BILL ANALYSIS                                                                                                                                                                                                    Ó






                             SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:       SB 20
          AUTHOR:        Hernandez
          AMENDED:       February 14, 2013
          HEARING DATE:  April 3, 2013
          CONSULTANT:    Moreno

          SUBJECT  :  Health care: workforce training.
           
          SUMMARY  :  Requires, beginning on the date that the California  
          Major Risk Medical Insurance Program (MRMIP) becomes  
          inoperative, all the funds in the Managed Care Administrative  
          Fines and Penalties Fund (MCAFP Fund) to be transferred each  
          year to the Medically Underserved Account for Physicians in the  
          Health Professions Education Fund for use by the Steven M.  
          Thompson Physician Corps Loan Repayment Program (SMT Program).   
          Requires the Director of Finance to notify the Joint Legislative  
          Budget Committee at the time MRMIP becomes inoperative.

          Existing law:
          1.Creates the SMT Program, which provides for the repayment of  
            educational loans for physicians and surgeons who practice in  
            medically underserved areas of the state, as defined. 

          2.Provides for the licensure and regulation of health care  
            service plans (health plans) by the Department of Managed  
            Health Care (DMHC) under the Knox-Keene Health Care Service  
            Plan Act of 1975 (Knox-Keene). Subjects health plans to fines  
            and administrative penalties for failing to comply with  
            specified provisions of Knox-Keene. Requires health plans to  
            pay specified assessments each fiscal year as a reimbursement  
            of their share of the costs and expenses reasonably incurred  
            in the administration of Knox-Keene. 

          3.Establishes MRMIP, which is administered by the Managed Risk  
            Medical Insurance Board (MRMIB) to provide major risk medical  
            coverage to eligible persons who have been rejected for  
            coverage by at least one private health plan. Creates the  
            Major Risk Medical Insurance Fund for purposes of MRMIP. 

          4.Requires fines and administrative penalties assessed against  
            health plans by DMHC to be deposited into the MCAFP Fund.   
            Requires those fines and penalties collected up to $1 million  
            be deposited into the Medically Underserved Account for  
                                                         Continued---



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            Physicians in the Health Professions Education Fund for  
            purposes of the SMT Program. Requires any amount over the  
            first $1 million to be transferred to the Major Risk Medical  
            Insurance Fund to be used, upon appropriation by the  
            Legislature, for MRMIP. 
          
          This bill: Requires, beginning on the date that MRMIP becomes  
          inoperative, all the funds in the MCAFP Fund be transferred each  
          year to the Medically Underserved Account for Physicians in the  
          Health Professions Education Fund for purposes of the SMT  
          Program. Requires the Director of Finance to notify the Joint  
          Legislative Budget Committee at the time MRMIP becomes  
          inoperative.

           FISCAL EFFECT  :  This bill has not been analyzed by a fiscal  
          committee

           COMMENTS  :  
           1.Author's statement.  The SMT program was created in response  
            to the physician-shortage problem in underserved areas, but  
            funding for this program has been unpredictable and  
            insufficient, with demand exceeding available funding every  
            year. This bill will provide much-needed funding for the SMT  
            Program, which provides loan-repayment assistance to  
            physicians who agree to practice in underserved areas of the  
            state for a minimum of three years, by shifting monies no  
            longer needed for MRMIP.

          2.Primary Care Physician Workforce Shortage.  According to a  
            report commissioned by the California Health Care Foundation,  
            the number of primary care physicians actively practicing in  
            California is at the very bottom range of, or below, the  
            state's need. The distribution of these physicians is equally  
            as poor. In 2008, there were 69,460 actively practicing  
            physicians in California (this includes Doctors of Medicine  
            and Doctors of Osteopathic Medicine) with only 35 percent of  
            these physicians reported practicing primary care. This  
            equates to 63 active primary care physicians per 100,000  
            persons. According to the Council on Graduate Medical  
            Education, a range of 60 to 80 primary care physicians is  
            needed per 100,000 persons to adequately meet the needs of the  
            population. When the same metric is applied regionally, only  
            16 of California's 58 counties fall within the needed supply  
            range for primary care physicians.  

          3.The ACA.  As a result of implementation of the Affordable Care  




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            Act (ACA), it is estimated that 3 to 7 million Californians  
            will be newly eligible for health insurance starting in 2014.  
            The ACA aims to change how care is delivered. It will provide  
            incentives for expanded and improved primary care, which may  
            affect demand for some health care professionals more than  
            others, and create team-based models of service delivery.  
            Research indicates that health care reform will place higher  
            skill demands on all members of the health care workforce as  
            systems try to improve quality while limiting costs. Studies  
            have also found that insured persons use more health care  
            services than uninsured persons, particularly in primary care  
            and preventive services. This was the experience in  
            Massachusetts, which saw a substantial increase in demand for  
            primary care services as a result of its 2006 health reform.  
            
          4.SMT Program. The SMT program was created in response to the  
            physician-shortage problem in underserved areas, but funding  
            for this program has been unpredictable and insufficient, with  
            demand exceeding available funding every year. According to  
            the Office of Statewide Hospital Planning and Development, the  
            SMT program encourages recently licensed physicians to  
            practice in Health Professional Shortage Areas (HPSAs) in  
            California. The program repays up to $105,000 in educational  
            loans in exchange for full-time service for at least three  
            years. To be considered eligible for an award, applicants  
            must: 
             a.   Be an allopathic or osteopathic physician;
             b.   Be free of any contractual service obligations (i.e. the  
               National Health Service Corps Federal Loan Repayment  
               Program or other financial incentive programs);
             c.   Have outstanding educational debt from a government or  
               commercial lending institution;
             d.   Have a valid, unrestricted license to practice medicine  
               in California;
             e.   Be employed or have accepted employment in a HPSA in  
               California;
             f.   Commit to providing full-time direct patient care in a  
               HPSA.

          1.Administrative Fines and Penalties.  Existing law allows DMHC  
            to investigate and take enforcement action against health  
            plans that do not comply with specified provisions under  
            Knox-Keene, including charging fines and administrative  
            penalties. All fines collected by DMHC go into the MCAFP Fund  
            and can vary in amount from year to year. According to DMHC,  




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            they collect about 90 percent of the fines announced, usually  
            taking two to eight weeks to collect, unless a fine is  
            challenged. Below are the amounts collected under DMHC's  
            enforcement authority since 2001-02.

          
                        ------------------------------- 
                       |Fiscal year       |Funds       |
                       |                  |collected   |
                       |------------------+------------|
                       |2012-13   (7/1/12 |$454,000    |
                       |- 1/31/13)        |            |
                       |------------------+------------|
                       |2011-12           |$1,147,398  |
                       |------------------+------------|
                       |2010-11           |$5,439,250  |
                       |------------------+------------|
                       |2009-10           |$3,642,500  |
                       |------------------+------------|
                       |2008-09           |$13,100,000 |
                       |------------------+------------|
                       |2007-08           |$7,018,600  |
                       |------------------+------------|
                       |2006-07           |$3,907,000  |
                       |------------------+------------|
                       |2005-06           |$965,000    |
                       |------------------+------------|
                       |2004-05           |$1,141,000  |
                       |------------------+------------|
                       |2003-04           |$779,000    |
                       |------------------+------------|
                       |2002-03           |$2,116,000  |
                       |------------------+------------|
                       |2001-02           |$640,000    |
                        ------------------------------- 
                       
            
          2.MRMIP.  MRMIP provides state-subsidized coverage through four  
            health plans to individuals denied coverage in the individual  
            market or whose premiums exceed MRMIP premiums. Premiums paid  
            by individuals enrolled in MRMIP are set at 125 percent of  
            what the MRMIP benefit package would cost in the commercial  
            market. MRMIP enrollment, as of December 2012, was 5,713  
            individuals and the program has an enrollment cap of 7,000  
            individuals. In 2014, MRMIP will no longer be necessary due to  
            the reforms enacted under the ACA, such as guaranteed issue.  




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          3.Related legislation.  AB 860 (Perea and Bocanegra) requires,  
            beginning January 1, 2014 and if the MCAFP Fund contains at  
            least $2 million, no less than $1 million be transferred each  
            year to the Steven M. Thompson Medical School Scholarship  
            Account, as specified.  AB 860 requires, if the MCAFP Fund has  
            a balance of less than $2 million, the first $1 million be  
            transferred to the Medically Underserved Account for  
            Physicians and the remainder, if any, to the Steven M.  
            Thompson Medical School Scholarship Account. 

          4.Prior legislation.  SB 635 (Hernandez) of 2012 would have,  
            upon a finding by the Department of Finance that MRMIP is  
            inoperative, halted transfers of specified revenues from the  
            MCAFP to the MRMIP program, and instead transferred the funds  
            to a newly created Song-Brown Program Account, which supports  
            training for health care professionals.  SB 635 was held on  
            suspense in the Assembly Appropriations Committee.

            SB 1379 (Ducheny) Chapter 607, Statutes of 2008,  requires  
            fines and administrative penalties levied against health plans  
            under the Knox-Keene Act to be placed in the MCAFP Fund and  
            used, upon appropriation by the Legislature, for a physician  
            loan-repayment program and MRMIP, instead of being deposited  
            into the State Managed Care Fund.  Requires DMHC to make a  
            one-time transfer of fine and administrative penalty revenue  
            of $10 million to MRMIP and $1 million to the loan repayment  
            program. Prohibits using the fines and administrative  
            penalties authorized by the Knox-Keene Act to reduce  
            assessments on health plans. 

            AB 2439 (De La Torre) Chapter 640, Statutes of 2008, mandates  
            the Medical Board of California assess a $25 fee to applicants  
            for issuance or renewal of a physician and surgeon's license.  
            Provides that up to 15 percent of the funds collected shall be  
            dedicated to loan assistance for physicians and surgeons who  
            agree to practice in geriatric care settings or settings that  
            primarily serve adults over the age of 65 or adults with  
            disabilities. 
            
          5.Support.  The Los Angeles Board of Supervisors writes that  
            this bill would provide additional funding for health  
            education and would increase the number of physicians who work  
            in underserved communities. The Board states that access to  
            well-trained physicians is critical to meeting the health  




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            needs of the County's underserved residents as the state moves  
            toward implementation of the ACA. The California Hospital  
            Association writes that this bill meets a crucial need without  
            imposing any additional costs on any stakeholder including the  
            state, our educational institutions, or health care providers.
            
           SUPPORT AND OPPOSITION  :
          Support:  California Communities United Institute
                    California Hospital Association
                    Los Angeles Board of Supervisors

          Oppose:   None received


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