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SB 770
THIRD READING
Bill No: SB 770
Author: Wiener (D) and McGuire (D), et al.
Amended: 4/24/23
Vote: 21
SENATE HEALTH COMMITTEE: 7-2, 4/19/23
AYES: Eggman, Gonzalez, Limón, Menjivar, Roth, Wahab, Wiener NOES: Nguyen, Dahle
NO VOTE RECORDED: Glazer, Hurtado, Rubio
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/18/23
AYES: Portantino, Ashby, Bradford, Wahab, Wiener
NOES: Jones, Seyarto
SUBJECT: Health care: unified health care financing
SOURCE: Healthy California Now
DIGEST: This bill directs the Secretary of the California Health and Human Services Agency to pursue waiver discussions with the federal government with the objective of a unified health care financing system that incorporates specific features, including a comprehensive package of medical, behavioral health, pharmaceutical, dental, and vision benefits, without cost sharing for essential services and treatments. This bill requires the Secretary to establish a Waiver Development Workgroup comprised of members appointed by the Governor, Speaker of the Assembly, and President Pro Tempore of the Senate, and including stakeholders representing various specified interests, including consumers, patients, health care professionals, labor unions, government agencies, and philanthropic organizations. This bill requires the Secretary to provide quarterly reports on the outcomes of waiver discussions with the federal government and the progress of the workgroup, and to submit a complete set of recommendations regarding the elements to be included in a formal waiver application and the legislative action needed by June 1, 2024.
SB 770
ANALYSIS:
Existing federal law:
1) Establishes the Medicaid program to enable each state to furnish medical assistance on behalf of individuals whose income and resources are insufficient to meet the costs of necessary medical services. Requires states to submit a state plan for medical assistance describing the coverage of mandatory and optional populations and benefits. [42 USC §1396 et seq.]
2) Establishes the State Children’s Health Insurance Program (CHIP) to allow states to provide free or low-cost health coverage to low-income children and pregnant women whose income is too high for Medicaid coverage. Requires states to submit a state child health plan in order to receive payment for health coverage under CHIP. [42 USC §1397aa, et seq.]
3) Authorizes the HHS Secretary to waive Medicaid state plan requirements (with the exception of citizenship and requirements of another agency) to the extent necessary to carry out a demonstration or experimental project furthering the goals of the program. [42 USC §1315]
4) Establishes state health insurance exchanges through the Affordable Care Act to sell qualified health plans with standard benefit designs to eligible individuals with or without premium assistance and cost sharing reductions. Limits eligibility for premium assistance and cost-sharing reductions to individuals who earn between 100-400%FPL or 100-250% FPL respectively and who do not have minimum essential coverage, are lawfully present and are not incarcerated. [42 USC §18031 et seq.; 26 CFR §1.36B-2.] 5) Authorizes waivers for state innovation under which states can seek federal approval to waive major provisions of the ACA, including the requirement for Exchanges, QHPs, premium tax credits and cost-sharing reductions, the individual mandate and the employer responsibility requirement, provided federal requirements for comprehensive benefits, affordability, and comparable coverage are met and the state proposal does not increase the federal deficit. [42 USC §18052]
6) Establishes, pursuant to federal law, the Medicare program, which provides coverage for seniors and certain persons with disabilities. Authorizes the federal Secretary of HHS, to develop and engage in experiments and demonstration projects for specified purposes, either directly or through grants to public or private agencies, institutions, and organizations or contracts with public or SB 770
private agencies, institutions, and organizations. [42 USC §1395 et seq.; §1395b-1]
7) Creates within the Centers for Medicare and Medicaid Services (CMS) a Center for Medicare and Medicaid Innovation (CMMI), the purpose of which is to test innovative payment and service delivery models to reduce program expenditures under Medicare and Medicaid while preserving or enhancing the quality of care furnished to individuals under those programs. [42 USC §1315a] 8) Penalizes employers with 50 or more full time or full-time equivalent employees who do not offer minimum essential coverage to their employees. [26 USC §4980H]
Existing state law:
1) Establishes the Medi-Cal program, administered by DHCS, under which low- income individuals are eligible for medical coverage through Medicaid, CHIP and state-only programs. Medi-Cal provides coverage to with incomes up to 138% of the federal poverty level (FPL) and to children with incomes up to 266% FPL. [WIC §14000 et seq., §14005.26, 14005.4, 14005.40, 14005.64] 2) Establishes the California Health Benefit Exchange, known as Covered California, which permits individual to purchase qualified health plans with standard benefit designs, with or without premium assistance and cost-sharing reductions. [GOV §100500 et seq.]
3) Establishes the Health Care Affordability Reserve Fund, which gives the state the option to reduce the cost sharing for Covered California enrollees with incomes up to 400% FPL. [GOV §100520.5]
4) Established the Healthy California for All Commission as an independent body to develop a plan that includes options for advancing progress toward achieving a health care delivery system in California that provides coverage and access through a unified financing system, including, but not limited to, a single-payer financing system, for all Californians. Required the Commission to submit a report to the Legislature and Governor by February 1, 2021, that that includes options for key design considerations for a unified financing system, including, but not limited to, a single-payer financing system. [HSC §1002, repealed on Jan. 1, 2022 by HSC §1005]
5) Requires all meetings to be conducted in the open of multimember state bodies that are created by statute. [GOV §11120, 11121]
SB 770
This bill:
1) Requires the Secretary of the California Health and Human Services Agency (CHHS) to pursue waiver discussions with the federal government with the objective of a health care system that would incorporate the following features and objectives:
a) A comprehensive package of medical, behavioral health, pharmaceutical, dental, and vision benefits;
b) A package of long-term care support and services, including measures to slow deterioration and provide palliative care;
c) A guarantee to services that will not vary by age, employment status, disability status, income, immigration status, or other characteristics; d) The elimination, to the greatest extent possible, of the distinctions currently existing among Medicare, Medi-Cal, employer-sponsored insurance, and individual market coverage;
e) The elimination of the adverse impacts of insurers attempting to avoid covering the sick or the benefits patients need in favor of a system that has a proactive, mission-driven focus on keeping Californians well; f) The absence of cost sharing for essential services and treatments covered under the program;
g) The establishment of sufficient reserves to guarantee solvency during times of public health emergencies and economic disruptions, supported in part by the elimination of the state’s unfunded benefit liabilities; h) A detailed program to ensure a just transition for insurance industry personnel or other individuals whose jobs are disrupted by the creation of a single payer system;
i) Assurances that no individual will pay more than a specified percentage of their income on a progressive sliding scale for the cost of financing the health system;
j) Unified financing that delivers health care more effectively, efficiently, and equitably;
k) Cost-effectiveness by pooling patients together and leveraging their purchasing power to negotiate the best prices from providers; l) Greater freedom for patients to choose providers, which will create greater competition, quality improvements, reductions in health disparities, and cost reductions from other system improvements;
m) Greater investments in public health and efforts to address the social determinants of health through an improved mix of health care and human services;
SB 770
n) Improvements in cost, quality, and health care system oversight and integration built on the accomplishments of the Office of Healthcare Affordability and other current initiatives, including the Data Exchange Framework and California Advancing and Innovating Medi-Cal; o) A rate-setting process that uses Medicare rates as the starting point for the development of final rates designed to avoid disruptions in the health care system and expand the availability of high quality vital services by sustaining a stable, experienced, and equitably compensated workforce; p) Promotion of a workforce that is diverse and able to provide culturally and linguistically competent care to all Californians regardless of race, nationality, ethnicity, sexual identity, and socioeconomic status; q) Adoption of policies and payments to support those safety net providers that serve a disproportionate percent of low-income Californians and other disadvantaged communities;
r) Prohibition on the kinds of risk-bearing contractual arrangements that could incentivize providers to withhold needed care;
s) Specific details regarding how care would be coordinated and organized; and,
t) Methods of payment, delivery, and oversight implemented under the unified health care financing system that ensures that California will continue to receive the full benefit of federal expenditures and tax credits that currently underwrite the full scope of health services.
2) Requires the Secretary to establish a Waiver Development Workgroup (workgroup). Requires the workgroup to advise the Governor on topics related to federal negotiations and to consist of representatives of consumer, patient, and community-based health care service providers, community organizations, health care professionals, labor unions, employers, and health policy experts, as well as representatives of government agencies. Also requires the workgroup to represent a variety of health care professionals and community voices and include representatives from philanthropic organizations focused on health care.
Requires the workgroup members to be appointed by the Governor, the Speaker of the Assembly, and the President Pro Tempore of the Senate as follows:
a) Nine members appointed by the Governor with a balance of expertise and perspectives, including five members with technical expertise in health care delivery, finance, operations, and public administration, and four members focused on the availability and quality of community health services; and, b) Four members appointed by the Assembly Speaker and four members appointed by the Senate President Pro Tempore. Requires these members to include representatives of health care professionals, labor unions, employers, SB 770
and community organizations, as well as people with experience as beneficiaries of Medi-Cal or Medicare, or of being uninsured. 3) Requires the workgroup to meet quarterly and to create a statewide stakeholder engagement program to address issues including transitioning to a unified health care financing system, adapting existing consumer protections to the new system, applying reforms to reward and prioritize improvements in health outcomes, health care quality, and health care equity, and reducing costs while providing consumers the comfort and security they deserve. 4) Requires the Secretary to provide quarterly reports to the chairs of the Assembly and Senate Health Committees, detailing the status and outcomes of federal discussions, as well as the progress of the workgroup. Requires the Secretary to report to the Legislature, no later than June 1, 2024, a complete set of recommendations regarding the elements to be included in a formal waiver application, along with all legislative action necessary to proceed with the application and to establish a unified financing system consistent with the outcomes of CHHS’ discussions with the federal government. Requires such recommendations to identify all of the elements among those proposed that the state may implement without a federal waiver, as well as any proposed elements that may require changes in federal statute in addition to a waiver. 5) Makes a number of legislative findings regarding the final report of the Healthy California for All Commission and endorsing the Commission’s recommendations for a health care system with unified financing that guarantees all Californians the benefit of a standard, comprehensive package of health care services and supports the CHHS’s discussions with the federal government regarding the terms of a potential waiver to effectuate the creation of a health care system consistent with this part.
Comments
1) Author’s statement. According to the author, this bill takes tangible steps on a concrete timeline toward achieving universal, more affordable healthcare in California by requiring the Secretary of CHHS to: pursue waiver discussions with the CMS to facilitate the creation of a unified healthcare financing system; establish a workgroup of healthcare system stakeholders appointed by the Governor, Speaker of the Assembly, and President Pro Tempore of the Senate; provide quarterly reports to the chairs of the Assembly and Senate Health Committees on the status and outcomes of waiver discussions with the federal government and the progress of the workgroup; and to submit a complete set of recommendations regarding the elements to be included in a formal waiver SB 770
application, as specified, by no later than June 1, 2024. Once the Secretary has gathered the information necessary for the Legislature to make informed decisions, they will be responsible to bring them to the Legislature for action.
California has the ability to establish a system of guaranteed healthcare for all and provide better care that costs less. This bill makes this potential real by establishing a specific statutory pathway for pursuit of this goal. 2) Healthy California for All Commission. SB 104 (Committee on Budget and Fiscal Review, Chapter 67, Statutes of 2019) established the Healthy California for All Commission, which was charged with developing a plan that includes options for advancing progress toward achieving a health care delivery system in California that provides coverage and access through a unified financing system, including, but not limited to, a single-payer financing system, for all Californians. SB 104 required the Commission to submit a report to the Legislature and the Governor with, among other things, an analysis of California’s existing health care delivery system and options to transition to a unified financing system, including a single-payer financing system. SB 104 also required the commission to submit a report to the Legislature and the Governor that includes options for key design considerations for a unified financing system, including a single-payer financing system.
Last April, the Commission issued its final report and endorsed a unified financing system with the following characteristics:
a) All Californians will be entitled to receive a standard package of health care services;
b) Entitlement will not vary by age, employment status, disability status, income, immigration status, or other characteristics; and, c) Distinctions among Medicare, Medi-Cal, employer-sponsored insurance, and individual market coverage will be eliminated within the system of unified financing.
The report pointed to the variety of methods that other countries use to achieve unified financing, some, such as Canada and the United Kingdom, which land squarely within the definition of single payer, while others, such as Germany or the Netherlands, which rely on health insurance that is highly regulated. The financial analysis done in connection with the report found that without a shift to unified financing, health care spending in California is estimated to increase by $158 billion over nine years, which is a 30% increase over base line spending. The total cost of a unified financing system would depend on a number of key design decisions including eligibility and enrollment, covered SB 770
benefits and services, patient cost-sharing, provider payment, purchasing arrangements and role for intermediaries, care coordination, and cost containment measures. In some areas, such as the decision to use risk-based capitation (e.g. managed care plan) versus a direct payment model, no consensus was reached by the Commission. A number of scenarios were run using both a direct payment to providers model and a health plan model, and using different options that included (or not) an expansion of long-term services and supports and included (or not) income-related cost-sharing. Almost every option resulted in considerable savings compared to the baseline health expenditure of $517 billion per year with the exception of scenarios that both expanded long-term services and supports and contained zero cost-sharing for consumers.
3) Availability of federal waivers. At the crux of the issue on how unified financing, whether single payer or not, could be achieved in California is how to draw down the federal dollars that are currently being spent on health care in California. The Commission’s report found that unified financing cannot be accomplished in California without federal support. Commissioners disagreed about whether federal participation could be accomplished through existing Medicare, Medicaid, and Affordable Care Act (ACA) waiver authority, or whether changes in federal law would be required. Waiver authority allows a state to ignore certain federal program rules for experimental or demonstration projects which are generally required to cost no more than what the federal government would have spent on the program without the waiver. [NOTE: For full analysis, see Senate Health analysis, noting that the amendments taken on April 24, 2023 were in response to the policy comments.] FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee:
CHHS indicates that costs are indeterminate, but potentially in the low millions (General Fund) in 2023-24 and ongoing thereafter, for establishing the new workgroup.
Unknown costs for activities related to pursuing waiver discussions with the federal government.
SUPPORT: (Verified 5/16/23)
Healthy California Now (source)
SB 770
Butte County Health Care Coalition
California Alliance for Retired Americans
California Conference of Machinists
California Federation of Teachers AFL-CIO
California OneCare
California Pan-Ethnic Health Network
California Teamsters Public Affairs Council
Clinica Monseñor Oscar A. Romero
Consumer Watchdog
Courage California
Gray Panthers of San Francisco
Health Access California
Inland Equity Partnership
League of Latin American Citizens of Riverside, Council 3190 National Union of Healthcare Workers
Physicians for a National Health Program -- California Chapter SEIU California
UNITE-HERE, AFL-CIO
Western Center on Law and Poverty
10 individuals
OPPOSITION: (Verified 5/16/23)
America’s Physician Groups
Association of California Life & Health Insurance Companies California Agents and Health Insurance Professionals
California Association of Health Plans
California Chamber of Commerce
California Nurses Association/National Nurses United
Democratic Socialists of America – Los Angeles
Fannie Lou Hamer Institute
Health Care for US
La Defensa
Topanga Peace Alliance
Trade Show Temps
37 individuals
ARGUMENTS IN SUPPORT: This bill’s sponsor, Healthy California Now, writes that this bill builds upon the findings and recommendations of the Healthy California for All Commission appointed by the Legislature and Governor, which in its final report cited the advantages of unified financing system for healthcare in SB 770
California. They say that this bill establishes concrete timelines and clear objectives for the work already budgeted by the Legislature enabling the Newsom administration to explore with the federal government the range of terms it might accept in a waiver for use of California's share of federal healthcare dollars to facilitate the creation of a unified healthcare financing system. Additionally, this bill establishes a stakeholder process to ensure constituencies including healthcare consumers and caregivers, unions, and the full range of community stakeholders will have a voice in the report it requires from the administration on policy and financing issues for action by the Legislature in 2024.
Supporter Health Access California, whose director served on the Commission, write that the Commission report usefully detailed the many policy issues that would be needed to transition to a unified health system. This bill is not an attempt to decide each issue or debate, but to facilitate California’s efforts to work through some of questions as well as to get clarity on the “threshold issue” of federal approval of the use of Medicare, Medicaid, and other federal dollars. The ability or willingness of the federal government to grant such approval would then shape what California can and should pursue in its ongoing health reform discussions.
ARGUMENTS IN OPPOSITION: A group of health plans, insurers, physicians groups, and the California Chamber of Commerce wrote in opposition to this bill stating that the ultimate goal is to ultimate goal is to force all Californians out of their existing health coverage – including Medicare, employer-based coverage and ACA plans – and into a new untested government-run system, with no ability to opt out or choose private coverage instead.. They also point out that any waiver obtained through this bill would not be permanent and could be disallowed by Congress at any time, eliminating 40% of the funding for the new health care system. This bill also requires raising taxes by roughly $300 billion a year.
Finally, this bill provides little details on how the transition to this system would be achieved, how providers would be reimbursed, and could ultimately cause providers to leave the state.
The California Nurses Association/National Nurses United (CNA), who also had seat on the Commission, writes in opposition stating that a new waiver workgroup would unnecessarily rehash the time, work, and resources expended by CHHS and the Healthy California for All Commission and potentially delay the implementation of single-payer health care in California until 2028. The Healthy California for All Commission already has completed an analysis of federal health care waivers, including an analysis by independent legal counsel. CNA also states that because HHS cannot lawfully preapprove federal health care waivers, protracted informal discussions with HHS are futile. Finally, CNA states that the SB 770
proposed new waiver workgroup lacks transparency. The Legislature must not rely on an unaccountable workgroup to ensure that all Californians have a right to comprehensive health care but should instead develop and pass legislation to approve a single-payer program before the development of a federal waiver application can begin in earnest. A number of other organizations and individuals raise these same points in their opposition.
Prepared by: Jen Flory / HEALTH / (916) 651-4111
5/20/23 13:09:29
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