag.

You covered that really well. So, yes. All the things that, director Landsberg said, we have a number of different tools for assessing geographic shortage and trying to prioritize the allocation of our awards. Really, the only thing I would add is, we do our best to prioritize the allocation of funding to where there is the greatest need. But sometimes we don't get applications from the areas of greatest need.

So, yeah, there is work ahead of us. I think to continue to do promotion and outreach. We've also recently started a practice of every time we run a cycle looking at specifically the demographics, and the geography of who was awarded, be that organizational or individual. And then trying to think about what that means for the way we run our next cycle. Do we need to do targeted outreach?

Do we need to change our scoring criteria? So we it's an active process but very much top of mind.

Okay. Great. Thank you. I don't know if you, the deputy director, or would be the right person to ask on the CYBHI initiative, the investments over five years. There's one part that says building a behavioral health workforce pipeline.

I'm wondering if that's the programs we just talked about or is there a separate thing?

Yeah. I didn't go into detail about kind of our four strategies, but pipeline and pathway is one of them. And under the CYBHI, we had eight different work streams and one was about pipeline and pathway. So critically important if we're gonna reach our equity goals, that we have those pipeline and pathway programs. Libby, do you wanna talk more about that?

Yeah. We have, two or three kind of smaller programs for pipeline and pathway and it looks like a mix of different things. We offer funding to organizations that hit one of several categories of pipeline or pathway programs. So for example, we will fund, internships. We will fund career fairs.

We will fund summer, exposure for high school or early college folks. So there's a couple of different categories by program. That said, we're actually in the process. We've contracted out an analysis of what is the best ROI in pipeline and pathway. What does the national evidence say?

What can we learn from what we've funded? What are other states doing? That analysis is actually meant to inform what we do with our BHSA funding. We've identified the need to strengthen pipeline and early pathway programming as one of our priorities for BHSA. Yeah.

So we're gonna take the outputs of that analysis, use it to set some design parameters, and try to fund what we think are the most high impact pipeline and pathway programs.

My humble input here is having navigated this program to be a behavioral health worker. It's one of the biggest complaints we get is that we have to do two years worth of unpaid work. So as much as we can if there's funding, the barrier into these jobs is that no one can go two years worth of not working. So oftentimes you'll work while going to school.

But however, if you work while going to school and that program also requires you to have another job, that's even more difficult.

So when I hear internships, I hope we're looking at master's levels. You know, the social workers, licensed marriage family therapists, entities that have to do these hours. Yeah. And if we can find a way to pay some of those programs while they're getting those hours, I think that would be a removal barrier into these jobs.

I appreciate the input and I'll just quickly make the distinction. So when I talk about pipeline and pathway, we're actually usually talking about high school or early college level intervention.

We do have work targeted to our masters folks and are proposing a bundled approach, which I was gonna describe later, but I'll just preview for you now where we're gonna fund education capacity expansion, but also fund the students who move through those master's programs, not just with scholarship, but with stipends for their internships and for their clinical time. And we wanna support clinical placement. So we're really trying to attack it from all angles for the reasons you just described.

Perfect. Thank you. Are you the right person to talk about the twenty first century nursing initiative? I am. Okay.

There's been a couple of delays in this space. And so I'm wondering maybe this is also a DOF question. What has been done since 2022? There's been 220,000,000 allocated for this program but it's been delayed. So has any investment been made in this program thus far?

Those funds were reverted. So I'll let Dov speak to that.

I don't have any information on that specific program in front of me right now. But I can take that back and see.

The '22 membership budget allocated $220,000,000 to this program.

And those funds were reverted?

So this program is not moving forward?

We have have a small amount of nursing funding. We have Samsung Brown program funding that supports nursing education, and we do, do some loan repayment and scholarship. We get a limited amount of funding through licensure renewals, but it's pretty limited. Okay.

Okay. So That's okay. Okay. And then, before I go into OCA.

Great. Thank you for the background on CalRx. I think deputy director I'm good with.

You're welcome to stay.

Okay. Thank you for the background on CalRx and everything. We're investing the school RB role one, really great initiative. I'm wondering if anything else is coming down the pipeline of other types of medical treatments we're gonna be investing in and making.

Our CalRx team has done some analysis of other, drugs that we think could be high impact for the state, but we don't currently have additional funding for this.

Are you allowed to share just what we're thinking about even though we don't have funding for it?

EpiPen is one that's come to mind. We're certainly looking at GLP ones.

Oh, wow. Okay.

Just as a high need area. Okay. I don't remember all of them. We're we're happy to follow-up if you're interested.

Okay. So, let's jump a little bit into OCA then. I appreciate the response. And then HR 1, given that the board mentioned that they're not gonna be adjusting, how then is that gonna be incorporated in the enforcement piece of hospitals? We're not gonna change the target, but are we gonna change our approach?

I do know that it's a like a progressive enforcement approach. Yeah.

Progressive enforcement. So what is that? Is it just one time you get a warning or in real life, what would that look like? And then I think there exists a waiver. If I'm not mistaken.

the statute does talk about, Waiver process. Allows a permissible waiver process.

Has that established what that waiver process will look like?

No. It hasn't. So, the OCA statute does define, as you note, a progressive enforcement approach. So for any entity that exceeds the target, our first step is to notify them of that, send them a letter. They have forty five days to respond, and correct any data that they think there was a mistake made on.

We then have a stage of technical assistance. There is also a permissive stage of having entities come testify at a public hearing. And then entities, we would work with to develop a performance improvement plan or a PIP. And the last and final stage of the progressive enforcement is around, financial penalties. And financial penalties can only come into effect after all the other steps have been met and she doesn't stick to their performance improvement plan.

So we have the ability to look at them on the back end in terms of enforcement considerations. The waiver is permissible in the statute. And at this time, we have decided not to put the waiver in place, but rather to have the data analysis with each entity.

So it's permissible, but it's not required?

Correct.

Okay. And it's the mindset of the department to not have a waiver process?

Because we believe it would be duplicative of the ability to look at the data, as part of the enforcement consideration technical assistance portion of the progressive enforcement.

Okay. And the the phrase for the past year is affordability. The word has been thrown around. It could mean a lot of different things. When we look at the work of OCA and the intent of the board, is it that it's not so much on decreasing cost and making it more affordable, but it's more on we don't want it to grow exponentially.

Well, I think that's a really important distinction. You know, we would love to be able to bring health care costs down tomorrow from where they are today. But in many ways, OCA is a modest goal to simply slow the rate of growth. Right?

So we're not saying entities won't be able to grow their spending. They have this 3%, 3.5% window. But what's been happening over decades is that wages are barely keeping pace with inflation at 3% and health care costs have been growing at 5%. So we're so it can seem very, modest goal to slow the rate of growth and spending.

But absolutely, the whole point of this is to make health care more affordable for consumers, but it's not gonna solve a problem tomorrow.

And director, you know, often times the limelight has been on the hospitals. Premiums have been jumping two to three times in the past year that we're gonna be looking at enforcement. Is there a different approach in looking at premium rates increase versus the hospital cost rate, hospital cost increase? Well, what I think is really important to note that OCA isn't all in approach. Right?

And it's important to be impacting every part of the market. So absolutely the same spending targets apply to health plans, to the medical groups, and to the hospitals, except those hospitals who have the high cost hospitals.

And so we absolutely wanna impact premiums over time, and we have a obligation under the statute to work with the Department of Managed Healthcare, to look at reasonableness of rates, and we should see a slow in that those premium increases that we've seen of late.

Okay.

Because now we're gonna be enforcing. Yeah.

Yes. And I will just note also on the health plans, we're measuring their total spending and then separately we're also looking at their administrative costs and profits. Okay.

When we're evaluating targets and, targets have gone past 3% or 3.5%, what are the cost reducing strategies that could would then be talked about with these entities to come back in compliance?

Yeah. Absolutely. So the California Healthcare Foundation's been doing a lot of work on this recently and they put out a series of pieces they call the 25% problem. So their analysis and a lot of research shows that actually 25% of health care spending today is wasteful or harmful or unnecessary for the cost of care.

So we at OCA and the board, the staff, we're not telling each individual health plan executive, hospital executive how to meet costs, but the research is clear there are many ways for folks to do it.

Today, consumers are getting some duplicative care. Data exchange framework, we hope, will will help address that. Right. Some of that duplicative care is actually harmful to patients if they're getting radiated multiple times. So we think there are multiple efficiencies.

There is administrative waste, and a lot of ways for health care entities to bring cost down. We have had a series of presentations about cost reducing strategies at our Board Meetings. Things like doulas, things like moving, surgeries to ambulatory care settings where they're lower cost. So we're at the same time not telling individual actors what they need to do and also trying to highlight some best practices that have been shown to improve health outcomes and reduce total costs.

And director, I really appreciate our relationship. We have a very open door policy and we continue to communicate. So this next question is a bit duplicative. I already asked in our private conversations. But how do we take into consideration hospitals investments in advanced technology, new medical treatment that they wanna invest in and bargaining should after bargaining with the unit, the increases supersede the 3.5%.

So again, we will have the ability to look each entry that exceeds the target. We will have a back and forth with them to look at the data. If there was some huge investment in technology and that is something we should look at in enforcement consideration, what we will have the ability to do that.

As it relates to, union, negotiated contracts, there's a separate process whereby, an employer can come to the table and say, there's a 3.5% target that was set. We just entered into a new contract with our unionized nurses that's at a higher amount.

The board has the ability to adjust targets upward if that's the case. We just started having the conversation with the board about that process. And putting that into place.

Okay. Looking forward for as we're moving to the enforcement year to get to see what that looks like and these are all living platforms, see how we can adjust moving forward. The last question in your department overview is the diaper initiative. I actually am very interested in that. I had concerns last year, I think around this being open to everybody, about just doing a hospital space that everyone gives birth there.

So I'm wondering where we are in the program, and any changes we're anticipating in its implementation.

Sure. So the diaper initiative that was adopted does take that universal approach. We are targeting hospitals in the higher needs area. So the first year, we anticipate being able to reach 25% of births and so we're looking at the healthy places index and areas with more vulnerable patients. And we are in the final stages of contract negotiation.

No announcement yet on that.

And it's the diapers will be given to them at the hospital?

Yes.

Okay. They'll walk out with them. And they have the ability to say no.

We Absolutely.

See any leftover diapers at the end of each year?

We will give out as many diapers as are available and we've had some preliminary, conversations with the hospitals. But certainly a family can decline the offer.

And the partner or the contract that we the vendor we contract with, they'll have experience and background and being able to distribute these kind of diapers at a hospital setting?

Yes. We did an RFA and received 14 responses and are in final conversations with one of the potential vendors.

Okay. Thank you, director. Thank you. I'm gonna move into issue number two.

Thank you. Good morning.

Yeah. Red is good.

Good morning. A quick quick item, technical adjustments, BCP. We're requesting to increase expenditure authority by 700,000 in FY 2627 and ongoing for four special funds. One of these is a federal source and then three of them are special funds driven by licensing fees. Basically, revenues have exceeded our projections.

We're asking for a bit more authority so that we can distribute those funds through grant making.

Okay. Rebecca, Jason? No? I'm wondering, is this result request only for this year or are we gonna do this request ongoing? Seems like there's a history of not providing enough expenditure.

This request is for this year and ongoing. Okay. It's true. So, beyond. If revenues changes, we'll have we may have to come.

Okay. Yeah. Great. We're gonna hold that item open. Move on to issue number three.

HCAI requests $8,800,000 general fund and 2.36 Health plan improvement trust fund, ongoing in 16 positions to facilitate the transfer of the data exchange framework and the office of the patient advocate from the center for data insight and innovation to HCAI. So the transfer of OPA and DXF, to HCAI has already been made administratively, and now formal budget action, is needed. We think DXF and OPA programs are a good fit with HCAI where they're embedded with similar functions, specifically with our data programs.

So we've, welcomed them, really excited about the work. As you know, Senator Menjivar, DXF was established in 2021, for that real time exchange of health and social services information. The data exchange framework includes a common data sharing agreement and policies and procedures that set the rules of the road. So we're we've been providing technical assistance. You're familiar with all the components of 660.

And so we are actually having our first, data exchange framework advisory committee one week from today, required, by your bill and moving forward on all the components for the legislative report. And, happy to go into more detail about PGA.

All providers were supposed to execute contracts earlier this year, January 31. Did everyone meet that?

So we have more than 5,000 health care, entities including health plans, providers, hospitals, and skilled nursing facilities that have signed the data sharing agreement. Under your bill, we are required by January 1 to post the list of all of those entities, both those who are complying and who are not complying, and to continue to look at possible governance.

So wait till next year to get the list of those who haven't?

It is not as simple, as it sounds to produce the list of those who haven't complied because we have to for example, there is no list in in the state of California about who all the physician organizations and medical groups are. Actually, our data team and our OCA teams have been trying to build a medical a physician organization index so that we have that.

But we have to do the comparison of all the entities, get that licensed information, For example, on skilled nursing facilities and the like. Is there anything you wanna add?

The only thing I'd add also is that Senate bill 660 also allows for those entities to share extenuating circumstances for reasons why

Technology doesn't exist for them.

So that's a process that's on.

Okay. Alright. We're gonna hold the item open. Move on to issue number four.

Alright. Issue number four. The long term care payment staffing. Each guy requests $597,000 from the California Health Data and Planning Fund and authority for three positions, fiscal year '26, '27, and ongoing to implement portions of the new federal rules related to the centers for Medicare and Medicaid services, new minimum staffing standards for long term care facilities and Medicaid institutional payment transparency.

Reporting final rule. This final rule requires state Medicaid agencies to calculate, report, and publish the percentage of Medicaid payments for services and skilled nursing facilities that are spent on compensation for various staffing categories. So that includes direct care workers and support staff across both fee for service and managed care delivery systems, and do so no later than 06/21/2028 or risk losing federal funding. The HCAI facility financial reports serve as the MediCal cost report.

Therefore, changes to Medicaid rules affect the data collection programs that HCAI administers and result in new workload one time and ongoing to meet the requirements of the federal rule and revise the data reporting for over a thousand skilled nursing facilities and this request would support the additional workload for that.

Jason, if I gotta turn to you on issue number three, was there anything you wanted to add to the

previous issue? No. No issues here or on this issue. Okay.

Great. Thank you. We're gonna hold the item open. Move on to issue number five.

Issue number five, assembly bill 1418, HCAI requests a $178,000 to fund one position in 2026, '27 annually thereafter from the California Health Data and Planning Fund to implement new reporting requirements related to healthcare workers health coverage waiting periods. Pursuant to AB 1418 that was signed in November. Commencing 01/01/2027, the bill requires HCAI to annually collect and publish, detailed data on employer sponsored healthcare coverage waiting periods from health facilities, including clinics and hospitals and long term care facilities.

Whether those waiting periods exist for the facilities employees and if so the length of the waiting period and the employee classification. The bill does allow HCAI to integrate this reporting into existing HCAI reporting programs but HCAI does not have the the dedicated staffing resources to make these changes to our porting systems for data collection, data validation, and program administration to collect data from over 10,000 healthcare facilities.

Okay. Okay. Hold the item open. Move on to issue number six.

Thank you very much. I'll provide an overview of our planning activities for the Behavioral Health Services Act Behavioral Health Workforce Initiative. 3% of BHSA revenues are directed to the Behavioral Health Workforce Initiative. And SB 326 has directed HCAI to work closely with stakeholders and community to develop a five year workforce education and training plan or WET plan, which is the vehicle for articulating our BHSA funding priorities.

So we began consultation in the summer of last year, summer twenty five, for the development of this plan.

We conducted 21 statewide convenings with almost 300 stakeholders. We used that feedback to develop our strategic framework, and in the last few months have met with an additional 60 plus partners from state departments, the education sector, and community partners to brainstorm strategies that will serve the objectives in the framework. And I'm happy to share that we have really strong support for this work thus far, and strong support for our proposed strategies to transform the way that behavioral health workforce is trained and supported.

So I'll share some of the key themes and the directions that we're proposing to take. Number one, key theme that we hear again and again, the current behavioral health workforce does not have the skills needed to serve the clients of today.

Particularly those with significant behavioral health conditions who are in the county or county contracted behavioral health system. So we're proposing work to define the core competencies needed to serve those clientele in the county contracted and county system. And then to use those competencies to conduct assessments, develop new materials, and essentially modernize, on the job training for the existing workforce in the county behavioral health system.

Number two, we also know that there are not enough health workers of the right type to meet demand in the county behavioral health system. We need investments to expand educational capacity for behavioral health training, but also to require programs that receive our funding to align training to the needs of the county behavioral health system and to serving individuals with significant behavioral health conditions.

And then as I described earlier, we intend to sort of bundle that institutional support for education capacity expansion with individual support for the folks moving towards those careers and through those training programs. So that would be scholarship support, support for stipends and time in their clinical training, and then support for clinical placement. Our modeling shows significant gaps in licensed as well as non licensed behavioral health professionals, such as, peer support specialists SUD counselors.

And we hear that those non licensed professionals also need additional supports and coaching. There's higher degrees of variability and readiness when they enter the workforce.

So we are just like with our licensed folks proposing expansion of training, but we are proposing to couple that with, coaching and and transition to practice support for non licensed professionals. Statute directs us to provide technical assistance to county contracted providers on BH workforce. And after consultation with our stakeholders, we're proposing to expand that concept to county and county contracted so that they may optimize the use of the behavioral health workforce to serve folks with significant behavioral health conditions.

So we've, heard good feedback on what the domains of that technical assistance would look like, but again, strong support for that concept. The idea here is that we want, the county behavioral health system to be able to maximize, optimize the workforce, attract, recruit, retain, and support the folks to serve individuals with significant behavioral health conditions.

And then the final objective is one we spoke about earlier today, pipeline and pathway. We know that if we need to grow the workforce, we have to start at the beginning. We have to show folks that they can see themselves in these careers. It's part of our effort to address equity and to diversify the workforce.

And so as I described, we are kind of going through an exercise to develop the design parameters for what the most impact full and effective pipeline and pathway programs could be.

And also under this objective, we propose to work with our education institutions to address some of the holes in career lattices so that folks who may enter in a non license can see their future, can stay in the behavioral health workforce, can continue serving, the folks who need it in California.

Rebecca, are you gonna be talking about the offset? Okay. I'll turn to you now.

Yeah. So, regarding the question of the 100,000,000 general fund offset. So the goal of this proposal is to preserve and protect existing behavioral health workforce programs currently funded by the general fund, especially given the significant out year deficit the state is facing. We do still consider this proposal in alignment with the aim of proposition one. With regards to the behavioral health workforce initiative, this proposal does not impact funding for the non federal share of BH Connect, And that work will still continue.

We're still evaluating what programs may be eligible to be funded under the Behavioral Health Services Act. And the specific proposal will be updated at the May revision to describe which programs would be funded under that. Okay.

Yeah. So just again speaking on the offset specifically, we think it raises kind of three key issues to consider. The first is that it's not quite clear to us that these savings are actually incorporated into the governor's budget. And that's because we worked with the department to track all of the general fund changes and we're able to tie everything out without assuming a $100,000,000 in savings.

So it's a little unclear to us whether this is, sort of a signal into what what we're looking at in May or if it's actually incorporated in the governor's budget.

The second issue really gets at question number three in your agenda that the staff raised, which is what are the eligible programs that would be supported by the funds. And, I have to say here we're not quite clear ourselves. The H Credit General Fund spending in '26, '27 is about a $175,000,000. So this $100,000,000 would be more than half of that amount. About 80 or so of that is for the BH Connect workforce initiative.

But the administration has indicated that a lot of that funding already has sort of an offset in the medical budget.

The rest of that is really for things like the Song Brown program and the Office of Healthcare Affordability. These are things that don't have an obvious behavioral health connection. And because of that, it's not clear to us that the legislature would want to really get a better sense of what these programs are before it incorporates any sort of assumed savings from a fund transfer. And then the third and final point is that it's reasonable to be thinking about budget solutions.

But really, the core, issue facing the legislature is the ongoing structural deficit in the out years.

This appears to be a one time solution. So the focus, we really recommend focusing more on this sort of ongoing structural changes rather than sort of one time solutions.

Jason, can you clarify? You said 170. I can't find that. 170 of?

Yeah. If you turn to page three of your agenda, that general fund amount in 26-27 is about a 175 million.

Okay. But for, for the purposes of the of the 3% that goes to the behavioral workforce?

It's a, that's a different amount. I'm saying that they're proposing to offset $100 million in general fund spending. That's more than half of their general fund amount in that. So that's a, that's a sizable amount, and we're not clear what, if there's really that much behavioral health workforce in that sort of appropriation to offset.

Thank you. Very similar questions to what LAO has brought up. One of, a couple of things. The subcommittee is not the first time that we've heard proposals of supplanting funding of general funds when we voters have voted for something. I think it's very disingenuous for Californians if we vote for something that's to add value to our investments.

And I've always been a huge fan of the behavioral workforce investments that we've made. And when this came about, I felt excited to add to this. I do recognize that we need a balance the budget. But it just seems that we're always balancing the budget with outward facing services. And then I continue to see BCPs on growing our internal government exponentially.

I don't, I am wondering if when looking to balance a budget, then we inwards we should look at ourselves first versus cutting outward services that we voted for with Prop 1. I don't, I don't know exactly the connection in terms of what programs will be funded exactly. So I would like more information. It is also frustrating that it's April. We don't have that information and we have to wait till May.

I've shared and just systematically how that crunch time is really not conducive for a proper conversation to have back and forth. I wish I could have had more details on this earlier rather than later. I think May just is not, it's not good for for for for this process.

So that's my thoughts on on the the offset part. If 100 million is being requested to offset, it leaves about $10.1 million available for this purpose. This is supposed to be implemented in July 2026. What are we going to be doing with the $10.1 million?

Thank you, Madam Chair. So as you note, so as Victoria from Department of Finance noted, most of...

Is your name Victoria? I've been calling you Rebecca. Correct me. Oh my God. She's staring at me. Sorry, Victoria.

As Victoria noted, so yes. With the portion of the BHSA funds going to BH-CONNECT, which is very important to draw down that 1.9 billion, it would leave leave us with a pretty minimal amount. So, you know, as Deputy Director Abbott noted, we've been doing a lot of stakeholder engagement and we'll use as many dollars as we have as meaningfully as possible.

But what's the actual plan? What would...

Well, we've been forced to go through a web planning process to hear from from constituents about what what their needs are at the same time this budget proposal. So we've kind of been on on parallel tracks.

And the plan from the five year web, the web, five year web plan is supposed to come out in spring 2026?

Correct. We have we have a draft plan that we've been socializing. We we've we've been presenting and we're presenting next month to the commission as required.

The plan should be approved in June by the California Behavioral Health Planning Council. We have been socializing a plan against an estimate of a 100 million.

If indeed the budget solution moves forward and we remain with only 10 million, we will reconsult with our stakeholders on prioritization. There are, as I just described to you, five major objectives that we are trying to accomplish. And so I think it will warrant additional conversation on what to do with 10 million.

If I had to hazard a guess now, we get a lot of push on the idea that there are immediate training needs for the workforce to, as I described, to modernize them to catch them up to the needs of today's clientele. With 10 million, I think that might be a direction we would pursue.

Got it. And then going back to the actual program details. Some things I heard that are completely different to what exists now. The stipends for paid internships and then the, or something else that you... Oh, the placements part, those are new.

But you also mentioned scholarships. Those already exist in the current programs right now. What is gonna be the difference in these type of scholarships versus the workforce investments we have now?

So we actually don't have significant funding for scholarships now. We leverage CYBHI funding to to support some of our behavioral health scholarships, loan repayments, some of those kind of traditional programs that Director Landsberg described are part of our toolbox.

As that funding winds down, we have the BH-CONNECT program, which you're aware of, up to 1.9 billion. That does contain a significant scholarship component. It also contains, for example, a significant recruitment and retention program.

Our approach with BHSA is to get everything we can out of the BH-CONNECT funding over the next several years while that is available. Use the BHSA funding, which is flexible, to fill gaps on the things that we cannot fund with BH-CONNECT.

Sorry, Deputy Director. I'm gonna just... Just because I'm looking at it. There's a lot. There's the Allied Healthcare Scholarship Program, that Advanced Practice Healthcare Scholarship Program, Associate Degree Nursing Scholarship Program, the Bachelor of Science Nursing Scholarship Program. So there's a lot of scholarship programs that currently exist.

And they have minimal funding and two of those will be winding down that include behavioral health providers. So you just, you just mentioned for example, two nursing programs. We will not be using BHSA funds to fund nursing. Exactly.

So it's our behavioral health scholarship programs that prior to BH-CONNECT were limited. As I described, we do have significant funding under BH-CONNECT.

But I'm wondering nursing training for behavioral, really important. Are we gonna be tapping into...

In BH-CONNECT, nurses who work at who serve in a Medi-Cal setting and serve behavioral health clients are eligible for scholarship and loan repayment.

What about the Psychiatry Fellowship Scholarship Program? Are we gonna be adding more money into that or is that a fully funded program that can be, that does not need any more assistance?

Psychiatry Fellowship Program? So through BH-CONNECT, we're funding both residency program expansion and fellowship program expansion. However, we're limited in the number of cycles that we can offer. So we have one open now for fellowship training. We'll have one open next year.

Our proposal with BHSA is to continue to fund psychiatry education and psychiatric mental health nurse practitioner training. And so that that falls under one of the objectives that I described of expanding educational capacity in select areas.

And then a lot of the focus sounds on the enhancement capacity for counties. In terms of the employees that work in the, on the county level, if I've understood correctly.

County and county contract. Correct.

Perfect. A lot of that sometimes what I hear anecdotally is we don't have enough employees to work in spaces. The cases are so much. While we can prepare and get people ready for these jobs, are those are those positions gonna be available? Will the counties have even the funding to hire them on? Is that a barrier to to closing the gap here? Is that being looked at?

It's a great question, and I would answer in two parts. One, my understanding, so we work closely with county and the County Behavioral Health Directors Association to shape these proposals. What I would take away is that they are, if the people are available, they are ready to hire them. We may ultimately, down the line, reach a point where that tension comes into play.

I think right now there are vacancies that are ready to be filled with the right folks. The second part of my answer is that is that TA package that I described. The goal of that package is to provide support to county and county contracted entities on how to get the most out of behavioral health workforce.

So if they are resource constrained, for example, how can they maximize the use of non licensed professionals so that within a constrained budget they're still getting the most they can out of both clinical and non clinical providers. So that's how I would say we're trying to tackle some of the demand side constraints.

Okay. Victoria, my request would be, if there's any details you can share with our office, with the with the Committee Members here that give us a little bit more time to review, at least myself, give more time to review instead of waiting to the May Revise, I would greatly appreciate more details on the offset and transferring programming.

Yeah. I'll take that request back and see what can be provided.

We're gonna hold the item open and we're gonna move on to issue number seven.

Great. Thank you, Madam Chair. Scott Christman, HCAI. I'll talk about the Rural Health Transformation Program, addressing the questions in order. So the California Rural Health Transformation Program is the state's implementation of a $50 billion national program authorized by HR 1, administered by the Center for Medicare and Medicaid Services, CMS.

These federal funds are distributed to all 50 states based on a semi competitive application process over a five year period intended to strengthen access, quality, and sustainability of health care delivery for rural communities.

So California was awarded 233.6 million for the first budget period, which is January through October of this year, 2026. It was the third largest award nationally. The California program is built around three integrative initiatives approved by CMS. Those are the transformative care model. I'll talk a little bit more about. Rural workforce development.

Obviously a foundational piece. And then technology and tools for organizations. So the transformative care model includes investments in regional hub and spoke care networks. Expands telehealth services, e-consults, and evidence based care models. Really focusing on primary care and maternity care.

Strengthens local capacity to reduce avoidable out of out of area travel for care. Essentially, we're trying to address the rural bypass issue. Rural workforce development supports workforce mapping, pipeline programs, clinical training capacity, and targeted retention and relocation incentives through grants tied to service commitments in rural communities.

And then the third initiative is health technology and digital tools. These investments are are in foundational infrastructure including electronic health records, data exchange, interoperability, telehealth expansion, cyber security, other infrastructure needs.

The program includes a rural health technical assistance center to support implementation directly to participating grantees across all of the three components of the program. So together these investments in the plan focus on strengthening regional systems of care, stabilizing access in rural communities over time, and reducing the need for rural residents to travel long distances for their healthcare.

The program is designed to complement not duplicate existing state and federal programs by targeting gaps specific to rural health delivery systems, workforce shortages, and infrastructure limitations that are not otherwise addressed through existing funding streams. I'll just quickly touch on some of the key milestones.

This opportunity was released by by CMS in September of last year. In November, we submitted California's application to CMS. At the end of December, CMS notified California of the award amount, 233 million for the first year. At the January, we we provided essentially a revised budget based on that amount to CMS.

End of February, CMS issued a revised notice award, which unrestricted the first 183.6 million, and CMS then asked for revisions to the remaining 50 million of the budget we proposed relating to transformative payments for rural hospitals.

So to the question, I'm gonna talk a little bit about that change that we were asked to make. So CMS requested additional details about the proposal we've made in a revision to the original approach on the 50 million, which were designated for essentially supporting rural hospitals.

What CMS asked is to ensure that these funds are tied specifically to transformative activities as part of rural health transformation rather than serving as general financial relief or backfill to solve for any cash flow issues in rural hospitals.

So in response to the request, we made the following changes. We reallocated $15 million to other approved program activities as listed. So part of the transformative care model, workforce development, and technology tools. The then we redesigned kind of the transformative payments, which we we term those for $35 million.

Again, this would target a limited number of of what we call strategically located rural hospitals. Let me speak to that a little bit. The $35 million number is key because CMS viewed these as provider payments, and there's a 15% cap to the award on provider payments. So that's $35 million. So they're classified as provider payments.

And what we do with that is essentially put more definition around what the payments would be for if not for essentially cash backfill. So what we did is establish clear eligibility and readiness performance criteria to ensure that these payments are milestone based, time limited, and directly tied to participation in feasible components of the transformative care model that we touched on earlier. I think... Yeah.

So CMS approved these revisions last week and released the the remaining funds on March 31. So essentially what we're looking at in terms of strategically located hospitals, it would be based on assessment where our capacity issues, for example, if there's labor and delivery deserts or something like that.

That would be an appropriate investment to purchase infrastructure and equipment to be able to stand up those services in a in a in a rural community that needs it. So again, that was kind of the adjustment that was made with the original $50 million proposal that we had had.

You know, it had more flexibility than was interested in CMS, so we made the change. So at this point all 233.6 million in federal funds are now unrestricted from CMS and available for distribution through the three program components as approved by CMS.

None of the programs were eliminated due to the CMS review process, but we made the adjustments to those transformative payments for rural hospitals as required. In terms of authority, we also appreciate the fact that we recently got approval from the Joint Legislative Budget Committee to for current year spending authority to begin using these funds to move forward with the Rural Health Transformation Program.

I would also note just going forward CMS maintains several oversight and approval responsibilities under the cooperative agreement that shape the implementation timeline. This includes final approval of all grantee selections, administrative review of grant agreements and contracts, prior review of materials that may be publicly posted.

As a federal requirement, we have to obligate these funds no later than October 30, 2026. So it's gonna be kind of a breakneck pace. We are actively coordinating program design now to build out those programs. We're doing internal review and CMS engagement to meet the requirements on accelerated timeline, ensuring all federal funds can be effectively committed by October to support healthcare delivery in California's rural communities.

I would note that our performance this year with these funds will inform the scoring for our award amount in year two and and so on over the next five years. So we're fully committed to moving these out in the most meaningful way and getting them to to providers and rural communities.

The second question in terms of timeline for application to various grant programs. So the grant opportunities under the the California Rural Health Transformation Program will be offered on a rolling and phased basis with multiple request for applications anticipated over the life of the program rather than a single one time opportunity. So again, we're working on design and grant guides right now.

We expect late spring, early summer this year. Our phase will will be released for what we're calling accelerated accelerator partnerships for the transformative care model, workforce development, critically, and technology and tools initiatives, again, across all three areas.

We would expect application reviews and award announcements, you know, in summer, early fall and subject to CMS approval. But we're looking to commit those funds by October as required by CMS. So again, grantees must be approved by CMS before receiving the funds.

CMS may approve or request modifications or deny based on their review. All funds must be obligated by October 30 consistent with the requirements. To be eligible, applicants must serve rural communities in California based on a HRSA definition.

It's pretty straightforward. This may include rural hospitals, critical access hospitals, clinics including FQHCs, rural health clinics, tribal clinics, tribal governments and tribal organizations, local government, non profit organizations, educational institutions, to be sure, and training partners.

And urban based providers to some extent that deliver services in rural communities. Obviously in a hub and spoke when we're doing telehealth delivery, there's gonna be service providers from outside the area. So funding again is intended for system transformation.

Activities such as care model redesign, workforce development, regional coordination, and technology modernizations. Again, funds may not be used for routine operating subsidies, direct patient care reimbursement, or to supplant any existing funding streams. All grant awards are subject to CMS review and approval.

So what we'll do is implement performance based grant agreements with regular reporting, federal compliance monitoring. Program success will be measured through improvements in rural access to care, workforce capacity, and provider stability over time. And again, these are measures that we included in part of our application. Happy to take questions.

Really robust background. Appreciate it. Very interested in this. It was $50 billion total?

For the nation.

How did California fare in our allocation?

We did well. And I used the term semi competitive. So of the 50 billion, the way they set it up was essentially every state was eligible to apply for a billion. So and then they split that with a floor of half over five years, half a million. And then the other half is competitive. So in the first year what we were able to apply, every state was eligible to apply for 200 million, which we did. And we received 233.6. So we did well.

The application scored well. We're glad to see that, obviously. You know, and the way that it's set up it, you know, it's not based on population. So so we have 2.8 million people in rural census tracks in California and so, you know, we're gonna be very...

Some states have 2.8 million just living in the whole state.

That is correct. That is correct.

And they might get the same amount of money?

Yeah. Yeah. So we're happy to get third and, you know, that kind of how it was broken down.

We were given 233.6 for this year. Have we been told how many, how much money we're gonna be getting next year?

We don't. And I think it's interesting is that that that's, so what they've set up is what's called a non competitive continuation. So we have an award, but they will do some scoring based on how well we perform with these funds. So...

Up to the max of 1 billion.

Yeah. It is critical. So so we got we got 33 over what we applied for. So it is possible that we could we could pull down additional funds in the next year if we do really well this year.

Or if other states have leftovers because they cannot...

Depending on what other states do. Yes.

We'll be able to get maybe potentially a little bit more.

I hope so.

Okay. Going into the actual, October 1 is a really tight timeline.

It's October 30. Yeah. They shifted it one month off.

Those extra 29 days are very important because I've seen a struggle with program funding allocation. You mentioned that we you just got approved from the joint committee. So that means you can, as soon as the RFAs are out, start.

You don't have to wait till this budget is passed. That money can start going out. And you anticipate that late spring, early summer for the first dollars to go out.

Yeah. We're doing the design right now.

However, you have to submit the grant awardees to CMS first before you you, any dollar goes out?

Correct.

Are they responding quickly?

They they have been. So we we have weekly meetings with our program officer. I think they've been very productive meetings, and we have turned, you know, interesting the public facing materials or something that are reviewed. So when we do a webinar or something that was gone through that, that's gone very quickly. You know, I'm pleased to note.

And so, yeah. We're basically ramping up that that relationship to ensure when these grants start to flow that they're able to turn around. They've hired an entire new staff for this Rural Health Transformation Office. So we have a program officer and a kind of a backup program officer that deals with a couple of states.

I've got five or six states or something like that. So we obviously are watching that and are sensitive to the timing because we wanna perform at a high level and pull down more dollars in the next year. So.

And it's not like we can use these dollars just to give to financially distressed hospitals in rural areas.

They were very specific about that. And again, in a in a professional way but we've had serious conversations about how to use it. And again, the the original proposal we tried to create some flexibility in the transformative payments for hospitals to, you know, to cover sort of the idea of stability so that they could participate in the program.

And we just had to revise it to be even more narrow and more specific to transformational efforts in terms of, yeah, they're gonna change the care model and, you know, we're gonna change the way they do, you know, maternity care. There's gonna be, you know, remote access for specialty care or things like that. So yeah, it was it was quite a kind of a process.

Did HR 1 or CMS implement an extension process? Should we need more time to disperse? Okay.

They do not.

That's a no. And then on the provider payments, you lost me a little bit. Is that provider payments to help them stay in those rural areas? To help draw providers to the area?

It's a good question. So what the term provider payment is something that CMS reference. So we sort of came up with this idea. Again, it was a it was a concept, the proposal around transformative payments to help a hospital that needed a bit to get to get steady so they could participate in these other Rural Health Transformation Grant programs.

And the interpretation was that's a provider payment, and provider payments are capped at 15%. So they allow for provider payments, but they can only be used in the course of executing sort of activities or investments that are specifically related to the scope of the Rural Health Transformation Program.

And that's so the $35 million is gonna be used? Yes. We can give it to providers.

Yes. We can give it to hospitals.

But it has to be tied to an activity?

Correct. Correct. And again, the idea would be let's say, you know, if if you wanted to, a rural hospital wanted to do something to move the needle on maternity care, which is one of our focuses, our targets. And there needed to be a purchase. They needed to build out space. They needed to buy equipment to do that service for maternity care. That would be an appropriate provider payment. So it can be used...

Oh, so it's not directly just like we do MCO tax provider payments?

Correct. It's not that. Exactly. It's just us providing essentially through the grant a payments to the provider. That's why they cap it at 15%. So we can't we can't give 100% of dollars to providers in that way. But what it gives it does allow for again the idea you could, you could buy some infrastructure, you could buy some equipment, but it's in the course of of of meeting the the goals of the program.

And one of the questions I had, but you covered it, because I was I was struggling to find labor and delivery. I thought I missed it. I was like, why aren't we talking about labor and delivery? So there is ability to use some of these funds to create labor and delivery locations, but also bring in providers. Because sometimes they have the space, they just don't have the providers for it.

Correct. I think they'll they'll be dollars for workforce in in that space. And again, it could be some of the provider payment to get infrastructure equipment. There might be technology.

Where in the grant, where does that fall under that could do the labor and delivery infrastructure?

Well, I think the way that we set up the the program is we highlighted primary care and maternity care as specific, you know, outcome goals. Right? That we're gonna, we're gonna measure towards. What the way we designed the three is actually, I think in all three areas you could you could you could apply, for example. Yeah.

And again, we're still doing some of the detailed design. But it could be infrastructure, it could be workforce, it could be, it could be technology that needs to be part of that. You know, there's examples out there. I think we're looking for, you know, innovative approaches.

We've learned of some where, you know, there's an alternative birthing center and you have on call staff and they in a rural area. So things like that. So I think there's a set of opportunities. It wouldn't be just one. But overall, we did highlight maternity care as where we wanna move the needle through this investment.

This next issue came up just this year. It's never been brought up. And dialysis centers not being available in rural areas. I don't know if in the short time we were able to connect with the stakeholders if that came up. It was the first time it's been brought up to me this year. Tribes talked to me about it.

It's interesting. Well, two things. It, I don't recall it coming up specifically. We did a couple of, we did a couple of rapid fire surveys and we did some webinars and some listening sessions before we went into this. You know, it wouldn't be surprising, you know, workforce was high on the list and some others. Dialysis didn't necessarily come up. We can go back and look.

We, you know, we are pleased about sort of the we've done our first tribal consultation to prepare for this program. There's a we have a 5% sort of set aside in these areas that a minimum that tribal organizations would be eligible for. But we can go back. Let me go back and we'll take a look at the survey information that we got from stakeholders and see if dialysis comes comes comes to the top.

On career pathways grants, 7 million will go to rural region high schools. Counseling, mentorships, is this behavioral health for them? I didn't know what it...

Yeah. So we are looking at funding, again, pipeline and early pathway programs with Rural Health Transformation funding. There's a concept around partnering with local high schools. What's I think exciting about the Rural Health Transformation approach is it's gonna be very sort of like locally rooted and grounded.

Another, we're also exploring sort of working with local workforce development boards on sort of like pulling, growing their own approaches. Right? How do you pull from your local population to get folks on the career ladder?

Or help their junior college have those four year nursing degrees. I think that's also a big priority in these areas. One of the things that stood out, and this is not just for this, in a lot of things. Sometimes often we pay too much money for consulting contractors.

$23.6 million for a contractor. I feel like you're the contractor here. You know, you're, you know, we are putting this together. What additional value would the, would creating a rural technical assistance center contractor bring that the department is not bringing?

Sure. And that's, I mean, that's very specific in terms of the rural technical assistance center because I think some of those skills are skills that we don't have and how so. So in in the transformative care model for example, doing hub and spokes.

You know, we believe there's significant work to be done around, you know, it's essentially organizational change management but it's often in the clinical workflow. Like if if you're not accustomed to doing to a telehealth, you know, service delivery. If you're not, if you're not accustomed to doing e-consults where you're bringing a specialist over.

You know, essentially a digital, with a digital solution. You know, that kind of work is not the kind of work that we do, but we're very much committed to providing hands on assistance to the rural providers that are interested in moving to those kinds of care models. So it is those are gonna be really specialty services that we just don't offer.

Now and, you know, to Deputy Director Abbott's point, I mean, the things that we can do, we will do. We'll be designing the workforce development grant making, which we're excited. But clinical care capacity is is not something that we have to offer so we're gonna have to. The thing that I think is important is that those are direct services to the grantees and the participants in the program, not for us.

Okay. No. No. No. Yeah. Of course. And then all of this that you described, I mean we submitted already to the CMS like this is these are set in stone programs.

The, yes. The concepts are. I mean the details are being designed now. But yes, generally how we're gonna make those investments and can and, you know, what the three programs are.

Sell me on this workforce mapping to expansion.

Sure. I'll let Deputy Director Abbott speak to that.

Happily. This is one of my great areas of passion. So...

Oh, okay. I was like...

Director Landsberg spoke earlier. When you asked the question about how are we looking at geographic inequities and access to care, she spoke about historically, we've been the office that establishes health profession shortage areas.

We are now sort of maturing our approach by developing supply and demand models for different areas of workforce. And we think that's a more accurate way to assess severity of shortage because we're looking at actual population based demand for services and then comparing it to the supply of existing workforce.

We did that work last year for behavioral health at nursing. We are, through the Rural Health Transformation work, which is focused on primary care and maternal health, going to develop our supply and demand models for primary care and maternal health.

And why that's important is because we want to, for example, look at demand for maternal health services and then target our funding for scholarships for midwives. Or our education capacity expansion for midwives.

Or our offering of fellowships for family care physician or physicians who provide OB services. We want to target that geographically to where we see the the biggest gaps in demand. So it is an analytical tool that helps us target our dollars.

So even though anecdotally we know that there are gaps, this is just putting in data form?

This is helping us prioritize. Because even, you know, let me give you example from behavioral health. We know that there are gaps in behavioral healthcare and we developed this model. And now we actually know where the most severe gaps are.

So when we have limited dollars, we channel those dollars to the areas of most severe shortage. Same approach here with maternal health and primary care. We know across rural health that there are gaps and we wanna make sure that our dollars are going toward the areas with the most severe gaps.

So for maternal health, if we're going to fund let's say the development of a new license midwifery program, we'd like to locate that program or incentivize the location of that program in in let's say the rural North if that's what we find has the most severe shortages.

And those are eligible for funding under this, under these dollars?

Yes. Workforce will include education capacity expansion.

Perfect. Okay. And then so anything to do with infrastructure, creating a satellite clinic, all that are eligible for grants that are gonna be distributed from this?

Yeah. If they're, if they're serving the the goal.

Yes. Of course. Of the rural area. Perfect. Okay. Did I turn to you already, Jason? Okay. Great. Perfect. We're gonna hold the item open. Move on to issue number eight. I mean, thank you so much. That's it. Moving on to our next department, Department of Managed Healthcare.

With issue.

You ready? Okay. Alright

I think it's afternoon. Good afternoon. My name is Mary Watanabe. I'm the Director of the Department of Managed Healthcare, and I have Dan Southard, our Chief Deputy Director with me. I'll quickly just provide an overview of our mission and our budget.

I'm happy to provide an overview of each of our offices, but I will say, the agenda did a good job going through those.

Okay, we'll move quickly.

So our mission is to ensure health fund members have access to equitable, high quality, timely, and affordable health care within a stable health care delivery system. We license and regulate a 140 health plans that provide health care coverage to approximately 30,200,000 Californians. We regulate more than 97% of commercial and government health plan enrollment in the state. Our proposed total budget for '26-'27 is a $186,000,00 and 798 authorized positions.

Just a reminder, we are specially funded by annual assessments on health plans and receive no general fund money.

And with that, I'll turn it over to Dan to cover two of our BCPs and then I'll be back.

Thank you and good afternoon, Madam chair. I'll start with SB41. SB41 bills.

Okay, so we're moving on session number nine. Okay.

Sorry.

So starting with SB 41, the Pharmacy Benefit Manager. So SB41 builds upon previously established Pharmacy Benefit Manager Licensure requirements enacted in 2025 through AB116. By expanding legal requirements related to PBM revenue practices and pharmacy network reforms. The bill enacts sweeping reforms for PBMs and requires PBMs to be licensed by the DMEC starting in 01/01/2027.

Yeah. Go ahead.

SB 41 limits how PBMs generate revenue by prohibiting spread pricing, requiring manufacturing rebates to be passed directly to health plans, and allowing only administrative fees to be charged. Additionally, this bill establishes new restrictions on how PBMs operate their contracted pharmacy networks, prohibiting discrimination against non affiliated pharmacies, and requiring PBMs to include any pharmacy willing to adopt standard terms.

SB41 requires the DMHC to issue formal guidance to ensure health plans and PBMs clearly understand and comply with requirements of SB 41, conduct detailed legal research of health plan and PBM contracts, policies and related documents to ensure compliance, address provider complaints against PBMs, and compile and analyze new PBM data.

Update medical survey technologies and or methodologies and tools to assess compliance with the requirements of SB4, and to implement the requirements of SB 41. The DMHC is requesting seven positions and $1,700,000 in '26-'27, increasing to a total of nine positions and $2,200,000 ongoing to implement the requirements from SB41. I can answer any questions or move on to the next.

Next item is prior authorization reporting, SB306. SB306 increases transparency in the prior authorization process by requiring health plans and health insurers to submit prior authorization data to the DMHC and the California Department of Insurance. After reviewing the data and consulting with stakeholders, the DMHC will develop and issue a list of healthcare services that will no longer be subject to prior authorization requirements.

The bill establishes a deadline of 07/01/2027 for issuing the list and 01/01/2028 for the health plans and insurers to implement the list of services that will no longer be subject to prior authorization.

SB 306 requires the DMHC to promulgate and amend applicable regulations to clarify the requirements of SB 306, review health plan contracts, policies and procedures, evidence of coverage, and disclosure force for compliance with SB 306, address consumer complaints related to prior authorization, and publish a list of healthcare services exempt from prior authorization requirements.

And finally, issue a public report on the impact of the prior authorization exemptions. To address this workload, the DMHC is requesting four positions at $1,400,000 in '26-'27 increasing to eight positions and $1,800,000 ongoing to implement requires of SB306. Any questions on that or continue on? I'll turn it back over to our Director, Mary. Thank you.

There we go. Alright. Beginning 01/01/2027, AB 1041 requires a health plan or its delegate to notify a provider within ten business days to verify receipt of their application, to make a determination regarding the credentials of a provider within 90 days after receiving a completed provider credentialing application, activate the provider upon successful approval, and notify the applicant of the activation within ten business days.

And if the plan fails to meet the 90 day deadline, the bill requires applicants credentials to be provisionally approved for a 120 days unless certain circumstances apply. And then beginning 01/01/2028, health plans and their delegates are required to use the Council for Affordable Quality Healthcare or CAQH credentialing form.

To implement this bill, we will issue guidance, review plans, contracts, policies and procedures, evidence of coverage and disclosure forms. We'll also update our medical survey tools to review compliance. We're requesting four positions and $1,200,000 in '26-'27 increasing to five positions and $1,400,000 ongoing to implement these requirements. And that concludes our overview of the BCPs.

Jason, anything to add? We're gonna hold the item open, move on to a joint request on issue number 10.

Okay. And I, DHCS may be joining us but I'll just move on. Okay. So the Governor's January-

Tyler is here.

Hi, Tyler.

Alright. The Governor's January budget included a proposal to increase access to treatment for the symptoms of perimenopause, menopause, and post-menopause through increased enrolling and provider awareness. The proposal specifies that health plans licensed by the DMHC, health insurers licensed by the California Department of Insurance, and medical managed care plans must cover services for evaluation FDA approved treatment for menopause when medically necessary.

In addition, health plans would be required to have a menopause program that includes a policy to provide an annual menopause assessment for enrollees age 40 and older during primary care and OB GYN appointments. A biannual notice to enrollees over age 40 that includes the definition of menopause and the services available to treat the symptoms of menopause.

And also a biannual notification to primary care and OB GYN providers on best practices for care, including current clinical care guidelines for menopause care from a nationally recognized professional associations, or the Menopause Society.

When making a determination about whether menopause care is medically necessary, health plans are required to base their criteria on generally accepted standards of menopause care from non profit professional associations for the relevant specialty.

They're also required to have a process to reimburse primary care providers and specialists for menopause care, including care integrated into OB GYN or primary care visits. Health plans are required to have a policy to contract with primary care OB GYNs with certification and credentialing by a nationally recognized organization such as the Menopause Society.

This should be include a policy to incentivize providers to obtain and maintain their certification. There are also other business and profession code requirements related to continuing education to incentivize providers to complete coursework related to menopause.

And finally, the proposal includes $ 3,000,000 for the California Health and Human Services Agency to conduct an outreach campaign to increase awareness of menopause symptoms, and about the menopause transition, and how to access treatment and evaluation.

To effectively enforce these requirements, we will need to review plan filings, monitor health plan implementation, and verify continued compliance through our medical surveys. We're requesting two positions and $407,000 in '26-'27 and $391,000 ongoing to address these requirements.

So you had a question about the difference in this proposal compared to AB432, including the rationale for why the administration is making these changes? I will just note, I think the most significant difference is AB432 would have limited utilization management for menopause related services. And would have required that one treatment option in each four categories of menopause symptoms be covered without utilization management, when deemed medically necessary by the treating provider.

The Trailer Bill proposal addresses the need for increased enrollee and provider education about the symptoms and latest clinical care guidelines for treating those symptoms, while maintaining the health plan utilization management practices. The proposals specify that health plans must cover FDA approved treatments. And we believe the requirement to use the non profit criteria when making medical necessity decisions will address some of those concerns.

I will just note, I think there are over 70. I read an article yesterday. There's maybe a 100 symptoms of menopause. So one of our concerns was, removing the requirement for the plans to use utilization measure prior authorization for that many symptoms, knowing that half of the population will experience menopause at some point. Has the potential to increase costs of the health care, and also lead to unnecessary treatments because there's an easier pathway.

So those were some of the greatest concerns. And I think I'll stop there and see if Tara Tyler has anything to add? No?

Thank you, Director Watanabe, and good morning, Madam Chair. Tyler Sadwith, State Medicaid Director. Very briefly, just with respect to the impact on MediCal. The proposal exempts MediCal managed care plans from changes to the health and safety and insurance code section of the statute, but it updates the welfare and institutions code to codify the existing comprehensive MediCal coverage for menopause treatments including screening, evaluation, and treatment. In effect, the proposal has the effect of bringing commercial payers up to alignment with current medical benefits coverage.

Okay. Thank you. My only question was a little bit more on the utilization. Like what kind of utilization controls are gonna be allowed within the TBL? 70 codes, it's a lot but what guard roads are gonna also exist?

Yeah. No. So plans can do utilization management today. I think AB432 would have removed that rate requirement for treatment of certain symptoms. Symptoms was not defined.

So I think the concern is that could have been very broad. So plans can, under this proposal, would continue to be able to do utilization management. But they would need to apply the non profit criteria, which would give more visibility, but also would mean they are using the latest clinical guidelines. I think one of the things we hear over and over and if you're this has showed up in your social media feed.

I think the biggest concern is there was a 2002 study that linked, hormone replacement therapy to breast cancer. And so there's been, I think, a lack of information for both enrollees as well as providers on what the latest clinical care guidelines are saying, which have kind of disputed or we've kind of, deviated from that study. And so the critical piece here is making sure that both health plan members and providers are up to date on the latest clinical guidelines.

And then also that the plans are applying those clinical care guidelines. The most current ones when they're making those utilization management decisions.

Okay. And then on the $3,000,000 with public awareness, you should, mention notifications to enrollees and providers. So it's just we're sending out emails. Is that our public?

So under the pieces under the DMHC, the health plans will be required twice a year to send information to their members on what what are the symptoms of menopause? What are your treatment options? Similarly, they will need to send information to the treaty to their provider network about what the latest guidelines are from these menopause societies really to go to on this.

Separately through our California Health and Human Services Agency, there will be a public awareness campaign really to make sure the general public, has kind of the latest guidance on what are all of these symptoms of menopause.

What can you do? Who do you talk to? And again, that's on us. That's not under the DMHC. That'll be under Health and Human Services Agency.

Okay. By any chance, do you have a little bit more details, Department of Finance, on the campaign? The public awareness campaign?

Angel Alonso Coronel, Department of Finance. So with the Public Awareness Campaign is still under development and Health and Human Services Agency will be able to request in a budget augmentation when ready to implement this campaign.

But it's being requested right now?

That is correct.

Yes. Okay. So but no details on the Public Awareness Campaign yet?

Okay. Details coming in May?

Correct.

We provided updates as soon as it's available.

Okay. Definitely tracking that to make sure we get more details on that. And that is it on this issue? Thank you so much. We're gonna hold it open. Sheridan Street Director.

Now speaking with DHCS on issue number 11.

Thank you. Good morning, Madam Chair. Tyler Sadwith, State Medicaid Director, Department of Health Care Services. First, I'd like to provide information about CalAIM enhanced care management and community supports. Enhanced Care Management or ECM in community supports continue to expand and mature statewide with strong uptake among high risk members, the population that these services are designed to reach.

These are members who benefit most from whole person community anchored care. Utilization growing utilization is growing consistently across all counties. We have public reporting available on our website and just to highlight some of the growth statistics for enhanced care management, 205,000 unique members received ECM in the 2025. This represents an increase of 61% over the prior year. Since launching ECM, more than 452,000 unique members have received this service.

For community supports, in the 2025, 187,000 unique members received a community support, which represents a 51% increase over the prior year. Since launching community supports, more than 521,000 unique members have received a community support service. And in total, over 1,300,000 community support services have been provided. Availability has grown significantly since launch. Although these are mostly optional for plans, every single Medi Cal managed care plan in California offers community supports.

Every county in California has at least eight community supports available to all Medi Cal members no matter which plan that they're enrolled in. In 43 counties, representing 94% of Medi Cal members, all members have access to at least 10 community supports no matter which plan they're enrolled in. And in 24 counties representing 75% of of members, they have access to all 14 community supports. In terms of ECM, provider network growth has grown substantially.

When we launched this service at the beginning of CalAIM, there were just 700 unique contracts.

Today, there are there are over 4,000 unique contracts. Turning to okay. Turning to the fiscal picture as requested, the governor's budget projects for ECM, dollars 1,200,000,000.0 total funds in '25, '26, and $1,400,000,000 total funds in budget year. For community supports, except for the newest community support of transitional rent, the budget projects $1,100,000,000 total funds in current year, and $1,100,000,000 total funds in, budget year. I want to note these estimates reflect only the distinct cost of providing community support services.

These estimates do not reflect avoided costs of more costly services that otherwise would have been provided, such as emergency department visits, inpatient hospital admissions, and nursing facility stays. I'll talk more in a bit about our analysis of cost effectiveness of community support services. But in terms of the budget, if ECM and community supports were discontinued, we would project a significant increase in high cost acute care spending due to higher levels of use of these intensive services.

For transitional rent, the final community support, we project $55,000,000 total fund in current year and $225,000,000 in, budget year. In terms of cost effectiveness of community supports, this is a sort of a, you know, a complex area of analysis.

In some cases, a member exiting a hospital might receive a community support like recuperative care in the lieu of being admitted into a nursing facility, so we can capture that type of cost avoidance immediately.

For some other scenarios, and other community supports like asthma remediation services, which reduce the incidence of asthma exacerbations and care management, cost avoidance may be seen over a longer period of time, in terms of community supports, we published a report in April describing a cost effectiveness analysis of 12 of the 14 community supports.

For members who received a community support, we compared the cost of delivering that service to the savings that we achieved from reducing and avoiding inpatient hospital use, emergency department use, and long term care use, and other services, and the six months before and after the intervention of the community support. So we have a fact sheet on our website.

It shows that of the 12 community supports analyzed in this report, nine are already demonstrating cost effectiveness and the three remaining services are on track to be cost effective over a longer study period consistent with guidelines the Federal Government has for how to measure cost effectiveness for these types of interventions.

Just a couple quick highlights. Respite services were associated with a 61% net cost reduction. Personal care and homemaker services are associated with a 58 net cost per 58% net cost reduction. Housing deposits achieved a 32% net cost reduction. Recuperative care associated with a 29% net cost reduction and so forth.

We are finalizing by the end of this month an updated report that analyzes more data over a longer study period including new analytical methodologies. In terms of enhanced care management, a formal evaluation of cost savings has not been completed. However, there are independent evaluations of

the programs that ECM is modeled on and based on. The whole person care and health home programs both demonstrated medical cost savings by reducing avoidable acute care and emergency department use. The all person care pilot showed annual medical savings of about $383 per member and $581 per medically complex members. We are exploring the possibility of a formal evaluation of ECM outcomes and cost effectiveness. We have a formal independent evaluation underway.

We are completing a full independent evaluation of community supports as required by our nineteen fifteen b waiver special terms and conditions. UCLA and the Rand Corporation are completing this independent evaluation examining the program's cost effectiveness and health outcomes with results due in 2028. Turning to the question regarding provider capacity and transitioning community supports into the state plan. Provider capacity for community supports continues to improve state wide.

Managed care plans report steady increases in executed provider contracts and expanding network growth across these services as reflected in in the submissions of their model of care that they that they send to us.

We show on our website, the number of provider contracts for community supports has increased from just 731 when we launched this program to over 3,000, as of about one year ago. In terms of the transition of community supports into a state plan benefit, we are not pursuing that transition at this time. Instead, we are working to ensure continuity of community supports under the optimal federal authority for sustainability, which is managed care authority as an in lieu of service.

In lieu of services is a permanent option for state Medicaid programs enshrined in federal Medicaid managed care regulations and it's memorialized in our approved managed care plan contracts. 12 of our community supports are covered under in lieu of services authority.

As we described in our Section eleven fifteen CalAIM waiver renewal, which we posted for public comment and had public hearings this in February and March, we're planning to transition the federal authority for recuperative care and short term post hospitalization housing from the eleven fifteen waiver into in lieu of services authority. This will allow us to incorporate those services and really ensure sustainability of these services into a consolidated service model.

Given there is a very significant risk, CMS would not approve these upon the eleven fifteen waiver renewal, and thus these services would no longer be covered effective 01/01/2027. Turning to the question regarding how the department ensures managed care plans leverage local vendors and community based organizations. We work closely and actively with all plans to promote the the use of community embedded and community rooted providers.

We emphasize and have consistently emphasized contracting with local providers and CBOs that have deep ties to the communities they serve. Understanding these CBOs understand local needs, cultures, and gaps. So in terms of oversight, we monitor the types of providers that our plans contract with to ensure they're engaging non profits and CBOs that reflect the cultural, geographic, and linguistic needs of members. And we have regular monitoring meetings and additional oversight mechanisms, to strengthen partnerships with these providers.

To support these providers, the department has awarded over $1,600,000,000 in grant funding and in technical assistance resources to more than 2,200 CBOs through the path initiative for providing access and transforming health.

As part of the independent evaluation of CalAIM that UCLA and Rand are conducting that I mentioned. They developed an interim evaluation report, that we submitted to CMS in December. And this focused on the impact that PATH has had on CBOs in participating in CalAIM. This report found that PATH is achieving its objectives of integrating CBO's that have historically not participated in medical, bringing them into medical for the first time for the purpose of delivering ECM and community supports.

Among providers that receive path funding or technical assistance, the vast majority were CBOs, ninety one percent and ninety three percent respectively.

This independent evaluation found path helped cover these providers initial operational costs and supported a gradual ramp up of their participation in CalAIM as intended. We are also working closely with the California Healthcare Foundation to support CBO's to participate in CalAIM, including through funding provided by the foundation in the development of technical assistance resources and toolkits in close collaboration with the department to really support managed care plans in CBOs to enter into as an option and arrangement through community care hubs.

Community care hubs are a way to enable CBOs to to focus on their core competency, service delivery, and reduce the administrative burden of data collection and reporting, claim submission, compliance requirement, contract negotiations, and so forth. So we have seen that these hubs really streamline these back office business functions for small grassroots CBOs and enable them to take advantage of CalAIM.

We've heard from plans that these, a DHCS endorsed resource explaining how these hubs can be operationalized consistent with federal and state requirements, was really pivotal for them to, expand these types of arrangements.

Happy to answer any questions.

Will, are you my guy on this one?

Yes. Will Owens with the LAO. So, on this item, last year our office published an update on the implementation of ECM and community supports, benefits. So in general, we found that utilization of the benefits, was growing over time, but was somewhat lower than anticipated at the start of these programs. Additionally, we noted that more information was needed to determine, whether these initiatives were meeting the goals, outlined at the start including reduction of cost and avoidance of higher cost services.

So as mentioned by the department, there have been a few updates since that report. More information has come out. And I just wanted to highlight for the committee a few updated issues for consideration from our original report. So first, the most recent data released by DHCS does show the utilization of these benefits. Both ECM and community supports has continued to increase since we published our analysis last year.

And as we discussed in a report that many of the barriers to increasing utilization of these benefits was mostly due to the fact that these were largely kind of provided by CBOs that were not as familiar with the Medi Cal managed care plan kind of billing ecosystem and how that all worked is much different operating model to what they usually did.

So we would expect that as, CBO's providers and managed care plans, got kind of more used to this benefit and working with each other that we would see utilization increase over time as things got streamlined. And that appears to be the case. However, we would still flag for the legislature, that additional information, may be requested from the department regarding, provider accuracy, as well as barriers, for both plans and providers and patients from accessing these services.

These would be things that go beyond simply number of provider contracts, but would be looking at things that are a little more closely related to things like timeliness of patients as accessing these benefits, reimbursement of per time timing of providers.

Things like that that, dig a little bit more deeper and and try to understand these barriers. So second, as mentioned by the department, DHCS released an annual report to CMS last year detailing some of the cost effectiveness measures of community supports. And they have an upcoming, evaluation as required by CMS that will be released later kind of looking at CMS or the community supports as a whole over a longer time period.

In general, most of the services were shown to reduce costs and and as the department said, reduce reliance on higher acuity care options such as inpatient emergency department utilization.

So this type of analysis really is critical for the legislature to assess the success of these programs kind of moving forward And kind of, adding on to to some of our recommendations last year, we would, suggest in the legislature may wish to work with the administration to determine how this type of analysis, could be done on an ongoing and sustainable way to evaluate community supports as well as ECM.

As department noted, ECM, the cost effectiveness is based on previous pilot programs that share some but not all components of the current ECM benefit. So given the kind of growing utilization and and growing share of general fund spending on this that that these benefits have shown over time. It's important for the legislature to understand how these cost savings are are still being had moving forward. With that, available to answer any questions.

Thank you so much.

Deputy director. I'm a huge fan of cost saving evaluations. Is does this program only do that because it's a requirement by CMS? Or is this common of our programs?

Thank you madam chair for the question. I would say that the sort of resources that are allocated specifically towards the cost effectiveness evaluations of community supports are prioritized in a way in part because they are federally required across a few different areas including our nineteen fifteen b STCs. The federal regulations that govern in lieu of services authority, which we're using for most of these services. And then, in addition, the CalAIM eleven fifteen STC is where an independent evaluator will review.

So because CMS requires such sort of rigorous and prescriptive and ongoing cost effectiveness determinations for these, we're able to receive the resources to do that level of analysis.

Generally speaking, we do try to take into account sort of, you know, cost effectiveness of healthcare services when, you know, designing and, you know, benefits in general, but not to the level of this rigor, if that's helpful.

Yeah. A little bit. I guess I'm trying to figure out is it just a a money thing if we if I were to want a formal evaluation there, you know, there have been stakeholders that have presented certain programs that say this will be cost savings down the line. And there's key points you've mentioned, you know, to avoid acute care, avoid people being in hospitals.

Not to this topic, but just bringing up things that have come up in the subcommittee air a private duty nursing or congregate health living facilities, ways to remove people from hospitals.

So I'm just wondering how to formally get a evaluation of other programs. See how it's been so beneficial for Kauai.

Thank you madam chair. Yeah and with congregate health living facilities in particular, I mean we are actively pursuing the opportunity to to carve that into managed care to enable

That's right, I forgot about that.

For that because we do believe that's members as well as for the budget.

So how do you I mean, did I turn to you, LEO? Hey, do a formal evaluation?

Well, so I I think some of the challenge here is in in cases where the department is required to look at a cost effectiveness. Sometimes their design works in a way where you can do that sort of evaluation. A lot of other policies that have been enacted over time, it it can be much harder to isolate those effects because they come in a package of many other sort of factors.

But but generally it is a it I would concur that it is a it is a high priority to sort of evaluate new things. This this come up a lot.

It's it's not just, sort of new benefits for example. Like, like, we're not aware still of an evaluation of how the prop 56 rate increases sort of affected access. And that that would be another sort of key

policy question. To MCO. Right?

And same thing with the MCO tax.

Providers in this area.

Yeah. That one MCO tax maybe because it still hasn't been implemented Sure. That that would be. But but it it Some of it comes down to sort of how it's designed. And sometimes you need to design it in a way that that that can contribute to the evaluation.

The other thing I would just emphasize is that you sort of asked is it is it just a money issue? And really, you know, the legislature has many priorities and it isn't it isn't always just a fiscal consideration. Sometimes, high priority policy issues cost more money, but they but they're high priority. They they ensure access, they improve people's health outcomes. There there can be other factors than just whether or not it saves money.

So that that would be an important consideration. True.

Can you go over the pro- you you you spoke on it a little bit. The they expire, the two waivers expire December 31. And you mentioned if we don't change something, it it it will be contingent on the ability to renew. So we are able to renew, but we have to change some things?

Yes. Thank you. Thank you madam chair. So we are, preparing to to navigate the expiration of the two federal waivers that we rely on for CalAIM. We have a 1915 what's called the nineteen fifteen b waiver and what's called a Section eleven fifteen waiver.

12 of our 14 community supports are covered under in lieu of services authority, which is really established simply in managed care regulations. And states are typically able to cover services like our community supports as in lieu of services outside of any waiver. They're typically able to cover them in their plan contract and they submit that to CMS for review and approval consistent with the regulations.

In CalAIM, in our nineteen fifteen b waiver, we do have a lot of specific standard terms and conditions about reporting on our in lieu of services because we were very comprehensive and we kind of were innovative in the addressing social determinants of health and health related social needs. And so CMS, when they approved our CalAIM waiver, added a lot of extraordinary reporting requirements in our 1915 b waiver.

But fundamentally, the authority for them is in the regulations and not subject to a waiver renewal. Two of our 12 community supports under CalAIM cannot be covered as an in lieu of service because they entail room and board. They I figured they yeah. So recuperative care and short term post hospitalization housing, the only way to cover them is in what's called the Section eleven fifteen waiver. That also expires at the end of this year.

We believe it would be unlikely that CMS would under this administration would renew our eleven fifteen waiver with recuperative care and with short term post hospitalization housing. And so if we just asked for that, it's likely they would deny it and these two services would fall off a cliff. So we're in the process and what we proposed through our public comment period for the 11/15 renewal.

We proposed to take those two services, really consolidate them into one because they're they're quite similar, and then move that new consolidated service into the in lieu of services authority, so that it's similar to all of the other community supports. In doing so, we avoid the risk that CMS says, no, that's not approvable in the waiver.

In doing so though, we have to remove the room and board component because room and board cannot be covered under a lieu of services. That's why it was in the 11/15 waiver. So we're modifying the service itself. We're also we're taking out room and board, but we are strengthening some clinical competencies, clinical staffing around it. So it's a little bit more of a medically monitored service.

So sort of updating the service if you will, and then covering it in in lieu of services to avoid this renewal process.

At what point would we have to stop offering that service to have enough time to individuals getting kicked out of that room and board?

So what we plan to do as we navigate the renewal process and transition across different federal authorities, we are aiming for a seamless patient and provider experience. So the providers that deliver recuperative care and short term post hospitalization today, we've been engaging them heavily on this approach. And our goal is to make sure that the majority, if not all of them are poised and positioned to deliver the new recuperative care service covered under the in lieu of services authority.

So they would still be able to continue operating, Patients would still be able to continue getting services there. The only fundamental difference is it's a different federal authority, and then technically speaking, we would no longer cover room and board.

And technically speaking, room and board would no longer be explicitly part of the payment rate development but we are making other updates to the service as I mentioned to to sort of strengthen some standards around it. We also are looking at the fact that we haven't updated these rates for inflation this entire time. And so just updating it for inflation would increase. So trying trying to make sure we're avoiding disruption for providers and patients as we do the transition.

And to that note, under the recuperative care, just with Health Net alone, there's been some recent incidents. I think it's up to 500 people. A lot in LA County that have been kicked out of their recuperative care facilities. The Health Net partner with Soul Housing. I'm wondering if the impending, expiration of this have caused the seize of contracts, and have kicked people off.

While the department put out a statement saying, they didn't violate anything because they gave enough time within the guidelines and said they were gonna eliminate that. It does seem though that the plan has not been ethical in providing continuity of care of where these people have gone to. What else is the department doing to ensure? I mean in South LA there was a recent big one. I don't know if you're aware of all these situations.

Is that connected to where everything you just mentioned?

Thank you, Madam Chair. So we have worked closely with Health Net with Soul Housing both in Los Angeles as well as in Fresno County where sole housing was also Part of a an interruption

Yeah.

In their contract with the managed care plan to deliver recuperative care. Based on our understanding and our involvement in in supporting members, these are unrelated issues. Sole housing was it's all an individual case by case issue but in many cases, sole housing was admitting people without prior authorization and expecting to be sort of paid and receive reimbursement without going through the typical and the required processes that medical managed care plans used to administer these benefits and ensure the integrity of the program.

Was it more an issue on because it was also housing locations. So it was more an issue on the non profits ability to follow the guidelines necessary. But I mean, a person at the end that, you know, gets impacted is the patient. Unbeknownst to them, you know, what is happening and so forth.

A 100%. And that's why we worked very closely with with Health Net and with all the plans involved and with Soul Housing to help make sure that above all, sort of the transitions were prioritized and making sure that there is individualized one on one case management to make sure people had a pathway to go to as the underlying, you know, business dispute was being adjudicated.

So unique situation, nothing needs to be in place for guardrails for other bigger picture issues on that. It was just this entity in specific. Part

see that as a pattern. We don't see the experience that we observed with sole housing in several different locations. That is not a pattern, across across community supports.

Okay. You mentioned 4,000 unique contracts. Is that 4,000 unique vendors? Non profits that clients have partnered with? Is that what you've alluded to?

Yes. In ECM. And that's moment in time. I think historically it's been 6,000 but, you know, these fluctuate over time. So currently, are based on the latest data available 4,000.

Provider yeah, providers delivering this.

And going a little bit more on one of the questions, I think it was the number third, number three that you talked about. The maximizing the benefits of local vendors. You know, there was reports that a lot of the contracts were out of state vendors. Do we have an update of, has that percentage changed? There was a huge percent of them that were out of state.

Have we focused more on in state contracts?

Yes. Thank you. Thank you madam chair. So for ECM, 90 over 99% are in state. And so that is not really a sort of an area that we've heard about.

Within community supports, you know, some just by nature are truly in state.

We did hear, you know, early on, I think with medically tailored meals in particular, reporting and and you know conversations with with plans that initially as they stood these services up there there were concerns about providers located out of state that obtained some contracts We've since engaged with plans and with, you know, representatives of CBO's and we've learned from plans that they have changed their provider contracting strategies to focus more on not only in state providers but specifically sort of the CBO's that this was intended for.

Okay. And my last question is and I apologize I can't remember the actual phrase. But there was an issue last year regarding the assisted living waiver. Yes. It's a list that needed to be disclosed.

No, I'm not hitting on the no here.

Apologize. Madam chair, we can follow-up. I'm not personally tracking that.

Okay. Yeah. I've been trying to figure this out. I'll I'll get back to you on the question. Okay.

That was it on issue number 11. Thank you so much. Move on to issue number 12.

Issue number 12 is the California community transitions, budget change proposal. The department is requesting limited term resources equivalent to one position, an expenditure authority of $165,000 in federal funds in budget year to support the, the California Community Transitions Program operations, noting this is a 100% federally funded and has no general fund impact.

Through the California Community Transition Program, which operates under the federal money follows the person initiative, eligible individuals with disabilities receive transition coordination services to help them move from institutional care to community based living to provide to receive long term services and supports and home and community based supports to mean independence at home or in their community. This program also plays a pivotal role in the state's efforts to update operational infrastructure including through the no rung door system that is operated by the California Department of Aging.

This position will help manage the administrative, operational and monitoring workloads associated with these activities and comply with federal grant funding and reporting requirements.

Okay. Now hold the item open. Move on to issue number 13.

Issue number 13 is a budget change proposal, related to a final rule that CMS passed in 2024. The department is requesting one year limited term resources equivalent to seven positions, four year limited term resources equivalent to 15 positions, and expenditure authority of $7,275,000 total funds, of which 1.788 is general fund in budget year. In addition, we are requesting four year limited term funding authority for 15 permanent positions, that we received one time funding for in last year's PCP.

These resources will continue to, support the department's ability to meet all federal and state requirements, as part of the 2024 final rule, the ensuring access to Medicaid services final rule, often known as the access rule. These resources are necessary to continue the planning, development, implementation, and ongoing administration, monitoring, and oversight for requirements starting to be effective this year.

The rule imposes permanent operational and regulatory workloads and, complete implementation requires long term staffing that far exceeds the limited term positions previously approved. And just as context, in HR 1, Congress included a moratorium on several final rules that CMS had promulgated in 2024. However, Congress did not include a moratorium on the Medicaid access rule. So as a result, ongoing resources are required to retain the initially approved positions and to achieve and sustain compliance and monitoring and stakeholder engagement, in accordance with this rule.

No questions here. Hold the item open. Move on to issue number 14.

This is a, budget change proposal related to human resources plus modernization. The department is requesting three permanent positions and expenditure authority of $4,535,000 total funds in budget year to continue the planning, procurement, and project implementation costs to modernize our human resources and related fiscal systems and processes. The department recently finalized the procurement for a new system, and we are working on implementation planning.

This system will result in streamlined human resources and fiscal reporting that are necessary to address current and ongoing federal concerns that CMS has raised in its financial reviews of our program regarding cost allocation documents in order to claim federal funds for administrative activities. This is necessary for DHCS to meet federal allowable claiming requirements and to not jeopardize significant federal funding and penalties and ongoing deferrals that we currently face as we administer a state only healthcare program for medical members with unsatisfactory immigration status.