BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1322
AUTHOR: Hernandez
AMENDED: April 1, 2014
HEARING DATE: April 24, 2014
CONSULTANT: Moreno
SUBJECT : California Health Care Quality Improvement and Cost
Containment Commission.
SUMMARY : Requires the Governor to convene the California Health
Care Quality Improvement and Cost Containment Commission
(Commission) to research and recommend appropriate and timely
strategies for promoting high-quality care and containing health
care costs. Requires the Commission to be composed of 13
members who are knowledgeable about the health care system and
health care spending.
Existing law: Establishes health care coverage programs to
provide health care to segments of the population meeting
specified criteria who are otherwise unable to obtain coverage
and provides for the licensure and regulation of health insurers
and health care service plans.
This bill:
1.Requires the Governor to convene the Commission to research
and recommend appropriate and timely strategies for promoting
high-quality care and containing health care costs. Requires
the Commission to be composed of 13 members who are
knowledgeable about the health care system and health care
spending.
2.Requires the Governor to appoint five members of the
commission (including the chairperson), the Senate Committee
on Rules to appoint three members, and the Speaker of the
Assembly to appoint three members. Requires the membership to
be comprised of at least one of each of the following:
a. A representative of California's business community;
b. A representative from organized labor;
c. A representative of consumers;
d. A health care practitioner;
e. A hospital industry representative;
f. A representative of the health insurance industry;
Continued---
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g. A representative of the legal community with expertise
in health and ethics;
h. A representative of persons with disabilities; and,
i. A health care economist.
3.Requires the Secretary of the California Health and Human
Services Agency (HHSA) and the Executive Director of Covered
California to serve as members of the Commission.
4.Requires the Commission, on or before July 1, 2015, or within
six months of the convening of the commission, whichever
occurs later, to issue a report to the Legislature and the
Governor making recommendations for health care quality
improvement and cost containment. Specifies the issues that
the Commission must examine, at a minimum, including health
care needs and available resources, containing costs,
improving quality, increasing cost transparency, use of
disease management, wellness, prevention, and other innovative
programs, consolidation of existing state programs, and
efficient utilization of prescription drugs and technology.
5.Prohibits the Commission from being convened until sufficient
private or federal funds have been received and appropriated
for that purpose.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, in March 2014,
the Senate Committee on Health convened health care experts to
discuss initiatives underway in California directed at
controlling the growth of health care costs. This
informational hearing educated members and the public about
potential state policy solutions to control health care costs
as millions of Californians obtain coverage under the
Affordable Care Act (ACA). It was organized to provide a
better understanding of why health care is so expensive and
why there are significant variations in health care costs
depending upon where a person lives or which hospital performs
a procedure. Testimony presented at the hearing illustrated
the complexity of the health care market and the myriad of
approaches to containing costs. In addition to expanded
coverage, the author believes that, like past health care
reform efforts, a long-term, comprehensive action agenda for
California policymakers is necessary to ensure that health
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care costs are appropriate and health care premiums are
affordable - especially given that the ACA contains a mandate
for individuals to purchase coverage. This bill requires the
Governor to convene the Commission towards that goal. The
overarching charge of the Commission is to help make available
valid performance information to encourage health care
providers and facilities to provide care that is safe,
medically effective, patient-centered, timely, efficient,
affordable and equitable. Additionally, it will seek to put
provider cost and performance information into the hands of
consumers and purchasers so that they are able to understand
their financial liability and realize the best quality and
value available to them.
2.Background. While reports indicate that health care costs are
increasing at a slower rate in recent years, health care still
accounts for over 17 percent of the U.S. Gross Domestic
Product and health care costs continue to consume
significantly large percentages of federal, state, and
personal budgets. Whereas most sectors keep pace with the
overall economy, health care continues to grow at higher rates
than inflation. According to the 2013 Health Care Almanac on
health care costs published by the California HealthCare
Foundation (CHCF), the average annual growth rate has declined
since 1981 and has remained flat over the last three years at
a historic low of 3.9 percent. Health spending in 2011 was
only slightly higher than inflation. Annual average health
care spending has been in the single digits (as compared to
double digits) for the last two decades, influenced recently
by the recession. However, some provisions of the ACA are
expected to cause a one-time spike in growth.
According to a May 2012 Primer published by the Kaiser Family
Foundation, the U.S. spends substantially more on health care
than other developed countries. In 2009, U.S. spending was 90
percent higher than many other industrialized countries. Some
researchers believe the U.S. pays more for health care because
prices are higher, technology is more readily available, and
Americans have greater rates of chronic disease. The CHCF
almanac indicates that hospital and physician services account
for just over half of U.S. health care expenditures.
Prescription drugs account for another 10 percent.
3.Health care spending. Health care is paid for through
insurance premium payments, out-of-pocket expenses, and
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payroll taxes, or by directing general taxes to health care.
If amounts people pay in payroll taxes for Medicare are
included, households and the government are the largest
purchasers of health care. According to the CHCF almanac,
approximately 78 percent of private business spending on
health care consists of employer contributions to insurance
premiums for workers. In contrast, household out-of-pocket
spending consists largely of spending on premiums, copays,
coinsurance, and items not covered by insurance.
4.State Health Care Innovation Plan. California, through HHSA
and the "Let's Get Healthy California" Task Force, developed a
draft State Health Care Innovation Plan (SHCIP) with the
support from a federal State Innovation Model. The draft
SHCIP offers some of insight into health care in California,
including:
a. In general, Californians are young and healthy.
California is the most populous state (12 percent of the
U.S. population) and the sixth youngest state (a median age
of 35 years compared to a national average of 37 years).
California's population over 65 will nearly double over the
next 20 years, a faster rate than the U.S. average.
California has a lower infant mortality rate, more
individuals meeting physical activity guidelines, fewer
smokers, and fewer obese adults than the national average.
California's per capita heath spending is below the
national average and ninth lowest in the nation ($6,238
compared to $6,815 nationally in 2009).
b. California has high rates of elective deliveries at some
hospitals. Half of all births in California are paid for
by Medi-Cal. California has a statewide cesarean delivery
rate of 33 percent, but some hospitals have rates as high
as 71 percent. Elective delivery rates are associated with
increased risk to mothers, neonatal morbidity, and longer
hospital stays.
c. High costs are associated with the elderly and medically
complex. California Medicare per capita spending is higher
than the national average. Across all payers, five percent
of the population accounts for over half of expenditures in
a typical year. Hospice utilization lags significantly
behind the national average (16.8 versus 21 days of hospice
in the last six days of life). Medicare per decedent
reimbursements were $46,686 in 2010 in California compared
to $43,728 nationally. Relative to the national average,
California tends to have higher rates of care utilization
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in the last two years of life.
5.The ACA. On March 23, 2010, President Obama signed the ACA
into law (Public Law 111-148), as amended by the Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152).
The ACA greatly expands health insurance coverage in
California. Beginning in 2014, millions of low- and
middle-income Californians began gaining access to coverage
under the expansion of Medi-Cal, and through premium and
cost-sharing subsidies offered through the California Health
Benefit Exchange (known as Covered California). As a result of
the coverage expansions under the ACA, between 89 and 91
percent of non-elderly Californians are predicted to have
health coverage, and the number of uninsured is projected to
decrease by between 1.8 and 2.7 million by 2019. Among its
many other provisions, the ACA requires individuals to
maintain health insurance or pay a penalty, with exceptions
for financial hardship (if health insurance premiums exceed
eight percent of household adjusted gross income), religion,
incarceration, and immigration status. For consumers
purchasing coverage through Covered California, deductibles
can be high. A Silver plan (a mid-level product with the
greatest enrollment of any of the plan tiers in Covered
California) has a deductible of $2,000 and out-of-pocket
maximum of $6,350. In addition to high out-of-pocket costs,
consumers are often confronted with big disparities in prices
charged by different providers for the same service.
6.Massachusetts. In 2006, Massachusetts was the first state in
the nation to implement comprehensive health care reform. The
Health Care Quality and Cost Council (HCQCC) was created as
part of the authorizing legislation. The HCQCC was charged to
"establish statewide goals for improving health care quality,
containing health care costs, and reducing racial and ethnic
disparities in health care; and to demonstrate progress
towards achieving those goals." The HCQCC developed a
"Roadmap to Cost Containment," which was included in its Final
Report, issued on October 21, 2009. The Roadmap recommended:
a. Comprehensive payment reform;
b. Support of system-wide redesign efforts;
c. Widespread adoption and use of health information
technology;
d. Implementation of evidence-based health insurance
coverage informed by comparative effectiveness research;
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e. Implementation of additional health insurance plan
design innovations to promote high value care;
f. Development of health resource planning capabilities;
g. Enactment of malpractice reform and peer review
statutes;
h. Implementation of administrative simplification
measures;
i. Consumer engagement efforts;
j. Emphasis on the prevention of illness and the promotion
of good health; and,
aa. Increased transparency.
In 2008, Massachusetts passed An Act to Promote Cost
Containment, Transparency and Efficiency in the Delivery of
Quality Health Care, which authorized the Attorney General
(AG) to review and analyze the reasons why health care costs
continue to increase faster than general inflation. The AG
issued its first report regarding cost trends and cost drivers
in the Massachusetts market in March 2010. The report
examined whether the existing health care market has
successfully contained health care costs, and found the answer
to be an unequivocal no. According to the AG, the market
players (insurers, providers, or the businesses and consumers
who pay for health insurance) had not effectively controlled
costs, in part, because the prices negotiated between insurers
and providers were not designed to encourage or reward
provider efficiency. The resulting market dysfunction has
threatened the viability of efficient providers, who have lost
ground on payment rates while also losing patient volume to
higher priced competitors. A second report, issued in June
2011, stated that Massachusetts continued to face significant
challenges in addressing market dysfunction and in shifting
who health care is purchased to align payments with value,
measured by factors the market should reward, such as better
quality. The report concluded that policymakers should focus
on these two foundational questions in considering strategies
to contain health care costs: how can market function be
improved and how can care coordination be improved.
7.Related legislation. SB 1182 (Leno), requires health plans and
insurers to submit to regulators for rate review any large
group plan contract or policy rate increases that exceed five
percent of the prior year's rate. Establishes new data
reporting requirements on all health plans and insurers
applicable to products sold in the large group market and
establishes new specific data reporting requirements related
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to annual medical trend factors by service category, as well
as claims data or de-identified patient-level data, as
specified, for a purchaser, at no cost, when requested, and if
the purchaser can demonstrate its ability to comply with state
and federal privacy laws, and is either an employer-sponsored
plan with an enrollment of greater than 1,000 covered lives or
multiemployer trust. SB 1182 is scheduled to be heard in this
committee on April 24th.
SB 1215 (Hernandez) removes the in-office exception from the
physician self-referral prohibition in current law for
advanced imaging, anatomic pathology, radiation therapy and
physical therapy services. SB 1215 is scheduled to be heard on
April 28th in Senate Business and Professions Committee.
SB 1340 (Hernandez) makes a number of changes to existing law
that prohibits contracts between health plans or insurers and
hospitals from restricting the ability of the health
plan/insurer from furnishing information concerning the cost
range of procedures at the hospital or facility or the quality
of services performed by the hospital or facility to
subscribers or enrollees. Includes self-funded health
coverage or other persons entitled to access services through
a network established by the health care service plan in the
prohibition of a contract gag clause. Requires health
plan/insurers to give a provider or supplier an advance
opportunity of 30 days (rather than at least 20 days) to
review the methodology and data developed and compiled by the
health plan/insurer. SB 1340 is pending on the senate floor
AB 1558 (Roger Hernandez) requests the University of
California (UC) to establish the California Health Data
Organization and requires health plans and insurers to provide
the explanations of benefits or explanations of review to that
organization to the extent permitted by federal law. Requires
UC to organize the data provided in those documents and to
design and maintain an Internet Web site that allows consumers
to compare the prices paid by carriers for procedures, as
specified. AB 1558 is pending in Assembly Health Committee.
8.Prior legislation. AB 1528 (Cohn, Frommer, Pacheco), Chapter
672, Statutes of 2003, contained provisions substantially
similar to this bill and was a companion to SB 2 (Burton and
Speier), Chapter 673, Statutes of 2003. SB 2 enacted the
Health Insurance Act of 2003 to provide health coverage to
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specified individuals (and in some cases their dependents) who
do not receive job-based coverage and who work for large and
medium employers, as defined. SB 2 imposed a fee on
employers, as specified, and made available a credit against
that fee for employers who provide coverage. Both bills
contained contingent enactment provisions, meaning that each
would only take effect if the other did. Proposition 72, a
referendum on the new coverage requirements under SB 2, was
subsequently approved by the voters in 2004 and that law was
repealed. Therefore, AB 1528 was never implemented.
AB 2967 (Lieber) of 2008, would have established a Health Care
Cost and Quality Transparency Committee to develop and
recommend to the Secretary of the Health and
Human Services Agency a health care cost and quality
transparency plan, and would have made the Secretary
responsible for the timely implementation of the transparency
plan. AB 2967 died on the Senate Inactive File.
AB X1 1 (Nunez) of 2007, among many other provisions relating
to health care reform, contained nearly identical language as
that contained in AB 2967. AB X1 1 failed passage in the
Senate Health Committee.
9.Support. The California Primary Care Association writes that
health care costs continue to rise and we must fund innovative
ways to bend this cost curve. Local Health Plans of California
states that the overall success and long-term viability of the
ACA will be based on finding methods to drive greater quality
and value in our state's health care system. The California
Association of Health Plans (CAHP) states that while growth in
spending has slowed over the past years, it has continued to
outpace both inflation and economic growth - and the rate of
growth is expected to nearly double in 2014. CAHP writes that
health plans, medical providers and individuals all play an
important role in helping to contain and lower costs in every
area whether it be chronic disease and obesity, expensive new
technology, or unnecessary tests and treatments. The
California Labor Federation states that this bill will start
to address the complex and urgent issues facing consumers,
purchasers, and the state in health care and that a state
commission of expert stakeholders will be able to delve into
the cost drivers in health care, look at quality measurements,
and identify innovative strategies to contain costs and
increase quality - delivering the greatest value health care
to Californians. Kaiser Permanente writes that they see
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tremendous value in a multi-stakeholder process to develop a
mechanism to make available meaningful, actionable information
to support key transparency, quality improvement and cost
containment initiatives.
SUPPORT AND OPPOSITION :
Support: California Association of Health Plans
California Labor Federation
California Primary Care Association
Local Health Plans of California
Kaiser Permanente
Northern California Carpenters Regional Council
Oppose: None received
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