BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1322|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 1322
Author: Hernandez (D)
Amended: 4/1/14
Vote: 21
SENATE HEALTH COMMITTEE : 7-0, 4/24/14
AYES: Hernandez, Beall, De Le�n, DeSaulnier, Evans, Monning,
Wolk
NO VOTE RECORDED: Morrell, Nielsen
SENATE APPROPRIATIONS COMMITTEE : 6-1, 5/23/14
AYES: De Le�n, Gaines, Hill, Lara, Padilla, Steinberg
NOES: Walters
SUBJECT : California Health Care Quality Improvement and Cost
Containment Commission
SOURCE : Author
DIGEST : This bill 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.
ANALYSIS : 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
CONTINUED
SB 1322
Page
2
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 Rules
Committee 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;
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
CONTINUED
SB 1322
Page
3
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.
Background
While reports indicate that health care costs are increasing at
a slower rate in recent years, health care still accounts for
over 17% 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%. 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 Affordable Care Act
(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%
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%.
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
CONTINUED
SB 1322
Page
4
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:
1. Comprehensive payment reform;
2. Support of system-wide redesign efforts;
3. Widespread adoption and use of health information
technology;
4. Implementation of evidence-based health insurance coverage
informed by comparative effectiveness research;
5. Implementation of additional health insurance plan design
innovations to promote high value care;
6. Development of health resource planning capabilities;
7. Enactment of malpractice reform and peer review statutes;
8. Implementation of administrative simplification measures;
9. Consumer engagement efforts;
10.Emphasis on the prevention of illness and the promotion of
good health; and
11.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
CONTINUED
SB 1322
Page
5
market function be improved and how can care coordination be
improved.
Prior Legislation
AB 1528 (Cohn, Frommer, and 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 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, 2008) would have established a Health Care Cost
and Quality Transparency Committee to develop and recommend to
the Secretary of HHSA 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 1X1 (Nunez, 2007) among many other provisions relating to
health care reform, contained nearly identical language as that
contained in AB 2967. AB 1X1 failed passage in the Senate
Health Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, one-time costs
of at least $500,000 for staff to support the Commission,
research health care cost and quality issues, and develop
recommendations and reports (private funds or federal funds).
Given the complexity of health care financing and the very
significant financial interests in any change to health care
financing, there is likely to be significant interest by
stakeholders in the recommendations of the Commission. It is
CONTINUED
SB 1322
Page
6
likely that significant staff support will be necessary to
accommodate interest by stakeholders and to provide information
on this issue to Commission members.
SUPPORT : (Verified 5/22/14)
California Association of Health Plans
California Chamber of Commerce
California Labor Federation
California Primary Care Association
Health Access California
Kaiser Permanente
Local Health Plans of California
Northern California Carpenters Regional Council
San Diego Electrical Health and Welfare Trust
OPPOSITION : (Verified 5/22/14)
Department of Finance
ARGUMENTS IN 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 tremendous
value in a multi-stakeholder process to develop a mechanism to
make available meaningful, actionable information to support key
CONTINUED
SB 1322
Page
7
transparency, quality improvement and cost containment
initiatives.
ARGUMENTS IN OPPOSITION : The Department of Finance (DOF) is
opposed to this bill because the Commission's activities are
redundant as multiple entities in California and the United
States, including state health directors and advocacy groups,
are developing recommendations to stabilize health care costs
and premiums. DOF also notes it is unlikely the Commission
could convene due to its lack of authority to collect and expend
private and/or federal funds.
JL:k 5/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED