Health Policy Updates

From our colleagues at California Health Plus Advocates:

Governor Brown’s 2018-19 State Budget – May Revision
Impact on Community Health Centers

May 11, 2018
Governor Brown’s 2018-19 Revised Budget (May Revise) shows a continued commitment to
balancing fiscal responsibility while remaining committed to protecting core priority areas:
education, infrastructure, and health care. We are encouraged by the Administration’s
continued commitment to maintain the Medi-Cal program, the Children’s Health Insurance
Program (CHIP), and the Affordable Care Act in California at a time when shifting federal policy
could have a detrimental impact on these programs and the state.
The May Revise acknowledges financial growth, with a projected additional $8 billion in higher
revenue, as the Administration continues to be focused on preparing the state for the next
recession. Though limited on-going commitments are being made with these funds, we are
excited to see homelessness and mental health services highlighted as areas for new
While grateful for the commitments this May Revise signals, we are concerned, and deeply
disappointed, to again find the Administration aims to destabilize and eliminate the 340B Drug
Discount Program (340B).
Budget Details Most Relevant to Health Centers
340B: The May Revise maintains the Administration’s proposal to eliminate 340B program
participation for Medi-Cal fee-for-service (FFS) and Medi-Cal managed care effective July 1, 2019.
The Administration now claims this proposal will result in $16.6 million General Fund savings
annually, beginning in FY 2020-21.
CHC Impact: Like 2017, the Administration is again seeking to make significant changes to
the 340B Program. This year, however, the Administration goes farther and instead of
restricting contract pharmacies in 340B Medi-Cal managed care, they overtly eliminate
340B altogether. The results of such a policy could be extremely detrimental to health
centers that rely on 340B savings to enhance patient services, pay for capital projects,
and support and improve operations. They May Revision claims that this proposal is
necessary to prevent duplicate discounts, overpayments, and reduce drug rebate
disputes. Being a 340B covered entity remains optional, but to note, as a requirement of
being a federally qualified health center (FQHC), health centers must purchase drugs at
340B prices or better. DHCS claims these changes will have no anticipated impacts on
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Medi-Cal beneficiaries, however the cuts to services that are bound to follow will surely
impact beneficiaries.
Medi-Cal and Affordable Care Act: With an expected general fund investment of nearly $23 billion
in FY 18-19, slightly higher than the January Budget proposal, the May Revise includes a revised
estimate in Medi-Cal General Fund costs to provide care to the 13.5 million Californians that rely
on the program.
CHC Impact: The May Revise continues to see health care coverage, the Medi-Cal
program and Covered California, as critical components to our state’s network of health
and human services. The Budget continues to reflect existing state and federal law,
however should there be significant federal funding changes or ACA repeal there will
likely be a disruption to benefits and coverage. The percentage of health center patients
enrolled in Medi-Cal, which has increased every year since the Affordable Care Act’s
implementation, has a direct impact on the fiscal health of California’s health centers.
Health centers continue to have a large percentage of their patients eligible for PPS
Children’s Health Insurance Program (CHIP): The May Revise reflects CHIP reauthorization and
maintains a commitment to this program and the families it serves.
CHC Impact: CHIP provides coverage for approximately 32,000 pregnant women and
children, persons that would not otherwise be eligible for Medi-Cal. With many of these
individuals receiving their care at health centers, this continued commitment to CHIP is
critically important.
Workforce – Residency: The May Revise includes a continuation of the Song-Brown funding
CHC Impact: After a 2017 attempt to eliminate $100 million in new funding commitments
to Song-Brown, and a successful campaign to reinstate those funds in the FY 17-18
budget, we are glad to see the Office of Statewide Health Planning and Development
(OSHPD) budget includes $33.3 million in general fund commitment to primary care
residency. This installment is critically necessary to stabilize, expand, and launch primary
care residency programs, including Teaching Health Centers. These funds are essential to
guarantee the primary care workforce shortage does not get worse.
Workforce – Residency: The May Revise includes new investments in an initial Medicaid Graduate
Medical Education (GME) Program and Psychiatric Graduate Medical Education
CHC Impact: While limited immediate direct impact on health centers, this commitment
will further buoy California’s ability to support residency. The new funding allocation will
bring two new positions to DHCS to implement a limited GME program under which
payments will be made to Designated Public Hospital residency programs. If successful,
this program could be the necessary catalyst to launch a more significant Medicaid GME
investment in our state. Additionally, the new, one-time, $55 million General Fund
support for psychiatric graduate medical education programs in underserved areas could
encourage the development of psychiatry residency programs at health centers.
Workforce -- MFT Billable Providers: With a Final 17-18 Budget that included a new July 1,2018
implementation date, the May Revise reaffirms this implementation commitment with new
dedicated staff.
CHC Impact: In anticipation of a new workload, DHCS is seeking limited-term resources
for the Audits and Investigations unit. This is a promising sign and indicates the state
commitment to working with health centers as they seek to expand behavioral health
access through the utilization of Marriage and Family Therapists (MFTs).
Proposition 56: The May Revise includes increased funding for supplemental payments for dental
and physician services and maintains supplemental payments for the other three provider types –
women’s health providers, developmental disability providers, and HIV/AIDS providers.
CHC Impact: As part of the FY 17-18 Budget, DHCS determined rules for allocating the
California Healthcare, Research and Prevention Tobacco Tax Act of 2016 (Proposition 56)
funds for supplemental payment purposes. The May Revise reflects slightly higher
tobacco tax revenues than previously expected, with net revenues increasing $32 million
over the Governor’s Proposed Budget. The May Revision maintains the increase of $163
million for physician payments and $70 million for dental payments. FQHCs will be
eligible for the supplemental payments for Family Planning, Access, Care and Treatment
(Family PACT ) services. The time-limited supplemental reimbursements under the
program will be available to all FPACT providers for the Evaluation and Management
portion of office visits rendered for the purpose of comprehensive family planning
services. FQHCs will not be eligible for any other supplemental payments, including
Medi-Cal and/or Denti-Cal fee-for-service or managed care supplemental payments that
could have caused challenges during reconciliation.
Drug Medi-Cal Organized Delivery System Pilot: The DMC-ODS pilot allows counties to opt-in to a
demonstration to provide an expanded continuum of care for substance use disorder (SUD)
services. This budget includes expected expansion of the number of counties choosing to
participate in the waiver, demonstrating a willingness on the part of the state to continue to invest
in behavioral health and SUD services.
CHC Impact: DHCS estimates an additional 15 counties will implement the DMC-ODS
waiver in FY 2017-18 and an additional 20 counties in FY 2018-19. FQHC patients will
benefit from greater availability and breadth of SUD services available under the DMCODS pilot in counties that opt-in to the demonstration. In addition, and furthered by the
implementation of SB 323 (Mitchell), counties may be seeking to grow additional SUD
resources in their county, and FQHCs who wish to offer medication assisted treatment
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(MAT) or other SUD services may have expanded opportunity to become a part of the
county delivery system.
Additional Investments in Behavioral Health: The May Revise includes new General Fund
investments in a variety of behavioral health service areas. These funds aim to support and
expand current programs, while also laying a path for new innovations. Among the new proposals
are investments in Children’s Mental Health Mandate Repayment, Homeless Mentally Ill Outreach
and Treatment, Graduate Medical Education, and Mental Health Services Act oversight and
CHC Impact: Health centers are on the frontline of addressing mental health, substance
abuse, and the needs of the homeless in our communities. The communities served by
CHC will benefit from these additional investments. Advocates staff look to learn more
about these commitments in the coming weeks to better understand CHC opportunities.
Please look out for additional information from CaliforniaHealth+ Advocates as trailer bill language
and additional details regarding the May Revision are made available.