November 22, 2019 Edition

CHEAC Office Closed November 28 and 29

The CHEAC Office will be closed on Thursday, November 28 and Friday, November 29 in observance of the Thanksgiving holiday. The CHEAC Weekly Update will not be published next week. We will resume normal operations on Monday, December 2.

Senate Committee Convenes Sweeping Oversight Hearing on Recent PSPS Events

The Senate Energy, Utilities, and Communications Committee on Monday convened a sweeping oversight hearing on the recent public safety power shutoff (PSPS) events that have occurred throughout the state, featuring a wide range of representatives including those from utility companies, the Newsom Administration, the California Public Utilities Commission (CPUC), and various disability and health, business and economy, and school and local government stakeholders.

The hearing began with an opening statement from both Senate Energy, Utilities, and Communications Committee Chair Senator Ben Hueso and Senate President pro Tempore Toni Atkins. Pro Tem Atkins in her remarks highlighted the Legislature and Administration’s recent efforts related to wildfire preparedness and response and examples of communities and residents working to support one another through natural disasters and power shutoff events.

Pro Tem Atkins called for a comprehensive statewide action plan to minimize risks to the public from wildfires and power shutoffs and detailed guiding principles as part of the action plan, including but not limited to: that energy must remain available with only limited, targeted disruption during emergencies; taxpayers should not be required to bail out shareholders who have profited from utility investments; and utilities must have realistic timeframes and goals for hardening utility infrastructure and be held accountable to those actions. A series of issues spanning utility oversight, climate change preparedness, health and social services needs, insurance reforms, and business operations, among others, were identified as topics for future legislative consideration.

The hearing consisted of a number of panels, beginning with an overview of the current landscape related to PSPS events provided by the Legislative Analyst’s Office (LAO). The LAO provided a brief history of the events and roles of utility entities and governmental agencies, including emergency preparedness and response operations carried out by state and local governments.

The second panel featured representatives from utility companies San Diego Gas & Electric, Southern California Edison, and Pacific Gas & Electric to discuss their companies’ activities related to PSPS events, response activities, and infrastructure hardening efforts. Members of the committee extensively questioned the utilities about their PSPS-related activities, business structures and operations, and response efforts to previous utility-caused wildfires.

A state oversight panel featuring Cabinet Secretary and Energy Czar Ana Matosantos, Governor’s Office of Emergency Services (CalOES) Director Mark Ghilarducci, Government Operations Agency Acting Secretary Julie Lee, California Health and Human Services Agency (CHHS) Secretary Mark Ghaly, and representatives from the Governor’s Office of Business and Economic Development (GO-Biz) and the California Public Utilities Commission. Each representative discussed their agency’s role in planning and responding to the widespread PSPS events and detailed services provided to California residents during the events.

Secretary Ghaly’s remarks focused on impacts of the PSPS events on medically fragile and vulnerable populations throughout the state as a result of service gaps left unaddressed by investor-owned utilities. CHHS worked to ensure individuals in state-licensed facilities and in their communities were safe and had no unmet needs. Secretary Ghaly discussed utility company efforts to reach vulnerable populations during PSPS events but indicated the companies’ efforts were significantly insufficient. CHHS had to deploy a considerable amount of resources to support local agencies, assist licensed facilities, and reach vulnerable individuals living in communities. Secretary Ghaly further detailed lessons learned from the recent PSPS events and identified areas of needed improvement to prepare for future PSPS events, including improving data and informational infrastructure, streamlining welfare outreach activities, and strengthening partnerships with state, local, and community partners.

The hearing was rounded out by a series of speakers detailing PSPS event impacts on Californians. Stakeholders from elderly and medically vulnerable populations, business and economy entities, schools and local governments, and other utilities and essential services spoke to their respective experiences in preparing for and responding to recent PSPS events. Extensive public comment further underscored elements of the hearing related to infrastructure improvements, preparedness activities, and the provision of essential services during PSPS events, among others.

The hearing agenda is available here. The committee background paper is available here. Video of the hearing is available here. Additional hearing resources are available here.

LAO Publishes Budget Report Detailing 2020-21 Fiscal Outlook, Estimates $7 Billion Surplus

On Wednesday, the California Legislative Analyst’s Office (LAO) released its report, “The 2020-21 Budget: California’s Fiscal Outlook.” The report is released annually in anticipation of the upcoming state budget process and details key economic assumptions, expected revenues, and subject area-specific reports, including health and human services. The outlook report examines whether the state has enough resources to pay for next year’s budgetary commitments, whether the state has capacity to take on new, ongoing commitments, and whether the state has enough revenues to cover revenue shortfalls in the event of a recession.

In its report, the LAO anticipates that the risk to this year’s economic outlook has increased compared to recent years, particularly due to weakening housing markets, trade activity, new car sales, and business startup funding. Still, the LAO projects that revenues will continue to grow from 2019-20 to 2020-21 at a rate of 3.5 percent, which is slower than recent years.

The LAO further estimates that California will have a budget surplus of $7 billion for 2020-21. Notably, the LAO indicates that a portion of the $7 billion surplus would be available for one-time commitments and a portion would be available for new, ongoing commitments. The LAO does note that if the recently submitted managed care organization (MCO) tax is not approved by the federal government, the state’s budget surplus would be $4 billion.

Should the economy continue to grow, the LAO expects the state to have sufficient capacity to take on new, ongoing budgetary commitments. Under current laws and policies, the LAO expects $3 billion to be available for ongoing commitments. Less than $1 billion is expected to be available for ongoing commitments if the federal government does not approve the MCO tax and delays cuts to hospitals serving higher shares of Medi-Cal patients, there is at least one major wildfire season within the next few years, and the voters approve the education facilities bond in 2020.

The LAO further determines that the state is in good overall fiscal condition and would be able to weather a recession typical of the post-World War II era. However, the LAO importantly points out that this does not mean the state is prepared to weather any possible recession.

Related to Medi-Cal, the LAO estimates the state will spend about $22 billion from the General Fund on Medi-Cal in 2019-20, representing a roughly $1.1 billion reduction relative to what was assumed in the 2019-20 Budget Act. This reduction is largely due to the LAO’s assumption that the federal government will approve the MCO tax renewal, as well as updated projections of lower Medi-Cal caseload. From the revised 2019-20 amount, the LAO projects that General Fund spending in Medi-Cal in 2020-21 will increase by $1.5 billion (seven percent) to a total of $23.5 billion. 

In its commentary and recommendations to the California Legislature, the LAO notes that the state has made significant progress in preparing for an economic downturn as a result of more than a decade of economic expansion and deliberate legislative action to place the budget on better footing. The LAO recommends the Legislature dedicate no more than $1 billion to ongoing purposes, a significant share toward building reserves and paying down debt, and the remainder toward one-time flexible commitments that can be changed midyear, if necessary.

In reacting to the LAO’s report, Governor Gavin Newsom highlighted the state’s work in ensuring a strong economy and providing opportunities to all Californians. In a statement, Newsom expressed, “Out state is proving what big-hearted, progressive governance can look like – all without breaking the bank. … As Washington soaks Americans with a trillion dollars in debt to pay for tax cuts that benefit the wealthy and destroys the social safety net, our state is now doing more than ever to provide opportunity to California families, especially those who are not equally sharing in our nation’s prosperity. As our state and nation face uncertain economic headwinds, the federal government would be wise to look to California as a model for how to get its fiscal house in order.”

The full LAO fiscal outlook report is available here. The Medi-Cal fiscal outlook is available here.

State of California Sues E-Cigarette Company JUUL Labs, Trump Administration in Flux Over Proposed Ban of Flavored E-Cigarettes

Two notable actions related to electronic cigarettes occurred this week, both on the state and federal levels. We detail these actions below:

AG Becerra Alleges JUUL Labs Unlawfully Targeted Minors

On Monday, California Attorney General Xavier Becerra announced the State of California has filed a lawsuit in the Alameda County Superior Court against JUUL Labs, claiming JUUL is responsible for creating “a public health epidemic.” The state is joined in the lawsuit by Los Angeles County which contends JUUL Labs delivered its electronic cigarette products to underaged individuals, delivered products without verifying customers’ ages, and violated minors’ privacy rights by emailing underaged individuals with marketing materials despite them failing age verification measures on JUUL’s website. Additionally, the lawsuit alleges JUUL failed to warn consumers of its products’ chemical exposure and risks for cancer, birth defects, and reproductive harm.

The lawsuit seeks to require JUUL Labs to pay $2,500 for each violation of the California Business and Professions Code and the Stop Tobacco Access to Kids Enforcement (STAKE) Act. The California Attorney General’s Office has conducted a 21-month investigation into JUUL and its marketing and sales practices, leading to Monday’s lawsuit filing. In a press conference announcing the legal action on Monday, Becerra cited a series of recent statistics from the U.S. Centers for Disease Control and Prevention (CDC) and the U.S. Food and Drug Administration (FDA) indicating a dramatic increase in electronic cigarette products, particularly among youth and young adults. Becerra claimed, “We’ve worked too hard, committed our hard-earned money for too long combatting harmful tobacco use to stand idly by as we now lose Californians to vaping and nicotine addiction. JUUL adopted the tobacco industry’s infamous playbook, employing advertisements that had no regard for public health and searching out vulnerable targets. … We will hold JUUL and any other company that fuels a public health crisis accountable.”

JUUL Labs released a statement in response to the State of California’s lawsuit indicating that they “remain focused on resetting the vapor category in the U.S. and earning the trust of society by working cooperatively with attorneys general, regulators, public health officials, and other stakeholders to combat underage use and cover adult smokers from combustible cigarettes.” JUUL further pointed to its recent decision to stop accepting order for mint flavored electronic cigarette device pods, cease all broadcast, print, and digital product advertising in the U.S. and invest in further research to ensure the quality of its FDA Premarket Tobacco Product Application.

A press statement from the Office of the Attorney General is available here. The full legal complaint against JUUL Labs is available here.

Future Unclear for Previously Proposed Flavored E-Cigarette Ban

Recall, in early September, President Donald Trump announced that his Administration would pursue a comprehensive plan by the U.S. Food and Drug Administration (FDA) for removing flavored electronic cigarettes and nicotine pods from the market, including mint and menthol flavors. The move was widely applauded by public health, health care, and children’s advocacy organizations, and the plan was to be revealed in several weeks. However, the timeline stretched into months until the FDA submitted its proposal to the White House Office of Management and Budget (OMB) for review on November 4. Reports then indicate all movement on the comprehensive plan were halted on November 5, largely as a result of industry opposition and political calculations.

President Trump’s advisers and tobacco industry representatives were reported to have swayed Trump by casting doubt onto the effectiveness of a market ban on the products, as well as suggesting that the move would lose supporters and result in economic and job losses. President Trump called off a rollout of the Administration’s proposal that was scheduled for earlier this month, including a news conference that U.S. Department of Health and Human Services (DHHS) Secretary Alex Azar planned to hold.

Instead, President Trump on November 11 tweeted that he would be meeting with vaping industry representatives, medical professionals, and individual state representatives “to come up with an acceptable solution to the Vaping and E-cigarette dilemma.” He further indicated that “Children’s health & safety, together with jobs” would be a focus of the meeting. While the announcement from President Trump reportedly took advisers by surprise, that meeting, characterized as a “listening session” took place today with representatives from medical and public health organizations, parents’ advocacy groups, and the vaping and tobacco industry, among other stakeholders.

At the conclusion of today’s meeting, President Trump appeared to suggest that his Administration would seek a minimum age requirement of 21 years old to purchase any electronic cigarette products, though concrete next steps remained unclear. Meanwhile, a number of states and localities have instead begun to implement their own actions and regulations on electronic cigarette products amid the nationwide outbreak of vaping-related illnesses and injuries.

CMS Proposes Federal Rule to Enhance Scrutiny over Medicaid Supplemental Payments

The U.S. Centers for Medicare and Medicaid Services (CMS) recently released the proposed federal rule, “Medicaid Financing and Accountability Regulation (MFAR)” which would broadly expand federal oversight of Medicaid supplemental payments and recast current rules and regulations governing how supplemental payments are structured, financed, and distributed. According to CMS, the proposed rule is an effort to “strengthen the fiscal integrity of the Medicaid program and help ensure that state supplemental payments and financing arrangements are transparent and value-driven.”

CMS points to an increase in federal Medicaid spending over recent years, largely driven by various supplemental payments, as the impetus for enhancing scrutiny and oversight. CMS Administrator Seema Verma expressed in a recent speech, “We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system.” According to CMS, the proposed rule largely aims to accomplish the following:

  • Improve Reporting on Supplemental Payments
    • Under the rule, states would be required to furnish provider-level payment detail for base and supplemental payments and report provider-specific payment information on payments received for state plan services and demonstration programs (including identifying the specific authority for such payments).
    • CMS would sunset existing and new supplemental payment methodologies after no more than three years and would require states to request a new CMS approval to continue supplemental payments beyond the maximum three-year approved period.
    • The proposed rule would also require use of Office of Management and Budget (OMB)-approved templates and CMS guidelines on specific upper payment limit (UPL) calculations.
  • Clarify Medicaid Financing Definitions
    • The proposed rule would establish new regulatory definitions for Medicaid “base” and “supplemental” payments and clarify definitions and processes associated with non-federal share financing arrangements.
  • Reduce Certain Financing Mechanisms
    • The proposed rule seeks to reduce state reliance on providers to fund non-federal share amount, clarify financial arrangements related to healthcare-related taxes and donations, and restructure Medicaid Disproportionate Share Hospital (DSH) payments.

According to legal experts, the proposed rule, if implemented, could affect billions of dollars of Medicaid payments nationwide, creating new uncertainty for state budgets and Medicaid providers. A number of provider groups, hospital organizations, and safety net providers have raised concerns over the proposed rule, claiming the rule threatens to undermine financial stability of state Medicaid programs, restrict state flexibility to provide care to vulnerable patients, and damage the healthcare safety net. Potential legal and political challenges to the proposed rule are widely expected.

The proposed rule has been published to the Federal Register for a 60-day public comment period, set to expire on January 17, 2020. CHEAC continues to review the proposed rule and will work closely with our county colleague organizations to assess the potential impact on local public health and health-related administration and operations. Any relevant information will be passed along to CHEAC Members as it becomes available.

The full proposed rule is available here. A CMS fact sheet on the proposed rule is available here.

UC Berkeley, UCLA Study Finds New California Health Care Policies Keep Uninsured from Growing, Improve Affordability for 1.55 Million

A recent report by the UC Berkeley Labor Center and the UCLA Center for Health Policy Research projects California’s recently passed health care policies will both lower the prices in the individual insurance market and keep steady the number of uninsured in California. The report, “California’s Steps to Expand Health Coverage and Improve Affordability: Who Gains and Who Will Be Uninsured?” determined the state’s policies will have prevented 770,000 Californians from becoming uninsured and reduced premiums for 1.55 million Californians, providing a net benefit to a total of 2.2 million Californians.

Recall, the California Legislature in 2019 took steps to build upon the Affordable Care Act (ACA) by providing additional state subsidies in the individual market, expand Medi-Cal coverage to low-income undocumented young adults, and institute a state individual mandate to replace the federal penalty previously eliminated by Congress.

Researchers at UC Berkeley and UCLA utilized CalSIM to determine the impact of the new policies, finding that without them, prices in the individual market would be higher and the number of uninsured in California would have grown to 4.3 million by 2022. However, with the policies in place, researchers project California’s uninsured would remain stable at 3.5 million, 770,000 would gain or retain coverage, 750,000 would pay lower premiums, and another 800,000 would receive state subsidies, including 120,000 middle income Californians ineligible for federal subsidies. Among the 3.5 million who are projected to remain uninsured, undocumented Californians remain the largest share.

The full UC Berkeley/UCLA report is available here.

CAPH/SNI to Host PRIME Webinar, UCLA Releases Interim PRIME Evaluation

The California Association of Public Hospitals and Health Systems (CAPH)/Safety Net Institute (SNI) will host a webinar on December 16 from 1:00 pm-2:00 pm to detail the progress and impact of California’s public health care systems in PRIME (Public Hospital Redesign and Incentives in Medi-Cal), a key program of the Medi-Cal 2020 waiver. During the webinar, participants will learn about PRIME performance data and implementation trends for year four of the program and learn from Los Angeles County Department of Health Services and the University of California, San Diego in their experiences in care delivery and data analytics, including how efforts have improved patients’ lives.

Webinar details and registration are available here.

Relatedly, the UCLA Center for Health Policy Research recently released its interim evaluation examining how the 18 PRIME projects were implemented by 54 public hospitals in California, challenges encountered, strategies used to overcome challenges, and early outcomes of their efforts. Results indicated establishment of needed infrastructures such as health information technology and protocols, delivery of care based on evidence-based guidelines, and regular monitoring of efforts.

The interim evaluation found that better care outcomes realized through the projects included increased screening for depression and follow-up, tobacco assessment and counseling, colorectal cancer screening, and high blood pressure screening and follow-up. Examples of improvements in better health included increased numbers of patients with hypertension control and reduced numbers of patients whose diabetes was not under control.

The draft evaluation is currently with the U.S. Centers for Medicare and Medicaid Services (CMS) and is expected to be finalized after comments and feedback from CMS are addressed. The full interim evaluation is available here.