2024 Trailer Bills Implement California Healthcare Budget
The finalized 2024-2025 budget bill was announced on June 22, 2024 with General Fund spending over $200 billion and nearly $47 billion in solutions to cover the shortfall that was created in part by the projected 2022 budget surplus and the tax filing deadline delay. While the finalized budget addresses many of these shortfalls, several trailer bills will be enacted to close the gaps and ensure continuation of state health and human service programs. Below is a closer look at the trailer bill language affecting health and human services and the fiscal effect they are slated to have on the budget in coming years.
AB 159
DEPARTMENT OF HEALTH CARE SERVICES
Medi-Cal Provider Payment Increase
AB 159 authorizes the Medi-Cal Provider Payment Increases and Investments Act via revenue obtained through managed care organization taxes (MCO Tax). The reimbursement increases are spread throughout 2025 and 2026 with the first round of rate increases set for January 1, 2025 for the following groups: Physician and Non-Physician Health Professional Services Rates, Emergency Department Physicians, Abortion Services, Clinic 340B Supplemental Payment Transition (providing supplemental payments for federally qualified health centers and rural health clinics), Ground and Air Emergency Medical Transportation, Community-Based Adult Services and Health Workers, Congregate Living Health Facilities, and Pediatric Day Health Centers. Beginning January 1, 2026, Private Duty Nurses, Non-Emergency Medical Transportation Services, and Continuous Coverage for Children 0-5 will see rate increases. Additionally, to match the increased reimbursement rates, there will be a $1,510 cap applied to Medi-Cal and the Hearing Aid Coverage for Children Program. As such, the bill will eliminate the changes in AB 97, which reduced provider rates. However, should voters approve the physician-backed ballot initiative regarding the MCO tax in November as part of the statewide general election, all the above mentioned provider payment increases will be repealed and eliminated.
Major Risk Medical Insurance Program
AB 159 “sunsets” the Major Risk Medical Insurance Program on December 31, 2024. This program provides coverage to California residents who are unable to obtain insurance because of pre-existing conditions in individual markets through premium payment supplements made by the state subsidized by tobacco tax funds. Those denied for individual coverage will no longer be informed of the availability of the program and instead requires those under the program to receive information and assistance regarding Medi-Cal transition.
Hospital Financing
Hospital financing will be streamlined through consolidation of the Hospital Directed Payment Program and allows for an increase of up to five percent for transferring of funds for these financing programs. Additionally, DHCS will be authorized to create or update reimbursement methods to children’s hospitals via a $115 million annual payment from the General fund. However, if voters approve an increased reimbursement rate ballot initiative, this annual payment can be reduced by $75 million annually.
CALIFORNIA DEPT OF PUBLIC HEALTH
AIDS Drug Assistance Program (ADAP)
Beginning January 1, 2025, eligibility for the program as well as for the Pre- and Post-Exposure Prophylaxis Assistance Program (PREP-AP) will jump to 600 percent of the federal poverty level from 500 percent. The cap on premiums for the Office of AIDS Health Insurance Premium Payment (OA-HIPP) will increase to $2,996 from $1,938 per month. However, AB 159 allocates millions of dollars to support a number of state initiatives that help fund HIV/AIDS related care including the Transgender, Gender Nonconforming, and Intersex (TGI) Wellness and Equity Fund, the Harm Reduction Supply Clearinghouse, the Ryan White Program, PrEP Navigation Service Program, and other community-based organizations. To continue the fight against the HIV epidemic in California, AB 159 requires the CDPH to draft a plan for modernizing and expanding the ADAP program.
Disease Surveillance System
The CDPH has been authorized to detect and investigate changes in disease occurrence rates through collection of California public health and medical data so as to create a surveillance system. All data must be kept confidential with sharing of data limited to various state agencies under a set of specified conditions. Although, data may be shared for “valid scientific” interests upon review and approval by the Committee for the Protection of Human Subjects.
CALIFORNIA HEALTH BENEFIT EXCHANGE
AB 159 authorizes the repayment of the $600 million loan from the Health Care Affordability Reserve Fund to the General Fund in three annual installments of $200 million through the 2028-2029 fiscal year.
MINIMUM WAGE FOR HEALTH CARE WORKERS
AB 159 delays the implementation of the health care minimum wage increase. The increase will go forward under one of the two following conditions: 1) The Department of Finance reports to the Joint Legislative Budget Committee that cash receipts for the first quarter are at least three precent higher than projections for the 2024-2025 budget. If this occurs, the minimum wage increase would be effective on October 15, 2024. 2) Upon DHCS initiating an increase in the hospital quality assurance fee which would increase Medi-Cal supplemental payments to hospitals so that they could afford the increase of the minimum wage. If this occurs, the increase would take effect on either January 1, 2025 or 15 days after the notification that the assurance fee has been initiated. The bill revises the definition of a “contracted”, “subcontracted”, and public employees by specifying work performance on the premises of a “covered health care facility more than one-half of the employee’s work time during a workweek” with the exception of facilities that are controlled by the state. Upon implementation, the Department of Industrial Relations will be required to make changes to wage orders that are consistent with the changes and must provide employees with written notice of the modifications. However, should a health care facility obtain a 12-month delay waiver, they will be required to gather and submit financial statements and related documentation that demonstrates their ability to comply with the minimum wage requirements and “maintain a positive cashflow.”
AB 160
AB 160 authorizes Medicaid to impose a provider-related tax for health care services that would be used to fund the non-federal share of spending for the state’s Medicaid program thereby reducing the amount needed from federal financing. Additionally, the bill modifies the tax amount imposed on managed care organizations by increasing the per enrollee tax for tier II from $205.00 to $274.00 for the 2024 through 2026 calendar years providing that the amount of enrollees is between 1,250,001 and 4,000,000. This increase would result in a net benefit to the general fund of approximately $1.77 billion, $1.92 billion, and $1.44 billion for the next three fiscal years, respectively.