BILL ANALYSIS
SB 810
Page 1
SENATE THIRD READING
SB 810 (Leno)
As Amended January 13, 2010
Majority vote
SENATE VOTE :22-14
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Bradford, | |
| | | |Huffman, Coto, Davis, De | |
| |De La Torre, De Leon, | |Leon, Gatto, Hall, | |
| |Eng, Hayashi, Hernandez, | |Skinner, Solorio, | |
| |Jones, Bonnie Lowenthal, | |Torlakson, Torrico | |
| |Nava, V. Manuel Perez, | | | |
| |Salas | | | |
| | | | | |
|-----+--------------------------+-----+--------------------------+--------------------------|
|Nays:|Fletcher, Conway, Gaines, |Nays:|Conway, Harkey, Miller, | |
| |Smyth, Audra Strickland, | |Nielsen, Norby | |
| |Silva | | | |
| | | | | |
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SUMMARY : Creates the California Healthcare System (CHS), a
single payer health care system, administered by the California
Healthcare Agency (CHA), to provide health insurance coverage to
all California residents. States that CHS would become
operative when the Secretary of Health and Human Services
determines the Healthcare Fund (Fund) has sufficient revenues to
implement this bill. Specifically, this bill :
1)Establishes CHS in state government, to be administered by the
CHA, an independent agency under the control of the Healthcare
Commissioner (Commissioner).
2)Prohibits any health care service plan or health insurance
policy, except for CHS, from being sold in California for
services provided by CHS.
Governance
3)Provides for a Commissioner, appointed by the Governor and
confirmed by the Senate, to be the chief officer of CHS and to
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administer all aspects of the CHA. Gives the Commissioner
broad powers to establish CHS budget, goals, standards, and
priorities; set rates; and, perform other duties as specified.
Establishes conflict-of-interest rules for the Commissioner.
Requires the Commissioner to oversee the establishment of a
number of bodies to assist and advise in the administration of
the CHA, as specified.
4)Directs the Commissioner to carry out numerous duties,
including establishing the CHS budget; set goals, standards,
and priorities for the system; set rates, fees, and prices;
establish a CHS enrollment system, systems for electronic
referral, medical records, claims, and reimbursement;
establish a prescription drug and durable medical equipment
formulary, and health planning regions; determine the
appropriate levels for a reserve fund for the system; appoint
specified officers and directors within the system; implement
specified cost control measures; oversee measures to ensure
quality of care; and, seek to secure a repeal or waiver of any
federal law provisions that would preempt any part of the
bill.
5)Establishes in the Office of the Attorney General an Office of
the Inspector General for CHS with broad powers to
investigate, audit, and review the financial and business
records of individuals and entities that provide services or
products to the system and are reimbursed by the system.
6)States that the operative date of this bill, except for
provisions related to the California Healthcare Premium
Commission (CHPC), shall be the date that the Secretary of
Health and Human Services notifies the Legislature that he or
she has determined that the Fund will have sufficient revenues
to fund the costs of implementing this bill. Requires CHS to
be operative within two years of the operative date of this
bill. Prohibits any state entity from incurring any
transition or planning costs prior to the operative date of
this bill.
7)States that the activities of the CHPC are not subject to 6)
above, and that provisions in this bill related to CHPC become
operative on January 1, 2011.
8)Requires regional medical officers to administer all aspects
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of the regional office of health care quality with duties as
specified.
9)Requires each region to have a regional health planning board
consisting of 13 members appointed by the regional planning
director in order to advise and make recommendations to the
regional planning director on all aspects of regional health
policy.
BUDGETING AND FINANCING
10)Establishes the Fund within the State Treasury, administered
by a director that is appointed by the Commissioner, into
which funds would be deposited to support CHS costs. Requires
all claims for health care services rendered pursuant to the
system to be submitted to the Fund via an electronic claims
and payment system.
11)Requires the Fund director to establish a system account to
provide for all annual expenditures on health care, and a
reserve account to maintain a reserve sufficient to provide
for the payment for all losses and claims for which the system
may be liable.
12)Requires the Fund director to immediately notify the
Commissioner when trends indicate that expenditures for the
system may exceed revenues and to immediately notify the
Legislature and the public regarding the possible need for
cost control measures. Specifies the types of cost control
measures the Commissioner could implement, including changes
in the system of health facility administration that improve
efficiency, postponement of introduction of new benefits or
benefit improvements, imposition of co-payments and
deductibles under specified circumstances, imposition of an
eligibility waiting period if the commissioner determines that
people are immigrating to the state for the purpose of
obtaining health care through the system, and others as
specified.
13)Permits specified cost control measures may be followed at
the regional level, if the Commissioner or regional planning
director determines that regional revenue and expenditure
trends indicate a need for regional cost containment.
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14)Requires, if the Budget Act has not been enacted by June 30th
of any year, all moneys in the reserve account of the Fund to
be used to implement the bill's provisions until funds became
available through the Budget Act. Requires the State
Controller to make one or more General Fund loans to the fund
for the purpose of making payments for health care goods and
services, if the reserve funds are exhausted.
15)Requires the Commissioner to establish a budget for all
expenditures, specifying a limit on total annual state
expenditures and establish regional allocations to cover a
three-year period. Requires the Commissioner to limit the
growth of spending on a statewide and regional basis with
reference to average growth in state domestic product across
multiple years, population growth, advances in technology, and
other factors. Requires the Commissioner to adjust the budget
so that aggregate spending for the state would not exceed
spending by more than 5%.
16)Requires the Commissioner to project the system's revenues
and expenditures pursuant to specified factors, and to
establish specified budgets for various components of the
health care system and shall include various adjustments
including cost-of-living differences between regions, health
risk of enrollees, workforce development needs, and projected
savings due to improved access and efficiency of care
delivery, among other variables.
17)Requires the Commissioner to seek necessary approval so that
all current federal payments for health care are paid directly
to CHS, which would then assume responsibility for all
benefits and services paid by the federal government with
those funds. Requires the Commissioner to establish formulas
for equitable contributions to CHS from counties and other
local government agencies.
18)Provides that the system would be secondarily responsible for
providing care, to the extent that the federal, state, or
county programs are not transferred to the system. Requires
CHS to cover the Medicare share of cost expenses to the extent
that the Commissioner obtains authorization to incorporate
Medi-Cal or Medicare revenues into the Fund.
19)Permits, until a single public payer for all health care in
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the state is established, health care costs to continue to be
collected by "collateral sources" including insurance
policies, health plans, employers, employee benefit contracts,
government benefit programs, judgments for damages, and any
liable third party.
CALIFORNIA HEALTHCARE PREMIUM COMMISSION
20) Establishes the CHPC, composed of 21 members, including 11
elected and appointed state officials, three health
economists, and seven representatives of business, labor, and
non-profit universal health care and taxation policy
organizations.
21) Requires the CHPC to develop an equitable and affordable
premium structure that will generate adequate revenue for the
Fund and ensure stable and actuarially sound funding for the
health insurance system that satisfies specified criteria.
22) Requires the CHPC, on or before January 1, 2013, to submit
a detailed recommendation for a premium structure to the
Governor and the Legislature, and, at least 90 days prior to
that submission, to make a draft recommendation available for
public comment.
GOVERNMENT PAYMENTS
23) Requires the Commissioner to seek necessary approval so
that all current federal payments for health care are paid to
CHS, which would then assume responsibility for all benefits
and services paid by the federal government with those funds.
Requires the Commissioner to seek all necessary waivers or
agreements so that all current state payments for health care
are paid directly to CHS.
24) Requires the Commissioner to establish formulas for
equitable contributions to CHS from counties and other local
government agencies.
25) Provides that the CHS be secondarily responsible for
providing health care to the extent that the federal, state,
or county programs are not transferred to the CHS.
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26) Requires the CHS to incorporate Medi-Cal and Medicare
payments, including premiums, copays, and deductibles, to the
extent that the Commissioner obtains authorization to do so.
FEDERAL PREEMPTION
27) Requires the Commissioner to seek all reasonable means to
secure a repeal or waiver of any provision of federal law that
preempts any part of this bill and, in the event that
preemption is not waived, requires the Commissioner to
promulgate conforming regulations.
28) Requires that employees, entitled to health benefits under
a contract that under federal law preempts provisions of this
bill, seek benefits under that contract before receiving
benefits from CHS.
Subrogation
29) Requires, until the time that the roll of all other payers
for health care have been terminated, that health care costs
be collected from collateral sources when services are
provided under a private insurance policy or other collateral
source.
30) Defines "collateral sources" to include insurance
policies, health plans, employers, employee benefit contracts,
government benefit programs, judgments for damages, and any
liable third party, and to exclude a federally preempted
contract or any service prohibited from subrogation by federal
law.
Eligibility
31) Deems all California residents eligible for CHS, and bases
residency on physical presence in the state with the intent to
reside. States that it is the intent of the Legislature for
CHS to provide health care coverage to state residents who are
temporarily out of the state, as specified.
32) Requires visitors to the state who receive care under CHS
to be billed for all services rendered.
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33) Deems individuals who are eligible for health benefits
from California employers but working in another jurisdiction
to be eligible for benefits under CHS if they make certain
payments.
34) Requires that individuals who arrive at a health facility
unable to document eligibility because of physical or mental
conditions be deemed eligible for services under CHS.
35) Requires the Commissioner to establish an eligibility
waiting period and other criteria needed to ensure the fiscal
stability of CHS if there is an influx of people into the
state for the purposes of receiving medical care.
Benefits
36) Allows any eligible individual to receive services under
CHS from any willing professional health care provider.
37) Provides that covered benefits include all care determined
to be medically appropriate by the consumer's health care
provider.
38) Specifies benefits under CHS.
39) Permits the Commissioner to expand benefits beyond the
minimum outlined above when expansion meets the intent of this
bill and can be sufficiently funded.
40) Excludes services determined by the Commissioner and chief
medical officer to have no medical indication, cosmetic
services, private inpatient hospital rooms, and services of a
provider or facility that is not licensed by the state from
coverage by CHS.
Delivery of care
41) Permits all licensed and accredited health care providers
in the state to participate in CHS. Prohibits a provider from
refusing to care for a patient solely on the basis of
discrimination that is prohibited by the Fair Employment and
Housing Act.
42) Permits individuals to select a primary care provider, as
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specified, and permits women to select an
obstetrician-gynecologist in addition to a primary care
provider. Permits a specialist to serve as a primary care
provider if the patient and the provider agree to this
arrangement and if the provider agrees to ensure the patient's
care is coordinated.
43) Requires individuals enrolling in integrated health care
systems, group medical practices, or essential community
providers that offer comprehensive services to retain
membership for at least one year after an initial three month
evaluation period, during which they can withdraw at any time.
44) Requires patients to have a referral from a primary care
or emergency care provider, or obstetrician-gynecologist, to
see a specialist, but not to see a dentist, ophthalmologist or
optometrist for a routine vision exam. Permits a patient to
see a specialist without a referral if the patient agrees to
pay the cost of care, or a copayment, if implemented by the
Commissioner. Permits a patient to appeal the denial of a
referral through the dispute resolution mechanism established
by the Commissioner.
45) Permits the Commissioner to establish financial
arrangements with medical providers in other states and
foreign countries in order to facilitate coverage for
California residents who are temporarily out of the state.
46) Permits a patient, during the first six months of CHS
operation, to see a specialist provider without referral, if
the patient had been receiving care from that specialist prior
to CHS.
47) Assigns the director of the Office of Health Planning
various duties, including establishing performance criteria
for health care goals, assisting health care regions in
developing operating and capital budgets, and estimating the
health care workforce and facilities required to meet the
needs of the population.
48) Requires the Office of Health Care Quality to be headed by
the chief medical officer and to establish processes for
measuring the quality of care delivered in the health
insurance system.
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49) Assigns various duties to the chief medical officer,
including establishing evidence-based standards of care for
CHS and implementing systems to measure quality of care and
correct quality of care problems.
50) Requires the patient advocate, in consultation with the
chief medical officer, to establish a grievance system,
establish an independent medical review system, publicize
information concerning the rights of enrollees, including the
right to request an independent medical review, and
expeditiously review requests for independent medical reviews.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Major Costs. Statewide healthcare costs in the current year
are between $200 billion (public and private funds) and $250
billion (public and private funds). These figures are based on
state and national estimates, including employer, employee,
individual, family, and government spending in Medicare,
Medi-Cal, and the Healthy Families Program. Because a single
payer system is a state-run system, the state GF would be
obligated in both short- and long-term scenarios to bolster a
system with GF augmentations or loans. Any cost overruns or
unpredicted expenses would generate major GF pressures.
2)Lack of Financing. This bill contains no specific financing
mechanisms. A prior version of the bill had a linked revenue
proposal that failed passage in the Senate Revenue & Taxation
Committee in 2007. This bill establishes requirements and
provides authority for a range of financial activities, but no
specific source of revenue is associated with this bill.
3)Revenue Sources. In order to pay the costs of a single payer
system, financing would likely include a series of taxes,
redirection of a variety of current health program funding,
and securing state waivers to aggregate federal and local
health care funds.
4)Federal Funding Challenges. Although it is conceivable that
California may receive federal permission to continue receipt
of major federal funding associated with Medi-Cal, Medicare,
and the Healthy Families Program (after 2017, per federal
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health reform waiver), it is unclear how California would
maintain the funding but not the structure and administrative
overhead of these programs. A significant challenge would be
the continued need to document eligibility for more than 10
million residents. Such eligibility workload would reduce
efficiencies and potentially require the maintenance of major
health care programming distinct from many features of the
single payer system established by this bill.
5)Major Shortfall Scenario. A 2007 Legislative Analyst's Office
(LAO) analysis of single payer costs and revenues, as
expressed in linked proposals, identified annual shortfalls in
the range of $40 billion GF due to a mismatch between costs
and underlying revenues. A challenge for a state-administered
approach proposed in this bill and a challenge facing the
American health care economy in general is that health care
cost increases often outpace general inflation. In addition,
employer-based coverage, where a majority of resident access
health coverage continues to erode as employers drop coverage
and workers lose their jobs. This erosion results in reduced
financial support that would need to be collected from other
sources.
6)Savings and Cost Avoidance. Several studies show major
reductions in particular types of health spending are likely
under a single payer system. Savings include a major reduction
in administrative overhead, which is a significant portion of
expenditures in the current system. According to research,
administrative overhead in our current health care system is
in the range of 25% to 30% of total health costs. Therefore,
if a single payer system reduced administrative overhead,
savings in the range of $20 billion to $30 billion may accrue.
Such savings would likely take up to a decade to be
identified.
COMMENTS : According to the author, this bill is needed because
existing law has led to a highly fragmented health finance and
delivery system that is administratively complex and clinically
wasteful, leading to billions of dollars being diverted annually
away from direct medical care and driving unaffordable premium
increases. According to the author, this bill would establish a
more efficient finance and delivery system in order to afford
universal coverage while stabilizing health care spending. The
author states that, with the passage of federal health reform,
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the establishment of a single payer model of health care is
particularly critical because the economic pressures of rising
health care costs will no longer have an escape valve of rising
uninsurance or lowered benefits. Taxes that fund public
programs, and wages that fund mandatory private insurance, will
both grow much more slowly than rising health insurance
premiums. Thus, the author states that the urgency for
effective cost containment will substantially increase under
federal health reform and necessitate movement toward a single
payer finance model.
According to the California HealthCare Foundation (Foundation),
an average of 6.6 million Californians were uninsured over the
three year period of 2006-2008. California has the largest
number of uninsured residents in the United States and the
eighth largest proportion of uninsured in the nation (20.5% of
the population). Of those, 5.6 million were adults and 1.1
million were children. Fifty-five percent of Californians have
employment based coverage, 17% get coverage through Medicaid,
and 8% purchase coverage through the individual insurance
market. The Foundation also reports that employer based
coverage in California from 1988-2008 declined from 65% to 56%,
with government sponsored coverage increasing from 16% to 20%,
individually purchased coverage increasing from 7% to 8% and the
percentage of uninsured increasing from 18% to 21%. Forty-one
percent of the uninsured in California have incomes below
$25,000 annually.
On March 23, 2010, President Obama signed the Patient and
Protection and Affordable Care Act (PPACA); P. L. 111-148, as
amended by the Health Care and Education Reconciliation Act of
2010; P. L. 111-152. Among other provisions, the new law makes
significant statutory changes affecting the health insurance
market, including a requirement that health plans cover an
essential health benefits package, at a minimum, with some
exceptions, the establishment of four benefit categories that
must be offered by health insurers, an individual mandate, a
prohibition against setting lifetime limits on the dollar value
of benefits and from setting unreasonable annual limits on the
dollar value of benefits, a Prohibition Against Rescissions, and
the creation of a national high-risk pool.
PPACA also includes a "Waiver for State innovation" provision.
This section permits states to apply to the U.S. Health and
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Human Services Secretary for the waiver of specified
requirements beginning in January 1, 2017, so long as the
substituted plan will:
1)Provide coverage that is at least as comprehensive as the
coverage defined in PPACA and offered through Exchanges.
2)Provide coverage and cost sharing protections against
excessive out-of-pocket spending that are at least as
affordable as the provisions of this title would provide.
3)Provide coverage to at least a comparable number of its
residents as the provisions of the PPACA would provide.
4)Does not increase the Federal deficit.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097
FN: 0005981