The 2021-22 Budget

LAO Preliminary Comments on the Governor’s Major May Revision Behavioral Health Proposals

The Governor’s 2021‑22 May Revision includes several proposals related to behavioral health. In the following sections, we provide our preliminary comments on the major May Revision behavioral health proposals, which consist of (1) the package of proposals targeted at children and youth that are together grouped under the Children and Youth Behavioral Health Initiative and (2) the May Revision augmentations to the Governor’s January behavioral health continuum infrastructure proposal. We note that these comments reflect our understanding of the major May Revision behavioral health proposals as of Monday, May 24. We may provide additional analyses to the Legislature as feasible when additional information becomes available.

Children and Youth Behavioral Health Initiative

The Governor’s May Revision includes a package of proposals known collectively as the Children and Youth Behavioral Health Initiative. Figure 1 provides the funding amount for each component of the initiative introduced at the May Revision. Further below, we describe the various components of the initiative.

The Proposal: One-Time Spending for Infrastructure and Capacity

Behavioral Health Service Virtual Platform. The Governor’s May Revision includes $83 million in Coronavirus Fiscal Recovery Fund (CFRF) monies (federal funding to the state to use flexibly from the American Rescue Plan Act) for 2021‑22, $107 million CFRF in 2022‑23, $156 million ($125 million General Fund and $31 million other federal funds) in 2023‑24, $180 million ($144 million General Fund and $36 million other federal funds) in 2024‑25, and $224 million ($179 million General Fund and $45 million other federal funds) in 2025‑26 to the Department of Health Care Services (DHCS) to establish a virtual platform that would facilitate the provision of behavioral health services to children and youth age 25 and younger through (1) interactive exercises and games, (2) automated screening and assessment tools, and (3) direct services delivered by peers or coaches. In addition, the virtual platform would facilitate referrals to appropriate health care delivery systems for children and youth (whom the assessment and screening tools indicate have higher behavioral health needs) to set up appointments with a clinician for behavioral health care. Under this proposal, the administration would procure a vendor to implement the platform, and use of the platform would be available to all children and youth regardless of payer (including any uninsured children and youth).

Continuation of CalHOPE Student Support Program. The Governor’s May Revision includes $45 million one-time CFRF (available over multiple years) to DHCS to continue the CalHOPE Student Support Program, which provides free crisis counseling and support services through a centralized resource website. This funding is intended to sustain the program until the Behavioral Health Service Virtual Platform is implemented.

Grants to Expand Capacity and Infrastructure for Behavioral Health Services in Schools. The Governor’s May Revision includes $100 million CFRF in 2021‑22 and $450 million CFRF in 2022‑23 to DHCS to provide grant funding to a variety of eligible entities (including schools, community colleges, universities, commercial health insurance plans, Medi-Cal managed care plans, community-based organizations, behavioral health providers, tribal entities, and counties) to build infrastructure for establishing partnerships between a variety of entities to provide behavioral health services in schools. (The Governor’s January budget included a similar proposal for grant funding to be provided to Medi-Cal managed care plans. Our analysis of that proposal can be found here.)

Grants to Expand Evidence-Based Behavioral Health Programs for Children and Youth. The Governor’s May Revision includes $10 million CFRF in 2021‑22 and $429 million CFRF in 2022‑23 to DHCS to provide grants to a variety of eligible entities (including counties, tribal entities, commercial health insurance plans, Medi-Cal managed care plans, community-based organizations, and behavioral health providers) to support the implementation of evidence-based behavioral health treatment services for children and youth.

Augmentation to Behavioral Health Continuum Infrastructure Proposal for Children and Youth Facilities. The Governor’s May Revision includes an augmentation to the January DHCS behavioral health continuum infrastructure proposal for children and youth behavioral health facilities. Of the total funding for the behavioral health continuum infrastructure proposal, $255 million would be available for facilities targeted at individuals age 25 and younger. (We provide further detail below on the Governor’s May Revision augmentations to the behavioral health continuum infrastructure proposal.)

Behavioral Health Workforce Development. The Governor’s May Revision includes $700 million CFRF in 2021‑22, $125 million General Fund in 2022‑23, and $75 million General Fund in 2023‑24 in funding to the Office of Statewide Health Planning and Development (OSHPD) to (1) increase the behavioral health workforce and (2) provide training for existing behavioral health professionals. This funding would both support existing OSHPD workforce programs and establish new OSHPD workforce programs.

Provider Training. The Governor’s May Revision includes $50 million one-time CFRF in 2022‑23 to provide behavioral health training to pediatric, primary care, and other health care providers.

The Proposal: Other Components of Children and Youth Behavioral Health Initiative

New Medi-Cal Dyadic Services Benefit. The Governor’s May Revision includes $200 million ongoing ($100 million General Fund and $100 million federal funds) beginning in 2022‑23 to DHCS to provide a new benefit in the Medi-Cal program for dyadic care—a model of care which provides integrated physical and behavioral health screening and services to children and youth and their families.

Increase Behavioral Health Literacy and Public Awareness Campaigns. The Governor’s May Revision includes $5 million CFRF in 2021‑22, $50 million General Fund in 2022‑23, $40 million General Fund in 2024‑25, and $5 million General Fund in 2025‑26 to the California Department of Public Health to implement a behavioral health literacy awareness campaign. The May Revision also includes $25.1 million CFRF in 2021‑22, $100,000 CFRF in 2022‑23, and $100,000 General Fund in 2023‑24 and ongoing to the Office of the Surgeon General to implement an Adverse Childhood Experiences (ACEs) and toxic stress awareness campaign.

Require Commercial and Medi-Cal Managed Care Plans to Cover Behavioral Health Services in Schools. The proposed budget trailer bill legislation for the initiative includes provisions requiring both commercial and Medi-Cal plans to cover behavioral health services provided by schools for children and youth age 25 and younger. (The proposed budget trailer bill legislation also includes provisions requiring DHCS to establish a statewide fee schedule for behavioral health services provided in school settings.) We understand that under this requirement, prior authorization would not be required to receive services, and plans’ ability to conduct utilization reviews or disallow claims would be substantially limited.

Coordination and Evaluation of Initiative. The Governor’s May Revision includes $50 million one time ($30 million CFRF and $20 million General Fund) to the California Health and Human Services (CHHS) Agency to coordinate activities under the initiative across departments, acquire subject matter expertise, engage stakeholders, and lead the overall evaluation of the initiative. The administration has indicated that it plans to commission an independent evaluator to evaluate the initiative as a whole, while having more focused evaluation activities in separate components of the initiative.

LAO Overarching Comments

Further Details Needed to Assess Initiative’s Merits and Answer Outstanding Questions. Given the size of the initiative, and that there are components that cut across multiple departments, there are several areas of the proposal where the Legislature will need further detail to assess the merits of the initiative as a whole.

In addition, there are many outstanding questions about the different components of the proposal. Below is a list of questions we have identified based on our initial review of the initiative.

Behavioral Health Service Virtual Platform

• What challenges might arise with procuring the vendor to implement the Behavioral Health Service Virtual Platform?

• How would the administration ensure access to the Behavioral Health Service Virtual Platform given existing disparities in broadband access?

• What rules would exist within the Behavioral Health Service Virtual Platform surrounding parental consent?

• How would reimbursement rates for services provided through the Behavioral Health Service Virtual Platform be set? Within the Medi-Cal program, how will these rates compare to the overall Medi-Cal telehealth rates that have been proposed?

Continuation of CalHOPE Student Support Program

• How long does the administration intend to continue to support the CalHOPE Student Support Platform? Would this platform eventually be supplanted by the Behavioral Health Service Virtual Platform?

Incentives for School Behavioral Health Infrastructure

• How would the proposed grant funding for capacity and infrastructure development for school services interact with the Governor’s January proposal to provide similar funding through Medi-Cal managed care? Why are Medi-Cal managed care plans included as an eligible entity for funding when they would already be receiving similar funding through the Governor’s January proposal?

Grants to Expand Evidence-Based Behavioral Health Services

• What are the specific evidence-based practices that are intended to be expanded under the grant program for evidence-based practices?

Children and Youth Component of Behavioral Health Continuum Infrastructure

• How would the requirements to receive funding under the behavioral health continuum infrastructure program differ for funds earmarked for children and youth?

Behavioral Health Workforce Investments

• What specific outcome measures would be used to evaluate OSHPD’s new workforce programs under the initiative? How would OSHPD’s existing workforce programs be refined to provide a clearer picture of the effectiveness of these workforce investments?

Medi-Cal Dyadic Services Benefit

• How would the new Medi-Cal dyadic services benefit differ between services provided to children and youth and services provided to adults?

Public Education and Change Campaign

• Why is the ACEs awareness campaign focused on K-12 educator training, rather than other sectors as well?

• What is the basis for the proposed funding level for the behavioral health literacy campaign?

In addition to the above questions on the administration’s proposal, we also raise one question for Legislative consideration below.

• Is budget trailer legislation (which provides limited opportunity for Legislative deliberation) the appropriate vehicle for the proposed major statutory policy change to require commercial and Medi-Cal plans to cover services in schools (at a statewide fee schedule established by DHCS)?

In General, Initiative Spending Focused on One-Time Investments. While there are relatively smaller portions of the initiative that fund the ongoing provision of services (such as the proposed new Medi-Cal dyadic services benefit), spending under the initiative would be largely focused on one-time investments for capacity and infrastructure development (such as the Behavioral Health Service Virtual Platform).

Infrastructure and Capacity Investments Bring Benefits Years Later, Creating Trade-Off Between Possible Long-Term Benefits and Providing Services Now. The potential benefits to children and youth as a result of the various one-time investments included in the May Revision may not materialize until some years in the future. (For example, it may take several years to fully implement the Behavioral Health Service Virtual Platform.) While these one-time investments to build statewide capacity for behavioral health treatment may have merit, they likely would not address the challenges children and youth are facing now. To the extent that the Legislature wishes to prioritize providing services to children and youth as soon as possible given urgent need for behavioral health services, especially in the wake of the coronavirus disease 2019 pandemic. Accordingly, the Legislature may wish to explore options for balancing the provision of more immediate services with longer-term capacity and infrastructure development.

Initiative Brings Potential for Ongoing Costs That Are Not Accounted for by the Administration. Although there are relatively smaller components of the initiative (that relate to direct service provision) that do provide a fiscal estimate of ongoing service costs (such as the proposed new Medi-Cal dyadic service benefit), in general, the administration does not score ongoing costs that may arise from the greater capacity for children and youth behavioral health services resulting from the major one-time investments of the initiative. For example, we find the proposed statutory change to require commercial and Medi-Cal plans to cover services provided in schools (with substantially limited options for prior authorization, utilization review, and claim disallowance) has the potential to bring ongoing costs. The Legislature may wish to consider what its longer-term vision for child and youth behavioral health services would be, as the administration appears to be setting one potential path through these proposals.

Proposed Grant Programs Raise Questions Around Program Design and Capacity to Sustain Services. A sizable portion of the funding for the initiative is proposed to be provided as grant funding to a variety of entities. For these grant programs, further key details related to program design need to be provided so that the Legislature can properly assess these grant programs’ merit. In addition, not all eligible entities may have the same capacity for meeting required benchmarks or reporting requirements, which could limit applications. (For example, a community-based organization may have different capacity than a health plan.) Accordingly, we find that what required benchmarks or metrics applicants would be need to meet to access grant funds under the initiative need to be clearly articulated to properly assess these grant programs’ merits as well. Furthermore, given that grant funding under the initiative is proposed to be provided one time, we find that whether grant recipients would be able to sustain services (after grant funds are exhausted) without additional funding from the state is unclear.

Initiative Targets Funding at Broader Population of Children and Youth, Not Just Those Participating in Public Programs. In general, the initiative is intended to create capacity for behavioral health services for all children and youth regardless of payer. This approach appears to represent an expansion of the state’s role in providing for the behavioral health care of children as it, for example, would extend the state’s role beyond public programs, such as Medi-Cal, for which it is currently responsible. While this approach may have merit, it represents a major policy choice that warrants substantial legislative deliberation. Before making a decision on this approach, we would suggest the Legislature consider (1) to what extent the administration has demonstrated that existing need for behavioral health services is evenly distributed among children and youth statewide, (2) whether it would like to target funding for behavioral health services at children and youth that are particularly disadvantaged—such as those on public programs—especially if the ongoing costs of the initiative were projected to be substantial, and (3) whether deficiencies in behavioral health services provided by commercial plans warrant this expanded statewide approach.

Evaluation Will Be Key. Given the substantial size of this initiative, a coordinated and well-developed statewide strategy for evaluating its effectiveness will be necessary to (1) ensure that the state is achieving desired specified outcomes as a result of the initiative’s various investments and (2) determine what ongoing resources for the initiative are warranted. As discussed earlier, the administration has indicated that the CHHS Agency would be tasked with leading the evaluation of the initiative overall, by commissioning an independent evaluator to conduct an overarching evaluation of the initiative. According to the administration, several of the various components of the initiative would have their own more narrowly focused evaluation activities. Right now, there is not a lot of detail about how both the (1) overall evaluation and (2) more focused evaluations would be undertaken. The Legislature may wish to ask the administration to provide more clarity on what it envisions for the evaluation of this initiative.

Consider Deferring Action on Major Components of the Initiative Until Further Detail Is Available. Given that there are many outstanding questions about this initiative, the Legislature might consider deferring action on major components of the initiative until later in the budget process (potentially through amendments to the budget act made subsequently to its initial enactment in this year’s budget process). The Legislature could defer action until it has received sufficient information from the administration to allow for a fuller evaluation of the initiative.

Behavioral Health Continuum Infrastructure Proposal

The Proposal

The Governor’s May Revision includes a number of adjustments to the January behavioral health continuum infrastructure proposal to provide competitive grants to counties to acquire or renovate facilities for community behavioral health services (contingent on counties providing matching funds and committing to providing funding for ongoing services). This proposal was originally for $750 million one-time General Fund in 2021‑22 and our office published an analysis of the proposal. The May Revision proposal now totals $1 billion in 2021‑22 and $1.4 billion in 2022‑23 (all funds). Figure 2 provides proposed yearly spending under the behavioral health continuum infrastructure proposal by target population. Further below, we describe the key adjustments to the proposal at May Revision and provide our comments on these adjustments.

May Revision Provides Additional Funding and Replaces Some General Fund With CFRF Monies. The Governor’s May Revision increases the total funding for the behavioral health continuum infrastructure proposal in 2021‑22 by $10 million CFRF, and shifts $300 million in funding from the General Fund to CFRF in 2021‑22. In addition, the May Revision provides $250 million one-time General Fund in 2021‑22 for facilities dedicated to individuals declared incompetent to stand trial (IST). Furthermore, the May Revision adds $1.4 billion ($1.2 billion General Fund and $200 million CFRF) to this proposal in 2022‑23. Of the available 2022‑23 funds, $255 million is dedicated for facilities for children and youth, and this portion is considered part of the Children and Youth Behavioral Health Initiative (discussed earlier).

LAO Comments

Further Details on Proposal Are Forthcoming in Proposed Budget Trailer Bill Legislation. While the administration’s original intent was to rely on budget bill language to implement this proposal, at the May Revision it stated that there will be budget trailer bill legislation instead. However, this budget trailer bill legislation is not yet available for legislative review.

Modifications to Proposal Address Our Concerns Around Counties’ Capacity for Real Estate Acquisition. In our prior analysis of this proposal, we noted that counties’ capacity for engaging in real estate acquisition was unclear, and that (based on our review of existing state grant programs for behavioral health facilities) this could lead to delays in getting grant funding out for facilities. To address this, we suggested either (1) nonprofits or corporations be allowed to apply directly for grant funds on counties’ behalf or (2) robust technical assistance be provided to counties to help them navigate the application process. A spring finance letter from the Department of Finance proposed to shift some resources within the proposal toward providing technical assistance to counties. We think that this would help improve counties’ capacity to apply for, and use, the grant funds that are the subject of this proposal. Furthermore, at the May Revision, the administration has modified the proposal to allow nonprofits or corporations to apply directly for grant funds. We think that this will help facilitate getting grant funding out for behavioral health facilities more quickly given these entities’ greater capacity for engaging in real estate acquisition activities.

Proposal Still Does Not Designate Funds Specifically to Individuals Experiencing Homelessness. In January, the administration presented the behavioral health continuum infrastructure proposal as part of its larger package of proposals to address homelessness. In our prior analysis, we noted that although many individuals with behavioral health needs also experience homelessness, these populations do not fully overlap. Accordingly, we found that without a targeting of funds toward this population, whether this proposal would directly address the state’s homelessness issues was unclear. The Governor’s May Revision does not propose any changes to address this issue. However, we note that the proposal now includes funding set asides specifically for (1) children and youth and (2) individuals declared IST.

Counties’ Capacity for Funding Ongoing Costs and Match Requirement Still Unclear. In our prior analysis, we noted that counties would be required to fund the ongoing costs associated with this proposal, and whether counties could increase their funding levels to pay for such new ongoing costs or the local match requirement without displacing existing activities was unclear. The administration has not addressed this outstanding question as part of the May Revision proposal.

Whether Grant Requirements Would Differ Based on Target Populations Is Unclear. Details about the design of the grant program, especially what requirements applicants would need to meet in order to obtain funds, are not available at this time. Accordingly, how these requirements would differ based on whether funds are used for (1) children and youth facilities, (2) IST facilities, or (3) overall behavioral health facilities is unclear.

Counties May Need to Use Some Behavioral Health Continuum Infrastructure Funds to Treat Lanterman-Petris-Short (LPS) Patients. The Governor’s May Revision proposes for the Department of State Hospitals (DSH) to stop accepting LPS conserved patients from counties and for DSH to phase out its LPS population in order to treat more IST patients. (LPS patients are individuals who have been found by a court to be unable to take care of themselves due to mental illness, and for whom the court has designated a conservator to make certain decisions on their behalf.) Given that counties would no longer have the option to send their LPS patients to DSH, they may need to build out infrastructure for treating that population. Accordingly, some amount of the behavioral health continuum infrastructure proposal could be used by counties for that purpose.