BILL ANALYSIS                                                                                                                                                                                                    Ó



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

          BILL NO:                    SB 1471             
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          |AUTHOR:        |Hernandez                                      |
          |---------------+-----------------------------------------------|
          |VERSION:       |April 14, 2016                                 |
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          |HEARING DATE:  |April 20, 2016 |               |               |
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          |CONSULTANT:    |Reyes Diaz                                     |
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           SUBJECT :  Health professions development: loan repayment.

           SUMMARY  : Requires funds in the Managed Care Administrative Fines and  
          Penalties Fund to be transferred each year to the Medically  
          Underserved Account for Physicians in the Health Professions  
          Education Fund and to the Major Risk Medical Insurance Fund, as  
          specified.  
          
          Existing law:
          1)Creates the Steven M. Thompson Physician Corps Loan Repayment  
            Program (SMT Program) within the Health Professions Education  
            Fund (HPEF), administered by the Office of Statewide Health  
            Planning and Development (OSHPD), 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 the Major Risk Medical Insurance Program (MRMIP),  
            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. 








          SB 1471 (Hernandez)                                   PageB of?
          

          4)Requires fines and administrative penalties assessed against  
            health plans by DMHC to be deposited into the Managed Care  
            Administrative Fines and Penalties Fund (MCAFPF). Requires  
            those fines and penalties collected up to $1 million be  
            deposited into the Medically Underserved Account for  
            Physicians in the HPEF 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 use by MRMIP.  

          
          This bill:
          1)Requires, beginning January 1, 2017, and annually thereafter,  
            the second $1 million to be transferred to the Major Risk  
            Medical Insurance Fund to be used by MRMIP (after the first $1  
            million gets transferred to the HPEF for the SMT Program).

          2)Requires, beginning January 1, 2017, and annually thereafter,  
            any amount over the first $2 million, including accrued  
            interest, to be transferred to the HPEF for the SMT Program.  
            Requires one-half of these moneys to fund repayment of loans  
            for those physicians providing psychiatric services or those  
            physicians whose primary specialty is psychiatry, as  
            specified.

          3)Prohibits existing continually appropriated funds deposited  
            into the Medically Underserved Account for Physicians from  
            being made available to fund the repayment of loans under the  
            SMT Program for those physicians providing psychiatric  
            services or those physicians whose primary specialty is  
            psychiatry, as specified, except as provided in 2) above. 

          4)Makes other conforming changes, and deletes references to  
            inoperative programs.

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

           COMMENTS  :
          1)Author's statement. According to the author, 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. Additionally, through various  









          SB 1471 (Hernandez)                                   PageC of?
          
            stakeholder meetings and informational hearings related to the  
            mental health workforce, mounting information, though largely  
            anecdotal, and various media reports highlight the shrinking  
            psychiatry workforce. Added to the lack of providers is the  
            low numbers who are willing to treat patients with  
            insurance-both public health system and commercial market. The  
            current SMT Program currently allows for up to 20% of the  
            available SMT Program funds to be awarded to program  
            applicants from specialties outside of the primary care  
            specialties, including psychiatry, but is annually disbursed  
            among other specialties. This bill will provide much-needed  
            funding for the SMT Program to assist with loan repayment for  
            physicians who agree to practice in medically underserved  
            areas of the state for a minimum of three years, as well as  
            prioritizing new funds for those who provide psychiatric  
            services. 

          2)Primary Care Physician and Psychiatry 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% 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 58 California counties fall within the needed supply  
            range for primary care physicians. Additionally, California  
            and the rest of the nation suffer from shortages of mental  
            health providers. The maldistribution of existing providers  
            compounds the issue, particularly for federally designated  
            medically underserved areas. Recent studies show that the U.S.  
            mental health provider shortage is also made worse by the  
            aging of the psychiatry specialty. Shortages in psychiatry may  
            be considered even more acute than they are in primary care.  
            <1>


          ---------------------------
          <1>  
          http://www.modernhealthcare.com/article/20150715/NEWS/150719943 









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          3)The ACA. As a result of implementation of the Affordable Care  
            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  
            OSHPD, 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; and
               f)     Commit to providing full-time direct patient care in  
                 a HPSA.

            Currently, up to 20% of the available SMT Program funds may be  
            awarded to program applicants from specialties outside of the  
            primary care specialties, including psychiatry.

          5)Administrative Fines and Penalties. The purpose of the MCAFPF  









          SB 1471 (Hernandez)                                   PageE of?
          
            is to act as a depository for fines and administrative  
            penalties associated with the licensing and regulation of  
            health care service plans. In September of each year, DMHC  
            transfers the revenue collected in the MCAFPF during the  
            previous 12 month period. This amount fluctuates from year to  
            year, which is illustrated in the table below. According to  
            DMHC, the current balance in the MCAFPF is $3,016,796.10.
           

                  ------------------------------------------------- 
                 |  Revenue Transferred from the MCAFPF Over the   |
                 |                 Last Five Years                 |
                  ------------------------------------------------- 
                 |---------+-------------+------------+------------|
                 |  Year   | Transfer to |Transfer to |   Total    |
                 |         |   Health    | Major Risk |  Revenue   |
                 |         |  Education  |  Medical   |Transferred |
                 |         | Professions | Insurance  |            |
                 |         |    Fund*    |   Fund*    |            |
                 |---------+-------------+------------+------------|
                 |  2011   | 1,000,000.00|2,416,138.19|3,416,138.19|
                 |         |             |            |            |
                 |---------+-------------+------------+------------|
                 |  2012   | 1,000,000.00|   92,709.98|1,092,709.98|
                 |         |             |            |            |
                 |---------+-------------+------------+------------|
                 |  2013   |   976,887.73|           -|  976,887.73|
                 |---------+-------------+------------+------------|
                 |  2014   | 1,000,000.00|  727,601.79|1,727,601.79|
                 |         |             |            |            |
                 |---------+-------------+------------+------------|
                 |  2015   | 1,000,000.00|8,541,412.58|9,541,412.58|
                 |         |             |            |            |
                 |---------+-------------+------------+------------|
                 |  Total  |             |11,777,862.5|16,754,750.2|
                 |         |             4,976,887.73|           4|7           |
                  ------------------------------------------------- 
               *Pursuant to Health and Safety Code Section 1341.45, the  
               first $1,000,000 is deposited into the Medically  
               Underserved Account for Physicians within the Health  
               Professions Education Fund.  Any amount over the first  
               $1,000,000 is transferred to the Major Risk Medical  
               Insurance Fund.
           
          6)MRMIP. According to DHCS's Web site and the MRMIP 2016  









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            Application and Handbook, MRMIP provides state-subsidized  
            coverage through two health plans to individuals denied  
            coverage in the individual market or whose premiums exceed  
            MRMIP premiums. MRMIP enrollment was expected largely to no  
            longer be necessary, beginning in 2014, due to the reforms  
            enacted under the ACA, such as guaranteed issue. According to  
            information from DHCS, in January 2014, MRMIP enrollment was  
            4,782 individuals, and by December 2015, enrollment was at  
            1,794. Projected enrollment figures support the expected  
            decline, with figures estimated at: 1,579 individuals in 2016;  
            1,485 in 2017; and 1,441 in 2018. 

          7)Related legislation. SB 1139 (Lara), would deem eligible any  
            student, including a person without lawful immigration status  
            and/or a person who is exempt from nonresident tuition, who  
            meets the requirements for admission to participate in a  
            medical school program and a medical residency training  
            program; would prohibit specified grant and loan repayment and  
            forgiveness programs from denying an application based on an  
            applicant's citizenship or immigration status; would require  
            an applicant, when mandatory disclosure of a social security  
            number is required, to provide it if one has been issued, or  
            an individual taxpayer identification number that has been or  
            will be submitted. SB 1139 is pending in the Senate  
            Appropriations Committee.

          8)Prior legislation. SB 20 (Hernandez, of 2013), was  
            substantially similar to this bill. SB 20 was held on suspense  
            in the Assembly Appropriations Committee before being amended  
            to a new purpose on April 9, 2014.

            AB 860 (Perea and Bocanegra, of 2013), would have required  
            that, after the first $1,000,000, is transferred each year  
            from the MCAFPF to the Medically Underserved Account for  
            Physicians, $600,000 be transferred each year from the fund to  
            the Steven M. Thompson Medical School Scholarship Account, as  
            specified. The bill would require that any amount remaining  
            over the amounts transferred to those two accounts be  
            transferred each year to the Major Risk Medical Insurance Fund  
            for purposes of MRMIP. AB 860 was held on suspense in the  
            Assembly Appropriations Committee.

            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 MCAFPF to the MRMIP  









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            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 MCAFPF 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% 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.

          9)Clarifying Amendments.

               a)     In SEC 1, Section 1341.45(c)(4)(B), clarify that up  
                 to one-half of the moneys deposited for the SMT Program  
                 may be prioritized to fund the loan repayment of those  
                 providing psychiatric services.
               b)     In SEC 3 of the bill, page 6, in line 27, strike out  
                 "or psychiatric services" and in line 33, strike out  
                 "psychiatry,"
               c)     Strike out SEC 4. 

           SUPPORT AND OPPOSITION  :
          Support:  None received
          
          Oppose:   None received
          

                                      -- END --
          









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