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Bill Review and Analysis

2020 Governor's Budget:

On Friday January 10, the Governor released a proposed a $222.2 billion ($153.1 billion General Fund) budget for the 2020-21 fiscal year, which is approximately $8 billion more than our current spending plan. These additional funds are the result of California’s increasing economic growth. 

Similar to last year, the Governor held court for a few hours detailing the budget and specific policy areas. His budget priorities include paying down the state’s unfunded pension liabilities, continuing to address the affordability crisis, expanding health care access, and building upon emergency preparedness efforts. 

Before releasing his proposed budget, Gov. Newsom provided a glimpse into the issues he will seek to tackle this year including signing an Executive Order requiring state agencies to take immediate action on homelessness, creation of a state-run generic drug label, expanding health care to individuals 65 and older regardless of immigration status, and additional wildfire prevention measures.

You can find the full budget summary on the Governor’s website. Below are some highlights in the proposed budget.

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HEALTH AND HUMAN SERVICES

The budget includes $167.9 billion ($47.4 billion from the General Fund and $120.5 billion in other funding) for all health and human services programs. Building on his efforts to lower the costs of prescription drug costs from last year, Newsom is proposing to create a state generic drug label, set uniform best prices for drugs under the Medi-Cal program and all other state departments, and create a Golden State Drug Pricing Schedule, which establishes a single market for drug purchasing in the state. 

Affordability is a key tenet of the Governor’s budget with the establishment of the Office of Health Care Affordability. Expected to open this spring, the goal is to return savings to consumers affected by rising health care costs. The Office will be charged with increasing transparency around health care pricing, coming up with strategies and cost targets, while imposing financial sanctions for failure to meet these goals.

The budget also includes funding for the Medi-Cal Healthier California for All initiative (formerly known as CalAIM), which is the Administration’s proposal to make broad payment and delivery reforms to the Medi-Cal managed care program. 

Medi-Cal makes up the largest portion of the HHS budget - $107.4 billion ($26.4 billion from the General Fund). Medi-Cal caseload is projected to decrease by 1.3% from 2018-19 to 2019-20 and increase 0.4% from 2019-20 – 2020-21. The projected caseload is 12.9 million in 2020-21 – approximately one-third of the state’s population.

Highlights of the HHS budget:

-Seeks to build a more robust public option in California by leveraging both Covered California and Medi-Cal and requiring HHS to develop options to increase enrollment, affordability and choice through the exchange and Medi-Cal managed care plans.

-Allocates $80.5 million to expand Medi-Cal coverage to all adults aged 65+ by 2021, regardless of immigration status (full implementation costs projected at $350 million in 2022-23 and ongoing).

-Includes savings of $178.3 million ($69.5 million from the General Fund) associated with the Medi-Cal Rx Pharmacy Carve-Out.

-Includes a Medi-Cal Best Price proposal to expand DHCS’ authority to consider the best prices offered internationally by manufacturers when negotiating state supplemental rebates. Also proposes to leverage Medi-Cal’s purchasing power to negotiate supplemental rebates for targeted populations outside of Medi-Cal.

-Establishes a Golden State Drug Pricing Schedule as a single market for drug pricing in the state.

-Creates a State generic drug label, whereby the state would contract with manufacturers to create generic drugs for the state.

-Creates a new supplemental payment pool for non-hospital 340B clinics that would reimburse non-hospital clinics for 340B pharmacy services.

-Assumes federal approval of the MCO tax, with revenue beginning to accrue in 2021-22 (projects the state will receive $1.2 billion in 2021-22 – the projected $1.9 billion will not be included until 2022-23).

-Includes a vaping tax of $2 per 40mg of nicotine – estimated to bring tens of millions of dollars in revenue (approx. $32 million including declining Prop. 56 revenue.)

- Establishes the Office of Health Care Affordability. In addition to what is outlined above, the Office of Health Care Affordability will look at regional hospital costs, establish standards to advance evidence-based and value-based payments to physicians and hospitals, and advance administrative simplification.

-Includes $695 million ($348 million from the General Fund) for Medi-Cal Healthier California for All (formerly CalAIM), which would grow to $1.4 billion in 2021-22 and 2022-23.

-Establishes the Behavioral Health Task Force to review existing policies and programs to improve the quality of care and improve response to mental illness and substance use disorders in California through a $45.1 million General Fund allocation to implement a Behavioral Health Quality Improvement Program.

-To combat the opioid crisis, the budget includes $89.2 million for the Medication Assisted Treatment Expansion Project and $426 million to support the Drug Medi-Cal Organized Delivery System. 

HOMELESSNESS

Governor Newsom has made homelessness a top priority this year.

The budget allocated $650 million in emergency aid to local governments from last year’s budget to be distributed this calendar year. In addition, this year’s proposal includes $750 million in one-time General Funding to establish the California Access to Housing and Services Fund to be administered by the Department of Social Services. This fund will be used to reduce homelessness by moving individual and families into stable housing and increase the number of available stable housing units. 

HOUSING

Last year’s Budget Act included $1.75 billion in resources to accelerate housing production which included $500 million for infrastructure grants, $500 million to expand the state’s housing tax credits, and $250 million for technical assistance and planning. In Governor Newsom’s presentation of the budget, he claimed that not one dollar of the $1.75 billion approved last year went out. To that end, no additional funding was provided in this year’s budget proposal; however, the focus will be spending investments made in last year’s budget. In total, the Budget includes $6.8 billion across multiple departments to address housing throughout the state. The state has also made efforts to seek and secure private investments to create affordable housing, which will continue in 2020. 

STATEWIDE/GENERAL ISSUES

Other general highlights of the 2020-21 budget:

-Creates a new financial protection bureau, renaming the Department of Business Oversight to the Department of Financial Protection and Innovation (in response to the federal rollback of the Consumer Financial Protection Bureau). The Budget expands the DBO’s authority (via the new department) to go after unlicensed financial service providers including debt collectors, credit reporting agencies and fintech companies. The budget includes $10.2 million and 44 positions in 2020-21, then $19.3 million and 90 positions in 2022-23.

-Continues the 2019 expanded earned income tax credit (EITC), including development of a program to allow workers to receive a portion of the EITC in monthly payments.

-Includes funding to enforce compliance of AB 5, codifying the ABC Employment Test under the Dynamex decision, including $17.5 million to DIR to address increased utilization of the workers’ compensation program, $3.4 million for the EDD to train staff and administer the ABC Employment Test, and $780,000 to the DOJ to address increased enforcement actions involving misclassification of employees as independent contractors. 

Now that the Governor’s proposed budget is released, the LAO will issue an analysis of the plan, followed by legislative hearings and negotiations that will begin in March and run through May. The Governor will release a revised budget (“May Revise”) in May, followed by a legislative vote and enactment in June. The Governor must sign the spending plan by July 1, 2020.

 

2019-20 Legislative Update

From Sacramento:

The Legislature wrapped up business for the year in the early morning hours of September 14. In the end Governor Newsom signed over 1,000 bills and vetoed 16.5%, matching Governor Brown’s highest veto rate. This veto rate was a bit unexpected since Governor Newsom and the Legislature see eye to eye on most policy issues, but Newsom is doing his best to follow Brown’s example of maintaining some fiscal restraint.

Governor Newsom completed his work with a press release thanking the Legislature and touting California’s efforts to “defend our state from Trump’s attacks.” He highlighted his signature on measures that:

·         Change California’s police use of force

·         End private prisons

·         Allow college athletes to receive compensation

·         Enhance wildfire mitigation

·         Capping interests on predatory lending

As with every California Governor over the last several decades, far more bills received Newsom’s signature than his veto. Several lawmakers took advantage of Brown’s departure and sent bills to Newsom that were vetoed in previous years. A few noteworthy recycled bills that Newsom signed include a smoking ban on state parks and beaches, additional labor organization opportunities and the requirement for public universities to provide emergency contraceptives to students.

In 2019 Legislators and Governor Newsom tackled an aggressive legislative agenda and can show results on a variety of high-profile issues including the state’s housing crisis, privacy, workers’ rights and a variety of health care related items.

Over the summer, Newsom approved an expansion of Medi-Cal coverage to young undocumented adults and expanded eligibility for health insurance subsidies for the middle class. Newsom also called for the creation of a single purchasing authority to negotiate prescription drug costs which is currently in the preliminary implementation phase.

Outside the budget, healthcare bills signed by the Governor include:

·         A proposal to limit dialysis clinics’ profits

·         Legislation further restricting vaccine medical exemptions

·         Legislation to require continued education courses for certain healthcare providers including implicit bias training

·         A proposal to extend the tax on managed care plans until 2023

·         Legislation requiring public universities to offer medication abortions (“abortion pills”) to students

·         A measure aimed at reducing prescription drug prices by prohibiting brand name and generic drug manufacturers from entering into “pay-for-delay” agreements

·         Legislation allowing pharmacists to furnish HIV pre-and post-exposure medications to patients

·         A bill to require insurers to reimburse providers at the same rate for telehealth services as in-person services

OPSC had an active and successful 2019 legislative year. We worked with our partners in Sacramento to defeat scope expansion bills and measures that attempted to negatively regulate the practice of medicine. Certain bills stalled in 2019, however, they will still be eligible in 2020. This includes (AB 890) the nurse practitioner scope expansion and (SB 201) that would significantly limit a physician’s ability to treat intersex patients. We should expect various proposals to limit or ban vaping products and Governor Newsom should continue his focus on expanding access to care while addressing the rising costs of health care.

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