Assembly Budget Subcommittee No 1 Health

and welcome to the Assembly Budget Subcommittee on Health. We are going to make some adjustments to today's proceedings. We were originally going to start with our joint hearing. Instead, we're going to start with the Sub 1 regular order of business, and then when our Senate colleagues are able to join us, we'll recess Subcommittee 1 and begin our notice joint hearing on access to gender-affirming care. Then once the joint hearing concludes, we will come back and resume Sub 1's proceedings. And one of the reasons we're doing this is we have over 40 witnesses and technical experts for the hearing today. We have seven topics just a momentous amount of information And so to be respectful of the public time that is here and that is watching we want to get started expediently and be able to move through both hearings. So we're now going to convene our regular Assembly Budget Subcommittee 1 hearing and if committee staff if you could please call the roll.

And we do have, we have quorum yet? Oh, we don't yet have quorum, so we will continue as a subcommittee while we're waiting for other members to arise. So this subcommittee has focused on H.R. 1 both this year as well as last year. We were anticipating H.R. 1. This is our third hearing looking at what H.R. 1 or the big, beautiful bill has meant to millions of Californians, 15 million actually who have Medi-Cal, another 1.6 million who have covered California and what H.R. 1 is doing to those folks and how California is navigating that. We've examined the impact of new restrictions on medical student loans, so people who want to become doctors who need to take out loans. We've also looked at residencies in California and the downstream impacts on physicians and health care delivery. And as a reminder, H.R. 1 restricts med school loans. And so we started our first hearing with that because so many Californians are having trouble accessing primary care doctors within their communities. We've also heard about the consequences to safety net programs across California. But today is our third hearing on HR1, and by far it's our most extensive, I think covering six issues across a wide range of programs and topics. And we're going to be talking about infrastructure, the healthcare safety net, which is not just about having healthcare coverage, but also about how you can be seen at a hospital, a clinic, how the counties and the providers actually deliver care. We know that H.R. 1 is making sweeping changes that are upending the financing of our health care system and our health care system as a whole, from the managed care organization tax to hospital fees to state-directed payments. So we're going to be talking about this. We're also going to look at reproductive health care, long-term care services and supports, as well as Medi-Cal dental that we've heard from a number of people. And throughout the hearings, I would say we've tried to bring voices, first-person voices from across California to testify so that we're hearing both from Department of Finance and the administration and the LAO, but also from regular everyday people and how policies here in California and budget maneuvers here in California affect people's real lives. So today I want to say thank you to all of the panelists that are coming. As I mentioned, we have over 40 witnesses and technical experts that are here. And due to the volume of testimony, we're going to ask everybody to keep their testimony to a three minute max, which I know is hard to do. But I think you got a heads up about that. And so would very much appreciate if you could respect each other's time by keeping your testimony as short as possible. In addition to accommodate space at the witness table we going to ask LAO and DOF to sit at the edge of the dais if the table becomes full so that we can have you up here but also have room for anyone testifying With that I want to see if there any committee members that wanted to make opening remarks And if not, we'll jump into the agenda. Okay. Not seeing any comments here. We are going to start with our subcommittee hearing that is set up to cover six different issues as listed on the agenda. So here's a couple housekeeping notes. The agenda is available online on our committee's website, and physical copies are available in the hearing room. You can also find available online several supplemental publications provided by either the LAO or stakeholders. At the end of each panel presentation, we'll take questions from members followed by public comment. And as a reminder, public comments will be taken in person at the end of each issue. We ask that you keep your public comment to name, position on the issue, and organization. So, again, we have six topics. We have 40 technical and other witnesses that are going to be presenting. And so we just ask that the public is also respectful of one another in terms of the time at the mic, as we'd like to allow people access to what is happening and be fully transparent in our budget process, but also move expediently so that no one feels they have to miss out because time is getting too long. If you're unable to attend in person, you may submit written comments via email to asmbudget at asm.ca.gov. And at the very end, we will open public comment for items not on the agenda. So we're going to begin now with oversight. No. Yeah. With oversight of reproductive health state investments. This issue, and please come on up to the table as I'm talking if you're here for this witness for this panel. This issue will examine the five reproductive health programs established by the California Department of Healthcare Access and Information in response to the Dobbs decision and the ongoing uncertainty surrounding the federal Title X family planning program, as well as our state's response to HR1's targeted defunding of Planned Parenthood. For this panel, we welcome to the witness table Director Landsberg from the California Department of Healthcare Access and Information, Kelly Mossberg on behalf of Essential Access Health, and Nicole Barnett, President and CEO of Planned Parenthood NorCal, and then we also have the LAO. But we're going to begin with HCI Director Landsberg, who will provide a brief overview of the five HCI reproductive health programs, their current status, and funding outlook. And as each of you goes on to testify, if you could please introduce yourself before beginning your testimony. And please start when you're ready, Director Landsberg.

Okay.

Good afternoon, Madam Chair and members of the committee. My name is Dr. Nicole Barnett. I'm the president and CEO of Planned Parenthood Northern California, where I oversee operations of 17 health centers spanning from San Francisco all the way to the most northern rural counties of our state. I'm here on behalf of my own affiliate, but also as well as the six other Planned Parenthood affiliates serving the state of California. Since July 4, 2025, Planned Parenthood has been blocked from receiving federal Medicaid funding under H.R.1. The intent was clear to defund Planned Parenthood, force health center closures, and restrict access to essential care. Since its inception, this defund has had real consequences. Nationwide, 23 health centers have closed, including five right here in the state of California. This impact is especially significant here in our state. Collectively, our affiliates serve one-third of all Planned Parenthood patients nationwide, with over 80 percent of those patients relying on Medi-Cal and Family Pact. Planned Parenthood is the largest provider in both programs, delivering critical services like birth control, STI testing, cancer screenings, not abortion services, which remain state-funded. The D fund threatened over $400 million in care for low-income Californians. We are incredibly grateful to this legislature and to the governor for doubling down as a reproductive freedom state and helping us to weather this devastating defund. California stepped up to use state funds to keep Planned Parenthood health centers open and to ensure minimal disruption for our patients. However, this stability is temporary. The defund expires on July 3rd, and if it ends, we may resume normal Medi-Cal operations and the state will be able to pay family planning claims using federal matching funds. However, if the defund is extended, we will once again need to explore alternative funding mechanisms or else we face devastating cuts which will impact access for patients enrolled in Medi-Cal programs. Despite these challenges, we continue to serve. Programs like the Uncompensated care fund have been absolutely critical. At Planned Parenthood Northern California alone, we served nearly 7,000 patients last year in five languages through this program. Of the hundreds of patient stories that I could share with you, there is always this common theme. Patients come to us because they know they will be treated with dignity, with respect, and without judgment. And we are honored to be that provider. And we strongly support the budget request for $30 million to extend its operation for another three years so that no patient is turned away. Thank you again for the opportunity to speak today. Planned Parenthood remains rooted on our mission to provide care no matter what. Thank you.

Thank you. to just address the uncompensated care needs. Given the fact that it sounds like we will, the demand has not waned at all. Given the changes to Medi-Cal, we also know that there will be more people who will be dealing with an affordability gap. With this in mind, has essential access seen over seen any year unmet needs in the program Yes we have And we can get you the specific numbers on that but we have definitely seen oversubscription of about million to million every year

Yeah. And then I know that we've been able to have an opportunity to continue to fund and fill the gap for Planned Parenthood. Are you foreseeing, what is the future foreseeing for Planned Parenthood and being able to cover, ensure coverage? I always am struck by the fact that 22,000 people a week, is it, go through Planned Parenthood doors?

Thank you. And then my last question, Chair. To HKI, given that these five programs that were established were one-time funds, many of them have been fully expended, have you been able to do an analysis around the efficacy of the five programs or where you believe that we are going to need additional investment across these five programs?

Okay. Thank you.

Great. Thank you. So questions about the uncompensated care program. So my understanding is health plans in California, unless they're self-insured, are required to cover abortion services. Is that correct?

So this money is going to individuals who are mainly self-insured or they receive their insurance through a self-insured health plan? or what's the uncompensated paying for?

So for that population?

Yeah, I mean, it would obviously, if we're spending $40 million a year, it would just be interesting to know... where that gap in coverage is?

Okay. Yes.

Yeah. Just would be interesting to know where that gap is. I don't think I'd be the only one interested to know in that. And do we know why approximately 49% of abortions in California are performed for individuals on Medi-Cal? Is there a pattern or a demographic or some kind of pattern about why that's the case?

Okay. And that wasn't some statistic I just pulled up. I mean, that was from UCSF. That was a number from UCSF. The advancing new standards in reproductive health. So it wasn't some blog I got it from or something like that. Just seemed like a really high number that a percentage of the population of individuals getting abortions are on Medi-Cal.

This is because we have CHIP as part of our Medi-Cal program. And so those populations tend to be at higher levels. So that could be one reason why you're seeing a disproportionate amount of abortion coverage in Medi-Cal. There could be other reasons, too, but just wanted to note that as one possible reason.

It's like 14 million or so. It's about a third of the state, but it's like half of kids. and then for pregnant persons, I don't know what the participation rate would be, but it does vary quite a bit depending on the population.

Yeah, and as Mr. Konstantinos noted, there is a higher income threshold for pregnant people on Medi-Cal. So you have more than a third of the pregnant population that would be on Medi-Cal.

keep their babies and need maternal care? Absolutely. So we do pregnancy counseling. If the individual decides that they do want to continue that pregnancy, we can refer them for prenatal counseling. We can refer them for prenatal care. They can also return to us for women's health care post having their baby as well. But when they're pregnant, you don't provide

in my affiliate, we don't have those resources to provide those services, but we do refer.

So in the past, we did provide prenatal care, but due to the reimbursement rates, we weren't able to continue that. So it's helpful to hear you say that maybe if the reimbursements rate were more appropriate that we could take that on again. We certainly want to stand to support.

All right. I think all of my questions really have been asked by folks on the dais. So we are going to open up to public comments. So this is our item on reproductive care. If there's anybody in the audience that wants to speak to oversight of reproductive health state investments. You're welcome to come up to the mic and name organization and position. We're just going to check the hallway. Hi, I'm here to support the uncompensated care fund.

Thank you. Thank you.

Thank you.

Okay. Seeing no other public comment, we're going to move on to Issue 3 on our agenda. Issue 3 on our agenda, long-term care services and supports. And if you're a witness, please come up while I'm speaking. This issue examines three specific issues within California's community-based long-term care infrastructure. The status of wait lists for the home and community-based alternatives, or HCBA, and assisted living waiver programs, ALW. the transition of congregate living health facilities, or CHLF, into managed care, and the status of the moratorium enacted on the program for all-inclusive care for the elderly or PACE. Due to the limited space at the witness table, we may take each issue as a sub-panel. So we'll start with HCBA and assisted living waivers, And we've got DHCS that will provide a brief overview of the current status of both waiver programs with a focus on slot availability and current wait lists. And then we will move on. And if you could please introduce yourself before you provide testimony. And feel free to begin when you're ready. Welcome.

Thank you. So we're taking, just to tell the committee what we're doing, we're taking each issue for this panel separately, seeing if there's committee questions, and then we will go on to the next issue, see if there's committee questions, go on to the third issue, see if there's committee questions. At the very end of all of that, we will take public comment on Issue 3, which is long-term care services and supports overall. We also do have DOF and LAO here. Anything that you'd like to add from LAO or DOF? Good afternoon.

Thank you. So for this item on the HCBA and ALW, are there any questions from members on the dais? Assemblymember Bonta.

So we're happy to engage if you have providers who say they have capacity. That's one of the topics that we have for the congregate health living facilities where it is a waiver program that we are proposing. It's the next item to turn that into a managed care benefit. So that can be more broad and not be limited to caps or slots. But with regards to the other HCBA or assisted living waiver, not tracking excess capacity, that isn't being used today.

Yeah, please. Yeah, just to note, in response to Assemblymember Bonta, there is the wait lists. The programs do have wait lists. And so in that sense, not everyone on the wait list is currently making served, and that's correct. So that was your point, that there are wait lists and there's not enough ability for us to be able to provide the care. Correct. But kind of the point we were trying to make is that bringing those wait list numbers down and getting people actually enrolled in the program, part of the equation is just the slots themselves. But then the other part of the equation is making sure that there are providers who can actually serve those people once they're brought off the wait list. So there's the workforce kind of component of it as well. Okay.

Assemblymember Scheibel.

So we are at maximum capacity is what you're saying. We're maxed out. Which is why we have a wait list in terms of the existing waiver agencies that we have today or those that can be potentially brought online. There is processing of those applications, but we are tracking. We have a wait list.

The slot is just an informal term for the number of spots in the waiver. So the wait, I can't remember off the top of my head how many slots there are, but it's the number of people who can enroll in the waiver at a given time. And then the wait list happens once all the people, once all the slots in the waiver are full.

So the cost for these waiver programs, it has to be cost neutral or less. And so I don't have the exact number of the comparison of a waiver slot versus a skilled nursing facility stay, but it has to be no greater. So that's why we want to expand these and grow these because they are more cost-effective and individuals are served in their home or in the community. This is our goal, and that's why we've been adding slots, 1,800 or so for the different programs over the last few years, growing the capacity, but clearly, you know, individuals want this to grow even faster than we have proposed.

1,800 for one of the programs. Yeah, I can find it.

And then I believe it's 1,600. I can get that.

and kind of, again, it's to the point of we can increase the slots, but they may not be able to be staffed. And so trying to find the balance of where we think we are actually being able to increase capacity and provide true access versus a slot that is meaningless because there's no, you know, no nursing or whatever it may be that needs to staff. How are you determining whether or not you can actually have the workforce?

I don't think we have a quantified way to do that, but it is based on these conversations and the ability to process the applications and the time it takes to do that. Okay. I think given the, clearly the pretty extensive wait lists, it might be helpful if we get a little bit more granular and rely less on anecdotal information and more what the particular drivers are for either the workforce or whatever the other kind of friction points are in the increase, given the fact that this is a cost neutral and in fact potentially cost savings opportunity for

Assemblymember Patterson. Great, thanks.

Sure, I would say it's somewhere in between. So these are less policy sensitive and they more routine insofar as when states are able to meet sort of applicable federal authority requirements you know, 1915C waiver requirements, Director Boss mentioned, sort of budget neutrality being chief among them. We're able to demonstrate that any proposed increase in slots meets the federal requirements we ordinarily would expect federal approval. Typically, this happens sort of on a year-by-year cases. So based on the waiver year, we propose increased slots on a year basis. It takes months to go through that process, but we don't have to grovel if it complies.

That was a statement, I think, in that letter. Is there, in terms of getting these waivers, does that kind of thing come up? in those discussions about how the state's checking for fraud? Or I'm just wondering in terms of the federal checks and balances on that, how that plays in, if at all, to these particular slots.

Okay, great. Yeah, I mean, I think, you know, I mean, everybody's consistently supported, you know, IHSS, you know, in this building. And I think it's important, you know, component, obviously. I just want to make sure we do our part, not that we're doing anything different, but to, like, mess that up, right? Because it is pretty important to a lot of people. Last question on long-term care, just generally speaking, because I had recently met with a constituent who, unfortunately, husband has to go into long-term care. And she had mentioned something about awaiting some kind of federal approval or something for that. But is this a state – is there a separate federal long-term care program, or is that administered by the state, long-term care, just generally administered by the state?

for many years now. Haven't quite got there, but I do appreciate, you know, the back and forth, and I think we're going to get there one way or another, and I know we're all committed to it. So thank you very much for working with me on that.

Back on to the cost of the cost differential between skilled nursing facilities and the cost of waiver services.

Do you all believe that it makes more sense to try to ensure that we are maximizing our HCBA waivers to ensure that we are recognizing more cost savings?

Presumably those people would be in skilled nursing facilities that cost considerably more.

Right. So the number of people that we are trying to get into the lower cost service, i.e. the waivers, at $24,000 seems to make a lot more financial sense than keeping people in skilled nursing facilities at $110,000 per year. Just from a pure math perspective, that seems to make a lot of sense. Would you agree with that, Beth?

That the cost of HCPA waiver slots is less than the cost of long-term care slots?

Yeah. Okay, so given that fact pattern, what can we do to make sure that we are, and I heard Director Boss talk about the need to make sure that we are increasing the workforce. What can we do to make sure that we are providing the cost savings that comes with ensuring that we are increasing the number of waiver slots? What are some direct steps that we can take to make sure that we are saving $75,000 to $85,000 per patient?

Thank you.

Hi.

Long day.

Voscanion.

Sounds good. I will try to stick to it. Thank you for this opportunity. My name is Mary Ann Voscanian. I'm a registered nurse and the owner of a congregate living health facility, or commonly called as CLIFS. I'm also the president of the CLIF Association. This association was formed out of sheer desperation by a group of CLIF owners who recognized the need to fight for our communities and to keep our homes open for those who need them the most. A CLIF is a residential home with a capacity of no more than 18 beds that provides inpatient care, including the following basic services. medical supervision, 24-hour skilled nursing and supportive care, pharmacy, dietary, social and recreational services. This care is generally less intense than that provided in a general acute care hospital, but more intense than that provided in a skilled nursing facility. All of these services are provided in the community and in residential homes despite the many severe disabilities that our residents may have I am here today on behalf of patients who cannot here themselves Our patients are statistics They are young men and women whose lives have changed in an instant Car crashes strokes sports injuries and ALS are some examples. The average age in our facilities is just 44 years old. Many are quadriplegic. Many rely on ventilators to breathe. All require around-the-clock skilled nursing care. But despite everything they have lost, They have not lost their will to live meaningful lives. They choose to live in cliffs because we provide something different. We don't just provide medical care, but a home, a place that they can decorate their rooms with Harry Potter posters, celebrate birthdays with outings to a park, and when possible, go out into their communities to work and to go to school. With all respect to seniors, placing these individuals in nursing homes is just not inappropriate, but it is heartbreaking. Our patients deserve dignity, choice, and a quality of life that reflects who they are. This is represented by our guest today, Trevor, that you see before you, who made it all the way out from Los Angeles on a plane ride with the help of his family and nurses. Unfortunately, many others who wanted to be here couldn't because of the logistical challenges of traveling with all the equipment that is needed. Cliffs make this possible, and yet today, that care is at the risk of disappearing. Our daily reimbursement rate is $490. It has not increased by even $1 since 1980s. No COLA, grants, or even relief funds over the pandemic. Absolutely nothing. For over 40 years, through inflation, rising wages, skyrocketing costs, we have received nothing. Yet the cost of everything has increased since 1983. In 1983, you could buy a gallon of milk for $1. The median price for a home in Los Angeles was $49,000. The median price today in L.A. is about $1 million, which is a 95% increase. CDPH licensing fees for our license type have gone up by 700% in the last 10 years. And not to mention the cost for staffing, insurance, food, medical supplies, compliance costs, and all the other things that go along with operating a cliff. We are doing everything we can to hold on, but we are definitely reaching a breaking point. We want to pay our staff what they deserve. We want to maintain safe, comfortable homes for our residents. We want to invest in the equipment needed to provide the level of care they require. But right now, even small improvements like installing a wheelchair ramp can wipe out what little financial cushion we have left. And I want to be clear, this is not about profit. This is about survival. Without support, these homes will close. And when they close, our patients don't just lose a place to live. They lose their home, their stability, and their community. Many have nowhere else to go. I also want to remind you that a rate increase for CLIFS was approved in 2024. For a brief moment, we felt seen. We felt hopeful. But that increase was tied to Prop 35 MCO tax initiative, and when that passed, our increase was taken away. I want to remind you that CLIFs are also carved out of SB 525 healthcare minimum wage law, but we still hire from the same workforce pool. So we have to pay competitive wages in order to retain staff. Additionally, we cannot build these costs into our rates as many other healthcare providers can. So once again, we are left with nothing. Today we are asking for a one two emergency bridge funding less than million from the general fund to keep our doors open until the transition of 1915 waiver is completed by DHCS We understand the state is facing difficult financial decisions We are not asking for a permanent solution today We are asking for time, time to survive, time to continue caring for the people who depend on us, time to ensure that these patients are not forced into institutions that cannot meet their needs. CLFS can and should be part of the solution, providing appropriate, cost-effective care to help relieve pressure on hospitals. But we cannot do this without your help. In closing, I ask you to think about the people behind this request, individuals who, despite unimaginable challenges, still want to live with dignity, purpose, and a sense of home. We are doing everything we can to give them that. Please help us continue. Thank you so much.

My name is Trevor.

I live in Chesma, California.

New South.

Yes.

Yes, I have.

Yes.

No.

Yeah.

Yeah, sure.

Yeah.

Yes.

Okay.

Oh, okay.

Thank you for being here at this late hour. I'm Trevor's mother. I came up from San Diego today with him on a plane for the first time, which I never thought would be possible. After his injury, catastrophic injury, two years ago, he was in ICU for a month, and then the hospital basically said we need to send him to a skilled nursing home. and I thought he would recover there enough to resume his life, but that did not happen. And so I found out about a congregate care that I was able to get him out of a nursing home. Sean was able to get him out of a nursing home because this is available. And I really had no idea that these type of homes are congregate care is at risk of closing because they can't afford to stay open. And so I totally support this emergency fund to keep them going. It doesn't sound like a ton of money compared to what is being asked and what will supposedly happen in a couple years. But I'm not quite sure what else to say other than my son would be laying in a nursing home still. He may have not made it this far because I had to hire someone because he lived in Los Angeles and I'm in San Diego to just basically make sure he was getting the care he needed in the nursing home until I was able to get him to a congregate care home. And the kind of care that he had there is nothing compared to what he's getting here. And he gets out of the house. He in a wheelchair that they didn allow him to have at the nursing home He was basically just laying there It like a warehouse type of situation it so sad So anyway, thank you for hearing us and being here and we appreciate your consideration for this funding. Thank you.

We do.

Thank you so much for being here. So I was happy to carry the budget request for the CLIF funding. and one of the things that I thought was so important when we've had conversations in the past is how much savings comes from actually having people in the cliffs. Obviously part of that is you haven't gotten a raise since the 1980s, which is not the good part of it. But do you remember kind of how much hospital care was versus SNF care versus cliff care? In terms of a daily rate?

Okay.

I'm not sure if you have a flight, so I want to get a question into you too. But yeah, how much, if you want to come up to the desk, and how much hospital care is versus, or SNF care compared to CLIFFs.

I'm Ron, one of the members of the accreditation. And I did some studies. In the ER, if you go, it's about 5,000 a day. in the ICUs, it's about $10,000 a day in hospital care. And I work at our local trauma one levels. I'm a nurse practitioner. It averages about $5,000 a day in hospital stay for regular patients. So given the acuity of these types of patients, it ranges between $5,000 to $10,000 a day in hospital care. And these patients are Medi-Cal beneficiaries, which means our Medi-Cal budget goes to these types of patients.

$490. $490.

So $5,000 to $490,000, basically $500,000, right? Yeah. And $490 includes everything that I mentioned, housing, skilled nursing, medications, DMEs, activities, food. Right. It's an all-inclusive, right?

Right.

Thank you. Let me just see if there's – are there any other questions or comments from the committee members for these particular witnesses?

Yeah, absolutely. Thank you to Trevor's mom. I'm sorry I missed your first name.

Karen. Karen. But I think Trevor's mom is a beautiful reference. Karen, can you just share a little bit who else is in Trevor's home?

Yeah.

I just want to say that that we get a lot of people,

And I am going to have to ask you to wrap it up. Not because we don't want to hear.

We are absolutely desperate.

Thank you. Thank you. This was Trevor laying in the nursing home before he went to Newstart. Terrible. Thank you so much, Trevor, for making your way up to Sacramento on the plane. I really appreciate you being here. Any other questions from members? I want to say thank you also to all three of you and appreciate you. You're welcome to stay. I don't know if you have a flight. We do. But we're happy to answer questions. We've been traveling since 4.30 a.m., so we're happy to finish. I know. We apologize for making you wait so long, but really appreciate all of your efforts. Appreciate your services. Trevor, appreciate your strength and your journey. That has been very difficult, and I appreciate you coming here. And I know that our committee has dug into this issue quite a bit. Ms. Schiavo has been an absolute champion on this issue last year. This year, it's actually why it was on the agenda today. So we're going to turn it over to DHCS to add a couple of minutes, and then we will see if members have questions after that and then move to public comment. Thank you.

Any questions from members for DHCS?

Thank you. Anything familiar or anything else? Any questions from committee members? Vice Chair Tangipa? Budget Vice Chair Tangipa?

I don't think we have those numbers in front of us, but that sounds like that could be right. We just don't have those numbers in front of us.

Yeah, it's in that range. It's over $200 billion estimated for the budget year.

sure I would say one one place to highlight is in our pharmacy spend noted earlier in 2022 this is gross spend, so pre-rebate, but just to give you a sense, in 2022, it was about $14 billion in pharmacy spend in the Medi-Cal program, growing to about $24 billion in 2025. So you can see a significant increase in pharmaceutical expenditures. For that reason, for example, last year as part of the 2025 Budget Act, we eliminated GLP-1 coverage for Medi-Cal program. We had seen close to 200% an increase in kind of utilization and cost in that space. And so that was one of the budget proposals that was approved as part of last year's budget.

So I will say for a GLP-1, for example, that has been a covered benefit for weight loss, I think, starting in 2007-8. And so it was covered. But with the new drugs that have become available, that's where we saw the increase in utilization. So back in 2007, 2008, very low utilization because there weren't as many drugs that were available in this space. And then, as we all know, over the last few years, just the more availability of these pharmaceuticals leading to more utilization in the Medi-Cal program. So there are expansions of benefits, expansions of populations, increased rates. We've done some rate increases over the last few years. So I think those are the three main levers of how these increase in expenditures in the Medi-Cal program.

Well I think I would highlight some of the things that we done with regard to CalAIM and some of the community supports where we are actually seeing you know expenditures in new services to support an individual But we know that that's offsetting reductions in terms of long term care, hospital services, et cetera. So there's some offsetting additions of things that we've done as kind of the legislature and the administration together. But we are recognizing some of the offsets as well.

I would also note, just generally speaking, health care across the nation are going up. Medi-Cal is not immune to that. So you can see just general rate increases for Medicare, for commercial coverage, for employer sponsor coverage. It's going up nationally, not just in the Medicaid space.

I can't answer that question. So I'm not sure about the – I'm sorry for the awkward leaning here. I'm not familiar with other states, too, but I did want to note that when we're talking about Medi-Cal cost increases, it does get a little complicated because Medi-Cal has a very complicated financing structure and there's a lot of moving pieces. And it depends a little bit what years you're comparing to and also if you're comparing to just general fund spending or total funds.

You know, we – if we're comparing to 2022, that would have been before the MCO tax increase, for example, where the state also sought to increase directed payments. That's like a $22 billion increase alone in the budget year. And that – those are mostly, you know, non-general funds. Those are on a total funds basis and they mostly reflect, you know, additional federal funds coming to the state. And those are legislative choices. So that it does depend a little bit what you're comparing to.

And again, there's no smoking gun there. There's there's managed care rates. There's provider rate increases. There has been some, you know, the aging population has meant there's more seniors in the in the program.

Another expansion that I'm sure you're aware of is the sort of expansion to comprehensive coverage for undocumented populations. A lot of that had occurred already by 2022. So for comparing just those years, I don't know if that would explain that much of the growth from them. But if you're looking over a longer time horizon, that is a bigger part of the growth, of course.

And I appreciate that.

I understand how important this is to get it right.

Sure. So, I do not have the hospice spend in the Medi-Cal program. I'm happy to follow up with that. I just don't have that at our fingertips. So, we can follow up with that. But, I mean, we take fraud, waste, and abuse very seriously at the department. And our Audits and Investigation Unit works very closely with the Department of Justice and goes after providers that we can find credible allegations of fraud and goes after them. I think a lot of the media out there recently has been in the Medicare space as well and so kind of working together with our federal partners to identify those providers and take action It the thing that really terrifies me because you know and I seen the governor and Attorney General Rob Vonta

Sure. I will say over the course of last year when we passed the trailer bill language, working with the legislature to allow plans and the state to allow prior authorization or kind of utilization management, there was a law prohibiting that prior to the passage of the bill last year. And that goes into effect in July of this year. So that is one safeguard. We've also implemented what we've called notice of election where we have to get a provider and individuals kind of basically saying, yes, I am opting into hospice care and not allowing payment until we have that form on record. And similar with our managed care plans, a similar process to really have some extra checks that go into a place to ensure that the providers who are billing us are actually providing the services to individuals who are wanting those services. So we've added those two mechanisms in the last year and are also thinking about other ways to kind of continue to increase our ability to domain oversight of our hospice providers.

So I think hospice care specifically has been a priority risk area both for the Medicaid program and the Medicare program. So over the past years, we have...

Yeah, yeah. So this is not new. This is not news to us. I think that's why the state imposed a moratorium on new licenses for hospices several years ago.

When you say pause the moratorium, do you mean they opened it back up?

They haven't opened it, it's still.

My understanding is that it's still in effect. Have to learn more about that though.

Yeah, so I think we collaborate with.

Yeah. Right. So the emergency regulations were pulled, but the pause or the moratorium.

That is the Department of Public Health. And so I don't.

the California Department of Justice under our Attorney General, finding that, it's a great job, and also the federal government finding that, it's a terrifying

Are there any other member questions? Assemblymember Bonta?

I think Director Basu mentioned that essentially because we have invested in CalAIM and other kind of community enhancements. and benefits, we know how much that has cost us in terms of care, but we don't know how much it has saved us over time. And I think that that... We do, so last spring in May, we released a report to CMS as required by our special terms and conditions showing the cost effectiveness of our community supports benefits. So for example, this community, I don't have the numbers you may But this community support resulted in a savings in our skilled nursing facility stays, our acute hospital stays. And so we do have actual, we had to prove it to the federal government, essentially, and we do have that information.

Well, our rates, for example, for inpatient services would increase to a certain extent otherwise for these services. And so the rate increases are not as significant. Just base rate increases are not as significant as they may otherwise would have been without community supports.

Yeah, I mean, to your point, we don't budget the cost avoidance, right? It would have been 11% compared to the 8% it is because of the cost avoidance of not having to provide inpatient services, for example.

Sure. So just to sort of add to my previous comments on the managed care data, the data that we could access went up to calendar year 2023. And so we didn't have a clear view of the growth trends in the more recent years. But even for the years that we could observe, there were some limitations. The data is generally not disaggregated enough to show precisely where the growth is concentrated. There are some breakouts by service category, but they tend to be fairly broad. So for example, we cannot distinguish between rate growth for emergency room versus outpatient facilities. There's a category for professional services, but we cannot distinguish between, say, primary care versus specialty care. The data also doesn't show breakouts by immigration status. So it's difficult to understand how spending has evolved for those with unsatisfactory immigration status as the full scope expansions have occurred. In the area of pharmacy spending, we do have some data on growth spending at the drug level, but it doesn't show the net spending after the drug rebates. It's also our understanding that the growth spending data include only claims that are connected to the federal drug rebates. So that would largely exclude, for example, claims that are state-only funded for UIS individuals.

Any other questions? Sorry, I did have one other question.

So a lot of that cost will fall on counties. I think you might be hearing that in an upcoming item. but generally I think we have been working with counties to better understand the fiscal estimate. We understand that the administration may be coming back in May with a proposal around that. The administration has a proposal around funding increases in the CalFresh area for eligibility admin but not for Medi-Cal but we understand that the administration might be working on that a little more but generally there's been a lot of, we've seen a lot of sort of requests from counties, and so we're still working through that to better understand it. But counties have been compiling sort of what they assess the workload impacts are on them.

And we do have that, I think, on the next item. We'll dig into that one. Assemblymember Scheibe.

Everybody can answer. Yeah, I think that would entail a little bit of thought in terms of the interaction. The rates are set, kind of actuarially adjusted, and so a lot of it really depends on the chart of judgment on the actuaries on what they sort of assess the impacts of OCA would be if there are impacts. Over the long run, you know, eventually what happens is the actuaries look at data in the past, and then they make assumptions about what costs should be in the future, kind of in the present. So they look at data, maybe that's about two years old, and then they say, okay, what are sort of the costs and utilization increases that have happened in the last two years? So what I'm saying is eventually as OCA's regulations come into effect, You would start seeing that in sort of the past data, but it could take a few years for that to sort of be, you know, actualized. But I would say it's uncertain, you know, the exact effect that might have. But there could be effects. It's just hard to gauge. So the only thing to add is that under federal law, we have to make sure our rates are actuarially sound and have to be approved kind of through CMS's process. And so we can't be bound by any kind of rate cap that maybe OCA applies because of these federal requirements.

Yeah. Yes. We collect data from our plans, their utilization, their cost, et cetera, And that's we go through an actuary process of, you know, using that, applying the trend factors that may be appropriate to kind of forecast the utilization in the future. And that's through an actuary process.

I mean, there are adjustments that are made based on policy decisions that might have come into play. And so there are adjustments based on what they see in the utilization and kind of any kind of leverage that might need to be adjusted to reflect, you know, the future reality of something.

So it's our understanding that that data is available and the administration does have the ability. There might be certain sort of concerns around confidentiality depending on sort of how disaggregated you make the data, but it's our understanding that for the kinds of analysis that would be helpful, it is feasible to obtain that level of disaggregation for different service categories and populations and regions. I just also wanted to add that we are working with the department on some of the getting, we have some outstanding requests we've been working with them on. So they have been, they've told us, they've indicated they've been working on some of those data too.

We do not.

I think part of this too right now, we're working on May revision. And so all of these numbers are all changing. I think that's part of the concerns that they're raising about the timeliness of some of this information. It is just a matter of the timing of when it's available and when the different slices of it can be available. But we are working with the LAO to assess what kind of data we can get them.

we, because of our kind of confidentiality with regards to our rebate negotiation, we do not provide net spend or net kind of information on the pharmacy. I see. Okay. Thank you.

Yes, and thank you. I did just want to ask one more question, too, and I was looking at this letter in response to some of the congressional investigations that have been happening. So it says in the letter that CDPH convenes a multi-agency hospice fraud task force with partners, including California HHS Agency, DHCS, the California Department of Social Services, the DOJ's Division of Medi-Cal Fraud and Elderly Abuse. So the question that I just wanted to ask, too, is what was the role that the task force played in these recent arrests and investigations?

again and so don't don't want to misspeak so how does dhcs participate on that task force

Do you think it would be beneficial if we had more resources allocated towards the fraud task force portion that falls under DHCS?

Just the main reason why I'm just looking at this hospice fraud task force and when, you know, they list DHCS underneath it, but it doesn't sound like that is what's happened either recently. I'm just trying to figure out what is the role currently? Is there a subdivision of DHCS specifically allocated towards the hospice task force?

Is there a point person that I can reach out to or anybody? And if I could always reach out to you after this, if there is somebody that I could spend some time.

Perfect. I appreciate that. And I'd love to ask the chair, too, in the future, if there's ever a time where we can have, whether it's a subcommittee or something, to really look at how some of the money is allocated, especially on the hospice side too. I think that's an area that is extremely important when we've seen, I mean, unfortunately, large-scale issues. And so that's just a simple ask that I'm making, and I appreciate you. Thank you.

and how can we have the data to make better decisions for the people of California. I think it is what our constituents want. So my hope would be that DHCS could commit to specific dates, specific deadlines, specific deliverables when it comes to information sharing and a deeper level of detail about why costs are the way they are and what's driving that. And I would suggest, even though it's hard to wrap our arms around those cost offsets that you mentioned, be part of that, right? So if we're starting to spend more money in one place, it is likely decreasing somewhere else because it's going into preventative care, as Assemblymember Bonta alluded to. So I would love to have that kind of data for us to be able to make decisions on. I have just a couple questions around the SNF and the WQIP. And this is a rare instance where employees and employers are jointly unhappy with what going on and jointly frustrated and jointly feeling like employees are going to lose out and patients are going to lose out And so just kind of wondering the level of savings if you could talk about with the WQIP you said that was a decision made last year but the understanding I think was that that was a delay. There was going to be a delay, that there was going to be reconsideration on some of these pieces potentially coming back. And there's a lot of disappointment out there around the way this has all happened. So as part of the 2025 Budget Act, the budget includes a reduction of $150 million as part of the WQIP that we took action on given the state's fiscal situation. And as part of this year's budget, we maintained that elimination but pushed out the renewal of the skilled nursing quality assurance fee as we are embarking on a robust stakeholder process now. We want to change it from a cost-based reimbursement system or where we pay our skilled nursing facilities to one about value and alternative ways to think about that. And that's what we are undergoing right now. We need more time in the stakeholder process, so we are pushing out the renewal one year. I will note that skilled nursing facilities are one of the only Medi-Cal providers that get an annual rate increase. Every year they get a rate increase compared to other providers that are not guaranteed that rate increase. It's 3.7% this year to about, equals about $240 million of a rate increase compared to last year. And so recognizing the WQIP is not there, they are still getting a rate increase to provide these services. And in pushing it out, is there a cost, it's not around cost savings, you're saying? No, it's really just, it's that you need more time. Right. Working, I mean, I think the stakeholders appreciate the time that we're taking and the stakeholder process that we're engaging in. But we're not ready that launch this fall. and really want to be thoughtful in this space and not just continue to do cost-based reimbursement, which we've done for decades. And there's some concern, at least concern brought to me, that some of the funds that are used to pay employees aren't really there and how that is going to work out during this delay, basically. I mean, the WQIP goes to the skilled nation facilities who meet certain criteria and how they use those dollars. I mean, we don't necessarily govern. govern. It's kind of incentives to the skilled nursing facilities if they meet certain metrics. And so, you know, but they will get a rate increase that they could use to potentially offset how they were thinking of using the W-BID. Okay. Okay. Well, thank you for that. Are there any other questions from members? If not, we're going to move to public comment on this issue. Number four, DHCS program budget, January proposals and trailer bills. And if I could ask you to just state name, organization, and position. I think it would be helpful to the folks that are waiting for the next issues coming after you. Hello. Kelly LaRue here on behalf of Eli Lilly. We appreciate the discussion on pharmacy pricing and would appreciate the conversation being reopened around coverage of GLP-1s. Thank you. I'm sorry. Good afternoon, Chair and Member. My name is Austin Bradley. I'm the Director of Nursing at Merced Behavioral Center and Educational Chair for CAPS Progress Valley Chapter, representing Merced County, Tuatlami County, and Stanislaus County. I'm also a mental health advocate of over 20 years. I'm here to respectfully oppose the current budget trailer bill, unless it includes the restoration of the WQIP, which we're discussing even before COVID, California was already facing a health care workforce shortage. And now that we've reached the occupancy levels. I just going to ask for name organization and position I hear that you oppose the WQIP Anything any other position that we need the funding also for behavioral health services for SNFs which they are sorely lacking Thank you. So name organization if you have one in position. My name is Maxine Neal, and I'm the administrator of Modesto Post-Acute in Modesto, and I'm definitely opposed to taking away our WQIP money. We need it to, I can staff so much better and give a lot to the employees that I couldn't do without it. So please bring it back. Thank you. Good afternoon, Yvonne Chung with the California Association of Health Facilities. We are the trade association representing most of California's skilled nursing facilities. We are speaking in opposition to the extension of the methodology unless the OOEQIP funding is restored. I would add that the general fund savings is $150 million, and without that, we are also losing a matching $150 in federal drawdown as well. So we are concerned that if we continue to not fund that program, we're eventually going to permanently lose that drawdown. Thank you. Good evening, Madam Chair. Connie Delgado on behalf of Point Click Care with an opposed and less amended position unless the WQIP is included. Thank you. Thank you to everyone on the subcommittee. My name is Jo Miller. I'm a registered dietitian and I represent the California Academy of Nutrition and Dietetics. We represent over 3,000 dietitians in the state of California and there's 11,000 or greater than 11,000 dietitians in California. Many of us work in skilled nursing facilities, and we provide very critical, essential support to food and nutrition services. We are opposed to the current budget trailer bill language, unless amended to include the WQIP funding. Food and nutrition services is a very dynamic source of employment, and we are critical. Thank you. Thank you. If you could just give your name, your organization, and your position. I'm Rhondi Crowley. I'm the wife of a, my husband went to Asian Care Center with a severe stroke, and I saw firsthand what it was to have qualified staff that were paid well and were respected. And I really oppose the Department of Health Care Services budget trailer bill related to the skills, nursing, and financing reauthorization, unless it includes the reinstatement of the Workplace Quality Incentive Program. The staff are invaluable. I saw it every day for two years. Thank you. It's important that you bring this back. My name is Martins Basharoun. I work for Cypress Head Care here in Sacramento, and I'm here to support WQ. I would like the restoration of WQ because it helps for quality of care, the employee, the employer, and for patient care as well. Thank you. Thank you. Madam Chair and members, Rand Martin here on behalf of Aviana Healthcare and California Association for Health Services at Home in support of Ms. Pellerin's and Ms. Stephanie's request for a 40% Medi-Cal rate increase for private duty nursing. Talk about cost avoidance. Thank you, Madam Chair. Madam Chair and members, Norlin Asprek on behalf of Prime Home Healthcare, a provider of private duty nursing services. echo my comments of my colleague. I'm also here on behalf of PACS, which is one of the largest skilled nursing facility operators As previous speakers have noted we oppose the DHCS budget trailer bill related to the skilled nursing facility financing reauthorization unless it includes a reinstatement of the W Thank you. Good evening, Madam Chair and members. Jack Anderson with CHIAC representing our local health departments. For the California Children's Services Program, in the current year, county programs are underfunded by $109 million, and we anticipate a similar funding shortfall in the in the budget year as well so CHIAC respectfully requests that the legislature provide sufficient funding based on program caseload and DHCS staffing standards. Thank you. Good evening Madam Chair and members. Jessica Moran with Capital Advocacy on behalf of the Occupational Therapy Association of California and the California Association for Nurse Practitioners have a support of amended position on the department's trailer bill language around skilled nursing facility financing and request that we restore the WQIP. Thank you. And you can sort of move on up so we can fit more people in. And so name organization and your position on the issue. Hi, my name is Kirsten Mozak. I am a SAIU member. I work at the Pines of Placerville Healthcare. And I would like you to restore the WQIP. Thank you. Sure. My name is Carol Silva. I'm a CNA at Sherwood Healthcare. I want to reinstate WQIP. Hi, I'm Adam Bernstein, a former caregiver in Nevada County asking you to restore the WQIP program. Thank you. Hi, Jennifer Snyder with Capital Advocacy representing Flagstone Healthcare, which operates 90 skilled nursing facilities in the state of California. We are also opposed to the governor's or the department's trailer bill, which would extend the reauthorization of the skilled nursing facility rate for an additional year without the inclusion of WQIP because that program is essential to these flagstone facilities and their ability to provide employee services and supports, retention, and recruitment programs. So thank you. Madam Chair, Tiffany Whiten with SEIU California. On behalf of SEIU California and our 21 responsible owners and operators of skilled nursing facilities, we represent over 500 nursing facilities in the state of California, and we all are opposed unless amended to include the WQIP. Thank you so much. Thank you, Madam Chair. Andrew Mendoza on behalf of the Alzheimer's Association. Out of respect for your time, we are opposed to the elimination of the WQIP. Thank you so much. Best comment. Thank you. Best for last. We are going to move on to Issue 5, HR1 and financing impact on Medi-Cal and providers. And I understand that we do have somebody who has a nine o'clock flight from the California Primary Care Association. If she is here, he is here, we're happy to have you come up first and testify. So this issue is going to examine the impact of H.R.1 on the three key financing mechanisms that support Medi-Cal providers, the MCO tax, the hospital quality assurance fee, and state-directed payments. We're going to look at the downstream consequences for hospitals, clinics, and patients they serve. So we've got LAO's office, the California Hospital Association, the California Association of Public Hospitals, the District Hospital Leadership Forum, and then California Primary Care Association. I think what we're going to do for members up here on the dais is we will have our witness from California Primary Care Association give her testimony you're welcome to stay as long as you can there Maybe member questions, but I know you've got a nine o'clock flight, so we want to get you out of here and then we can move on to the rest of testimony and member questions. I very much appreciate that. And welcome. Thank you so much. So thank you, Madam Chair and members of the committee. I'm Dr. Christine Park. I'm a pediatrician and the chief medical officer for Northeast Valley Health Corporation, a federally qualified health center serving communities across the San Fernando and Santa Clarita Valleys in Los Angeles County. The financing decisions before this committee are not abstract budget line items. They're decisions about whether clinics like mine can continue to exist and whether the patients who depend on us will have anywhere to go. California's community health centers operate nearly 2300 clinic sites and serve 6.2 million Californians annually. This includes one-third of all Medi-Cal beneficiaries while providing nearly one-half of all Medi-Cal primary care visits. In 2024, community health centers were among the strongest champions of Prop 35, which made California's MCO tax permanent and dedicated increased Medi-Cal funding to providers and services. We backed it because California has chronically underinvested in primary care, a gap that the state's own Office of Healthcare Affordability has formally recognized. FQHCs are one of the most cost-effective parts of our health care system. In 2023 alone, collectively, we saved Medicaid $38.6 billion nationally. So like hospitals and other Medi-Cal providers, health centers will feel the direct impact of HR1's changes to California's MCO tax financing structure. And the coverage side impacts of HR1, including work requirements and more frequent redeterminations, will accelerate Medi-Cal disenrollment, shifting uncompensated care costs directly onto health centers who are legally required to serve all patients regardless of coverage. So FQHCs, as you know, are paid through the prospective payment system, PPS, and this sustains the comprehensive care model our patients depend on, primary care, dental, behavioral health, and enabling services that keep patients connected to care. At the visit level at Northeast Valley, 82% of the reimbursement for a Medi-Cal patient comes from PPS, and the managed care organization pays 18 cents on the dollar. The 2025 Budget Act eliminated PPS for state-only Medi-Cal populations, including individuals for unsatisfactory immigration status, beginning July 2026. Layered on top of HR1's MCO tax and coverage changes, California health centers are projected to lose at least $1.6 billion in the upcoming fiscal year alone, with losses compounding in every year that follows. At Northeast Valley Health Corporation, 15 to 25 percent of our patients have UIS. We are projecting approximately seven million dollars in losses this year growing to 14 million dollars by 2027. To prepare for these losses we have been forced to decrease clinic hours including the evenings when patients school and work days are done We have found some cost savings this year but we may need to reduce services or staffing in upcoming years I like to emphasize that health centers cannot segment care by immigration status So cuts to UIS reimbursement reduces resources for every patient at the clinic, low-income families, seniors, and children. And when patients lose access to primary care, they reappear in emergency departments, sicker and at far greater cost. So on behalf of California health centers, our preferred ask is to fully reverse the elimination of PPS for state-only Medi-Cal populations, including UIS communities. But our minimum ask is to delay implementation for one full fiscal year to July 1st, 2027, to allow the legislature, the administration, and stakeholders to develop a sustainable alternative that preserves reimbursement, protects patient data privacy, and maintains a pathway back to full scope Medi-Cal. This is not only a policy question, it's an operational question. With fewer than three months until the scheduled implementation date, DHCS has yet to issue any guidance to FQHCs on how to implement a billing compliance and data infrastructure change of this complexity. A delay is not a retreat from fiscal responsibility. Rather, it's the minimum threshold for implementing such a consequential policy without causing unnecessary harm. California's community health centers are the backbone of the primary care safety net. The decisions that this body makes in the coming weeks will determine whether that backbone holds, and I urge you to protect it. Thank you very much. Thank you. Do you have time? If there are a member questions, you need to go. Thank you. Thank you. Thank you for taking the time to be here. We really appreciate it. We really appreciate it. Okay, we are going to move on next to LAO that will provide a brief overview of California's hospital types, key medical financing mechanisms, and a high-level summary of how HR1 changes those mechanisms. And we are going to ask Elio if you can keep it to five minutes. I know it's very technical. But after you, we've got four other groups at least that are going to be presenting on this panel. Sure. So we have a handout that should be distributed that we can speak from. The handout is dense and covers more than five minutes of material. So I think I'll try to stick to the Cliff Notes version of it. But it is available as a resource if you have any questions. I really want to just focus on the handout on four key pages. The first is really page two, and page two provides that first issue that the chair had discussed about what are the kinds of hospitals. And really, when it comes to Medi-Cal financing, you can think of there as being three key kinds of hospitals. Private hospitals, county and UC hospitals, and district hospitals. And these distinctions are important because these hospitals are paid somewhat differently in Medi-Cal, and then they also have somewhat different financing arrangements, which we describe in the handout. Now, you'll also hear throughout the hearing something called a safety net hospital. Safety net hospitals are hospitals that disproportionately serve Medi and low patients and those who are uninsured And because they serve a higher share of uninsured patients they tend to have more care that goes uncompensated There are both private and public safety net hospitals, so both kinds of hospitals function as safety net. And because they're safety net hospitals, they also qualify for some additional federal funding. The next page I want to turn your attention to is page five. Now, page five really has a figure that talks about provider taxes. So, you know, there are two key financing issues before you in this issue. One is on provider taxes, and the other is directed payments. And I think this committee has talked about these issues quite a bit in the past, so I won't elaborate on them too much. The key provider taxes at issue here are the MCO tax and the fee on private hospitals, which you'll hear more about. when hospitals come and describe it. And then directed payments are ways that the state can direct payments through the managed care system to providers. And they effectively function like supplemental payments. So the plans pay a sort of base rate, and then the directed payment provides an additional amount on top of that. And so that's become a key funding mechanism for hospitals and Medi-Cal. But on page 5, what page 5 shows is a figure that shows the federal rules around provider taxes. And these federal rules are changing under H.R. 1, and so they're part of the key discussion here. And a key concept in particular that's important for today's discussion is proportionality. So the federal government cares about proportionality. They care about whether the state charges a higher rate on Medicaid or non-Medicaid services, because generally the higher the charge on Medicaid services, that tends to result in a higher cost to the federal government, Higher charges on non-Medicaid services tends to shift costs onto private health care and ultimately the consumers. So the federal government cares about proportionality because it's trying to limit its costs in the Medi-Cal program. You can get a waiver to proportionality, and the state has gotten waivers to that over the years. And that's really kind of what's at heart here. Next page I want to turn your attention to is page eight. And page eight describes sort of the three key HR1 changes that you'll be hearing about on this issue. And as I said, there really are three key ones. The first one are changes to those proportionality rules. So the changes are somewhat complex, but in effect what they do is they limit the state's ability to get a waiver from the proportionality rules. Moving forward, the state will have to charge the same rate on Medicaid and non-Medicaid services, and getting a waiver from that will be much harder. The second change is on a revenue limit. So in addition to having rules around proportionality, The federal government also imposes a limit on how much revenue you can generate from provider taxes. And H.R. 1 gradually reduces that limit over time to almost half of what it is now. And then the third change would be the limit on directed payments. So previously, prior to H.R. 1, in the managed care system, the state could – managed care plans could pay hospitals as much money up to the amount that's paid on average among private health insurance. And H.R. 1 reduces this limit to what is paid in the Medicare program. And Medicare tends to pay a lower rate than what's paid in private insurance. And that decrease also happens over time. So the final page, again, are pages 8 and 9. And these really talk about what the effects of these changes will be on the MCO tax, on the private hospital fee program, and on directed payments. But the bottom line is generally speaking it will result in reductions in all three areas The reductions work a little bit differently So for example in the MCO tax it not so much that the H requires a reduction to the MCO tax It's that we also have Proposition 35. Proposition 35 places a limit on how much you can charge private health plan enrollment. And so because of that, to equalize the rates, absent an amendment of Prop 35, the state can only reduce the Medi-Cal rate. It can't increase the private health plan rate. And so that results in a reduction in the MCO tax. For the private hospital fee, it's a little bit more gradual. HR1 basically prevents us from pursuing an increase to the private hospital fee in 2025 that the state was pursuing. But it sort of requires us to have the same level that we had in 2024. So it's more of a missed opportunity. But then moving forward, eventually there will be rules in time that could trigger some reductions to the private hospital fee. And then similarly, it's our understanding that the state, the managed care payments do exceed what Medicare pays in aggregate, although data on how much it exceeds it is sort of unknown to us at this time. And so pinpointing that exact reduction is hard to do. So that's really the gist of the handout. I do want to kind of leave with a couple of key points. The first is that this is an area where our understanding is still evolving. Federal guidance is still emerging. And so the estimates that you'll be hearing throughout the hearing are subject to some change over time as we get more information and more guidance from the federal government. The other thing I would really emphasize is when you're hearing from providers about the fiscal impacts, it can be helpful to keep in mind that in some cases what we're talking about are missed opportunities. We're not getting that increase that we had planned to get. In the case of the MCO tax, that increase had only been around a few years, and the rate increases that were going to go to hospitals really had only recently come into fruition. In other cases, reductions will be an actual reduction to hospital operations. This is because hospitals are relying, for example, on the private hospital fee to help cover costs. And so reductions to their current levels would potentially require some operating reductions. So when we're thinking about fiscal effects, it can be helpful to try to differentiate between what sort of an opportunity cost versus what is a cost to today's service level. Thank you. And we will now turn to DHCS. Thank you, Madam Chair. Tyler Sadwith, Chief Deputy Director at DHCS, happy to provide brief information about the hospital value strategy budget change proposal as requested, as well as updates on the HCOF hospital quality assurance fee and the MCO tax. The department is requesting 23 permanent positions and one-year limited-term resources equivalent to three positions, an expenditure authority of $10,664,000 total funds, of which the non-federal share are administrative fees or reimbursements in budget year to develop, implement, and sustain a comprehensive value strategy for payments in hospital settings in Medi-Cal managed care delivery system. Just as context, the department received one-year funding in 25-26 with the non-federal share comprised of a combination of reimbursements and the California Health Data and Planning Fund. This BCP provides ongoing funding for those positions and it shifts the state share entirely to reimbursements, which again are administrative fees derived on intergovernmental transfers. The department is taking a phased approach approach to the hospital value strategy with the initial phases focused on making existing state-directed payments compliant with the new federal requirements. Work is well underway, including policy research, data analysis, stakeholder engagement, and payment and program design. We have released a request for information and plan to onboard a contractor this year to convene a diverse stakeholder group to really inform the development of the landscape analysis, policy options, and a multi-year strategy and an implementation roadmap. This BCP has also contributed to the establishment of a new branch exclusively dedicated to hospital financing and the Medi-Cal managed care program. So just as context-setting as LAO mentioned, in recent years and especially from 24 to 25, the department has significantly increased hospital reimbursements through state-directed payments. So today as context on a statewide basis on on average, Medi-Cal Managed Care reimburses significantly higher than Medicare for inpatient hospital services and close to Medicare for outpatient and emergency services. And this is the result of intentional steps we've taken in recent years to improve hospital reimbursement through expanded state-directed payments. In addition to expanding the payment amounts, we're also expediting the timeliness so that we can sort of disperse those payments more quickly. HR 1 constrains state options and flexibility as related to hospital financing. So, as I just noted, we recently increased hospital state-directed payments to approximate and even exceed Medicare. This is critical, especially to supporting hospitals experiencing financial distress. However, H.R. 1 sets new limits on state-directed payments, so they do not exceed Medicare rates, which means we will have to be decreasing those state-directed payments over time to comply with H.R. 1. H.R. 1 also prevents proposed growth of missed opportunity in the hospital quality assurance fee. There's new limits on the amount of funding and also stringent new requirements on the tax model related to proportionality, as Elio shared. So given this landscape, the goal of the hospital value strategy is to support California to be better positioned to adapt to federal cuts and constraints and also really align payments for hospital care with the appropriate incentives, including quality and value. In terms of updates on the hospital quality assurance fee, this, as noted, is not compliant with new H.R.1 requirements regarding provider taxes being generally redistributive. The calendar year 2025 fee that we had submitted represents a significant increase to the current levels. We were notified by CMS that that is not approvable given the new HR1 framework. CMS gave us technical assistance to comport with the transition period that they have allotted for this fee. So based on the technical assistance, last month we amended the HCOF 9 tax waiver amount to match the level of the 2024 fee plus limited growth. So again, we submitted that several weeks ago. For the calendar year 2026 fee, we also submitted that HCOF tax model request to CMS in late March. Again this is representing sort of the reduced level consistent back to the current HCOF tax amount levels based on technical assistance from CMS In terms of timing there is no prescribed timeline in sort of law or regulation for CMS to review and approve either the pending 25 fee or the recently submitted 26 fee. Typically, based on our experience, approval can take up to three quarters. Based on significant back and forth and engagement with CMS that we've done, we do believe the 25 fee will be approved sooner. We continue to seek to understand the federal perspective on fees. I think the CMS is still sort of evolving and landing on their policy analysis and interpretation of HR1. So based on our engagement with CMS we will identify potential future modifications and will adjust payment timelines in consultation with affected hospitals. In terms of you know looking looking beyond the transition period, HR1 requires that the department redesign the calendar year 28 fee to really reduce the tax burden on Medi-Cal, either by reducing the total fee amount or shifting the tax burden more to commercial hospitals in line with proportionality. So at this time, it's premature to provide a specific revenue impact. This is still sort of early stages of analysis. There are potentially multiple scenarios or pathways to comply, including some potentially with minimal revenue impact. And we think that the approach to this will be, again, further informed buyer engagement with CMS on their review and their feedback and their approval for the 25 and the 26 fees that are pending with them. Pivoting quickly to the MCO tax, again, this is not broad-based or uniform. It's not generally redistributive under new H.R.1 requirements. And we did receive a transition period from CMS, including through the new regulations that they've released. This transition period leaves the MCO tax intact through the end of this calendar year, which represents the full term of the approved tax waiver. And so all Proposition 35-supported investments will end at the end of this year, except for targeted rate increases for primary care, maternal care, and non-specialty mental health services. I want to highlight the challenges facing us as a state with redesigning the MCO tax in conjunction with Proposition 35 requirements, given new H.R. 1 parameters. Proposition 35 calls for a substantially similar MCO tax as of January 1st, 2027, and it limits the annual non-Medicaid tax to $36 million. So basically an H.R. 1 compliant tax with a $36 million cap on non-Medicaid taxes would amount to a total tax of less than $100 million per year. And this can be compared to the current authorized tax of $12.7 billion per year. Furthermore, the net benefit to the state of that new tax compliant with both H.R. 1 and Proposition 35, the net benefit would be approximately $6 million per year compared to the current net benefit of approximately $7 billion per year. So the department is evaluating options, including timelines for a future MCO tax given this landscape. That's it. Thank you. We have four more folks that are going to come up to the table. So appreciate not trying to kick you off the table. You been so kind to stay here all night with us and share really important information I know members are going to have questions for you We going to move next to the California Hospital Association We're also going to have, after that, the California Association of Public Hospitals and then the District Hospital Leadership Forum. So we will, as you're getting seated, we'll turn to the – we'll go in that order. So California Hospital Association, and please go ahead and introduce yourself. Then California Association of Public Hospital, please introduce yourselves. And then the District Hospital Leadership Forum, if you could introduce yourself. Welcome. Thank you. Hi, I'm Adam Dorsey with the California Hospital Association. So just very quickly, you know, we've had nine hospitals that have closed since 2020. And we've had an additional 16 that have only stayed open with the assistance of state government assistance. We've had 3,500 layoffs in health care in 2025 alone. And we now have 12 counties in California that do not have access to hospital maternity services. These are all kind of the situation that hospitals were in before the reductions associated with the BBB. And so we're in a tough situation that is getting much more challenging right now. And in recognition of all of the work that has been done and the structural budget deficit, what we're asking for is reseeding $300 million in the existing distressed hospital loan program. because it's a one-time investment. It does not significantly contribute to the structural budget deficit and will allow for hospitals to have a fighting chance at continuing to keep their doors open. This is not a permanent solution. This is kind of putting a finger into the dam and giving us time to fix the larger structural issues that we're facing. Thank you so much. and please introduce yourself and you can continue. Good evening, Chair Addis, members of the subcommittee. I'm Susan Ehrlich. I'm the chief executive officer of Zuckerberg San Francisco General Hospital. I'm also a primary care physician and I still see patients there. Just to tell you a little bit about ZSFG, we've been an essential part of the healthcare landscape in San Francisco for more than 150 years. We are the city's only trauma center. We're the busiest emergency department in the city. We're the only psychiatric emergency service in the city. And we are the safety net for the least well-served in our community. We serve more than 100,000 people a year or about one in eight San Franciscans. We're a major teaching site for the University of California, San Francisco medical school. School of Nursing, School of Pharmacy, and we also educate many other allied health professionals. Our revenues come almost entirely from Medi-Cal and Medicare. So this issue of H.R.1 is a big deal for us. The reductions to state-directed payments are catastrophic for our systems. We're doing everything we can to preserve access to services. things like working very hard on the way we see patients in the emergency department to reduce leave without being seen to increase block times in our ORs We doing everything possible with the money we have to be able to see as many patients as we possibly can And we do this because we know that by doing this, we will be able to sustain our mission. Otherwise, we can't do this. But HR1 creates a structural problem for us that operational efficiencies cannot fully solve. As the mayor prepares to submit his budget to the board on June 1st, we are already reducing more than 100 positions in the health department, as well as making more than $20 million of cuts to community-based organizations. And this is just even before the major effects of HR1 take place. We expect about 25,000 to 50,000 people in the city and county of San Francisco will lose Medi-Cal coverage. but they will not stop needing care. They will still come to our emergency department for everything from routine illness to needing life-saving care, and systems like ours will be forced to absorb the cost either through our Indigent Care Program, Healthy San Francisco, or by providing uncompensated care. And that pressure will not stay contained within our system, Because when our emergency department is full, every other emergency department in the county, including private and nonprofit hospitals, will also feel the strain with overcrowded EDs. Healthy San Francisco is a great coverage program that provides access to affordable and basic ongoing health care services for uninsured residents. But if 25,000 to 50,000 people lose their Medicaid coverage, that would increase the healthy San Francisco enrollment from today about 5,000 to about 30,000 to 55,000. And that would force the city to make some really unpleasant choices. We would either have to reduce the coverage pool. We would have to change the benefits or cutting the number of people who qualify. thus rationing services in one way or another. And we won't be able to do this alone. So for these reasons, we're asking the governor and the legislature to reinvest in public hospital systems with a $500 million general fund appropriation to the 26-27 budget. This investment by the state this year is a fraction of what we need, but it's an important first step, a down payment to shore up public hospital systems as we navigate these federal cuts that threaten to completely unravel our systems. Thank you. I'll stop there. I welcome your questions. And Katie Rodriguez with CAPH is also here to answer questions. Great. Thank you. Good evening. My name is Ryan Witts. I'm the executive director for the District Hospital Leadership Forum for Trade Association that represents the 33 district hospitals. And in your background materials, LAO did a great job highlighting the difference between the private versus county and UC versus district. And, you know, I think the notable differences between the privates versus the publics is obviously the fact that they can act as a governmental entity. But unlike, I guess, the county and UCs who are our larger public hospital colleagues, the district hospitals tend to be smaller in scale and far more rural. You know, the 18 of our 33 district hospitals are critical access hospitals, meaning they have fewer than or 25 or fewer beds. And they serve remote and rural locations across the state. HR1 is not a single policy change, as you guys saw in your background materials. And for our hospitals, it's kind of a culmination of overlapping financial shocks that are all going to come to roost here pretty soon. We are going to see pressure on state-directed payments. We also know that while we do not participate directly in the MCO tax, that the infrastructure and the financial benefit for the state budget is at risk. And so that will lead to Medi-Cal instability. We know that that will also lead to coverage losses and other federal funding reductions. So specifically for districts, H.R. 1 could reduce overall Medi-Cal supplemental payments by roughly 30 percent as compared to today levels that are funded today. So as Adam and CHA and my colleagues had mentioned, many district hospitals participated in that distressed hospital loan program. Nine of the 16 recipients actually were district hospitals. We only represent 8% of the hospitals in the state, but yet we received half of the funding in the DHLP program. So they are not in a position right now that's strong to absorb these types of hits. and unfortunately today many still remain distressed. That was a program that was funded a few years back. Today we have 12% of district hospitals, as we refer to them as in survival mode. They have less than two weeks of days cash on hand, and we have 40% of our others that are within 60 days cash on hand, so nowhere near investment grade or any financing support. These hospitals do have few good options. they are delaying hiring, deferring maintenance, and needed facility upgrades. They're narrowing their service lines. In rural communities, it just means patients have to wait longer, travel further, or just defer care altogether. So we do not have a specific ask. We just recognize that there's a lot in front. California is going to need a broader strategy than, you know, any specific Medi-Cal value-based program structure or even the Rural Health Transformation Program Fund that we're all hoping comes to us. But they alone by themselves will not solve the existing financial crisis and or the rising cost of healthcare that you've heard here today. So thank you and happy to respond to any questions you have. Thank you. Any questions? I think we're getting tired. I will just, I will also say, it's not just that we're tired. I will also say that we have been steeped in this for two years and, and lack of questions does not at all indicate a lack of interest or lack of understanding how serious this is. We started talking about this, this budget subcommittee started talking about the impacts of HR1 last year before HR1 was even signed and started talking about how detrimental we thought this was going to be. And so now it's here and just, I think we do understand the gravity of this situation and appreciate all of you for staying and testifying and sharing the story again, because I do think while the three of us, and I appreciate my two lady colleagues who are to the bitter end here, but I think while we understand it, it really important for the public to hear time and again what happening with the hospitals and agree that we need a broader strategy on that So since there no questions up here if there public comment we open it up name, organization, and position. The set short representing PEACH, which are the 88 private disproportionate share hospitals that provide more than one-third of all Medi-Cal hospital care in California. I look forward to working with y'all. We believe that if we create policies where the money follows where the patient is going to access that care, we can ensure that there is access to care as we move forward. Thank you. Good evening, Madam Chair and members. I'm Erin Evans. On behalf of the County of Santa Clara, we operate the second largest public hospital system in the state, and we strongly support the $500 million funding request towards public hospitals for this important work. Thank you. Kelly Brooks on behalf of Riverside County, Ventura County, the urban counties of California, and the University of California here in support of the $500 million funding request for public hospitals. Just a few facts about each of these clients. Riverside County operates a public teaching hospital and 14 community health centers. As a result of H.R. 1, Riverside County estimates 100,000 patients will lose Medi-Cal, which will result in 1 million fewer visits and 300 million in losses to the county hospital health system. Ventura County Medical System consists of two public hospitals and 36 clinics. They estimate $400 million in losses. University of California estimates $165 million in losses, and this is on top of $1.3 billion in losses associated with the Medi-Cal program. Good evening, Chair and members. Beth Malinowski of SEIU California. I want to speak to a couple of items. One, I want to appreciate the work of the department on addressing the provider tax challenges. Additionally, on the hospital conversation today, I stand strongly with our colleagues in county public hospitals and health systems to making sure we're funding those $500 million. As noted, this is just starting, really, the conversation of what is really needed to stabilize these systems. Additionally, I just want to also comment on DGEN care funding. It was noted on the day as a moment ago. We are going to have individuals that need to still receive care, and we have to make sure we're sending those dollars aside for that. Last thing we have with the Fight for Health Coalition, of whom some have had to go home this evening, just want to acknowledge the best way we can continue care and coverage is to keep folks on Medi-Cal. We can do that by finding new revenue and really holding accountable as corporations. They're taking advantage of the program today and how they're covering folks. Thank you. And if we could do name, organization, and position. Good evening. My name is Dolores Alvarado. I'm the CEO of Community Health Partnership in San Mateo, Santa Clara. We have seven federally qualified health centers, two other clinics. We serve 200 million, excuse me, 200,000 folks a year. About 30% of those are UIS. And if I may just say one last thing, because my colleagues will give you more data. is please consider who we are hurting by removing the PPS revenue system, by removing Medi-Cal. We are hurting the most vulnerable of all. Thank you. Thank you. If we could do name, organization, and position. I'm so sorry. Dolores Alvarado, Community Health Partnership. Thank you. Thank you. I'm the CEO of Gardner Health Services in San Jose, California, about 40,000 unique lives. I think the ask for us is to restate the PPS rate. And I'll give you just some data points. Actually, we understand. But thank you. Okay. Yeah. Name, organization, and position on the issue, please. My name is Sarita Kohli. I CEO of Asian Americans for Community Involvement which is another federally qualified health center And we have about a 33 UIS population so you know what the implications of that would be Thank you Excellent example there. Katie Rodriguez with the California Association of Public Hospitals in support of the 500 million general fund asks for public hospitals, as well as the reversal or delay of PPS cuts. We have over 100 FQHCs at public hospitals. Thank you. Dean Alonza, San Francisco Community Clinic Consortium here to speak against asking you to restore the UIS, the PPS for UIS. We heard a lot about the potential costs of why Medicaid is so high. I didn't hear anyone saying that it was primary care, and yet this would take a billion dollars out of the primary care system. Thank you. So it's name, organization that you're with, and position. You support a budget ask or you oppose a budget ask. Thank you. Andy Liebenbaum on behalf of Los Angeles County, we're the largest public hospital and healthcare system in California, providing care to over 600,000 people every year. We operate four hospitals, two level one trauma centers that serve as our first stop for emergencies and disasters. And position on the issue. We support the $500 million funding request, and we're estimating the cost of HR1 to exceed ongoing revenues by $1.8 billion by 2028. Thank you. So we do understand the impact. So we just need your name, your organization, and you support or oppose a specific budget ask. Christine Smith, Health Access California, in the Fight for a Health Coalition, urging long-term revenue solutions for the legislature to look into long-term revenue solutions. Apologies, I'm tired. Thank you. Thank you. Good evening. Katie Layton, on behalf of the Children's Specialty Care Coalition, just wanting to comment on how changes to Medicaid financing will impact pediatric specialists who treat children and youth with complex health care conditions. HR1 will certainly harm this network, and so we just ask that the legislature protect current Medi-Cal provider rates and encourage creative thinking about future MCO tax. Thank you. Thank you. Good evening. Omar Altamimi with CPEN, the California Pan-Ethnic Health Network. Related to the MCO tax, if the legislature, considering the limitations on how that can be raised and spent, how many can be raised and spent, if the legislature was to look into a plan to open it up, CPAM would be supportive of a plan that supports the 3.5 million Californians who are about to lose coverage and funding for that coverage. And so that's one. And then on the second, just a line in comments with SEIU and health access on revenues and the FIFER Health Coalition. Thank you. Hello, all. Thank you so much for your time today. I'm Madeline Merwin. I am a resident physician, And I am standing here from San Francisco on behalf of all of my co-residents who are working so hard to provide care for our Medicaid population. And I urge support on behalf of them for the expanded Medicaid coverage. Thank you. Good evening, Chair and members. Allison Ramey on behalf of Ultimate Health Services here today to ask for the legislature's rejection of the PPS for the UIS reimbursement and asking that you guys reinstate that. Thank you. Thank you so much. And thank you to our panelists. I know you had a short time in the spotlight, but a very important message. And we really do appreciate you. And we're going to move on to issue number six, HR1 impact on the counties. This issue is going to examine cumulative impact of HR1 on California 58 counties Oh my apologies One more comment Thank you. Please. Thank you. So name, organization, and I support or you oppose a particular budget item. I'm on behalf of Fighting for Health and Disability Voices United, and we support the bill. Thank you. Thank you. Thank you for your time. I'm working late. Thank you. So moving on to item six, and we have talked a number of times about counties. I'll ask you to come on up. We've got a county supervisor from Plumas, a director from Sacramento County Department of Health Services, a county administrator, officer, and chair of the county medical services program, a director of the Department of Social Services from San Luis Obispo County, and a social services benefit specialist from Santa Clara County. So there should be five of you snugging into the table up here. And then if we have other questions for LAO or DOF, we may ask you if you have anything to add here. But I will start by saying we have talked quite a bit about the impact on the counties, how difficult this is, and I know we have some champions on this committee, so I am going to ask you to tighten up your testimony. We still have another issue after you, so as quick as, as tight as you can be to get your point across would be very much appreciated. And we will start with Supervisor Hall with an overview of county responsibilities in administering Medi-Cal and CalFresh. And then let's just go down the line. you can introduce yourselves and we can move through or down the line the other way. Well, good evening and thank you for your stamina and for your public service. I'm Mimi Hall, Plumas County Supervisor, and we really appreciate the opportunity to be here today. I began my public health career in California, serving California counties in 1999, and I have served as a county health leader in Sierra, Loomis, Yolo, and Santa Cruz counties. And across all of these roles, one truth has remained constant, and that is that when people fall through the cracks, counties are the ones who catch them. So that's why we're all here today to speak about the very real and immediate impacts of H.R.1. HR1 fundamentally shifts fiscal responsibility for safety net programs from the federal government to the state and counties and at full implementation California counties are projected to face costs of up to $9.5 billion annually. It's staggering. So why are counties not positioned to absorb this shock? To understand why this is so concerning I'm going to briefly walk you through a history of the complicated relationship between the state and counties to fulfill safety net responsibilities. In 1978, Prop 13 fundamentally altered the state and local fiscal relationship and it sharply reduced property tax revenues for counties. Fast forward to 1982, in response, the state then shifted responsibility for the medically Indigent Adult Program to counties and provided some funding for that. In 1991, the state experienced the worst state budget crisis it had in decades, and that's when we had something called realignment. And what realignment did was it created a structural solution to shift the response responsibility for health, which included public health and indigent medical care, social services, and mental health programs to the counties. This greatly alleviated the state general fund from funding these programs in the past. And it also created this direct funding stream from a half-cent sales tax and vehicle license fees revenues that came directly to counties. 2010. In 2010, we all know what happened, the passage of the Affordable Care Act. And it created a situation where millions of Californians gained health care coverage. And as a result, the county indigent care program scaled down significantly. 2013, well, with so many people gaining health care coverage, AB85 was passed. And the state began redirecting a significant portion of health realignment revenues from counties to offset the state general fund costs for the CalWORKs grant increases. So what will happen, HR1 is going to drive major increases in the number of uninsured individuals at a time when counties over the years have found themselves in a situation where we have less resources, capacity, and infrastructure than in any other point in recent history to respond. So our ask. Counties are longstanding partners with the state. Without additional state investment, we will not be able to absorb the impacts of HR1 on county programs and the communities that we serve. Under the leadership of the California State Association of Counties, counties and their associations have collectively developed a multi-year countywide HR1 budget request. What we respectfully request is $1.9 billion in fiscal year 26-27 and $4.5 billion in fiscal year 27-28. And this request includes targeted funding that is essential for indigent care, so $761 million in budget year in the current budget year and $2.4 in the following year. For county hospitals, $500 million in the budget year and $850 million in the following. to stabilize their revenues. County eligibility operations, $373 million in the budget year and $402 million in the following year to maximize the number of individuals who can retain Medi-Cal and CalFresh. And finally, County Behavioral Health Services, $224 million in the budget year and $828 million in the following year to serve all the individuals anticipated to lose Medi-Cal. We appreciate the opportunity to share our perspective and look forward to continued discussions with the legislature and the administration. Thank you. Good evening and echoing Supervisor Hall's comments. Thank you for your stamina and endurance and public service for being here today and going through all this. My name is Timothy Lutz. I'm the director of the Department of Health Services within Sacramento County. And today I'm gonna elaborate a little more depth in what Supervisor Hall mentioned around an opportunity to highlight, in this case, how Sacramento County historically met its obligation and is preparing to again meet its obligation to serve the indigent adult population coming back to our counties. First, Sacramento County is an Article 13 county. What that means is we do not operate a public hospital system and we are not part of County Medical Services Program or CMSP So to provide some historical context for how our indigent program operated in Sacramento prior to the implementation of ACA Sacramento County determined eligibility for indigent care by setting the income threshold at 200% of the federal poverty line and imposing an asset test. At the At the height of the program, which was 2009-10, we served approximately 50,000 individuals annually, and the budget was approximately $50 million. At the time, the county operated 11 county clinics with program and clinic staff of about 150. And we also contracted with FQHCs within the community and had a specialty provider network built up of over 300 providers. Services included medically necessary primary care, secondary care, emergency and inpatient hospital care. This would be representative generally of a comprehensive county run, county contracted system capable of managing large volumes of uninsured patients. Fast forward now to post Affordable Care Act implementation and the Medi-Cal expansion, our enrollment declined to zero. And so the county's prior clinic infrastructure was substantially reduced or repurposed. Leaving Sacramento County today without a large scale delivery system, we have one county clinic and one satellite location. Given that enrollment has been non-existent and also with AB 85 diverting funding, the county is in a position where it does not have the resources today to serve this population returning to it. Which, accentuating the point again, Supervisor Hall mentioned, with federal H.R.1, it does fundamentally shift that responsibility back to the county by imposing work requirements. DHCS is estimating that around 1.4 million are likely to lose coverage and become newly uninsured. We believe that in Sacramento, that number is approximately 50,000 residents that may lose Medi-Cal due to work requirements. In January of this year, the Sacramento County Board of Supervisors adjusted our indigent program eligibility criteria, reducing our threshold to where it had been recently at 400% of the FPL down to 138% while keeping the same scope of services intact. The fiscal impacts that we're estimating for Sacramento County are between $50 and $90 million at full implementation of work requirements. So, in summary, many counties are struggling with staffing, systems, contracts, operational capacity, and the ability to suddenly absorb a large return of uninsured individuals back to the county. AB 85 did redirect funding from counties. It also slowed the growth of 1991 health realignment, which left counties right now with limited or no resources to expand in the GIMP programs. Our county organizations led by CSAC are advocating for a multi funding request In our case on counties like ours million is the amount in fiscal year 26 27 that we were indicating we needed and billion in subsequent years I'm included in that request, direct medical services, obviously, to eligible indigent adults, but also $200 million for rebuilding county infrastructure for the 23 non-CMSP counties. That infrastructure includes clinical infrastructure, information technology subsystems, fiscal, legal, billing, administrative, workforce, and operational support that is necessary to then start to bring this type of a program back. It also includes $50 million for public health departments to address increased demand that we expect for vaccinations, STI services, and other communicable disease response. In closing, we appreciate the legislature's attention to this issue and look forward to continuing to work together towards solutions. Good evening. My name is Scott DeMoss. I'm the county administrative officer for the great little county of Glen. I'm also the CMSP Chair. CMSP was established in California law in the early 1980s as a pulled risk health benefit program for 39 eligible counties with populations 300,000 or less. Currently, there are 35 participating counties with four additional counties eligible to participate. Currently, Placer, San Luis Obispo, Santa Cruz, and Merced do not participate but are eligible. The program was designed to support the participating counties in meeting their WIC Section 17,000 obligations. In 1995, the CMSP Governing Board was established as a local public agency in charge with overall program and fiscal responsibility for CMSP. CMSP was funded primarily by 1991 state local program realignment statute. In 2014, following the Affordable Care Act, most revenue allocated to CMSP was redirected to the state through AB85. And then in 2019, funding was fully redirected to the state through SB1371. This redirection of funding was to continue until CMSP reserves are equal to two times the CMSP budget. In December of 2013, before the Affordable Care Act, CMSP served over 80,000 members at an annual cost of $400 million. Today, less than 3,000 members are served at an annual cost of $25 million. The impacts of HR1 post-Medi-Cal work requirements are estimated to increase the mandated population to between 41,000 and 124,000 members, with an annual cost of $311 million on the low end to as high as $943 million. The current CMSP reserve is equal to one year of expenditure at the low end of these estimates. CMSP counties will be responsible for cost overruns if program expenditures exceed available funding. CMSP can build capacity and serve this population in FY26-27, but will need state resources to continue serving this population beyond the 26-27 year. As we prepare for H.R. 1 changes, the CMSP Board has already taken the first steps regarding the future of benefits and eligibility. The Board reinstated the upper income limit to pre-ACA levels at 200% of the federal poverty level We lowered the asset limit test to for an individual per couple for all CMSP applicants We discounted the selected benefits added post This included benefits such as chiropractic services, some individual and group counseling services, vision, hearing, and dental services. For all CMSP-covered services, the board reinstated a share of cost for CMSP applicants above 100% of the federal poverty level. Lastly, we've made the decision to discontinue full coverage for undocumented immigrants and shifted to emergency-only services to cover this population. We look forward to working with the legislature in providing the best care that we can with the funding made available, meeting our $17,000 requirement. Good evening, Chair Addis and committee members. I'm Devin Drake, Director of the Department of Social Services in the County of San Luis Obispo. I've worked in social services for over 27 years and served my current position for over nine years. Investing in our county eligibility workforce offers a proven and cost-effective path to mitigate the harms of H.R. 1, but we are quickly running out of time. In San Luis Obispo, nearly a quarter of our county's entire population is on Medi-Cal. We estimate over a third of all adults currently receiving Medi-Cal benefits will be impacted by HR1's work requirements and six-month redeterminations. This population reflects several characteristics that highlight our unique community. 16% are experiencing homelessness with many facing complex health needs and limited documentation. Nearly one-quarter of our residents are Latino or Hispanic, and many face language and access barriers. We have a significant farm work population, often with seasonal employment fluctuating income and limited access to transportation. In order to implement new HR1 changes responsibly, we estimate that our workload will at least double, and I will need to increase our eligibility workforce by 65%. Although promising, we know we cannot rely solely on automated data sources because those systems can't capture the full complexity of real-life circumstances, and many individuals have limited data footprints. Examples of this in my county include individuals working in informal seasonal jobs, major sectors of our local economy, like farm workers and migrant workers, with inconsistent records but significant health needs. Individuals experiencing homelessness with serious health conditions but limited documentation. Older adults, ages 50 to 64, managing health issues, unstable housing, or caregiving responsibilities. responsibilities, informal caregivers whose responsibilities are not reflected in any system, and individuals with limited English proficiency or digital access. In these cases, eligibility workers will be required to make more individualized assessments, gather alternative forms of verification, and rely on person-centered interviews rather than automated data. When a participant who is subject to the work requirement is completing only partial hours, the eligibility worker will need to provide individualized support to help them meet the full requirement. Without direct engagement and trust built by an eligibility worker, individuals may not know whether to report certain exemption factors that could help them maintain coverage. My county is approaching implementation of H.R.1 with urgency and rigor, but without state investment, my county will lack the capacity to implement H.R.1 in a harm reduction manner. In closing, I need to increase my workforce by 65%. It takes roughly nine months to recruit, interview, onboard, and train new eligibility staff to prevent people from losing We need this funding now. On behalf of the County of San Luis Obispo, we urge the legislature to support CDBA's Medi-Cal budget request of $270 million in fiscal year 2627 to implement HR1 in a client-centered manner. And we do thank Assemblymember Schiavo for championing this request. Thank you. And then the social workers here. Oh, great. Perfect. Kristina, Crystal, Porras. Yep. Thank you. Good evening. My name is Crystal Porras-Echoa, and I'm a proud member of SEIU Local 521 and a social services benefit specialist eligibility worker from Santa Clara County. I've been in this field since 2021. I'm one of 13,455 eligibility workers represented by SEIU across California. We help people apply for and keep benefits to help them keep their families, keep their dignity, their life opportunities, and in many cases, stay alive. I wanted to become an eligibility worker because I was a recipient of CalFresh and Medicaid when I was younger. I remember going to benefit offices with my mom and the people there who would help us. It is often the first place of stabilization for many families. As I got older, I became educated in sociology and public health. Becoming a member of the social safety net was a way for me to bring my experience full circle to empower and educate my community on a personal level. In my job, my team handles the intake of new clients for general assistance, a cash aid program, CalFresh and Medicaid, as well as the renewal of benefits. The clients I primarily serve are indigent households who are experiencing homelessness. Many are dealing with substance abuse and behavioral health issues that they are working on, as well as several people who are trying to reenter the workforce. I also work with new families, those who are experiencing pregnancy, or those who are going through the reunification process with their children. Oftentimes, households are not aware of CalWORKs and we offer a referral process for them. I work in a unit with eight other intake workers and a supervisor. Currently, I hold 179 cases to my name. Depending on the household composition, that number includes more than 250 people assigned just to myself. Continuing workers would carry 322 cases per worker. Medicaid-only workers carry 422 cases, which increases the amount of individuals' households served. Demographically speaking, the majority of my clients are single individuals, parts of families, adults with disabilities, and older adults. Many are members of our non-citizen population, including asylees, refugees, victims of trafficking, and victims of violent crime. As you can see, it's a large swath of the population we serve. Less than a month ago, our office implemented a new same-day service. Every application that comes in gets assigned to a worker. Every morning, we have a bulk listing assigned to us and several times throughout the day. Workers will then screen those cases for expedited services and immediate need CalWORKs, which means if they meet certain emergency criteria, like if their expenses exceed their income, their gross income and property is under $150 or $100 respectfully, they qualify for an on-the-spot interview or within three days from us getting their application. We also offer Medicaid to any application, and we review retroactive Medicaid when needed. I also do annual redeterminations to clients to make sure that they are still eligible for services for another 12 months, plus a semi-annual report six months after certification. Continuing workers process roughly 40 to 60 combined semi and annual certifications a month. It's extremely challenging to connect all of our clients to the services that they need, but I try each and every day based on keeping abreast of different community service organizations and different waivers that may apply to them. That why I started tracking the development of what eventually became HR1 as far back as the 2024 election The day the so great big beautiful bill passed I downloaded it to my phone and I combed through it to see how it would impact my clients and my coworkers. We're still getting used to the same-day model, and now the severe restrictions of HR1 will set us back, creating backlogs as we have to screen clients further than ever before. For example, a typical redetermination interview takes about an hour, but now thanks to changing roles like the able-bodied adults without dependents and the work requirements, and for which non-citizens which are still eligible for CalFresh, which all of the aforementioned categories I mentioned earlier are no longer eligible starting April 1st and at their next recertification. Interviews will take twice as long as we try to do everything we can to keep household aided and help them work through all of the new and extra verification that they will need and provide explanations to their determinations to help keep their trust in these systems. When I saw these new requirements, I was heartbroken because I knew instantly how it would impact my specific clients. The Asylee College students and her siblings who now lose SNAP. The parents who work part-time and care for their parents and their children who are now limited to three months of food assistance in a three-year period because of the so-called ABOD rule. The elderly veteran will lose SNAP because they don't have a formal disability, but HR1 imposes work requirements on people under 65 years of age. And how much time it will now take us to provide as many resources as we can for these families, including Meals on Wheels, Senior Nutrition Programs, Free Food Zites. But everyone knows that these services don't come anywhere near replacing the benefits they will lose from H.R. 1. The population I serve is in so much need, and the federal limits that are in place are already so strict that people are already going without food and without health care coverage. I'm terrified on how H.R. 1 will hurt my clients and neighbors, especially during this time of food inflation caused by the war in Iran. We know we can't shift the cost of services to the counties. Every one of us, even the wealthiest Californians, will pay a price if our systems fail. I love my job. I love my clients and it hurts to know how they will be negatively impacted by HR1. No matter what actions the Budget Committee takes today, you can make it hurt not so much. Working together to implement these new restrictions in a way that supports workers and does the least harm possible, keeping the most folks enrolled in coverage, we can make a difference and prevent human suffering. Not everyone gets to make a difference. I get to every day. With your leadership, I can make a bigger difference with people whose well-being has been disregarded by federal lawmakers. Thank you for the opportunity to share with you. I look very forward to the difference we can make as Californians who need it now more than ever. Thank you and thank each of you for your service. Assemblymember, do Do you have any questions? Or LAO or DOF, do you have anything to add? Will Owens with the LAO, I think your agenda does a good job laying out some of our analysis on specifically counting indigent care and previous committees have touched on some of the eligibility workload. So with that, we'll be available for questions. Thank you. Please. Thank you and at this late hour, I want to really thank this last panel for starting to paint a very dire picture that we've all been living with for a while. I think the challenge that we have is that we are kind of losing sight of the fact that we essentially did away with our indigent care program especially for the counties, because we were rightfully kind of focused on realignment. And I think the question before us right now is how do we make sure to recognize the fact that we've, you know, the earthquake has happened. and we need to make the changes that we need with HR1 and we need to start making the changes around what that realignment looks like, particularly for indigent care. So just to kind of drive the point home for you all, for us all here, and for the public, just around the indigent care component itself. You've asked for $761 million for this budget year and $2.4 billion for 27-28. What would happen if the state did not provide that funding? What would your indigent care programs look like? How would the counties respond? How would you fund that? Because at the end of the day, I just want to say, just because someone doesn't have health insurance doesn't mean that they're not going to need to have health. Well, I'll certainly speak to what we're looking at in Sacramento County. Recognizing these impacts coming up pretty quickly, we first started briefing our board in December and then again in January as budget was developed. And recognizing that if no new resources came in, what this means is some pretty significant cuts across the board for county departments. So the board directed departments and the CEO to direct departments and work with departments on reducing across the board budget. So holding the line on any COLAs, which is a certain amount, and then an additional 2.5% So it was about a 6.5% cut to county departments, including our public safety departments, including our parks department. Public health services also had reductions. Basically, everything was on the table and currently is on the table. So I think without those additional resources, you're going to see counties that are already seeing stagnant revenue and increasing costs having to significantly find revenues and cuts within their budget, and no one's going to be exempt. I'd like to add to that. I think that Tim Lutz succinctly points out the ripple effects to other county services that are funded by General Fund. I was a health director pre-ACA, and I was a health director 2008 recession when the bottom fell out and our realignment revenues that we never thought would be in a place where we wouldn't have growth became decimated. And what counties do, I was in a rural county at that time, Plumas County. We were a CMSP county. And so CMSP had to make a lot of changes in policy adjustments for that. When I moved to become the health services agency in Santa Cruz County, we had our own program called Metacruz. What happens in times of limited resources means counties get to choose who they cover who eligible and what they cover And it will create a situation where you reduce the income limits to 100% of FPL instead of 200% or 300% or 400%. You will only cover certain qualified services that are the most needed or the most dramatic. I mean, it's going to affect people's lives because counties don't have endless resources, so they will continue to meet their commitments to the best of their abilities, but with what happened with the trajectory of realignment, starting many, many years ago and where we are now, we are not poised to go back to those 2008 days. I don't have any questions, but I do want to thank you, Crystal, for your service and the way that you clearly care about your clients. And to everybody that is here, thank you for driving so far, probably from San Luis Obispo, and to everyone who came tonight. I'll repeat what I said for the last panel. Lack of questions does not at all exemplify lack of understanding or empathy or caring for this issue. We've started to talk about it last year as well, the effects that might happen on the county and started thinking about the cost shift, basically, that's happening from the federal government to the counties, really bypassing the state in certain ways, although we are being asked to solve at the state level. And I think there's a lot of desire to do that. I know Assemblymember Bonta has been a huge leader asking really important questions around, you know, what is the cost going to be to counties and what is that going to look like? So it's very helpful for us to hear from each of you, you know, what it's like boots on the ground to go through this and what kind of adjustments are going to have to be made regardless of, you know, which levels of funding. if we're able to get to the, I think you said 761 was for Sacramento County, but I thought I heard 1.9 billion and then 4.5 billion later. Is that 761? 761 is actually the ask for indigent care. Okay, for indigent care alone. 4 billion. Okay. Not just Sacramento County, although I'm sure. Okay. Okay. I heard somewhere in there at $1.9 and at $4.5 billion as well. But it sounds... That's the total for public hospital. It's astronomical any way we shake it. So I just want to say thank you to all of you. And you're welcome to stay for a public comment. We'll open it up for public comment if there's anyone in here. And again, I would love to have your name, your organization, and if you support the budget ask or you are opposed to the budget ask. Good evening, Madam Chair. Jeff Neal, representing Contra Costa County, which not only runs the public hospital and a single plan, Medi-Cal, and, of course, all the other services, in support of significant ask for indigent care and public hospital costs, there simply isn't possible for counties to raise enough revenue and make enough cuts to make it up on our own. Appreciate it. Thank you, Madam Chair. Brendan McCarthy with CSEC in support of the collective budget request for implementing HR1 of $1.9 billion in the budget year, which is inclusive of Indian care, public hospitals, county-eligible workforce, and behavioral health. With those funds, counties can meet our obligations or section 17,000 and protect those other health care systems. Without them, these public safety net systems will be decimated, and it will also spill over into public safety and elections and roads and all those things. So counties look forward to partnering with the legislature on some important issue. Thank you. Good evening. Michelle Gibbons with the County Health Executives Association of California, representing local health departments here to echo our support for the county multi-year budget ask. I would also just note that in addition to indigent care, to answer your question about what happens, I just want to remind folks about public health and how decimated it's been. Without funding, public health will be decimated even more, and we will lack preparedness for our state. Thank you. Thank you. Madam Chair and Assemblywoman Bonta, Paul Yoder on behalf of several of our counties. I want to pick up on what the Assemblywoman said about the earthquake. Unfortunately, after earthquakes, sometimes there's tsunamis. And to go to what Tim Lutz said, the countywide impacts of not providing the $2 billion to the counties, it will decimate all of their services. Kern County is looking at losses of $20 to $30 million annually and then growing. They're a county hospital. County, after all these years, keeping a county hospital open in the southern Central Valley, really urged you can find that $2 billion somewhere. Thank you. Thank you. Good evening, Erin Evans, on behalf of the County of Santa Clara. With admiration for my colleague, Ms. Porras, who had to leave, we certainly request your support for funding for eligibility work, indigent care, and the other services that my county colleagues have requested. Thank you. Thank you. Kelly Brooks on behalf of the counties of Riverside, Ventura, Santa Cruz, Santa Barbara, the California Association of Public Hospitals and Health Systems, and the urban counties of California were here in support of the funding for indigent care, for eligibility work, and for behavioral health. HR1 puts California's longstanding commitments to care for its most vulnerable residents at risk without state support now. counties cannot sustain the services that millions of Californians rely on. Thank you. Amy Costa on behalf of Alameda County, we support any efforts the legislature puts forward to help with our administrative costs related to H.R. 1 and indigent care. Thank you. Thank you. Nicole Wardleman on behalf of the Orange County Board of Supervisors in support of funding for indigent care, behavioral health, as well as eligibility workers. Thank you. Michelle Balcaba representing San Diego County. HR1 squeezes urban counties at both sides. Tightening eligibility requirements will push more people into the county system while federal funding cuts decrease. And we just need which item you support or you oppose. Any funding for indigent care and resources for counties. Great. Thank you. Thank you. Thank you. Good evening. Dylan Elliott on behalf of the counties of Fresno, Merced, and Placer aligning ourselves with the comments made by our previous county colleagues. Thank you. Thank you. Clifton Wilson on behalf of the counties of Humboldt, Nevada, Solano, Placer, Sutter, and Napa All CMSP counties in support of the county HR1 will take your budget request Thank you Thank you All right Seeing no other public comment we going to move to our final issue which is Medi dental, issue seven, Medi-Cal dental and Prop 56 supplemental payments. So we will ask those witnesses to come on up. We've got Laura Marcus, chief executive officer of Dientes, community dental, and Dr. John Hollister, president of Tolosa Children's Dental Center. And just as a point of personal privilege, I've worked on this issue quite a bit and been talking to quite a few dentists. It's an issue of personal concern to me. We know that the Medi-Cal dental provider payments are scheduled to be eliminated on July 1st this year. We know that there's going to be grave harm. I think what a lot of the public doesn't know is how intricately connected dental is with health overall. I think that's a missing piece that sometimes the public doesn't always know, and sometimes our colleagues don't always know. But welcome. We'll start, I think, with Laura Marcus of Dientes. And if you're able to keep it to three minutes, we would be grateful to both of you. Yes, of course. Thank you, Chair Addis and members of the subcommittee. My name is Laura Marcus, and I serve as CEO of Dientes Community Dental Care in Santa Cruz County. And each year, our organization serves over 18,000 patients, the majority of them Medi-Cal. Before I go into why I'm here, and I apologize for my voice. I've lost my voice today. I feel compelled to say a few things regarding the issues that have been discussed. First, I acknowledge that cuts need to be made, and there are so many important issues you're facing and so many necessary services that require state resources as evidenced by today's testimonies. But remember that seniors and trans youth need dental care too. Over and over, I've heard some of you commenting on the increased cost of the Medi-Cal program, And I want to be clear here that so much of that increase is because of good news. The cost of Medi-Cal has increased because so many more people are getting the care that they need. When I started at DeAnthas in 2004, we were serving just under 7,000 patients, and they had an average of two visits a day, probably an exam and maybe a filling or a cleaning, but not much else. Today, after more than two decades of growth, most of that in the past decade occurring since the ACA rolled out and California's medical expansion occurred, we now serve 18,000 patients and people receive all of the care they need, comprehensive care that they need. This includes specialty care like root canals and crowns and dentures and deep cleanings, treatments that are required before giving birth or getting heart surgery or cancer treatment. Today, our patients are receiving much more care than ever before, and I think most of you would say that that is the goal of California's health program. With that said, this is all going to change with the governor's proposed cuts to dental. And so I'm here to speak against the governor's plans to eliminate full-scope adult dental benefits in Medi-Cal for individuals with certain immigration statuses, the cuts proposed to Proposition 56, Medi-Cal Enhanced Reimbursement, and the movement of UIS patients to the fee-for-service payment system next year. It states that this will save the state $2 billion next year, which all sounds prudent in a tough budget year, but I want to be clear that these savings will end up costing the state more in the long run. I was leading DeAnthes when California eliminated adult dental benefits in 2009. I saw firsthand what happened People stopped seeking preventative care dental infections became medical emergencies Patients showed up in hospital emergency departments with conditions that should have been treated in a dental chair months earlier Can our hospitals, especially those in rural districts which are already facing economic hardships and some even failing, afford to manage dental infections in their emergency rooms? I don't think so. Can our health care system deal with thousands of worsening cases of diabetes, heart disease, or Alzheimer's, which are all linked to dental needs? A 2025 policy analysis from the American Dental Association estimates that eliminating adult dental benefits for the UIS population alone would cost California roughly $400 million over five years. This is due to increased emergency department visits, higher medical costs associated with untreated oral disease, and the loss of health care jobs and economic activity across the state. At the same time, eliminating Proposition 56 funding would undermine the very progress California has spent a decade building, restoring a provider network willing to serve Medi-Cal patients. Even today, with enhanced reimbursement, access remains fragile. In my community, only one in three adults with Medi-Cal are able to access a dentist. Today, Western Dental, one of the largest providers in Santa Cruz County and in the state for Medi-Cal patients, is planning to close offices all over our state. Members of the Assembly, we've already lived through the consequences of eliminating adult dental benefits. We know how this story ends. Please do not repeat the mistakes of 2009 and trade short-term line-item reductions for long-term structural costs. I appreciate all of your time. Thank you so much. I'm happy to answer questions after. Madam Chair, member of the committee, and your dedicated staff, thank you all for being here. A very long day. Thank you for giving me this opportunity. I'm Dr. John Hollister. I currently serve as President of the Board of the Tulsa Children's Dental Center. We are the only nonprofit in San Luis Obispo County dedicated exclusively to providing dental care to underserved children. In the late 1990s, remember that date, a group of visionary community members identified the greatest unmet need in our county to be accessed to dental care, particularly for children covered by Medi-Cal Dental. At the time, lack of access had already become a serious and growing health crisis. In response, Tulosa Children's Dental Center opened its doors in 2003. Now, more than two decades later, our mission remains unchanged, improving children's oral health in San Luis Obispo County. We've provided a dental home to thousands of children whose families would otherwise have nowhere to turn. Operating a full-service, non-profit pediatric dental practice funded largely through Medi-Cal has always been financially challenging. That is why we strongly supported Proposition 56 in 2016. The long-overdue reimbursement increases were essential, not only for our survival, but to allow us to expand care. And across California, more providers began accepting Medi-Cal, and more children gained access to critical oral health services. Today, however, we face multiple new and very real challenges. Following the pandemic, the cost of supplies, equipment, and operations has risen dramatically, even more impactful, has been the shortage of health care providers, which has driven staff costs to new heights. These pressures have made the enhanced Prop 56 reimbursements not just helpful, but essential to maintaining care. Despite these challenges TELOSA continues to serve children through our Paso Robles Clinic and is expanding access through our Dentistry at School program bringing care directly to children who would otherwise go without But now, proposed cuts to the Medi-Cal Dental Program would undo this progress. Based on our 2025 patient data, Telosa Children's Dental Center would experience an annual revenue loss of nearly $300,000 under the proposed fee schedule. There is no feasible combination of cost-cutting or fundraising that can absorb a loss of that magnitude. Even more concerning, many private dental providers will be forced to stop accepting Medi-Cal altogether. This will lead to thousands of children without access to care, leaving Telosa as one of the only remaining providers, but without the resources to handle the demand. The result is predictable and deeply troubling. More children in pain, more untreated infections, more emergency room visits, more missed school days, and ultimately higher costs to the state. I understand the difficult budget decisions before you. I've been here most of the day. It's very serious. However, eliminating voter-approved funding, reducing reimbursement rates to levels not seen since the 1990s, and placing California near the bottom nationally in Medicaid dental reimbursement is not just unsustainable, it's unacceptable. As someone who practiced dentistry in California for over 40 years, and it was worked over 20 years to bring dental care to our underserved children, I urge you to maintain Medi-Cal dental funding at a sustainable level. The alternative is a future where vulnerable children suffer unnecessarily, where preventable dental disease becomes a barrier to health, confidence, and success. Please do the right thing for the smiles, health, and futures of California's children. Thank you. Thank you. And I was so excited to hear from two people from my district that I completely skipped the LAO, who is going to give us an overview of Prop 56 and its history. and maybe if you can do it just in your briefest of summaries. I'll talk as fast as I can. Karina Hendren, LAO. So as the chair noted, we are providing a brief overview of Proposition 56. Voters passed Prop 56 in 2016. It increases taxes on tobacco products and allocates most of that revenue to Medi-Cal. The measure states that the Medi-Cal funding is intended to improve timely access to care, limit geographic shortages of care, and improve quality of care. And since the 2018-19 budget agreement, the state has dedicated most of these funds to various provider payment increases. Prop 56 raises a key fiscal consideration in terms of Medi-Cal. The figure on page 41 of your agenda illustrates this issue. This is the figure on page 41. This shows that the amount of Prop 56 revenues that are allocated to Medi-Cal has declined over time. And this is because tobacco purchases have decreased over time. The reduction in tobacco consumption has been a public health objective of the state. At the same time, it means that tax revenues for Medi-Cal provider payments have declined. To manage this challenge, the state has structured provider payments as supplemental or limited term. This strategy gives the state more flexibility to respond to changing revenues over time, as well as changes in the state's fiscal condition. Though it's not required by Prop 56, the legislature has taken actions to continue supporting provider rate increases, even as revenues have declined. For example, in 22-23, the state made some of the provider payments ongoing and permanently shifted them to the general fund. In 24-25, the state made physician rate increases ongoing as part of its MCO tax spending plan. The state has also backfilled decreasing Prop 56 funding for remaining supplemental payments in recent years. But on the other hand, the state has also ended support for certain supplemental payments established under Prop 56. So bringing us to the 2526 budget and dental payments specifically, the supplemental increase for dental services is one of the larger items under Prop 56, originally created in 2017-18. The aim of this payment was to expand access to dental services for Medi-Cal beneficiaries. The 2526 enacted budget eliminated these supplemental payments beginning in 2627 as a budget solution. This solution basically reduces the general fund backfill for Prop 56 supported initiatives. This was part of a larger package of solutions, as many of you recall, and this saves about $300 million in general fund annually. But we do note there is some uncertainty around this budget solution, namely that the reduction is subject to federal approval. if the legislature is concerned about this federal approval, it could consider directing DHCS to report back in the fall after it has submitted a request to the federal government. Thank you so much. We'll move. Any questions, Assemblymember? If not, I have a couple. But you go ahead. Oh, my gosh. Thank you, Chair, for being a warrior queen. I just wanted to kind of get at the reality that was raised in our analysis and in the LAO report that 50% of responding Medi-Cal dental providers would likely leave the program entirely if the $300 million general fund obligation for supplemental payments was cut. That strikes me as essentially a complete annihilation of the infrastructure in the short term and the long term for our dental care over time. Can you all speak to that as providers? But it will. In our own county, there are very few providers. And I've spoken to a couple of them, and they've said that they will cut back or drop completely. and so all those kids will have nowhere to go. And that was the case prior to the supplemental payments being made, right, as there was a very, very limited access in our counties or communities. And I think not only is that going to hit the private providers, Prop 56, the other cuts are going to be hitting the public providers, and then you're going to have this complete decimation of the health safety net system, for dental at least, which is going to impact the hospitals. It's going to impact the rest of the health care system. There's just not going to be anybody there to serve adults or kids. We're already talking about cutting two clinics if the other cuts go into effect. So the UIS is going to affect us. 9,000 adults in our community are losing adult dental in July. And then in addition to that, of course, the additional cuts that will be coming PPS to fee-for-service. and then in January the re and other eliminations are just hitting us from every side you know death by a million cuts Yeah And then just this other issue around raised very aptly in the analysis whether the general fund savings are worth the total reduction in provider revenue. I don't know. You didn't have DHCS on that. We didn't ask DHCS to testify, but you've generously waited. So if you don't mind, I think the assembly member has maybe a couple questions on this, and I may as well. Thank you. The saying, I don't know, you know, spite your, what is that saying? Cut off your nose to spite your face. Cut off your nose to spite your face. Pennywise, pound-flesh, I think all of those are kind of what we are getting at here. How would we lose provider revenue? if we were to be able to think about making this $300 million cut. It's a federal match. Yeah. Are you asking about the federal match? So it's about $331 million general fund that is eliminated as part of the 2025 Budget Act. And then that is drawn. We draw down FFP for that. So I think it's a close to almost more than 50-50 match. So closer to $800 million total fund impact. So we would essentially be leaving on the table through the federal match. Yeah, that's how all Medi-Cal rates work, exactly. But how much would we? I believe it's noted in your agenda. I think it's about $800 million total funds that would be lost. Okay, so to save $300 million, we would lose $800 million. To save $300 million general fund. As you may recall, this was a solution as part of the general fund significant shortfall facing. the budget in 2025. And so this was enacted to save $300 million general fund. Right. So to save $300 million, we would lose $800 million and completely destroy our dental health care infrastructure in the process. That's not a question to be responded to. That's just my observation at my midnight observation. Sorry, it's not LA, but we're there. And I, But I think, yes, that solution happened in 25-26. I think there were a lot of folks who had an expectation that we would have been working this year to find a different way to address this. So I guess one question is, has DHCS re-looked at this at all? I certainly know dentists out there who have thought, well, we put these delays in place, hoping that, you know, come July 1 this year, some of these things wouldn't be happening. Has DHCS looked at anything to prevent the loss of dental coverage for so many people? So this was part of the 2025 Budget Act in terms of items to address the state general fund shortfall. And the administration maintains that there are still general fund shortfalls in the out years. And so there's no change to this proposal. And then can you talk about the, and I'm going to say it probably wrong because it looks complicated on paper, but the gist is what the LAO said is that federal approval is needed to be able to eliminate this funding and where you at with that federal approval and the expectation of being able to get that approval So the department must complete a federally required rate reduction or rate restructuring analysis and we must submit this to CMS by the end of September, so the last day of the quarter in which the change goes into effect. We're attempting to complete this sooner so that we have information to share before September. And this analysis reviews public feedback, compares dental rates to those of other California payers and then presents kind of this information to CMS. And we're happy to share it, obviously, before we submit it to CMS, but this is required under federal law. And do you believe, I mean, it sounds like we could be in a pickle. I don't know another way to say this. If the federal government doesn't approve this, then what? Then we cannot reduce the rate. Okay. And I guess my last question for DHCS on this is earlier on another issue we talked about the cost shift that happens when you cut preventative care and how expensive it becomes to the entire system. And so if DHCS has calculated out the cost shift of cutting so much dental care to the rest of the population. We have not conducted that analysis. I would note emergency dental services would still be covered, but the preventive services would potentially be impacted with a rate reduction. And do either? I don't expect you to have a figure, but maybe. But I encourage you to look at the American Dental Association Health Policy Institute policy brief they published last April, which actually highlights what had happened in California in 2009 and the cost impacts to California based on that cut to eliminate adult dental. And I have, I think, provided it to Patrick, but I'm happy to provide copies also. And it does identify that California could expect to lose $2 billion over five years in associated costs because of all of the effects of losing access to oral health care. Yeah. I mean, in my estimation, it's one of the easier things that we could do to be on the preventative side. Even just cutting some treatment, you know? I mean, there's ways to save, and I think that that's something that the dental community would be happy to participate with DHCS to talk about, you know, cut some things but not everything, because we still can maintain good oral health by providing some things. Yeah, yeah. Well, I've been to both your clinics. I know the kind of services that you provide and very much appreciate that. And we have certainly been working as a budget subcommittee to try to figure this piece out. Would invite partnership, obviously, from the administration and from DHCS on how to not cut dental care any further and how to ratchet back some of the things that were done last year, knowing, you know, one, primarily how important it is to kids and families, but two, understanding the cost shift that we talked about earlier, that we're, you know, in many ways, to Assemblymember Bonta's point, you know, cut off your nose to sweat your face or Pennywise pound foolish. One way or another, these costs are going to, whether it's loss of federal dollars or cutting preventative care, that creates more cost in the system that we're all trying to reduce cost. Seems like going in the wrong direction for something that going to have a relatively small effect on the overall budget when we think about the magnitude of the overall budget So I really appreciate you coming and staying all day taking the time to come up all the way from San Luis Obispo I know what that is like. We have a couple people here that do that. So, yeah, very much appreciate it.

I think people treat your mouth like it's something separate from the rest of your body. Exactly. What happens when we don't actually have good oral care? Oh, my gosh. If I had a dental carry that went untreated. Because our dental center takes care of children. I look at the cost of lost school time, lost self-esteem, loss of future employment opportunities if they don't have a good smile. The worst case scenario, if you have a dental carrier that's untreated, it could kill you. It literally the infection. There was a case and it was now a dozen years ago. I think it was in Vermont where a young child didn't get served. He couldn't access any dental care, and his infection in his tooth went to his brain, and he died. And that's when Bernie Sanders picked up, you know, really the support of oral health care as a necessary part of your overall health. But it also affects you. It can cause – it can exacerbate dementia. I'm tired, I have to say. I'm so tired I can't even talk anymore. It can exacerbate dementia, heart disease, diabetes, so many, so many parts, inflammation in your body in general. So it's really, really an important part of your overall health. Thank you. And I think dentistry has done a wonderful job in the prevention mode. We've really tried to, you know, stop the disease and treat it when it's early and when it's cheaper to treat. And, you know, these cuts could potentially eliminate all that. So these little things will become big things. And big things in a little tooth is not a good thing. Thank you.

You don't have to.

Absolutely.

Thank you, Madam Chair and members. Eric Dowdy with the California Dental Association. I appreciate so much the comments made today. Really hoping that we can find another solution and urge you to reject the cuts to Prop 56. Thank you.

Hello. I'm Deborah Payne. I'm the founding member of the Sacramento County Medi-Cal Dental Advisory Committee since 2008. I'm also oral health consultant at First Five Sacramento. Please keep Prop 56. We've made so much progress. Please let's not go backwards.

Thank you guys so much for troopers. I'm Catherine Eager with Vitamin Group on behalf of our client, DenteQuest. We respectfully urge the committee to reverse the proposed Proposition 56 cuts to dental cow providers. DenteQuest, I'll be really fast, DenteQuest is one of the largest, the nation's largest dental benefits administrators in Medicaid and a key partner in delivering DenteCal services here in California. Given the revenue that the state has received above January projections, we strongly urge the committee to restore this funding. Thank you.

I know you've all been here a long time, and I would appreciate my two minutes if possible.

My name is Mitchell Goodis. I work in a Diamond Springs Dental Center in a clinic in El Dorado. Very impacted with indigent people. We get referrals from Tribal Health, El Dorado Community Health Center. And then your request. I'm sorry.

What?

I'm a dentist. I'm a dentist there, okay? We have a bilingual dental clinic.

I am asking that Proposition 56 funding not be rescinded Right now just to give an example a filling that we get in 1990 pays a private practice Thank you.

This is a letter for the committee. Although I wouldn't like to say it. It's not adequate.

Thank you very much, Madam Chair and members. Chris Scroggen with Capital Advocacy on behalf of Big Smiles and Children's Choice Mental Care, urging the legislature to reject the proposed Guster Proposition 56 funding for dental care. Thank you.

Thank you.

Kelly Brooks, on behalf of UC Health, urging you to maintain funding for the Prop 66 funding for dental. Thank you.

Jim Wood with California Strategies. Here on behalf of Blue Cloud Surgery Centers and a coalition of 15 dental surgery centers who see over 40,000 patients a year who will end up in emergency rooms for pain medication and antibiotics and no definitive treatment. This is surgery, not preventive care. They will have nowhere else to go. I also representing speaking on behalf of the California Society of Anesthesiologists and KOS Dental which has a group of pediatric dental offices in Southern California all asking to reverse the funding post cuts by the administration Thank you Thank you

Thank you.

Thank you. Thank you so much for all the issues you heard today. You guys are wonderful. Like, you're thanking us, but thank you guys for everything that you do.

Thank you for your long evening.

Thank you Seeing no other public comment we are going gonna move to public comment from items not on the agenda there's anyone that has public comment for items not on the agenda I don't know how that could be at this point but but maybe seeing no I'm just gonna give him a sec to there's nobody out there. Okay. Seeing no other public comment, we'll adjourn. And thank you so much for your time today. Thank you. Thank you.