BILL ANALYSIS                                                                                                                                                                                                    


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                                 THIRD READING

          Bill No:  AB 1657
          Author:   Hertzberg (D)
          Amended:  5/14/01 in Assembly
          Vote:     21

           SENATE HEALTH & HUMAN SERV. COMMITTEE  :  9-0, 6/20/01
          AYES:  Ortiz, Haynes, Battin, Chesbro, Figueroa, Kuehl,  
            Romero, Vasconcellos, Vincent

           SENATE APPROPRIATIONS COMMITTEE  :  10-0, 7/9/01
          AYES:  Alpert, Battin, Bowen, Burton, Johannessen,  
            Karnette, McPherson, Perata, Poochigian, Speier

           ASSEMBLY FLOOR  :  74-0, 5/30/01 (Passed on Consent) - See  
            last page for vote

           SUBJECT  :    County health care

           SOURCE :     State Auditor

           DIGEST  :    This bill requires the State Auditor to evaluate  
          the financial capacity of the Los Angeles County Department  
          of Health Services to provide necessary health services to  
          the county's residents.

           ANALYSIS  :    Existing law:

          1.Requires every county to relieve and support all  
            incompetent, poor, indigent persons, and those  
            incapacitated by age, disease, or accident, lawfully  
            resident therein, when such persons are not supported and  


                                                               AB 1657

            relieved by their relatives or friends, by their own  
            means, or by state hospitals or other state or private  

          2.Establishes the Medi-Cal Program, administered by the  
            Department of Health Services (DHS), to provide  
            comprehensive health care services to qualified,  
            low-income, aged, blind and disabled individuals and  
            establishes the Healthy Families Program, administered by  
            the Managed Risk Medical Insurance Board (MRMIB), to  
            provide low-cost, subsidized health, vision and dental  
            insurance to uninsured children who are not eligible for  
            no cost Medi-Cal with family incomes up to 250% federal  
            poverty level (FPL).

          3.Establishes the Bureau of State Audits, headed by the  
            State Auditor.  The duties of the Bureau of State Audits  
            are to examine and report annually upon the financial  
            statements prepared by the executive branch of the state  
            and to perform other related assignments, including  
            performance audits that are mandated by statute.

          4.Creates the Joint Legislative Audit Committee to, among  
            other things, determine the policies of the Auditor  

          This bill:

          1.Requires the State Auditor to evaluate the financial  
            capacity of the Los Angeles County Department of Health  
            Services to render necessary health care services to the  
            residents of Los Angeles County.

          2.Requires the State Auditor, in conducting the evaluation,  
            to do all of the following:

             A.   List and describe each of the proposals that have  
               been put forward to reduce expenditures or increase  
               revenues, and the current status of each proposal.

             B.   Determine to what extent proposals put forward are  
               complete and are likely to be effective in reducing  
               the gap between revenues and expenditures.


                                                               AB 1657

             C.   Review projections of budgetary shortfalls to  
               independently determine if the assumptions that  
               underlie baseline revenue and expenditure estimates  
               for the Los Angeles County Department of Health  
               Services are reasonable for the period commencing in  
               2001 and ending in 2005.

             D.   Adjust the projections of budgetary shortfall, as  

             E.   Devise an accounting tool that can be used to track  
               progress made in dealing with the budget shortfall as  
               changes occur in the complicated set of revenues and  
               expenditures and as decisions are made that affect the  
               operations of the Los Angeles County Department of  
               Health Services.

             F.   Evaluate the overall effectiveness and timeliness  
               of the county's efforts to bring the revenues and  
               expenditures of the Los Angeles County Department of  
               Health Services into balance.

          1.Requires the State Auditor to report their findings and  
            evaluation to the Legislature by June 1, 2002.

          2.Makes various findings and declarations regarding the Los  
            Angeles County Department of Health Services, the  
            county's 1115 Medicaid Waiver, and how the financial  
            condition of the Los Angeles County Department of Health  
            Services will affect the quantity and quality of health  
            care service available to the county's low-income  


          This bill is intended to allow the Legislature to closely  
          monitor an evolving budget problem potentially affecting  
          the state General Fund and disrupting the delivery of  
          health care in the Los Angeles area.

          In 1995-96, the Los Angeles County DHS faced a $655 million  
          budget deficit and was able to secure five years of  
          financial assistance from the federal government through a  
          Medicaid 1115 waiver.  In June of 2000, the county, state  


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          and federal government negotiated a five-year extension of  
          the waiver.  However, federal funds will decrease from $246  
          million in 2001-01 to $86 million in 2004-05, making it  
          necessary for the county health department to deal with the  
          imbalance between long-term revenues and current operating  
          expenses.  As part of the waiver extension agreement, the  
          state has committed to provide $300 million in Medi-Cal  
          funding to the County DHS by providing cost-based  
          reimbursement under Medi-Cal for outpatient services.

          According to the author, the Los Angeles County DHS has  
          notified the County Board of Supervisors that if major  
          changes are not made to either reduce costs or increase  
          revenues, that it will begin running major deficits by  
          2002-03.  The deficit for 2002-03 is estimated at $184.6  
          million.  Over the five-year period of the waiver the  
          cumulative deficit is estimated at $884 million.  The  
          annual budget for the county is $2.6 billion, however, the  
          majority of that amount is state and federal funds.

          The Los Angeles County Department of Health Services is the  
          second largest public health system in the nation.  The Los  
          Angeles health department cares for 10 million residents,  
          is responsible for 2.5 million uninsured residents and  
          provides 85 percent of all uncompensated care in the  
          county.  In 1999, the department provided 2.8 million  
          ambulatory care visits, 110,000 hospital admissions,  
          405,000 emergency room visits and 490,000 public health  
          visits.  The county operates six hospitals, six  
          comprehensive health centers, 20 health centers, and 100  
          private/public clinics.

          The Joint Legislative Audit Committee considers requests  
          for audits conducted by the State Auditor, and legislation  
          is not required for an audit, although bills in the past  
          have contained a provision requiring an audit by the State  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to Senate Appropriations Committee:

                          Fiscal Impact (in thousands)


                                                               AB 1657

          Major Provisions        2001-02             2002-03               
           2003-04                    Fund  

          2nd Audit report                       120              

           Staff comments  :  
          Note.   The Joint Legislative Audit Committee (JLAC)  
          considers requests for audits conducted by the State  
          Auditor, and separate legislation is not required for an  
          audit.  However, in the past bills have been enacted that  
          require an audit by the State Auditor.  The Budget Act  
          contains a block of funding earmarked for audits in the  
          State Auditor's budget.

          In this case, a request for the first portion of the audit  
          contained in the bill has already been approved by JLAC,  
          and is already funded in the proposed budget.  Thus, the  
          only cost associated with the passage of this measure would  
          be for the second portion of the audit, and JLAC has  
          estimated that it would be approximately $120,000 from the  
          General Fund.

           SUPPORT  :   (Verified  7/11/01)

          State Auditor (source)
          Los Angeles County Board of Supervisors

           ASSEMBLY FLOOR :
          AYES:  Aanestad, Alquist, Aroner, Bates, Bogh, Calderon,  
            Bill Campbell, Canciamilla, Cardenas, Cedillo, Chan,  
            Chavez, Chu, Cogdill, Cohn, Corbett, Correa, Cox,  
            Daucher, Diaz, Dickerson, Dutra, Firebaugh, Florez,  
            Frommer, Goldberg, Harman, Havice, Hollingsworth, Horton,  
            Jackson, Keeley, Kehoe, Kelley, Koretz, La Suer, Leach,  
            Leonard, Leslie, Liu, Longville, Lowenthal, Maddox,  
            Maldonado, Matthews, Migden, Mountjoy, Nation, Negrete  
            McLeod, Oropeza, Robert Pacheco, Rod Pacheco, Papan,  
            Pavley, Pescetti, Reyes, Richman, Runner, Salinas,  
            Shelley, Simitian, Steinberg, Strickland, Strom-Martin,  
            Thomson, Vargas, Wayne, Wesson, Wiggins, Wright, Wyland,  


                                                               AB 1657

            Wyman, Zettel, Hertzberg

          CP:sl  7/11/01   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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