201720180SB562 - Senate Health
201720180SB562 - Senate Health
2) Provides federal funds to states to enable them to initiate and expand the provision of child
health assistance to uninsured, low-income children through the Childrens Health Insurance
Program (CHIP). The program is funded jointly by states and the federal government. CHIP
is a capped program and each state is provided an annual CHIP allotment. CHIP is authorized
under federal law until September 30, 2017.
3) Requires, under the Patient Protection and Affordable Care Act (ACA, Public Law 111-148),
as amended by the Health Care Education and Reconciliation Act of 2010 (Public Law 111-
152), each state, by January 1, 2014, to establish an America n Health Benefit Exchange that
makes qualified health plans (QHPs) available to qualified individuals and qualified
employers. Requires, if a state does not establish an Exchange, the federal government to
administer the Exchange. Establishes requirements for the Exchange and for QHPs
participating in the Exchange, and defines who is eligible to purchase coverage in the
Exchange. Limits enrollment in the Exchanges to citizens or nationals of the United States, or
aliens lawfully present in the United States.
4) Allows, under the ACA and effective January 1, 2014, eligible individual taxpayers, whose
household income is between 100% and 400% of the FPL, an advanceable and refundable
premium tax credit (APTC) to use for coverage under a QHP offered in the Exchange.
Requires a reduction in cost-sharing for individuals with incomes below 250% of the FPL.
Legal immigrants with household incomes less than 100% of the FPL who are ineligible for
Medicaid because of their immigration status are also eligible for the APTC and the cost-
sharing reductions. Undocumented individuals and incarcerated individuals are ineligible to
purchase coverage in Exchanges.
5) Authorizes, under Section 1332 of the ACA, waivers for state innovation under which states
can seek federal approval to waive major provisions of the ACA, including the requirement
for Exchanges, QHPs, premium tax credits and cost-sharing reductions, the individual
mandate and the employer responsibility requirement, provided federal requirements for
comprehensive benefits, affordability, and comparable coverage are met and the state
proposal does not increase the federal deficit.
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6) Establishes, pursuant to federal law, the Medicare program, which provides coverage for
seniors and certain persons with disabilities. Medicare is funded by payroll taxes, premiums
paid by individuals who enroll in various parts of Medicare (Part A is hospital services,
Part B is medical services, Part C is Medicare Advantage plans, and Part D is prescription
drug coverage) and general revenue. Authorizes the federal Secretary of the Department of
Health and Human Services, to develop and engage in experiments and demonstration
projects for specified purposes, either directly or through grants to public or private agencies,
institutions, and organizations or contracts with public or private agencies, institutions, and
organizations.
7) Creates within the Centers for Medicare & Medicaid Services a Center for Medicare and
Medicaid Innovation (CMI), the purpose of which is to test innovative payment and service
delivery models to reduce program expenditures under the Medicare and Medicaid while
preserving or enhancing the quality of care furnished to individuals under those programs.
This bill:
1) Healthy California purpose and governance
Establishes the Health California program in state government as an independent public
entity not affiliated with an agency or department. Requires the Healthy California program
to provide comprehensive universal single-payer health care coverage and a health care cost
control system for the benefit of all residents of the state. Requires Healthy California to be
governed by an unpaid (except for per diem) executive board consisting of nine members
appointed by Legislature (4) and Governor (5). Four members have to be from the following:
a labor organization representing nurses, the general public, a labor organization, and the
medical provider community. Requires each person appointed to the board to have
demonstrated and acknowledged expertise in health care.
Requires each board member to have the responsibility and duty to meet the requirements of
this bill, the ACA, and all applicable state and federal laws and regulations, to serve the
public interest of the individuals, employers, and taxpayers seeking health care coverage
through the program, and to ensure the operational well-being and fiscal solvency of the
program. Requires appointing authorities to take into consideration the cultural, ethnic, and
geographical diversity of the state so that the boards composition reflects the communities
of California.
Makes every resident of the state eligible and entitled to enroll. Resident is defined as an
individual whose primary place of abode is in the state, without regard to the individuals
immigration status.
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3) Enrollee premiums in Healthy California
Prohibits members from Healthy California from being required to pay any premium.
The bill requires the Healthy California board to apply to the federal Secretary of Health and
Human Services or other appropriate federal official for all waivers of requirements, and
make other arrangements, under Medicare, any federally matched public health program, the
ACA, and any other federal programs that provide federal funds for payment for health care
services that are necessary to enable all Healthy California members to receive all benefits
under the Healthy California program through the program, to enable the state to implement
this bill, and to allow the state to receive and deposit all federal payments under those
programs, including funds that may be provided in lieu of premium tax credits, cost-sharing
subsidies, and small business tax credits, in the State Treasury to the credit of the Healthy
California Trust Fund, and to use those funds for the Healthy California program.
Requires all moneys in the Fund to be continuously appropriated without regard to fiscal year
for the purposes of this bill, and any moneys in the fund that are unexpended or
unencumbered at the end of a fiscal year is authorized to be carried forward to the next
succeeding fiscal year.
Requires the board to establish requirements and standards, by regulation, for the program
and for health care organizations, care coordinators, and health care providers, consistent
with this bill and consistent with the applicable professional practice and licensure standards
of health care providers and health care professionals established pursuant to the Business
and Professions Code, the Health and Safety Code, the Insurance Code, and the Welfare and
Institutions Code, including specified requirements and standards established by this bill.
Requires the board to establish requirements and standards, to the extent authorized by
federal law, by regulation, for replacing and merging with the Healthy California program
health care services and ancillary services currently provided by other programs, including,
but not limited to, Medicare, the ACA, and federally matched public health programs.
SB 562 (Lara and Atkins) Page 5 of 20
13) Healthy California and Medicare
Permits the Healthy California to take actions consistent to enable the program to administer
Medicare in California, and requires the program to be a provider of supplemental insurance
coverage (Medicare Part B) and to provide premium assistance drug coverage under
Medicare Part D (drug coverage) for eligible members of the program. Requires a member
who is eligible for benefits under Healthy California, as a condition of continued eligibility
for health care services under the program, to enroll in Medicare, including Parts A, B, and
D.
Requires the program to provide premium assistance for all members enrolling in Medicare
Part D drug coverage, limited to the low-income benchmark premium amount established by
the federal Centers for Medicare and Medicaid Services and any other amount the federal
agency establishes under its de minimis premium policy, except that those payments made on
behalf of members enrolled in a Medicare advantage plan may exceed the low-income
benchmark premium amount if determined to be cost effective to the program.
Permits the Healthy California board to apply for coverage for, and enroll, any eligible
member under any federally matched public health program (such as Medi-Cal) or Medicare.
Prohibits enrollment in a federally matched public health program or Medicare from causing
any member to lose any health care service provided by the program or diminish any right
the member would otherwise have.
Requires the Healthy California board, by regulation, to increase the income eligibility level,
increase or eliminate the resource test for eligibility, simplify any procedural or
documentation requirement for enrollment, and increase the benefits for any federally
matched public health program and for any program in order to reduce or eliminate an
individuals coinsurance, cost-sharing, or premium obligations or increase an individuals
eligibility for any federal financial support related to Medicare or the ACA. This provision
does not apply for long-term care services. Permits the board, to enable the board to apply for
coverage for, and enroll, any eligible member under any federally matched public health
program or Medicare, to require that every member or applicant provide the information
necessary to enable the Healthy California board to determine whether the applicant is
eligible for a federally matched public health program or for Medicare, or any program or
benefit under Medicare.
Requires the board to develop a proposal for Healthy California coverage of health care
services currently covered under the workers compensation system, including whether and
how to continue funding for those services under that system and whether and how to
incorporate an element of experience rating.
Requires the board to develop a proposal, consistent with the principles of this bill, for
provision by the program of long-term care coverage, including the development of a
proposal, consistent with the bill, for its funding. Requires the board, in developing the
proposal, to consult with an advisory committee, appointed by the chairperson of the board,
including representatives of consumers and potential consumers of long-term care, providers
of long-term care, members of organized labor, and other interested parties.
Prohibits this bill from preempting any city, county, or city and county from adopting
additional health care coverage for residents in that city, county, or city and county that
provides more protections and benefits to California residents than contained in this bill.
FISCAL EFFECT: This bill has not been analyzed by a fiscal committee.
COMMENTS:
1) Authors statement. According to the author, despite the incredible gains made under the
ACA, almost three million California residents still do not have access to health care because
cost or legal status. With the federal governments promises to abandon the ACA and undo
the progress we have made, leaving even more people without access to care, California has
a chance to lead the rest of the nation toward a health care model that is less expensive and
provides better coverage.
SB 562 will move health care services to one publicly run plan that covers everyone who
lives in the state. Every Californian will have access to the same comprehensive health
benefits under a single plan. Patients will have the ability to choose their providers without
worrying about what their insurance will cover or if they are out of network. SB 562 will
consolidate and streamline access to care for patients and simplify the billing for hospitals
and providers.
SB 562 will fundamentally change Californias health care system and improve health access
and care for our residents. SB 562 will change health care in California from commodity to a
right.
2) The Affordable Care Act (ACA). The federal ACA, approved on March 23, 2010, was the
most transformative legislative action the U.S. health care system had seen in 40 years. The
passage of the ACA meant sweeping changes to health care coverage in this country,
including establishing more generous eligibility rules and federal funding for Californias
Medicaid (Medi-Cal) program, providing federally funded premium and cost-sharing
subsidies offered through Californias Health Benefit Exchange (known as Covered
California), and imposing new requirements on health insurers that made it easier for
individuals with pre-existing conditions to obtain coverage. The coverage expansions alone
led to 20 million newly insured individuals in this country, including over 5 million
Californians.
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California has seen a remarkable decline in the number of people without health insurance
coverage as a result of the ACA. Most notably, the percentage of Californians under age 65
without insurance declined from 22% in 2011 to 8.6% in 2015 (from 7.3 million in 2011 to
2.9 million in 2015). California experienced the largest percentage point decline in the
uninsured rate of any state, according to the United States Census Bureau. The federal
Centers for Disease Control and Prevention has indicated a further fall to 7.1% in the first
nine months of 2016. The decline in uninsured as a result of the ACA crosses the major
race/ethnic and income groups in California.
3) How do Californians receive health coverage now? Unlike other industrialized nations, the
American health care system is primarily an employer-based system. Like the rest of the
country, most of Californias 39 million residents receive employer-based coverage, which is
subsidized by the state and federal tax code. Public programs are the other major health
coverage source, followed by the individual insurance market. The chart below with data
from the California Health Benefit Review Program shows the sources of coverage (or lack
thereof) for Californians:
Source of Coverage Percentage Population
Employer-based coverage 56% 17,595,000
Individual coverage 7% 2,616,000
Medi-Cal (includes dual eligibles*) 29% 11,169,000
Medicare 10% 4,054,000
Uninsured 8% 3,079,000
*Individuals eligible for both Medicare and Medi-Cal
4) How much is spent on health care expenditures in California? According to an August 2016
Health Policy Brief by the UCLA Center for Health Policy Research, personal health care
expenditures in California are estimated to total more than $367 billion in 2016.
Approximately 71% of these expenditures will be paid with public funds, broadly defined to
include government spending for public employee health benefits, Medicare and Medicaid,
tax subsidies for employer-sponsored insurance and ACA insurance exchange and county
health care expenditures. The chart below shows the expenditures by category, dollar amount
and percentage:
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Expenditures, in Billions
Health Care Expenditure Category (% of total Expenditures)
While the uninsured rate dropped dramatically for families with incomes under $25,000 as a
result of the ACA, the uninsured are more likely to be from low-income families, as shown in
the data below:
The data below shows the age groups of Californians as a percentage of the population and as a
percentage of the uninsured:
The ACA also contained waiver provisions related to Medicare and Medicaid through a newly
established Center for Medicare and Medicaid Innovation (Innovation Center) and through a
waiver of the tax credits for small employers and the premium and cost-sharing subsidies in
the individual market under Section 1332. Specifically, Section 1332, the ACA permits states
to apply to the federal government for a waiver of major provisions of the ACA beginning in
2017. The provisions of the ACA that can be waived under Section 1332 include any or all
parts of the provisions relating to QHPs (including the essential health benefits package
requirement), the Exchanges, premium tax credits and cost-sharing reductions, the minimum
coverage requirement (commonly referred as the individual mandate), and the employer
responsibility requirements. If a state is granted a Section 1332 waiver, the state can fund its
reforms through the aggregate amount of federal funding that otherwise would have been paid
out within the state for premium tax credits, cost-sharing reduction payments, and small
business tax credits. However, to qualify for an innovation waiver, the state must establish
that its reform plan would provide coverage that:
The Innovation Center allows the Medicare and Medicaid programs to test models that
improve care, lower costs, and better align payment systems to support patient-centered
practices. The Innovation Center evaluates innovative reform efforts widely used in the
private sector, and is unique in its ability to develop provider-proposed approaches and
quickly adjust models in response to feedback from clinicians and patients.
Congress created the Innovation Center for the purpose of testing innovative payment and
service delivery models to reduce program expenditures while preserving or enhancing the
quality of care for those individuals who receive Medicare, Medicaid, or CHIP benefits.
Congress provided the Secretary of HHS with the authority to expand the scope and duration
of a model being tested through rulemaking, including the option of testing on a nationwide
basis. In order for the Secretary to exercise this authority, a model must either reduce
spending without reducing the quality of care, or improve the quality of care without
increasing spending, and must not deny or limit the coverage or provision of any benefits.
7) Prior legislation. Since 2004, there have been four single payer bills and one bill to fund
single payer, as follows:
8) Support. This bill is sponsored by the California Nurses Association/National Nurses United
and supported by numerous labor organizations, faith-based and consumer groups, certain
businesses, and Democratic Party groups, who argue this bill would provide publicly funded
and progressively financed health care coverage for all California residents regardless of age,
income, or immigration status, with no network restrictions, deductibles, co-pays, or other
limitations on necessary care. Supporters argue health care is a human right, and the United
States continually outspends other wealthy nations on per capita health care costssome by
more than doublewhile the quality of care and national health outcomes continue to fall
behind. Californians as individuals, workers, families, businesses, and taxpayers are driven
past their breaking point because of soaring health costs and lack of access. Supporters argue
the experience of Medicare and of nearly every other industrialized country shows a single
payer system is the most cost-effective and equitable way to provide quality health care as all
residents are covered, and the system can eliminate wasteful spending and rein in
skyrocketing prices. Supporters argue the Healthy California Act would provide the
comprehensive and quality health care coverage that all Californians deserve and would
ensure that insurance companies and the corporate ledger no longer determines the health and
well-being of our state.
9) Support in concept. The California Pan-Ethnic Health Network, Western Center on Law and
Poverty, and Health Access California write that they support this bill in concept in that they
support single payer and universal coverage, and suggest additional changes to this measure.
Health Access California writes that further work needs to be done on financing, and raises
questions about the lack of specifics or provisions that run counter to goals for a universal
coverage system related to provisions in this bill regarding transition to a single payer system,
system governance, whether existing consumer protections apply to the single payer system,
quality improvements/delivery system reform and integrated care, purchasing for cost and
quality, cost control and information technology.
10) Opposition. This bill is opposed by business and health insurance groups who argue this bill
would create a single-payer government bureaucracy which would control and finance the
states health care system and ultimately result in significant job loss to the state. Opponents
argue California employers cannot sustain an added tax burden after the most recently enacted
transportation tax package, that significant job loss will result from this bill, that California
voters in 1996 previously rejected a single payer health measure, that single payer costs are
unsustainable, and government-run health care is less efficient and effective. Other opponents
argue the state has made important progress in implementation of the ACA, but this progress is
in a precarious position due to Congressional repeal and replace proposals, and this is not an
appropriate time to divide the health care and policy community against itself with a symbolic
measure that could not be implemented even if it were passed.
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11) Policy issues.
a) Can single payer be implemented on a state level? The US employer-based health care
system is a tax-subsidized employer-based system, augmented by state and federal
programs for low-income individuals (Medi-Cal) or seniors (Medicare), and federal
premium and cost-sharing subsidies for low-to-moderate income individuals buying
individual coverage through Exchanges. This system has grown incrementally over decades
as health coverage programs have been created or expanded and mandates and tax
subsidies have been enacted to increase insurance coverage. If state and federal legislators
and the state and federal executive branch were starting with a blank state and designing a
health care delivery system from scratch, the US health care delivery system would
unlikely look like the one that exists today.
The extension of coverage to additional Americans through the ACA has largely been built
upon that existing system, with significant amounts of new federal funding to provide
health insurance coverage to additional people who were previously uninsured, either
because the uninsured are low or moderate income and are unable to afford the high cost of
insurance, or have a pre-existing medical condition that made coverage unavailable. For
example, California received over $19.2 billion in federal funds for ACA Medicaid
expansion in 2016-17, and nearly $5 billion in federal funds for premium subsidies ($4.2
billion) and cost-sharing subsidies (over $700 million) for Covered California enrollees in
2016.
b) Financing single payer and risks to the state. This bill contains intent language on broad-
based revenue, and intent for the state to work to obtain approval and other approvals so
that Medicaid, Medicare, ACA and other federal funds and subsidies paid by the federal
government that would otherwise be paid to the State of California, Californians and health
care providers would be deposited in the Healthy California Trust Fund.
Any tax increase to fund Healthy California costs would need to take into account the
requirements of Proposition 98, the 1988 school funding initiative, which generally
requires 40% of revenues from taxes go to K-14 public education. Because Proposition 98
is in the State Constitution, any tax increases would either have to receive voter approval to
exempt the resulting revenue from the calculation of Proposition 98, raise enough new
revenue to offset the amount of revenue allocated to Proposition 98, or have a poison pill
that would invalidate the new taxes if a Proposition 98 claim reduced the resulting revenue
to fund Healthy California.
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In addition, if the state were able to receive federal approve to combine Medicaid,
Medicare, Covered California premium and cost-sharing subsidies and other federal funds
for health care, the state would still be potentially at risk if the formula for allocating those
funds does not take into account actual state health care expenditures for expenditures the
federal government would otherwise have made. While this bill does not request a block
grant or per capita amount of federal funding, and the state would argue that it has a legal
basis for funds that the federal government would have otherwise spent in the absence of
the single payer system, if federal funds come to the state in a fixed amount based on
projected expenditures, the state would need to ensure that those amounts would be
adequate to fund the actual coverage costs of Healthy California for people who would
have been enrolled in those programs.
The recent DHCS preliminary fiscal estimate of the impact on Medi-Cal of the proposed
American Health Care Act illustrates the state fiscal risk of a per capita cap on funding,
even when growth in the per capita amounts were tied to medical inflation. The DHCS
fiscal analysis projected a financing shortfall of $679 million in the first year of the
proposed Medicaid per capita cap, increasing to over $5.3 billion in 2027.
This bills sponsor has funded a research project that will estimate the overall cost of the
proposed Healthy California program in SB 562 which will examine different ways of
financing the program. Specifically, the project will calculate the additional costs
associated with covering California residents who are currently uninsured and the
expansion of health care utilization of residents who are underinsured (for example, those
that currently limit their use of health services due to high deductibles or co-payments).
The project will identify areas of savings associated with the Healthy California program,
including lower administrative costs and cost-control mechanisms for pharmaceuticals and
rates for physician, clinical, and hospital services. The sponsor indicates estimates for
additional costs and areas of cost savings will determine the financing needs, and based on
these estimates, the project will explore different modalities for financing Healthy
California. In addition, the project will assess the ability of the cost-control mechanisms to
limit the rate of increase of health care costs over time, to ensure the fiscal sustainability of
the program.
c) Health care costs and Healthy California. Health care spending is driven by four principle
components: who is eligible for coverage, the rates health plans, health care providers, and
health facilities are paid, what benefits enrollees receive, and administration. One of the
main arguments for single payer is the significantly higher amount spent on health care in
the US as compared to other industrialized counties, despite a lack of evidence that the
additional spending produces uniformly better health care outcomes. The principle reason
for higher spending are the higher prices charged for health care goods and services in the
United States. The United States spends far more per person and as a percentage of Gross
Domestic Product as compared to other industrialized countries.
Single payer health care systems are more likely to achieve cost savings over the current
multi-payer system by significantly reducing administrative costs through eliminating the
multiple payers and associated billing-related costs in the current system, and by using the
governments bulk purchasing power to negotiate and/or set rates with health care
providers, health facilities, and prescription drug and device manufacturers.
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While this bill requires the Healthy California program to provide a single-payer health
care coverage and a health care cost control system, there are multiple provisions in this
bill that would make cost control unlikely to occur. For example this bill:
In addition, this bill is silent on provisions commonly used by managed care plans and
other payers to control costs, such as the use of a prescription drug formulary to obtain
price concessions, the use of selective contracting to obtain price discounts from health
care providers based on volume, and criteria to be used by Healthy California for coverage
of new drugs, devices and procedures.
d) Should this bill have an implementation trigger? As drafted, the provisions of this bill
would take effect on January 1, 2018. The bill also requires the Healthy California board to
determine when individuals may begin enrolling in the program, and requires there be an
implementation periods that begins on the date that individuals begin enrolling and ends on
a date determined by the board.
f) Other policy and bill language issues. There are several provisions of the bill that require
language tightening and/or policy clarification. For example, the bill makes all California
residents eligible for Healthy California, but contains permissive language on the program
administering Medicare, which could result in the program having Medicare enrollment but
not Medicare funds. In addition, language is needed clarify the condition of Healthy
California enrollment on Medicare-eligible individuals enrollment in Medicare Parts A, B
and D with the prohibition on paying a premium and providing coverage that provides the
same benefits as Healthy California, to clarify the authors intent with regard to the scope
of long-term care coverage for non-Medicaid enrollees of Healthy California, to address the
scope of benefits that would be provided out-of-state to Healthy California enrollees, to
specify the types of documentation the program will use to determine residency in
California, to clarify the ability to opt out of an integrated delivery system in the event a
member moves, and to clarify which payments would include a component of
reimbursement for graduate medical education.
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