BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 840| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 840 Author: Kuehl (D), et al Amended: 4/30/07 Vote: 21 SENATE HEALTH COMMITTEE : 6-4, 4/18/07 AYES: Kuehl, Alquist, Cedillo, Ridley-Thomas, Steinberg, Yee NOES: Aanestad, Cox, Maldonado, Wyland NO VOTE RECORDED: Negrete McLeod SENATE APPROPRIATIONS COMMITTEE : 10-6, 05/31/07 AYES: Torlakson, Cedillo, Corbett, Florez, Kuehl, Oropeza, Ridley-Thomas, Simitian, Steinberg, Yee NOES: Cox, Aanestad, Ashburn, Dutton, Runner, Wyland NO VOTE RECORDED: Battin SUBJECT : Single-payer health care coverage SOURCE : California Federation of Teachers California Nurses Association California School Employees Association California Teachers Association Health Care for All DIGEST : This bill establishes the California Universal Healthcare System under which all California residents will be eligible for specified health care benefits. The universal system will, on a single payer basis, negotiate for or set fees for health care services provided through CONTINUED SB 840 Page 2 the system and pay all claims for those services. The bill establishes a new administrative structure and provide for oversight of health care operations statewide. (See a point by point description of the bill at the end of Arguments in Opposition.) ANALYSIS : Existing federal and state law establishes several publicly financed health insurance programs, including Medicare, Medi-Cal, and the Healthy Families program, that provide health coverage to eligible individuals and families, including children, the aged, blind, and disabled, and pregnant women. Existing law also provides for the regulation of private health care service plans by the Department of Managed Health Care (DMHC) and health insurance policies by the Department of Insurance (DOI). This bill fundamentally alters the financing of health care in California by shifting the current employer based/multi-payer system to a single financing system. The bill provides comprehensive medical benefits to every California resident, authorizes participation of all licensed medical providers, incorporates federal and other public programs into the universal system, prohibits the sale of private health insurance and regulates health care costs. The program will be financed with current government health care funding for incorporated federal/county programs, a payroll tax to replace employer benefit plans and other taxes to replace insurance premiums. This bill will be governed by an appointed commissioner charged with establishing the universal system's budget and setting rates, establishing expenditure limits, developing a capital management plan, seeking all necessary waivers and exemptions and establishing equitable distribution of services and financing. This bill contains the structure and policy for a universal single payer system. The financing provisions are contained in a companion measure, SB 1014 (Kuehl). This bill constrains growth in future spending to match SB 840 Page 3 growth in the state gross domestic product which is expected to be approximately 5.14 percent annually through 2015. By 2015, health care spending under the single payer program will be approximately $68.9 billion less than currently projected ($343.6 billion). Total savings over the 2006 through 2015 period will be $343.6 million. Savings to state and local governments over this ten year period will be approximately $43.8 billion. The bill requires the universal system to be operational no later than two years after it is determined there are sufficient resources to implement the program. The bill provides authority for a loan from the General Fund to finance transitional costs. Prior Legislation SB 840 (Kuehl) - 2005-06 Session . Would have implemented a system substantially similar to that proposed by this year's SB 840. The bill was vetoed by the Governor. AB 772 (Chan) - 2005-06 Session . Would have created the California Healthy Kids Insurance Program to expand health care coverage to all California children. The bill was vetoed by the Governor. SB 921 (Kuehl) - 2003-04 Session . Would have implemented a system substantially similar to that of this year's SB 840. SB 921 was held in the Assembly Health Committee. SB 2 (Burton), Chapter 673, Statutes of 2003 . Enacted the Health Insurance Act of 2003, to provide health provide coverage to employees (and in some cases their dependents) who do not receive job-based coverage and who work for large and medium employers. SB 2 was repealed by Proposition 72, a voter referendum on the November 2004 ballot. Related Legislation SB 1014 (Kuehl) - 2007-08 Session . A companion to SB 840, this bill imposes a health care coverage tax on the wages of an employee that would be paid by both the employee and the employer, and direct revenues generated from these SB 840 Page 4 taxes to fund the California Health Insurance Fund that would be created by SB 840. SB 48 (Perata) - 2007-08 Session . Proposes a health care reform plan designed to insure all working Californians and their dependents, as well as children regardless of residency status in households with incomes up to 300 percent of the federal poverty level. AB 8 (Nunez) - 2007-08 Session . Proposes a health care reform designed to insure all working individuals and dependents employed by firms of two or more employees, all children, regardless of residency status, with household incomes up to 300 percent of the federal poverty level, and eventually low-income childless adults. SB 236 (Runner) - 2007-08 Session . Enacts the Cal CARE program to increase access to health care services in the state and provide health coverage incentives. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes Fiscal Impact (in thousands) Major Provisions 2007-08 2008-09 2009-10 Fund State/county net ($1,000,000) ($2,800,000) GF/county savings Transition loan $6,000 SUPPORT : (Verified 6/4/07) California Federation of Teachers (co-source) California Nurses Association (co-source) California School Employees Association (co-source) California Teachers Association (co-source) Health Care for All (co-source) Access to Independence Alameda County Public Health Department Alameda Health Consortium SB 840 Page 5 Alameda-Contra Costa Transit District Alliance for Democracy - San Fernando Valley Chapter Alliance of Retired Americans - West Side Chapter Los Angeles Altschuler Clinic - A Center for Weight Loss and Wellness American Civil Liberties Union American Civil Liberties Union American Federation of State, County and Municipal Employees American Federation of State, County, and Municipal Employees Retirees, Chapter 36 American Federation of Teachers California Federation of Teachers American Federation of Television and Radio Artists American Nurses Association California Applied Research Center Association of California Caregivers Resource Centers Butte County Health Care Coalition Board of Supervisors of Marin County California Advocates for Nursing Home Reform Califonria Alliance for Retired Americans California Association of Public Authorities for In-Home Supportive Services California Catholic Conferences California Church IMPACT California Faculty Association California Foundation for Independent Living Centers California Healthcare Institute California Labor Federation California Pan-Ethnic Health Network California Physicians Alliance California Professional Firefighters California Public Health Association - North California Public Interest Research Group California Retired Teachers Association California Senior Legislature - State of California California Teamsters Public Affairs Council Castro Valley Democratic Club - Resolution Central Labor Council of Butte & Glenn Counties City and County of San Francisco Department on the Status of Women City of Berkeley - City Clerk Department City of Capitola City of Santa Barbara - Office of the Mayor SB 840 Page 6 City of Santa Cruz - City Clerk's Department City of Santa Cruz - Mayor and City Council City of West Hollywood - Resolution of the City Council Coalition for Humane Immigrant Rights of Los Angeles (CHIRLA) CoHousing Partners Communications Workers Community Clinic Consortium Community Collaborative for Youth Community Homeless Alliance Ministry Congress of California Seniors Consumer Attorneys of California Consumer Federation of California Consumers Union County Health Executives Association (if amended) Davis Joint Unified School District Davis Office Systems Dean Democratic Club of Silicon Valley Democratic Action Club of Chico Democratic Central Committee of Santa Barbara County Democratic Club of Santa Maria Valley Democrats of the High Desert Demos Democratic Club of Hayward Dental Health Foundation Effective Assets El Cerrito Democratic Club Equality California Family Resource Network of Santa Cruz County First Congregational Church of Long Beach First 5 Children and families Commission, Marin Friends Committee on Legislation of California Grass Valley Friends Meeting of the Religious Society of Friends Gray Panthers Gray Panthers - Berkeley - East Bay Greater Lodi Area Democrats Green Party of California Green Party of Alameda County Green Party of Butte County Health Access California Health Care for All Californians Health Care for All - Marin Health Care for All - San Gabriel Valley Health Care for All California - Santa Barbara SB 840 Page 7 Health Care for All Santa Cruz City Health Care for All Sonoma County Health Care for All South Bay/Long Beach Howard L. Berman - Congress of the United States House of Representatives Independent Employees of Merced County Independent Living Center - San Gabriel Valley Insure the Uninsured Project Interfaith Council of Contra Costa County JERICHO Kramer Translation Lambda Letters Project Latino Coalition for a Healthy California Latino Health Access Latino Issues Forum League of Women Voters, California League of Women Voters, Diablo Valley League of Women Voters, Fremont, Newark, and Union City League of Women Voters, Humboldt County League of Women Voters, Long Beach Area League of Women Voters, North and Central San Mateo County League of Women Voters, Oakland League of Women Voters, Palos Verdes Peninsula/San Pedro League of Women Voters, San Joaquin County League of Women Voters, Santa Barbara League of Women Voters, Santa Cruz County League of Women Voters, Southwest Santa Clara Valley LifeLong Medical Care Los Angeles Free Clinic Lutheran Office of Public Policy - California Manteca Democratic Club Mexican American Legal Defense and Educational Fund (MALDEF) Mendocino Coast Democratic Club National Asian Pacific American Women's Forum National Association of Broadcast Employees and Technicians National Association of Social Workers (NASW) National Association of Working Women Newsom & Fitzpatrick Medical Group, Inc. Oak Grove Educators Association Oakhurst Democratic Club Oakland Education Association Older Women's League of California SB 840 Page 8 Organization of SMUD Employees Pacific Palisades Democratic Club Planned Parenthood Affiliates of California Planned Parenthood of Mar Monte Planned Parenthood of San Diego and Riverside Counties Planned Parenthood of Shasta-Diablo Progressive Christians Uniting Rainbow Coalition - West Contra Costa Richmond Greens Steering Committee San Bernardino Public Employees San Diego County Water Authority San Francisco for California San Francisco for Democracy San Francisco Labor Council San Jose - Evergreen Community College District San Luis Obispo County Employees Association San Mateo County Central Labor Council Santa Rosa City Employees Association Santa Clarita Valley $CV Clean Money for Better Government Senior Advocacy Council Service Employees International Union Service Employees International Union, United Healthcare Workers Sierra Friends Center Sober Living Network Sourcingmag.com South Bay Center South Hayward Parish South of Market Project Area Committee South Pasadena Activists Southern California Public Health Association State of California Commission on the Status of Women St. Mary's Center Stockton Unified School District Resolution No. 06-77 Strawberry Creek Lodge Tenant's Association Sutter County Democratic Central Committee Torrance Democratic Club UE Western Regional Council - United Electrical, Radio and Machine Workers of America United Electrical, Radio and Machine Workers of America, UE Local 1421 United Food and Commercial Workers Union United Nations Association - USA & UNESCO Santa Barbara County Chapters SB 840 Page 9 United Nurses Association of California/Union of Heath Care Professionals United Methodist Women Valley Interfaith Council, Board of Directors of San Fernando Valley Valley Women's Club Wellstone Democratic Renewal Club West LA Democratic Club Western States Council Women For Orange County Women's Foundation Women's International League for Peace and Freedom Women Organized to Win OPPOSITION : (Verified 6/4/07) America's Health Insurance Plans Association of California Life & Health Insurance Companies Blue Cross of California Blue Shield of California California Association of Dental Plans California Association of Health Plans California's Benefits Specialists California Chamber of Commerce California Farm Bureau Federation California Manufacturers & Technology Association California Medical Association California Resource Institute Cal-Tax Capitol Resource Institute Health Net Howard Jarvis Taxpayers Association Insurance Brokers and Agents of the West Kaiser Permanente National Association of Insurance and Financial Advisors of California National Federation of Independent Business Modesto Chamber of Commerce United Chambers of Commerce of the San Fernando Valley ARGUMENTS IN SUPPORT : According to the author's office, this bill provides fiscally sound, affordable health care to all Californians, provide every Californian the right to SB 840 Page 10 choose his or her own physician, and control health cost inflation. The author's office states that the single greatest problem facing California's health care system and economy is the growing cost of health insurance. As evidence, the author cites research that demonstrates most of the newly uninsured come from solidly middle-class families. The author's office also cites unsustainable increases in health care premiums noting that health insurance premiums have increased 87 percent since 2000, and although wages have only increased by 20 percent over this period, the average employee contributes 143 percent more to their company-sponsored health insurance. The author's office states that overall, health care costs have outpaced increases in wages by a ratio of 4:1 since 2000. The author's office notes that California spent an estimated $186 billion in health care last year, and that this amount is sufficient to provide every resident of the state with excellent health care, and ensure fair and reliable reimbursements to doctors, nurses and other providers. The author's office states that a single payer universal health care system is the only long-term way to address the issue of unsustainable growth in spending, arguing that private insurance companies are not innovators when it comes to cost management - they are, instead, innovators only when it comes to risk aversion. The author's office also cites studies demonstrating that nearly half of all health care spending is misspent on administrative and clinical waste related to the fragmentation of the current system. Other studies highlighted by the author's office find that 30 percent of every health care dollar is wasted on administrative overhead, alone. The author's office argues that under a single payer system, California would consolidate the administrative waste of thousands of health plans - saving the system nearly $20 billion in the first year. In addition, the author's office states that a single payer system would emphasize preventative and primary care and allow California to use its purchasing power to negotiate discounts for prescription drugs and durable medical equipment. SB 840 Page 11 The author's office cites the Lewin Group analysis stating that a single payer health care system could achieve universal coverage while reducing total health spending in California. Additionally, the author argues that this bill is the gold-standard for health reform in California because it offers truly universal health care since eligibility is based on residency, not on employment or income. The author's office states that this provides affordable coverage, involving no new spending, because the plan will be paid for by federal, state and county monies already being spent on health care and by affordable insurance premiums that replace all premiums, deductibles, and co-pays now paid by employers and consumers. The author's office states that this bill will combine needed cost controls with high medical standards, and place an emphasis on preventative and primary care to improve California's overall health in a way that also saves billions of dollars. ARGUMENTS IN OPPOSITION : Opponents state that costs associated with this bill would create an expensive labyrinth of bureaucracy, and that competition among private companies leads to lower costs and better care. Opponents assert that a socialized state-run health care system would eliminate these companies, thereby forcing people to rely upon the state to take care of their health needs, and limiting medical advances because of decreased competition. Opponents argue that this bill would extend taxpayer obligations too far, result in rampant fraud, waste and mismanage public services, and damage the state's competitiveness for jobs. They state that a major portion of the health care system created by this bill would be paid for through increased taxes which would discourage business growth, and hurt state investments, and that that out-of-state individuals would move to California to take advantage of the new health care system adding to the state's economic burden. Opponents disagree with the premise that a single payer system will generate substantial savings from lowered administrative costs and profits, as administrative costs will not be eliminated under a single payer system. They assert that competitive forces in the marketplace are vital SB 840 Page 12 in health care, and that while California's premiums have increased, they are still lower than other large markets. Opponents cite cases in Canada where waiting times to see general practitioner increased by 72 percent, and where some provinces sent patients to the U.S. to have heart surgery as a result of long wait times. The California Medical Association (CMA) states the bill may create unintended consequences that could hurt patient care and the practice of medicine. CMA states that the bill allows for a decrease in benefits to cover revenue and shortfalls, leaving open the possibility to reduce benefits from what a standard Medi-Cal or commercial plan now offers. The CMA also cites concerns that the premium commission created by this bill has a concentrated authority to decide benefit design, provider payments, and cost-sharing that may not benefit patients. Lastly, the CMA states that a single-payer system may limit the ability of doctors to make autonomous decisions about courses of treatment. Following is a detailed description of what the bill does : This bill establishes the California Universal Healthcare System (CUHS) to provide health insurance coverage to every California resident. The bill would prohibit the sale of any private health care service plan or health insurance policy in the state, and would make the CUHS the primary payer for health care services in California. This bill establishes a new state agency, the California Universal Healthcare Agency (CUHA), which will oversee the CUHS and receive all federal, state and local monies paid with respect to the applicable provisions of state and federal law. The CUHA will be comprised of the following entities: 1. The Universal Healthcare Policy Board 2. The Office of Patient Advocacy 3. The Office of Health Planning 4. The Office of Healthcare Quality 5. The Universal Healthcare Fund 6. The Public Advisory Committee 7. The Payments Board 8. Partnerships for Health SB 840 Page 13 System Governance The bill provides for the appointment of a commissioner of the CUHA by the Governor subject to confirmation by the Senate. The appointed commissioner will be the chief officer of the agency and establish the CUHS budget, set goals, standards and priorities for the system, set rates, appoint specified officers and directors within the system, and promulgate generally binding regulations concerning implementation of the CUHS. The bill requires the commissioner to be subject to conflict of interest provisions two years prior to, during, and for two years following his or her service. The bill assigns duties to the commissioner, including the oversight and establishment of integrated service delivery networks, an enrollment system, a system-wide electronic claims and reimbursement system, a system of secure electronic medical records, a referral system, and health planning regions. The commissioner will also be required to develop a system budget, to determine the appropriate levels for a reserve fund for the system, to implement specified cost control measures, to negotiate and set rates, fees and prices, and to oversee measures to ensure quality of care. Lastly, the bill requires the commissioner to seek all reasonable means to secure a repeal or waiver of any provision of federal law that preempts any part of the bill and, in the event that preemption is not waived, requires the commissioner to promulgate conforming regulations. The bill also establishes the Universal Healthcare Policy Board, to establish goals and priorities for the system, establish the scope of services to be provided to patients and establish guidelines for evaluating the performance of the system, its officers, the health planning regions and providers. These guidelines will include measures to include public input. The bill establishes a Public Advisory Committee to advise the Board on all matters related to the system. Members of the committee will be appointed by either the Governor, the SB 840 Page 14 Senate Committee on Rules or the Assembly Speaker, and will represent a range of providers, including physicians, nurses, hospitals, allied health professionals, clinics, other providers, and other stakeholders, including consumers, labor and business. This bill creates the Office of Patient Advocacy within the agency to represent the interests of health care consumers relative to the system, as specified. This bill establishes the Office of Health Care Planning and assigns the director of the office various duties, including evaluating regional budget requests, estimating the health care workforce, health disparities, infrastructure needs required to meet the health care needs of the population in accordance with the goals and standards set forth by the commissioner, and other duties as specified. The commissioner will be required to establish the Office of Health Care Quality, headed by the chief medical officer, in order to support the development of high quality, coordinated heath care services, establish processes for measuring the quality of care delivered in the health insurance system, and establish a means to make changes needed to improve health care quality. The bill assigns various duties to the chief medical officer, including establishing evidence-based standards of care to serve as guidelines to support health care providers. The chief medical officer will be required to identify, measure, and prevent medical errors within the system, and to recommend to the commissioner a benefits package based on clinical efficacy for the system, including priorities for needed benefit improvements. The bill establishes, within the Office of the Attorney General, the Office of the Inspector General for the CUHS who would be appointed by the Governor subject to Senate confirmation. The Inspector General will be granted broad powers to investigate, audit and review the financial and business records of individuals and entities that provide services or products to the system or are reimbursed by the system. SB 840 Page 15 Transition The bill requires the system to be operational no later than two years after it has been determined that the Universal Healthcare Fund has sufficient revenues to fund the costs of implementing the bill's provisions. The bill requires the transition to be funded from a loan from the General Fund and from other sources, including private sources identified by the commissioner. A transition advisory group comprised of the officers of the system, specified stakeholders and health care policy experts, and representatives from all existing departments and agencies affected by establishment of the system, will be established to advise the commissioner on all aspects of implementation of the CUHA. Regional Planning This bill requires the commissioner to establish up to 10 health planning regions comprised of geographically contiguous counties grouped according to specified criteria including patterns of health utilization, health needs of the population, geography, population and demographic characteristics. The commissioner will be required to appoint a director for each region who would be required to identify and prioritize regional health care needs and goals, assess projected revenues and expenditures to ensure fiscal solvency of the system at a regional level, establish and implement a regional capital management plan and operating budgets, and undertake other duties as specified. The bill requires each regional planning director to appoint a regional planning board to advise the director on regional health policy and to appoint a regional medical officer who would administer the regional Office of Healthcare Quality. The regional medical officer will also be required to assure the evaluation and measurement of quality of care delivered in the region, and to perform other specified duties. Eligibility SB 840 Page 16 The bill deems all California residents eligible for the CUHS, and bases residency on physical presence in the state with the intent to reside. This bill also states legislative intent for the system to provide health care coverage to state residents who are temporarily out of the state. The bill provides that visitors to the state who receive care under the CUHS will be billed for all services rendered. Additionally, the bill deems individuals who are eligible for health benefits from California employers but working in another jurisdiction to be eligible for benefits under the CUHS if they make certain payments. This bill also provides that individuals who arrive at a health facility unable, because of physical or mental conditions, to document eligibility shall be deemed eligible for services. Benefits The bill provides that any eligible individual may receive services under the system from any willing professional health care provider. Covered benefits will be defined under the bill to include all medical care determined to be medically appropriate by the patient's health care provider, including but not limited to: 1.Inpatient and outpatient health facility services. 2.Inpatient and outpatient professional health care provider services by licensed health care professionals. 3.Diagnostic imaging, laboratory services, and other diagnostic and evaluative services. 4.Durable medical equipment including prosthetics, eyeglasses, and hearing aids and their repair. 5.Rehabilitative care. 6.Emergency transportation and necessary transportation for health care services for disabled indigent persons. 7.Language interpretation and translation for health care SB 840 Page 17 services. 8.Child and adult immunizations and preventive care. 9.Health education. 10.Hospice care. 11.Home health care 12.Prescription drugs listed on the formulary. 13.Mental and behavioral health care. 14.Dental care. 15.Podiatric care. 16.Chiropractic care. 17.Acupuncture. 18.Blood and blood products. 19.Emergency care products. 20.Vision care. 21.Adult day care. 22.Case management and coordination to ensure services necessary to enable a person to remain in the least restrictive setting. 23.Substance abuse treatment. 24.Care of up to 100 days in a skilled nursing facility following hospitalization. 25.Dialysis. 26.Benefits offered by a bona fide church, sect, denomination, or organization whose principles include healing entirely by prayer or spiritual means. SB 840 Page 18 This bill allows the commissioner to expand benefits beyond the minimum outlined above when expansion meets the intent of the statute and can be sufficiently funded. The bill excludes specified services from coverage by the CUHS health are services that are determined by the commissioner and chief medical officer to have no medical indication, including services primarily for cosmetic purposes, private rooms in inpatient health facilities, and services of a provider or facility that is not licensed by the state. The bill prohibits co-payments and deductibles for preventive care or when prohibited by federal law. The bill requires individuals enrolling in integrated health care systems to retain membership for at least one year after an initial three-month evaluation period during which they could withdraw at any time. The bill also requires patients to have a referral from a primary care provider to see a specialist, except that referrals would not be needed to see a dentist and allows a specialist to serve as the primary care provider if the provider agrees to coordinate the patient's care. For the first six months of system operation, the bill provided that no specialist referral shall be required for patients who had been receiving care from a specialist prior to initiation of the system. This bill allows a patient to appeal the denial of a referral through the dispute resolution mechanism established by the commissioner. Budgeting and Financing Provisions The bill establishes the Universal Healthcare Fund (UHF) within the State Treasury administered by a director appointed by the commissioner. The bill provides that all claims for health care services rendered pursuant to the system shall be submitted to the UHF via an electronic claims and payment system. The bill requires the UHF director to establish a system account and a reserve account. The system account will be required, at all times, to hold an amount estimated in the SB 840 Page 19 aggregate to provide for the payment for all losses and claims for which the system may be liable. The bill requires the UHF director to immediately notify the commissioner when trends indicate that expenditures for the system may exceed revenues and to immediately notify the Legislature and the public regarding the possible need for cost control measures. The bill specifies the types of cost control measures the commissioner could implement, including changes in the system of health facility administration that improve efficiency, postponement of introduction of new benefits or benefit improvements, imposition of co-payments and deductibles under specified circumstances, imposition of an eligibility waiting period if the commissioner determines that people are immigrating to the state for the purpose of obtaining health care through the system, and other as specified. The bill provides that at the regional level, if the commissioner or regional planning director determines that regional revenue and expenditure trends indicate a need for regional cost containment, specified cost control measures may be followed. The bill provides that if the Budget Act has not been enacted by June 30th of any year, all monies in the reserve account of the Universal Healthcare Fund would be used to implement the bill's provisions until funds became available through the Budget Act. The bill also requires the State Controller to make one or more General Fund loans to the fund for the purposes of making payments for health care goods and services, if the reserve funds are exhausted. The commissioner will be required to establish a budget for all expenditures, specifying a limit on total annual state expenditures and establish regional allocations to cover a three-year period. The commissioner will be required to limit the growth of spending on a statewide and regional basis with reference to average growth in state domestic product across multiple years, population growth, advances in technology, and other factors. Additionally, the bill requires the commissioner to adjust the system budget so that aggregate spending for the state would not exceed SB 840 Page 20 spending under this division by more than five percent. The bill requires the commissioner to project the system's revenues and expenditures pursuant to specified factors and to convene an annual conference of system officers and representatives of the governance system to discuss projections and possible policy directions. The commissioner will also be required to establish specified budgets for various components of the health care system and shall include various adjustments including cost-of-living differences between regions, health risk of enrollees, workforce development needs, and projected savings due to improved access and efficiency of care delivery, among others variables. This bill requires the commissioner to seek necessary approval so that all current federal payments for health care are paid directly to CUHS, which would then assume responsibility for all benefits and services paid by the federal government with those funds. This bill also requires the commissioner to establish formulas for equitable contributions to CUHS from counties and other local government agencies. The bill provides that the system be secondarily responsible for providing care to the extent that the federal, state, or county programs are not transferred to the system. Additionally, the bill requires the CUHS to cover Medicare share of cost expenses to the extent that the commissioner obtains authorization to incorporate Medi-Cal or Medicare revenues into the UHF. This bill provides that until a single public payer for all health care in the state is established, health care costs shall be collected from "collateral sources" including insurance policies, health plans, employers, employee benefit contracts, government benefit programs, judgments for damages, and any liable third party. Health Care Providers Under the bill, the commissioner will be required to establish a Payments Board that is responsible for negotiating reimbursements and establishing a uniform SB 840 Page 21 payments system for health care providers and managers not part of health delivery systems, essential community providers, and group medical practices. The bill also requires the Payments Board to negotiate compensation for upper level managers subject to specified guidelines, and to report annually to the commissioner on the status of health care provider and upper level management reimbursement including satisfaction with reimbursement levels and the sufficiency of funds allocated. The bill allows providers to choose to be compensated by the system or by persons to whom they provide services, in which case they may establish charges for their services. Providers who accept any payment under this division would not be allowed to bill a patient for any covered service. Providers electing to be compensated under fee-for-service would be required to choose representatives of their specialties to negotiate reimbursement rates with the Board consistent with the state action doctrine of the federal anti-trust law. The bill requires provider compensation to be actuarially sound and include a just and fair return for health care providers. The bill requires physicians to be reimbursed for all services provided pursuant to the CUHA. The bill requires payment schedules that would be in effect for three years, and for bonus payments associated with specified performance standards and goals for the system including service to medically underserved areas. The bill allows all licensed and accredited health care providers in the state to participate in the CUHS, and prohibits a provider from refusing to care for a patient based on discrimination. The bill also allows individuals to select a primary care provider, and women to select an obstetrician-gynecologist in addition to a primary care provider. Under the bill, integrated health delivery systems, essential community providers, and group medical practices that provide comprehensive, coordinated services would be required to negotiate operating budgets with regional SB 840 Page 22 planning directors and would be allowed to choose to be reimbursed on the basis of a capitated system or a non-capitated operating budget that covers all costs of providing health care services. The bill prohibits payments from capitated or non-capitated operating budgets to pay for capital expenses, with specified exceptions. Health systems operating under capitated or non-capitated budgets would be required to immediately report any projected operating deficits to the regional planning director who will then evaluate whether to make an adjustment in the operating budget. The bill provides that margins generated under a health system's operating budget could be retained and used to meet the health care needs of the population, conditioned upon specified restrictions. Health facilities operating under system operating budgets would be allowed to raise and expend funds from sources other than the system including, but not limited to, private or foundation donors for purposes related to the goals of the system. Funding of Health Facilities and Equipment The bill directs the commissioner to perform a system-wide assessment of existing capital health care assets, prioritize short- and long-term capital needs, and develop a multi-year capital management plan, according to specified criteria, to govern all capital investments and acquisitions undertaken. This bill requires the commissioner to develop and maintain capital inventories on a regional basis and to establish a process whereby those intending on making capital investments or acquisitions would be required to prepare a business plan, as specified. The bill requires the establishment of a competitive bidding process, as described, for the development of capital management plans that meets the needs of the system and provides that the system may fund, partially fund, or participate in seeking funding for those capital projects. The bill prohibits capital investments from being made from operating budgets. This bill requires the regional planning directors to develop a regional capital development plan pursuant to the SB 840 Page 23 CUHS capital management plan established by the commissioner. The bill requires regional planning directors to make financial information available to the public when the system's contribution to a capital project is greater than $25 million, and requires the commissioner to establish conflict of interest requirements in regard to capital outlays made by the system. Purchase of Prescription Drugs Under the bill, the commissioner will be required to establish a budget for the purchase of prescription drugs and to use the purchasing power of the state to obtain the lowest possible prices for prescription drugs. This bill also requires the commissioner to establish a budget to support research and innovation recommended by the system to support the goals and standards of the system. The commissioner will also be required to establish a budget to support the training, development and continuing education of health care providers and the health care workforce needed to meet the health care needs of the population. Health Care Premiums The bill establishes the California Universal Healthcare Premium Commission, comprised of specified representatives including health finance experts, business and labor representatives, and state tax department representatives to determine the aggregate costs of providing health care coverage pursuant to the CUHA, and to develop an equitable and affordable premium structure, as described, that would generate adequate revenue to support the system and ensure actuarially sound funding for the system. The Premium Commission will be authorized to obtain grants from and contract with individuals and entities and receive charitable contributions or any other lawful source of income in order to perform its function. The Premium Commission will be required to seek structured input from representatives of stakeholder organizations, policy institutes, and other expertise to ensure it has the necessary information to perform its function. Additionally, the bill requires that the Premium Commission be supported by a reasonable amount of staff time provided SB 840 Page 24 by the state agencies with membership on the commission. CTW:cm 6/4/07 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****