Health Care and Human Services

From the beginning of his Administration, the Governor has made providing health coverage for children a major priority. In January of 1999, 50,000 children were enrolled in the Healthy Families Program (HFP). In his first two Budgets, the Governor launched an aggressive outreach campaign, expanded eligibility, and dramatically simplified the application process. As a result of these efforts, enrollment is projected to reach 455,000 children by June 2001, and it is projected to reach 561,000 children by June 30, 2002. The Governor has committed that he will include funding to provide coverage for the maximum number of eligible children in California, and that no child will ever be placed on a waiting list for coverage under this program.

In addition, Medi-Cal eligibility has been expanded to provide no-cost benefits to low-income families with incomes at or below 100 percent of the federal poverty level (FPL); to aged, blind, and disabled persons with income below 133 percent FPL; and to working disabled individuals up to 250 percent FPL. Beginning January 1, 2001, Medi-Cal will provide additional coverage by simplifying the complex eligibility process through the elimination of quarterly status reporting, providing continuous eligibility for children, and continuing coverage eligibility for persons leaving CalWORKs until their annual Medi-Cal redetermination date.

California has made progress in reducing the number of uninsured persons in the state. These Healthy Families and Medi-Cal Program enhancements are estimated to provide affordable health insurance for an additional 1.1 million California citizens between January 1, 2001, and the end of the budget year.

Healthy Families Program—The 1999 Budget Act expanded HFP coverage to uninsured children with family income between 200 and 250 percent of the FPL. The number of children enrolled in the program is projected to increase by 106,000 in 2001-02. The Governor’s 2001-02 Budget includes $74.4 million from the Tobacco Settlement Fund for expanded coverage to children with family incomes between 200 and 250 percent of the FPL.

Healthy Families Parent Expansion—Currently, the HFP provides medical insurance to children with family income up to 250 percent of the FPL. The 2001-02 Budget proposes $201.5 million ($76.1 million Tobacco Settlement Fund) to expand the HFP to include the uninsured adult parents of children covered by either the HFP or the Medi-Cal program with family incomes between 100 and 200 percent of the FPL. This expansion of the HFP will increase affordable health care coverage to low-income, uninsured adults and will enhance efforts to enroll all eligible children by offering family-based coverage. It is estimated that by June 30, 2002, 174,000 adults will receive health care benefits under this expansion, bringing total HFP enrollment to 735,000 by June 30, 2002 (see Figure A).

Healthy Families Outreach—Since taking office, the Governor greatly enhanced outreach efforts to increase enrollment in the HFP:

• The application for the HFP was simplified and reduced from 28 pages to 4 pages.
• Information about enrollment is now available in multiple languages.
• Outreach efforts were increased by more than $10 million.

Outreach efforts are currently provided by the School Health Connections office in the Department of Health Services (DHS). These outreach programs work with local school districts to provide children and their families with information about both programs and application assistance. Recent studies show that schools rank as the number one referral source for both general information and application assistance concerning these programs.

The Governor’s 2001-02 Budget proposes $42.2 million to expand funding for outreach programs by $7.9 million. Of this augmentation, $6 million is for expanding partnerships with schools and school-affiliated programs such as the Child Nutrition, Healthy Start, and Head Start programs. In addition, the Budget includes a $1 million outreach augmentation to implement the HFP adult expansion.

Targeting Tobacco Settlement Funds for Health Care Expansion—The 1998 Master Tobacco Settlement requires tobacco companies to make payments to the states totaling an estimated $206 billion nationally through 2025. California is projected to receive an estimated $25 billion over 25 years. In 2001-02, the State expects to receive approximately $468 million. Local governments will receive an equal amount.

The Administration proposes trailer bill legislation to create the Tobacco Settlement Fund into which will flow 100 percent of the State’s share of the tobacco settlement revenues. These funds will be used solely for health care programs, including expanding health coverage to the uninsured, cancer research and treatment, and anti-tobacco efforts.

The trailer bill legislation establishing the Tobacco Settlement Fund will also include annual General Fund loan authority of $250 million for cash flow purposes. The tobacco settlement funds are received by the State in two payments—one-third of the funds in January, and the remainder in April. Consequently, General Fund loans are needed during the first half of each fiscal year.

The legislation will also establish a "base year" and define "base year expenditures" as expenditures for newly created or expanded health care programs funded with General Fund or any health programs funded with Cigarette and Tobacco Products Surtax Funds (Proposition 99), on or after July 1, 1999. As shown in Figure B, these programs and associated funding are as follows:

Healthy Families Program—$76.1 million to expand the HFP to provide medical, dental, and vision care to 174,000 uninsured parents of children in the program and in the Medi-Cal program. In addition, the Budget includes $74.4 million from the Tobacco Settlement Fund for expanded coverage to 106,000 children with family incomes between 200 and 250 percent of the FPL.

Medi-Cal Program—$47 million to establish an income deduction to provide no-cost Medi-Cal benefits to aged, blind, and disabled persons with incomes below 133 percent of the FPL. This adjustment will provide benefits to an estimated 52,800 individuals previously uninsured. Further, the Budget includes $123 million from the Tobacco Settlement Fund to expand Medi-Cal eligibility to poor or low-income families with incomes at or below 100 percent of the FPL. This adjustment will provide benefits to an estimated additional 249,000 individuals. Together, these two adjustments will provide benefits to an additional 301,800 individuals previously uninsured.

Breast Cancer Treatment—$20 million to provide breast cancer treatment to uninsured or underinsured individuals whose income is below 200 percent of the FPL. These adjustments will provide benefits to an estimated 1,250 adults previously uninsured.

Prostate Cancer Treatment—$20 million to double the prostate cancer treatment program for uninsured or underinsured individuals whose income is below 200 percent of the FPL. These adjustments will provide benefits to an estimated 1,200 adults previously uninsured.

Youth Anti-Tobacco—$20 million ($5 million one-time) to reduce the incidence of youth smoking. This program will provide grants to local nonprofit organizations to reduce smoking among teens and college-aged youth. In addition, the program will provide assistance to local governments to reduce the sale of tobacco products by improving anti-smoking enforcement activities. Along with the $20 million for the youth anti-smoking campaign, California has committed $114.5 million from the Cigarette and Tobacco Products Surtax Fund (Proposition 99) for anti-tobacco efforts.

Child Health and Disability Prevention Program—Due to declining Proposition 99 revenues in 2000-01, the Child Health and Disability Prevention (CHDP) program and other essential health and anti-tobacco programs were threatened with funding reductions. The Administration targeted tobacco settlement funds to maintain the entire CHDP program. Providing tobacco settlement funds to support CHDP also allowed the Administration to use Proposition 99 funds to preserve critical county health programs for indigent Californians and continue funding for emergency room physicians and specialists. The 2001-02 Budget shifts funding for CHDP to the newly established Tobacco Settlement Fund, and includes $64.9 million to provide preventive health assessments and immunizations to low-income children from the age of 6 through 18.

For 2000-01, the Governor’s Aging with Dignity Initiative provides an augmentation of approximately $495 million ($240 million General Fund) to help seniors remain at home and lead independent lives in the community, and to enhance the quality of care in California nursing homes. The number of people over the age of 60 in California will grow from 5 million in 2000 to 6.7 million in 2010. This Initiative recognizes the importance of our growing senior population.

The 2001-02 Budget includes the following proposals to further strengthen long-term care resources for seniors:

Quality of Care—As part of the Aging with Dignity Initiative, the 2000 Budget Act included increased Medi-Cal rates of payment to nursing homes, and provided $9.1 million General Fund for additional enforcement measures to ensure increased quality of care. Chapter 451, Statutes of 2000, requires enhanced State oversight of nursing facilities, improved responsiveness to consumer complaints, a new quality assurance process for State surveys, and assistance to facilities to improve programs and services. The 2001-02 Budget proposes an additional $1.9 million ($1 million General Fund) to ensure response within 24 hours of any safety complaint from patients in nursing homes.

Institutions for Mental Disease Transition Pilot Project—The Budget includes $1 million General Fund for pilot projects to expand community-based options for long-term care for patients currently placed in Institutions for Mental Disease. This proposal will fund these pilots at $1 million annually for three years.

Assisted Living Waiver for Long-Term Care Alternatives—The Budget provides $1 million ($508,000 General Fund) on a one-time basis to develop an assisted living waiver that would ultimately increase alternatives to nursing home care. Currently, many Medi-Cal beneficiaries in nursing homes could receive care in less restrictive community settings. This waiver would allow DHS to offer Medi-Cal recipients more options for long-term care, and would allow those beneficiaries to receive medical care in a more home-like environment.

Pilot Projects to Expand Community Options for Long-Term Care—The Budget provides $1 million ($500,000 General Fund) for the development of an assessment tool for individuals who qualify for long-term care in a community setting. Although the number of persons receiving State-funded long-term care in community settings has increased in recent years, many Medi-Cal beneficiaries continue to live in nursing homes or Institutions for Mental Disease. These funds would be used by the DHS to explore strategies for assessing which individuals could be better placed in residential facilities.

Senior Wellness Education Campaign—As part of the Aging with Dignity Initiative, the 2000 Budget Act included a one-time appropriation of $1 million General Fund and staff for a Senior Wellness Education Campaign. The purpose of this campaign is to educate seniors and their families on innovative community-based and in-home care alternatives to institutional placement. The Budget includes $1 million to continue this program.

Linkages Program—The Linkages Program provides case management and supportive services to seniors who may not qualify for other State or federal programs, but still need assistance in order to remain in their homes. The Budget includes $1.5 million General Fund to expand the program by adding, for each of the 36 Linkages programs, 25 additional client slots (900 statewide) and a half-time Public Health Nurse who will manage the new clients and provide a health improvement component for all clients.

Adult Day Health Care—The Budget includes $982,000 ($484,000 General Fund) and additional staff for the Adult Day Health Care Program to provide certification, oversight, and monitoring activities. These activities will help provide a more safe and secure environment in which seniors may receive important health, therapeutic, and social services that will allow them to remain in their homes for a longer duration.

Elder Abuse Public Awareness Campaign—The Budget includes $2 million General Fund to implement Chapter 559, Statutes of 2000, which requires the Attorney General, with the assistance of the Health and Human Services Agency, to establish a statewide elder and dependent abuse awareness media campaign. This campaign will begin a three-year effort to enlist the efforts of the public to reduce the instances of elder abuse.

In August 1996, the President signed the Health Insurance Portability and Accountability Act (HIPAA). The HIPAA is designed to improve the availability of health insurance to working families and their children, including 25 million Americans who change jobs, are self-employed, own small businesses, or have preexisting medical conditions. It also requires administrative simplification, revised security procedures, and fraud control. Health care industry experts consider the HIPAA to be the most sweeping legislative effort to improve health insurance programs in 30 years. It will affect nearly every business process of the health insurance industry and result in significant systems changes. If the State is not compliant with HIPAA regulations, federal funding for health care delivery programs may be lost, and other financial penalties may be imposed. Inadequate implementation could result in increased General Fund costs and hinder the delivery of and payment for health care.

As part of administrative simplification, the HIPAA requires all health care providers and health plans that engage in electronic administrative and financial transactions to use a single set of national standards and identifiers. Electronic health information must meet security and privacy standards, which should result in more cost-effective claims processing and coordination of insurance benefits.

The 2001-02 Budget proposes $22.4 million ($3.9 million General Fund) and 25.1 positions in various Health and Human Services Agency budgets, as well as a statewide budget appropriation of $70 million ($20 million General Fund and $50 million other funds) for implementation of the HIPAA (see Figure C). A task force will be established and modeled after the interagency efforts to prepare for the Y2K transition. Membership will include the Health and Human Services Agency; Business, Transportation and Housing Agency; CalPERS; State Teacher’s Retirement System; Veterans Affairs; representatives from both K-12 and Higher Education; Department of Information Technology; and the Department of Finance. Using a process similar to the Y2K funding model, the Department of Finance will determine the priority of projects to be funded from the statewide HIPAA appropriation.

The Health and Human Services Agency appropriations for HIPAA implementation are as follows:

• Department of Health Services—$18.7 million ($2 million General Fund) for 15.1 positions and contract funding for the Department to develop policy associated with the administrative simplification objective of the HIPAA. Of this amount, $17.2 million ($1.7 million General Fund) is for consulting services to perform detailed systems assessments and remediation planning for all non-claims related systems. Claims payment systems assessments are underway. Additional funding to support these activities may be required upon completion of these assessments. The Department will ensure that all appropriate health plans and programs that electronically maintain or transmit health information comply with requirements to use a single set of national identifiers and codes.
• Department of Mental Health—$2.4 million ($1.2 million General Fund) and 9.0 positions to write and implement regulations and modify computer systems affected by the new federal regulations. The Department will work with the 60 county and city mental health plans to ensure compliance with HIPAA requirements.
• Department of Developmental Services—$850,000 ($425,000 General Fund) to contract with computer programmers to assist the Department in meeting requirements for coding and processing of health insurance claims and managing electronic files containing consumer information.
• Department of Alcohol and Drug Programs—$300,000 General Fund to conduct a feasibility study for an enterprise-wide consolidated relational database incorporating several stand-alone databases and HIPAA requirements. The study will provide the information necessary to determine if a single statewide system could provide client billing, evaluate service utilization, track service delivery costs, determine effectiveness of services, and assess reasonableness of rates.
• Office of Statewide Health Planning and Development—$99,000 to fund 1.0 position to initiate compliance with new federal requirements on electronic data collection and transfer emerging from the HIPAA. The Health Policy and Analysis Program of the Office of Statewide Health Planning and Development collects, analyzes, and reports on many types of health care data and must also become compliant with HIPAA requirements.

Figure C - Health Insurance Portability and Accountability Act

The Governor initiated the most aggressive crackdown on Medi-Cal fraud in California history in 1999. It is estimated that more than $1 billion a year is siphoned off through fraudulent billing practices. As part of the 2000 Budget Act, 192.0 additional positions and $20.1 million ($8 million General Fund) were added to DHS to conduct Medi-Cal fraud prevention activities and to establish and support the Medi-Cal Fraud Prevention Task Force. In the first 18 months of operation, the Task Force has identified more than $400 million in fraudulent billings, secured 84 fraud convictions, and produced more than $150 million in program savings and $20 million in restitution.

The Governor’s 2001-02 Budget again provides these resources for Medi-Cal fraud prevention activities and the Medi-Cal Fraud Task Force to continue aggressive anti-fraud efforts, including the following:

• Tighten the Provider Enrollment Process—In order to curb fraudulent billing practices, changes in the provider enrollment process have been implemented. Enrollment application information has been subject to more stringent review and verification. Full implementation of the enrollment/reenrollment reviews during 2000-01 have resulted in 270 completed reviews with a 35 percent rate of denial. Implementation of the new provider enrollment regulations, procedures, and provider agreements has greatly increased DHS’ ability to prevent fraudulent providers from enrolling in Medi-Cal.
• Increase Anti-Fraud Field Audit Activities—Not all of the providers applying to the Medi-Cal program have legitimate credentials, nor do they establish and maintain legitimate medical practices or businesses. In many of these cases, on-site reviews are needed to ascertain the legitimacy of providers. For 2000-01, the DHS has expanded its field presence through additional provider reviews and audits.
• Increase Penalties and Collection of Overpayments—The DHS has pursued suspension from the Medi-Cal program of providers who have willfully misrepresented their identity, ownership, practice, or laboratory test results. To date, the DHS has referred, and the Department of Justice has accepted, 69 referrals for criminal investigation. In the current year, the Federal Bureau of Investigation has accepted 20 referrals from the DHS for criminal investigation.
• Expand Anti-Fraud Measures into Medi-Cal Managed Care—The DHS has expanded its anti-fraud measures into Medi-Cal managed care during the current year. This expansion has produced an increase in fraud referrals to the DHS’ Audits and Investigations Unit and a reduction in fraudulent requests to disenroll from managed care due to medical exemption.
• Expand Anti-Fraud Measures into Denti-Cal—Fraud and abuse in Denti-Cal has expanded greatly since rates for dental procedures have tripled and many of the submission requirements for dental claims were eliminated. During 2000-01, the DHS expanded its anti-fraud measures into Denti-Cal. This effort has provided additional contractor staff to detect and refer providers suspected of defrauding the Denti-Cal program.
• Create Program Integrity Unit in Laboratory Field Services—The Laboratory Field Services Unit has created a Special Investigation Section to conduct on-site reviews of laboratories suspected of fraudulent activities.

On November 7, 2000, voters statewide approved Proposition 36, the Substance Abuse and Crime Prevention Act of 2000, making substantial changes to the State’s substance abuse treatment system and criminal justice processes effective July 1, 2001. Proposition 36 requires probation and drug treatment, in lieu of incarceration, for conviction of possession, use, transportation for personal use, or being under the influence of a controlled substance, and related parole violations.

Proposition 36 makes the following significant changes to the judicial process and substance abuse treatment system:

• Revises sentencing laws to specify that nonviolent offenders convicted of certain drug-related offenses are to receive probation and treatment in lieu of incarceration, unless the offender refuses or is found to be unamenable to treatment.
• Changes conditions of parole to require treatment for specified nonviolent drug offenses, or for violating substance abuse conditions of parole, in lieu of parole revocation and return to prison.
• Authorizes the courts and the Board of Prison Terms to require participation in job training, family counseling, literacy education, and/or community service. A trial judge may also require offenders to pay for their treatment, if they are reasonably able.

• Specifies that one year of community-based drug treatment and up to six months of aftercare will be provided to nonviolent substance abuse offenders.
• Provides that offenders who are unamenable to treatment or who violate conditions of probation or parole may be sanctioned.
• Requires participating treatment programs to be licensed or certified.

• Appropriates $60 million General Fund in 2000-01 and $120 million annually through 2005-06 for treatment, probation costs, court monitoring, family counseling, vocational training, literacy training, and other miscellaneous costs made necessary by the measure.
• Specifies that no more than 0.5 percent of the annual appropriation is required to be used by the Department of Alcohol and Drug Programs to fund an evaluation by a public college or university.
• Prohibits the use of these funds for drug testing.
• Since the passage of Proposition 36, the State has established the Substance Abuse Treatment Trust Fund, the State Controller has transferred the $60 million appropriation for 2000-01 to the new fund; and the Department of Alcohol and Drug Programs has allocated the $58.8 million of local assistance funding to the counties in 2000-01. The balance of the 2000-01 appropriation has been disbursed to the Department for program administration.

• Requires the Department to annually evaluate the effectiveness and fiscal impact of the programs funded, including the implementation process, review of incarceration costs, and changes in the crime rate, prison and jail construction, and welfare costs.
• Includes up to $3.3 million, through 2005-06, for a long-term study by a California public university on the effectiveness of the Act and the fiscal impact of the programs authorized by the Act.

• Department of Alcohol and Drug Programs:

The Budget includes $1.2 million and staff in 2000-01 and $2.8 million in 2001-02 for the Department of Alcohol and Drug Programs to implement the Proposition. Departmental support costs are proposed to be funded from Proposition 36 appropriations. At this point in time, no more than 2.5 percent of total appropriations will be used for these state-level costs. Funding and staff will be used to do all of the following:

• Establish an administrative structure for appropriate oversight, as the Department is the principal State agency responsible for allocation of funding to local entities, annual auditing, and program evaluation.
• Develop, implement, and monitor ongoing regulations in consultation with law enforcement and other stakeholders, including the allocation formula to be used to distribute the funds appropriated by the Act.
• Design and implement data collection systems for the required evaluation of the effectiveness and financial impact of programs funded at the county level.
• Prepare and issue a competitive bidding process for the long-term study required to be conducted by a public university in California.
• Increase the licensing capability of the Department. The Act requires that treatment be provided by licensed or certified programs. Therefore, the Department, currently responsible for licensing drug treatment providers, will be required to license hundreds of additional providers. The Department will undertake a review to determine if there should be changes to the licensing or certification process, how the two processes differ, and the appropriate situations in which providers should be licensed or certified.
• Develop and implement audit procedures.
• Address legal issues and any challenges to the provisions of
  Proposition 36.
• Work with the courts to develop, to the extent feasible, a uniform means test to determine when program participants will be required to pay for treatment.

• Other State Costs

  Implementation of the Proposition is anticipated to result in cost impacts to various local and State agencies and departments including the California Department of Corrections, Board of Prison Terms, trial courts, and county probation offices. At this time, the cost impacts, including potential cost-savings, are unknown.
  
  

• Local Government

  Proposition 36 will affect counties in several ways. Because persons convicted of nonviolent drug possession offenses will receive probation rather than a jail sentence, county jails will house fewer inmates, resulting in county cost avoidance of tens of millions of dollars annually. However, the number of new probationers is expected to increase significantly, increasing county probation costs by tens of millions of dollars annually. Counties will also provide drug treatment services or contract with drug treatment providers, as well as arrange for other treatment services ordered by trial courts, such as vocational training and family counseling. Due to the uncertainty of how the Proposition will be implemented and the number of offenders affected, the net fiscal impact on counties is unknown.
  
  Allocations will be made to the county Auditor-Controller as the representative of the Boards of Supervisors. The Boards of Supervisors will be responsible for allocating available funds among the various local entities responsible for carrying out the initiative.