BILL ANALYSIS Ó SB 1471 Page 1 Date of Hearing: June 21, 2016 ASSEMBLY COMMITTEE ON HEALTH Jim Wood, Chair SB 1471 (Hernandez) - As Amended April 21, 2016 SENATE VOTE: 39-0 SUBJECT: Health professions development: loan repayment. SUMMARY: Requires, on and after January 1, 2017 any funds over two million dollars in the Managed Care Administrative Fines and Penalties Fund (MCA Fund) to annually be transferred to the Medically Underserved Account for Physicians (MUAP) in the Health Professions Education Fund (HPEF), to be used for the purposes of the Steven M. Thompson Physician Corps Loan Repayment Program (SMT Program). Specifically, this bill: 1)Clarifies the current distribution of funds deposited into the MCA Fund as follows: a) The first $1 million to be transferred to the MUAP to be used for the SMT Program; and, b) On and after January 1, 2017, any amount over the first $1 million, including accrued interest, in the MCA Fund be transferred to the Major Risk Medical Insurance Fund SB 1471 Page 2 (MRMIF) to be used for the Major Risk Medical Insurance Program (MRMIP). 2)Specifies that on and after January 1, 2017, and annually thereafter, any amount over the first $2 million, including accrued interest, in the MCA Fund be transferred to the MUAP within the HPEF, and upon appropriation by the Legislature, be used for the SMT Program. 3)Authorizes up to half of the amount over the first $2 million deposited into the MUAP within HPEF to be prioritized to fund the repayment of loans for providers of psychiatric services. 4)Deletes an obsolete reference in law to the Healthy Families Program. EXISTING LAW: 1)Creates the SMT Program within the 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 (MUAs) of the state. 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. SB 1471 Page 3 3)Establishes the 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 MRMIF for purposes of MRMIP. 4)Requires fines and administrative penalties assessed against health plans by DMHC to be deposited into the MCA Fund. Requires those fines and penalties collected up to $1 million be deposited into the MUAP in the HPEF for purposes of the SMT Program. Requires any amount over the first $1 million to be transferred to the MRMIF to be used, upon appropriation by the Legislature, for use by MRMIP. FISCAL EFFECT: According to the Senate Appropriations Committee: Unknown potential future cost pressure due to the reduction in funding for MRMIP (General Fund or Proposition 99 funds). Under current law, the cost of operating MRMIP is funded with subscriber premiums and state funds. The state has used Proposition 99 (Tobacco Tax) funds and transfers from MCA Fund to subsidize the program. Enrollment in MRMIP has declined significantly in recent years, from 4,782 in January 2014 to a projected enrollment of 1,400 in 2018. The declining MRMIP enrollment (and the existing MRMIF balance, estimated to be $132 million at the end of this fiscal year) should reduce the need for additional state funds in the future. However, as long as MRMIP is active there is a potential need for additional state funding. It is also important to note that final reconciliation of expenditures in MRMIP takes several years, so there is some uncertainty about future MRMIP funding needs, even with declining enrollment. SB 1471 Page 4 COMMENTS: 1)PURPOSE OF THIS BILL. According to the author the SMT Program was created in response to the physician shortage problem in MUAs, but funding for this program has been unpredictable and insufficient, with demand exceeding available funding every year. Additionally, through various stakeholder meetings and informational hearings related to the mental health workforce, mounting information, though largely anecdotal, 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 SMT Program currently allows for up to 20% of the available SMT Program funds to be awarded to 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 MUAs of the state for a minimum of three years, as well as prioritizing new funds for those who provide psychiatric services. 2)BACKGROUND. a) Physician supply in California. California is home to the largest number of primary care physicians (PCPs) and nurse practitioners in the country. However, the state ranks 23rd in the number of PCPs per resident. An August 2014 report by the California HealthCare Foundation (CHCF) states that California has only 35 to 49 PCPs per 100,000 Medi-Cal enrollees. Federal guidelines call for the state to have 60 to 80 doctors per 100,000 patients. The supply of PCPs also varies substantially across California's counties. The number of PCPs actively practicing in California counties is, in too many cases, at the bottom SB 1471 Page 5 range of, or below, the state's need. According to 2011 Health Resources and Services Administration data, 29 of California's 58 counties fall at the lower end or below the needed supply range for PCPs. In other words, half of Californians live in a community where they do not have adequate access to the health care services they need. b) Access to mental health care in California. According to a CHCF 2013 report, "Mental Health Care in California: Painting a Picture," nearly one in six California adults has a mental health need, and approximately one in 20 suffers from a serious mental illness that makes it difficult to carry out major life activities. The rate among children is even higher: 1 in 13 suffers from a mental illness that limits participation in daily activities. According to the report, the distribution of licensed mental health providers varied considerably among California regions. The Bay Area has the greatest concentration of licensed mental health professionals, exceeding the state average. The Inland Empire and San Joaquin Valley fell well below the state average for all mental health professions. The Northern and Sierra region was below average in the numbers of psychiatrists and psychologists, but above average for marriage and family therapists. c) SMT Program. The SMT program was created in response to the physician-shortage problem in MUAs, 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: SB 1471 Page 6 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. d) Administrative Fines and Penalties. The purpose of the MCA Fund 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 SB 1471 Page 7 each year, DMHC transfers the revenue collected in the MCA Fund during the previous 12 month period. This amount fluctuates from year to year, based on the amounts of fines and penalties levied by DMHC. According to DMHC, the current balance in the MCA Fund is just over $3 million. e) MRMIP. MRMIP is a program originally developed to provide health insurance for Californians who were unable to obtain coverage in the individual insurance market due to pre-existing conditions. The Patient Protection and Affordable Care Act gave Californian's otherwise unable to obtain health insurance coverage additional choices, but according to the 2016 Application and Handbook, MRMIP will continue to provide coverage as well. MRMIP services are delivered through contracts with health insurance plans. MRMIP subscribers participate in the payment for the cost of their coverage by paying subscriber contributions, an annual deductible and copayments. MRMIP supplements subscriber contributions to cover the cost of care and is funded annually by tobacco tax funds. 3)SUPPORT. The California Psychiatric Association (CPA) states this bill will potentially increase the number of psychiatrists serving in California's MUAs of California by giving psychiatrists an opportunity to better access loan repayments in the SMT Program. CPA notes that California has 339 areas designated as federal Mental HPSAs. The Medical Board of California (MBC) states this bill would provide much needed funding for the SMT Program to assist with loan repayment for physicians who agree to practice in medically underserved areas, as well as prioritize new funds for those who are trained in, and practice psychiatry, promoting MBC's mission of access to care. The Association of California Healthcare Districts supports this bill, noting that it is especially difficult for rural regions SB 1471 Page 8 to attract a physician workforce and loan repayment programs are a critical step in solving the health care workforce shortage and ensuring access to health care services in the most underserved areas of the state. 4)POLICY COMMENT. SB 826 (Leno) which enacts the 2016-17 Budget redirects all monies in the MCA Fund above the first million dedicated to the SMT Program, to the Medi-Cal program through 2019-20, based on the assumption that the existing funds in the MRMIF will be sufficient to fund MRMIP. Since this bill conflicts with the recently enacted budget, the author may wish address this and identify an alternative funding source. 5)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 set to be heard in the Assembly Health Committee on June 28, 2016. 6)PREVIOUS LEGISLATION. a) 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. SB 1471 Page 9 b) AB 860 (Perea and Bocanegra), of 2013, would have required that, after the first $1 million, is transferred each year from the MCA Fund to the MUAP, $600,000 be transferred each year from the fund to the Steven M. Thompson Medical School Scholarship Account, as specified. AB 860 would have required that any amount remaining over the amounts transferred to those two accounts be transferred each year to MRMIF for purposes of MRMIP. AB 860 was held on suspense in the Assembly Appropriations Committee. c) 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 MCA Fund 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. d) SB 1379 (Ducheny), Chapter 607, Statutes of 2008, requires fines and administrative penalties levied against health plans under Knox-Keene to be placed in the MCA 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 Knox-Keene to reduce assessments on health plans. e) AB 2439 (De La Torre), Chapter 640, Statutes of 2008, mandates the MBC 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 SB 1471 Page 10 who agree to practice in geriatric care settings or settings that primarily serve adults over the age of 65 or adults with disabilities. REGISTERED SUPPORT / OPPOSITION: Support Association of California Healthcare Districts California Association of Marriage and Family Therapists California Psychiatric Association County Behavioral Health Directors Association Medical Board of California Opposition None on file. Analysis Prepared by:Lara Flynn / HEALTH / (916) 319-2097 SB 1471 Page 11