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--- SB 20| Page 2 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 SB 20 | Page 3 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, SB 20| Page 4 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. SB 20 | Page 5 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 SB 20| Page 6 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 -- END --