BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 243
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|AUTHOR: |Hernandez |
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|VERSION: |April 13, 2015 |
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|HEARING DATE: |April 22, 2015 | | |
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|CONSULTANT: |Scott Bain |
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SUBJECT : Medi-Cal: reimbursement: provider rates
SUMMARY :1. Repeals prior year Medi-Cal provider and managed care rate
reductions. Increases specified fee-for-service Medi-Cal
provider rates to Medicare levels. Requires rates paid to
Medi-Cal managed care plans to be actuarially equivalent to the
payment rates established under the Medicare program. Requires
Medi-Cal hospital inpatient claims for diagnosis-related groups
to be increased by 16 percent for the 2015-16 fiscal year, and
to be increased annually thereafter. Requires Medi-Cal managed
care plan rates to be increased by a proportionately equal
amount for increased payments for hospital services.
Existing law:
1.Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), under which
qualified low-income patients receive health care benefits.
2.Requires DHCS to develop and implement a Medi-Cal hospital
inpatient payment methodology based on diagnosis-related
groups (DRGs), subject to federal approval, but excluding
public hospitals, psychiatric hospitals, and rehabilitation
hospitals, which include alcohol and drug rehabilitation
hospitals.
3.Requires Medi-Cal provider payments, with specified
exceptions, and payments to Medi-Cal managed care plans to be
reduced by 10 percent for dates of service on and after June
1, 2011.
This bill:
SB 243 (Hernandez) Page 2 of ?
1.Requires Medi-Cal payments to providers for dates of service
on or after June 1, 2011, to be determined without application
of the prior year rate reductions, including the 10 percent
rate reduction in AB 97 (Committee on Budget), Chapter 3,
Statutes of 2011. Requires Medi-Cal managed care plan rates to
be determined without application of the prior year rate
reductions, limitations, and adjustments.
2.Requires payments for medical care services rendered by
fee-for-service (FFS) Medi-Cal providers, including dental
providers, to be not less than the payment rate that applies
to those services as established by the Medicare program for
services rendered by fee-for-service providers.
3.Defines "medical care services" as specified outpatient
services (such as physician, hospital or clinic outpatient,
psychologist, optometric, podiatric), dental and dental
hygiene services (including adult dental), medical
transportation, home health services, and hospice services.
4.Requires, commencing January 1, 2016, rates paid to Medi-Cal
managed care plans to be actuarially equivalent to the payment
rates established under the Medicare program.
5.Requires DHCS to implement the payment increase required by 2)
through 4) above to managed care health plans that contract
with DHCS. Requires payments by DHCS to Medi-Cal managed care
health plans to be increased by the actuarially equivalent
amount of the payment increases pursuant to contract
amendments or change orders effective on or after January 1,
2016.
6.Permits DHCS to implement the payment increases in 2) through
5) above via provider bulletin or similar instructions,
without taking regulatory action until the time regulations
are adopted. Requires DHCS to adopt regulations by July 1,
2018, in accordance with the requirements of the
Administrative Procedures Act. Requires DHCS to provide a
status report to the Legislature on a semiannual basis until
regulations have been adopted.
7.Implements the requirements in 2) through 6) above only if and
to the extent that federal financial participation is
available and any necessary federal approvals have been
obtained.
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8.Requires hospital inpatient claims for payments under DRGs to
be increased by 16 percent for the 2015-16 fiscal year, and
requires rates to Medi-Cal managed care health plans to be
increased by a proportionately equal amount for increased
payments for hospital services for the 2015-16 fiscal year.
9.Requires, commencing July 1, 2016, and annually thereafter,
DHCS to increase each DRG-related group payment claim amount
based, at a minimum, on increases in the medical component of
the California Consumer Price Index. Requires, commencing July
1, 2016, and annually thereafter, Medi-Cal managed care plan
rates to be increased by a proportionately equal amount for
the increased payments for hospital services.
10.Contains an urgency clause that will make this bill effective
upon enactment.
FISCAL
EFFECT : This bill has not been analyzed by a fiscal committee.
COMMENTS :
1.Author's statement. According to the author, this bill would
provide critical stability to health care provider networks
and ensure access to health care services for people receiving
services in the Medi-Cal program. The author notes that with
the dramatic expansion of enrollment in California's Medi-Cal
program, it makes no sense to continue Medi-Cal provider rate
reductions that limit access to care that were enacted during
California's economic downturn. California already pays its
Medi-Cal FFS providers some of the lowest rates in the entire
country (for primary care and obstetric care, California
ranked 48th among all states in 2012, and overall, Medi-Cal
compensated physicians at only 51 percent of Medicare levels).
Having expanded Medi-Cal under the Affordable Care Act (ACA),
California needs to ensure that Medi-Cal provider rates
provide sufficient access to Medi-Cal beneficiaries. In order
for the expansion of Medi-Cal program to result in access to
care, an adequate number of health care providers must be
available to provide care to Medi-Cal patients.
2.Physician and dentist participation in Medi-Cal. Surveys of
physicians and dentists have found lower participation in
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Medi-Cal and lower reimbursement rates as compared to Medicare
and private insurance. A survey of physicians through the
Medical Board of California found the percentage of California
physicians accepting new patients in 2013 was 62 percent for
Medi-Cal, compared to 79 percent for private insurance and 75
percent for Medicare. The percentage of physicians with any
Medi-Cal patients in their practice (69 percent) was
significantly lower than the percentage with any Medicare
patients (77 percent) and much lower than the percentage with
any privately insured patients (92 percent). A March 2015
National Centers for Health Statistics Data Brief found 76.6
percent of California physicians were accepting new privately
insured patients, 77.2 were accepting new Medicare patients,
as compared to 54.2 percent of California physicians who were
accepting new Medi-Cal patients. The national average for
accepting new Medicaid patients was 68.9 percent.
A December 2012 publication by the Kaiser Commission on Medicaid
and the Uninsured (KCMU) showed how states compare in their
2012 Medicaid fee levels, and how Medicaid fees compared to
Medicare fees. In California, Medi-Cal fees for all services
were 51 percent of Medicare, primary care physician fees were
43 percent of Medicare, obstetrical care services were 54
percent of Medicare, and other services were 67 percent of
Medicare. A December 2014 Bureau of State Audits (BSA) review
of California's Denti-Cal Program found that California had
similar access to care problems for children needing dental
services, as five counties may lack active providers, an
additional 11 counties had no providers willing to accept new
Medi-Cal patients, and 16 other counties appear to have an
insufficient number of providers. The BSA stated a primary
reason for low dental provider participation rates is low
reimbursement rates compared to national and regional averages
and to the reimbursement rates of other states BSA examined.
3.Access to care in Medi-Cal. Surveys of Californians conducted
before coverage expansions enacted under the ACA consistently
showed a wide gap between Medi-Cal enrollees and other insured
populations with respect to access to care. A 2011 survey
funded by the California HealthCare Foundation (CHCF) of over
1,500 Medi-Cal beneficiaries identified difficulties in
finding health care providers who accept their coverage, as 34
percent of Medi-Cal beneficiaries said it was difficult to
find health care providers who accept their insurance,
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compared to 13 percent for people with other coverage. The
survey found a higher percentage of adults with Medi-Cal say
they have more difficulty getting appointments with
specialists and primary care providers than adults with other
health coverage (42 percent v. 24 percent for specialists and
26 percent v. 15 percent for primary care providers).
Similarly, the 2012 California Health Interview Survey asked how
access to care in Medi-Cal compares to access to care in
employer-sponsored insurance (ESI) for adults with similar
health care needs. Medi-Cal had bigger gaps in access to
care, including Medi-Cal beneficiaries being less likely to
have a usual source of care other than the emergency room as
compared to individuals with ESI (21.5 percent v. 8.1 percent,
Medi-Cal beneficiaries were more likely to have used the
emergency room than individuals with ESI (3.7 percent v. 0.5
percent), and Medi-Cal beneficiaries were either sometimes or
never able to get a physician appointment within two days of
seeking an appointment compared to individuals with ESI (46
percent v. 20.6 percent).
5.Primary Care Rate Bump under ACA. The expansion of Medicaid
under the ACA has exacerbated concerns about whether the
supply of primary care providers would be sufficient to ensure
access to care for this new population, particularly given low
reimbursement rates offered by many Medicaid programs. For
this reason, the ACA included a "primary care bump," which
required states, for 2013 and 2014, to increase their Medicaid
primary care rates to those rates provided by Medicare, and
provided states federal funds to make up the difference
between state rates and Medicare rates. Final federal
regulations were released in November 2012, but a state plan
amendment California submitted to implement the federal
requirement was only approved October 24, 2013, nearly 11
months after the effective date. The increased payments
covered the two years the primary care bump was in effect, but
the increased payments ended December 31, 2014.
6.Recent Actions on Medi-Cal Rates. While the number of people
receiving health care through Medi-Cal has grown dramatically,
beginning in 2008, Medi-Cal payment rates to health plans and
providers in the program were reduced to help address state
budget deficits. In 2011, the Legislature passed and Governor
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Brown signed AB 97 into law, which largely replaced prior
Medi-Cal rate reductions and which remains in effect today.
Major provisions of AB 97 include the following:
a. Reduced Medi-Cal provider payments, with specified
exceptions, by 10 percent for FFS benefits for dates of
service on and after June 1, 2011;
b. Required Medi-Cal managed care plan rates to be reduced
by the actuarial equivalent amount of the FFS reduction,
effective July 1, 2011;
c. Froze rates at the 2008-09 rate year and then applied
the 10 percent rate reduction for certain types of facility
providers;
d. Required the payment reductions to be applied
retroactively to June 1, 2011 or on such other date as may
be applicable when federal approval is obtained;
e. Conditioned the implementation of the payment reductions
on the reductions complying with federal Medicaid
requirements;
f. Granted the Director of DHCS the discretion to not
implement a particular payment reduction or adjustment, or
to adjust the payment as necessary to comply with federal
Medicaid requirements, to the extent that the director
determines that the payments do not comply with the federal
Medicaid requirements or that federal financial
participation is not available with respect to any payment
that is reduced; and,
g. Prohibited implementation until federal approval was
obtained.
Federal approval of the AB 97 rate reductions was obtained in
October 2011, but a court injunction prevented DHCS from
implementing many of these reductions. In June 2013, the
injunctions were lifted, giving the state authority to (1)
apply the reductions to current and future payments to
providers on an ongoing basis; and, (2) retroactively recoup
the reductions from past payments that were made to providers
during the period in which the injunctions were in effect
(this is commonly referred to as a "claw back").
The AB 97 reductions did not apply to certain provider
categories, including hospital inpatient and outpatient
services, critical access hospitals, federally qualified
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health centers and hospices, services provided under Family
PACT and payments funded by intergovernmental transfers or
certified public expenditures. Entities subject to the AB 97
rate reduction include physician services to adults, other
health care providers (such as nurse practitioners,
psychologists, podiatrists, optometrists, physical
therapists), blood banks, adult day care centers, MSSP
providers, medical transportation providers, durable medical
equipment/supply providers, dental service providers, clinics
and pharmacy providers.
Since the 2013-14 budget was enacted, several types of
providers and services have been exempted from the ongoing
payment reductions through either administrative decisions by
DHCS or through subsequently enacted legislation. DHCS
administratively exempted from the Medi-Cal managed care plans
from the AB 97 retroactive reduction, and the following
providers/services were exempted prospectively:
a. Pediatric health care;
b. Audiology rates by a particular type of provider;
c. Residential care facilities for the elderly and care
coordinator agencies;
d. Genetic disease screening program;
e. Community-based adult services providers located in San
Francisco;
f. Non-profit dental pediatric surgery centers that provide
at least 99 percent of their services under general
anesthesia to children with severe dental disease under age
21;
g. For-profit dental pediatric surgery centers that provide
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services to at least 95 percent of their Medi-Cal
beneficiaries under age 21; and,
h. Certain prescription drugs (or categories of drugs) that
are generally high-cost drugs used to treat extremely
serious conditions, such as hemophilia, multiple sclerosis,
hepatitis.
Providers subject to the retroactive payment recoveries
include pharmacies, durable medical equipment/supply
providers, clinical laboratories/laboratory services, distinct
part skilled nursing facilities, and radiology service
providers. DHCS has indicated these retroactive payment
recoveries will not occur until after the prospective 10
percent provider payment reductions are implemented, and DHCS
has indicated it will provide at least 60 days advanced
notification of scheduled recoveries.
DHCS assumes total fund savings from the AB 97 reductions of
$550 million ($275 million General Fund) in 2015-16.
1.Medi-Cal FFS. Medi-Cal rates and access to care requirements
vary by FFS versus managed care, and are governed by a complex
mix of state and federal laws and regulations, administrative
decisions by DHCS and the federal Centers for Medicare and
Medicaid Services (CMS), and court interpretation of federal
Medicaid requirements.
Medicaid is a cooperative federal-state program, and in order to
qualify for federal funds, states must submit their Medicaid
plan and any amendments to CMS. Before approving a Medicaid
State Plan Amendments (SPA), CMS conducts a review to
determine whether they comply with federal requirements. For
the AB 97 FFS rate reductions, the state submitted several
SPAs for federal approval. Relevant federal law (Section
1902(a)(30)(A) of the Social Security Act) for the AB 97 SPAs
is as follows (emphasis added):
"provide such methods and procedures relating to the
utilization of, and the payment for, care and services
available under the plan . . . as may be necessary to
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safeguard against unnecessary utilization of such care
and services and to assure that payments are consistent
with efficiency, economy, and quality of care and are
sufficient to enlist enough providers so that care and
services are available under the plan at least to the
extent that such care and services are available to the
general population in the geographic area;"
As a condition of approval of the AB 97 FFS rate reductions in
California's SPA, CMS required DHCS to monitor health care
access. DHCS was required to provide metrics which adequately
demonstrated beneficiary access to CMS, and a monitoring plan
that would apply to the services where rates were being
reduced. DHCS developed a health care access monitoring system
to detect if Medi-Cal beneficiaries are experiencing
difficulties accessing health care services in FFS Medi-Cal.
CMS indicated DHCS would monitor predetermined metrics on a
quarterly or annual basis in order to ensure the beneficiary
access is comparable to services available to the general
population in the geographic area. DHCS indicates it will
report on 23 access measures annually and a subset of four
access measures quarterly. The four areas reported quarterly
are changes in physician supply, Medi-Cal beneficiary
participation, service utilization rates per 1,000 member
months, and beneficiary feedback.
2.Medi-Cal Managed Care. Medi-Cal managed care rates are also
set under state and federal requirements. State law requires
DHCS to pay capitation rates to health plans participating in
the Medi-Cal managed care program using actuarial methods
under what is commonly referred to as the "Mercer methodology"
(Mercer is DHCS' actuarial consulting firm). Medi-Cal managed
care plans must provide DHCS with financial and utilization
data to establish rates. DHCS is required to utilize a county-
and model-specific rate methodology to develop Medi-Cal
managed care capitation rates that includes health
plan-specific encounter and claims data, supplemental
utilization and cost data submitted by the health plans, FFS
data for the underlying county of operation or other
appropriate counties as deemed necessary by DHCS.
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Federal regulations for Medicaid managed care plans require all
payments under risk contracts (such as to Medi-Cal managed
care plans) and all risk-sharing mechanisms in contracts to be
actuarially sound.
For enrollees of Medi-Cal managed care plans, DHCS has
requirements for network adequacy in existing law, regulation,
contracts with health plans, and through All Plan Letters
issued by DHCS. For example, DHCS contractually requires
Medi-Cal managed care plans to abide by the time and distance
standards in the Knox-Keene Health Care Service Plan Act of
1974 (Knox Keene Act). The Knox-Keene Act is the body of law
regulating health plans, and it requires a primary care
physician to be no more than 15 miles or 30 minutes from the
place of residence or work of the member unless the member
chooses a different provider; the Medi-Cal standard is 10
miles from a member's residence unless the plan has a
DHCS-approved alternative.
In addition, the Knox-Keene Act requires Medi-Cal managed care
plans (except for County Organized Health Systems, which are
exempt from the Knox-Keene Act) to make all services be
readily available at reasonable times to each enrollee
consistent with good professional practice. Regulations
implementing the Knox-Keene Act require timely access to care
by requiring urgent and non-urgent appointments to be provided
within specified timeframes.
3.Recent Supreme Court decision on Medicaid rates. In March
2014, the United States Supreme Court issued a decision in
Armstrong et al. v. Exceptional Child Center, Inc., et al. In
that case, providers of "habilitation services" under Idaho's
Medicaid plan are reimbursed by the Idaho's Department of
Health and Welfare. Section 1902(a)(30)(A) of the federal
Medicaid Act requires Idaho's plan to "assure that payments
are consistent with efficiency, economy, and quality of care"
while "safeguard[ing] against unnecessary utilization of . .
.care and services. The providers of habilitation services
sued the Idaho Health and Welfare Department officials,
claiming that petitioner Idaho reimbursed them at rates lower
than §30(A) permits, and sought to enjoin Idaho to increase
these rates. The District Court entered summary judgment for
the providers. The Ninth Circuit affirmed, concluding that the
Supremacy Clause gave the providers an implied right of
action, and that they could sue under this implied right of
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action to seek an injunction requiring Idaho to comply with
§30(a).
The Supreme Court reversed this decision in a 5-4 opinion. The
Supreme Court concluded that the Supremacy Clause of the
Constitution does not confer a private right of action, and
that Medicaid providers cannot sue for an injunction requiring
compliance with §30(a). The Supreme Court also stated that the
providers of habilitation services suit cannot proceed in
equity as the power of federal courts of equity to enjoin
unlawful executive action is subject to express and implied
statutory limitations. In this case, the express provision of
a single remedy for a State's failure to comply with
Medicaid's requirements-the withholding of Medicaid funds by
the federal Secretary of Health and Human Services, and the
sheer complexity associated with enforcing §30(A) combine to
establish Congress's "intent to foreclose" equitable relief.
4.Support. Supporters of this bill include labor, health care
provider, consumer, and labor groups, who argue this bill is
necessary to ensure Medi-Cal recipients have real access to
health care. Supporters note that as California's Medi-Cal
program as grown to serve over 12 million people, patients
throughout the state are experiencing significant hurdles
receiving care due to California's low reimbursement rates
paid to Medi-Cal provider, one of the lowest reimbursement
rates in the country. As a result of the low rates, patients
on Medi-Cal frequently express frustration about limited
provider availability and delays in accessing care. The
supporters note that Californians who rely on Medi-Cal for
health insurance are often unable to get medical services and
often must turn to hospital emergency rooms for access to
health care, demonstrating that the low rates have negatively
impacted the health of all Californians. Supporters conclude
that although California law promises Medi-Cal beneficiaries
access to needed medical care in timely manner, patients and
providers know that promise is not being met.
5.Support if amended. The California Association for Health
Services at Home (CAHSAH) writes it would support this bill if
it were amended to include a rate increase for home health
providers. CAHSAH states Medi-Cal rates for home health
service providers have not been increased since 2001, Medi-Cal
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rates do not reflect the current cost of care which has
steadily increased, and linking health home rates to Medicare
rates will help to promote access for Medi-Cal beneficiaries.
6.Related legislation. AB 366 (Bonta), is identical to this
bill. AB 366 passed out of the Assembly Health Committee on
April 14, 2015 on a 16-0 vote.
7.Prior legislation.
a. AB 1805 (Skinner and Pan), would have required DHCS to
disregard the 10 percent payment reductions for Medi-Cal
providers, to the maximum extent permitted by federal law
and for the maximum time period for which federal financial
participation is obtained. AB 1805 was set for hearing in
the Assembly Appropriations Committee, but the hearing was
cancelled at the request of the author.
b. AB 900 (Alejo), of 2013, would have eliminated scheduled
Medi-Cal payment reductions for distinct part skilled
nursing facilities. AB 900 was held on the Appropriations
Committee suspense file.
c. SB 646 (Nielsen), of 2013, was similar to AB 900. SB 646
was held in the Senate Appropriations Committee.
d. SB 640 (Lara), of 2013, would have required scheduled
Medi-Cal payment reductions not apply to Medi-Cal provider
and managed care health plans for services delivered after
June 1, 2011. SB 640 was held on the suspense file of the
Senate Appropriations Committee.
e. SB 640 (Lara), would have required scheduled Medi-Cal
payment reductions not apply to Medi-Cal provider and
managed care health plans for services delivered after June
1, 2011. SB 640 was held on the suspense file of the Senate
Appropriations Committee.
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f. AB 5 X3 (Committee on Budget), Chapter 3, Statutes of
2007-08 Third Extraordinary Session, reduced Medi-Cal
provider fee-for-service payments and payments to Medi-Cal
managed care plans by 10 percent effective July 1, 2008,
and also reduced payments for specified non-Medi-Cal
programs in a similar manner and reduced non-contract
Medi-Cal hospital payments as specified. AB 5 X3 exempted
specified providers from payment reductions.
g. AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008, rendered inoperative the AB 5 X3 rate reduction
provisions on February 28, 2009, and applied various
payment reductions to other providers.
h. AB 5 X4, for specified providers, froze Medi-Cal payment
rates for services provided in the 2009-10 rate year and
beyond, by prohibiting reimbursement rates from exceeding
rates applicable in the 2008-09 rate year after the five
percent reduction mandated by AB 1183.
i. AB 97 requires the rate reductions required by AB 1183
and AB 5 X4 not be instituted for services delivered on or
after June 1, 2011 (with specified exceptions). Reduces
Medi-Cal provider FFS and managed care payments by 10
percent effective June 1, 2011. Reduces payments for
non-Medi-Cal programs for services on and after June 1,
2011, with exceptions. AB 97 was dependent upon federal
approval and specified that payment reductions would be
collected retroactively to June 1, 2011. Federal approval
was obtained October, 2011 and effectively voided the
payment reductions mandated in AB 1183 and AB 5 X4.
j. AB 102 (Committee on Budget), Chapter 29, Statutes of
2011, continued the 1 percent and 5 percent Medi-Cal
reductions set to expire effective June 1, 2011, until the
reimbursement reductions specified in AB 97 received
federal approval, at which time payments were to be
collected retroactively back to June 1, 2011.
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SUPPORT AND OPPOSITION :
Support:
California Academy of Family Physicians (co-sponsor)
California Hospital Association (co-sponsor)
California Medical Association (co-sponsor)
Association of California Healthcare Districts
Association of Northern California Oncologists
California Academy of Audiology
California Ambulance Association
California Association of Health Facilities
California Chapter of the American College of Emergency
Physicians
California Children's Hospital Association
California Commission on Aging
California Coverage and Health Initiatives
California Dental Association
California Healthcare Institute
California Labor Federation
California Medical Transportation Association
California Optometric Association
California Program of All-Inclusive Care for the Elderly
California School Employees Association
California Society of Anesthesiologists
Children Now
Children's Defense Fund California
Community Action Fund of Planned Parenthood of Orange and San
Bernardino Counties
DaVita Kidney Care
District Hospital Leadership Forum
Health Access California
Kaiser Permanente
Los Angeles Area Chamber of Commerce
Maxim Healthcare Services
Medical Oncology Association of Southern California
National Association of Chain Drug Stores
National Coalition for Assistive and Rehab Technology
Occupational Therapy Association of California
Older Women's League
Osteopathic Physicians and Surgeons of California
Paramedics Plus
PICO California
Planned Parenthood Action Fund of Santa Barbara, Ventura, and
San Luis Obispo Counties
Planned Parenthood Action Fund of the Pacific Southwest
Planned Parenthood Affiliates of California
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Planned Parenthood Mar Monte
Planned Parenthood Northern California Action Fund
Planned Parenthood Pasadena and San Gabriel Valley
Private Essential Access Community Hospitals
Rural County Representatives of California
SEIU-UHW
The Children's Partnership
United Ways of California
114 individuals
Oppose: None received
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