BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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  








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               (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. 









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          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.













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          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  








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               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: 








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              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  








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               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  








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            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.










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             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  








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               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















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