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2013

Other Budget Issues

Further Detail

Background 

Tuberculosis (TB). TB is a contagious bacterial disease that is spread through airborne particles. An individual with active TB can spread the disease to others through coughing, sneezing, or talking around others. Individuals may also be infected with “latent” TB, which does not exhibit any symptoms, but if left untreated can develop into active TB disease. In 2011, there were 2,325 reported cases of TB in the state. In recent years, between 8 and 10 percent of individuals infected with TB have died from TB in the state.

TB Control. The Department of Public Health (DPH) is the lead state agency for TB control and prevention activities, and the department performs various administrative and support activities for TB control. However, the primary responsibility for TB control resides with local health officers (LHOs). Each county and city is required to designate an LHO to perform a variety of public health responsibilities (including TB control). However, most cities, with the exception of the cities of Berkeley, Long Beach, and Pasadena, have conferred this authority upon their county LHO. The LHOs have broad statutory authority to protect the public from the spread of TB, and can issue civil detention orders for individuals known or suspected to have TB to be detained in a health facility for examination or treatment. The LHOs can also issue civil orders excluding individuals with infectious TB from attending public places or requiring individuals to isolate themselves in their residence. The law requires that counsel be provided, upon request, for individuals who are subject to a civil detention order.

Local Detention and Health Facility Discharge of TB Inmates/Patients. When a local inmate with TB is released or transferred from a “local detention facility” (local jails) to another jurisdiction, the transferring local detention facility is required to provide notification and a written treatment plan to the LHO in the receiving jurisdiction. When transferring inmates with TB, local detention facilities are also required to provide notification and a written treatment plan to the medical officer of the receiving local detention facility. In addition, health facilities must submit for approval a written treatment plan to the LHO prior to discharging a patient with TB. An LHO must review treatment plans submitted to them by health facilities within 24 hours.

State Provides TB Control Funding to LHOs. The DPH provides approximately $6.7 million (General Fund) annually to LHOs for TB control through a funding formula that is based on the number of TB cases in each jurisdiction. The DPH provides this funding based upon three ranking priorities of activities: (1) identifying and treating individuals with TB; (2) identifying individuals who have had contact with TB patients, and providing appropriate treatment; and (3) targeted testing of high-risk populations to detect individuals with latent TB. In addition to the state funding, DPH also passes through federal funding to the LHOs for TB control (approximately $4 million annually). Additionally, three counties (Los Angeles, San Diego, and San Francisco) receive their federal funding for TB control directly from the federal government (a total of $7.7 million in 2012-13).

State Law Prescribes a Process to Identify Reimbursable Mandates. State law establishes the mandate determination process, which has three phases. In the first phase, a local government files a test claim with the Commission on State Mandates (CSM) alleging that a new state law or regulation creates a reimbursable mandate and the CSM holds hearings to determine whether or not a reimbursable state mandate exists. If the CSM determines that a reimbursable state mandate exists, the process moves into the second phase, in which the CSM—with input from the local government claimant, Department of Finance, and other interested parties—adopts a methodology (“parameters and guidelines”) for local governments to follow in claiming state reimbursement. In the final phase, which occurs at least six months after completion of the second, local governments submit initial claims for reimbursement. These claims, which typically include costs for multiple years, beginning with the fiscal year preceding the filing date of the initial test claim, serve as the basis for the statewide cost estimate that the CSM reports to the Legislature. Pursuant to state law, the presentation of the CSM’s statewide cost estimate to the Legislature triggers the Legislature’s constitutional obligation to fund, repeal, or suspend the mandate. If the Legislature decides to fund the mandate, it must appropriate funds in the budget bill to pay the full amount reflected in the statewide cost estimate, which consists of costs incurred by local governments in all prior years. Conversely, if the Legislature repeals or suspends the mandate, the state, while still liable for local government costs in years prior to the repeal or suspension, may defer reimbursement for prior-year local government costs to a later date. Under state law, local governments are not required to comply with mandates that are suspended in that year’s budget act.

CSM Finds Several Provisions of TB Control Laws Are State Mandates. On October 27, 2011, the CSM determined that the following provisions of TB control laws (see Figure 1 below for full list of statutes) constituted state-reimbursable mandates: 

• For LHOs…(1) Reviewing treatment plans submitted by health facilities within 24 hours of receipt and (2) notifying the medical officer of a state parole region when there are reasonable grounds to believe that a parolee with TB has ceased TB treatment.
• For local detention facilities...(1) Notifying and submitting a written treatment plan to LHOs when an inmate with TB is discharged and (2) notifying the LHO and medical officer of the local detention facility when a person with TB is transferred to a facility in another jurisdiction.
• For counties and cities with designated LHOs…Providing counsel to non-indigent TB patients, who are subject to a civil detention order, for purposes of representing the TB patients in court hearings reviewing civil detention orders. 

CSM Adopted Parameters and Guidelines. The CSM adopted the parameters and guidelines for the TB control mandate on December 7, 2012. The next stage in the mandates process for the TB control mandate is the preparation of the statewide cost estimate, which will provide an estimate of the total backlog of costs related to the mandate (the reimbursement period for the TB control mandate goes back to fiscal year 2002-03).

Governor’s Proposal

The Governor’s budget proposes to suspend the TB control mandate in 2013-14. Suspending this mandate would make local compliance with the provisions of the statutes related to the TB control mandate (see Figure 1 above) optional in 2013-14. As discussed below, there is no statewide cost estimate for this mandate at this time, and the Governor’s proposal would not result in any budgetary savings in 2013-14.

LAO Analysis

Mandated Activities Likely Reduce TB Infection Rates. The activities required by the TB control mandate likely reduce the spread of TB through a standardized system of treatment plan review by LHOs, although the extent of such reduction is unclear. The LHOs likely have more experience with TB cases than a typical medical professional, particularly as TB has become less common. The complexity of TB cases also varies, and certain cases (such as multidrug-resistant TB) may require more assistance from LHOs than others.  The LHO review and approval of TB treatment plans appears to be a reasonable way to ensure that TB patients are on an appropriate treatment plan prior to being discharged from medical facilities and potentially exposing the public to active TB. Similarly, the notification requirements under the TB control mandate for local detention facilities appears to be a reasonable method to prevent the spread of TB within and outside of local detention facilities.

Increased TB Infection Rates Could Increase Public and Private Health Care Costs. To the extent that suspending the TB control mandate resulted in increased rates of TB infection, there would be unknown, but potentially significant public and private health care costs related to an increase in annual TB cases. Therefore, any savings realized from suspending the TB control mandate would be offset by any increase in TB-related health care costs that resulted from the mandate suspension.

Suspending LHO Review of Treatment Plans Raises Issues Given Other Statutory Requirements Placed on Health Facilities. Health facilities are required to submit treatment plans to LHOs and obtain approval prior to releasing TB patients. If the TB control mandate were suspended, and LHOs chose to no longer review treatment plans submitted by health facilities, health facilities would never receive approval to release TB patients. Under this scenario, health facilities would be unable to comply with the existing statutory requirement to obtain approval prior to discharging TB patients. In order to ensure that statute is internally consistent, any decisions by the Legislature to make changes to the requirement of LHOs  to review treatment plans submitted by health facilities should also take into account the statutory requirements of health facilities.

No Near-Term State Savings from Suspending Mandate. The TB control mandate is in the final phase of the mandate determination process: development of the statewide cost estimate. At this stage, the Constitution does not require the Legislature to provide funding for a mandate in the annual budget. Based on the usual timeline for commission mandate determinations, we expect that the constitutional funding requirement for this mandate will become applicable in the 2014-15 fiscal year. Thus, the Governor’s proposal to suspend the TB control mandate in 2013-14 would not affect the state’s 2013-14 budget. Suspending the mandate, however, would reduce the total bill for this mandate that will ultimately be presented to the Legislature (likely not until 2014-15) because local governments would not be eligible for reimbursement for activities carried out in 2013-14.

Lack of Cost Information Complicates Decision. Since there is no statewide cost estimate for the TB control mandate, data are lacking to fully evaluate the benefits of the mandated activities against their costs (for both the backlog and ongoing annual costs). However, given that there are a relatively small number of TB cases in the state on an annual basis (approximately 2,300 cases), it seems reasonable that the annual costs of this mandate could be on the order of magnitude of a few million dollars.

LAO Recommendation

Reject the Governor’s Proposal. Given the lack of cost information available against which to weigh the benefits of the TB control mandate, and the fact that the constitutional requirement to fund or suspend/repeal  the mandate will not be triggered until 2014-15 (at the earliest), we believe that it is premature to suspend the TB control mandate at this time. We therefore recommend the Legislature reject the Governor’s proposal to suspend the TB control mandate in 2013-14. The statewide cost estimate will likely be available within the next year (as well as potentially better data on the benefits of the mandated activities), and this will give the Legislature more information from which to weigh the costs and benefits of the TB control mandate and make a more informed decision. As discussed above, rejecting the Governor’s proposal would have no fiscal effect in 2013-14, but would add an unknown amount—associated with local government costs of carrying out the TB control mandate in 2013-14—to the total reimbursement for prior-year costs that the state must provide in the future.

Consider Modifying Existing TB Control Funding to Address Mandate Costs. Although the Legislature is not bound by constitutional funding requirements for the TB mandate in 2013-14, the Legislature will likely be required to fund, suspend, or repeal the TB control mandate in 2014-15. Given the potential drawbacks of suspending or repealing the TB control mandate, we recommend the Legislature carefully consider alternatives to suspension or repeal that maintain some or all of the mandate's requirements in future years. In general, we see two such alternatives: (1) funding the mandate through the traditional mandate reimbursement process and (2) modifying the existing state funding stream for TB control as a solution outside the mandate reimbursement process. The traditional mandate reimbursement process has several drawbacks, including lack of incentives for cost-effectiveness, significant variation in reimbursement across local governments, and limited accountability for local governments receiving reimbursement. For this reason, we think modifying the existing state funding stream for TB control is a superior means of avoiding the policy drawbacks of suspension or repeal. In preparation for the 2014-15 budget, we recommend the Legislature direct the administration to work with affected local governments to examine how the existing funding stream could be repurposed to fund the mandated activities. Some potential options include: (1) requiring the existing funds to be used first to offset mandate costs, (2) making receipt of state funding conditional upon carrying out the mandate requirements, or (3) augmenting the existing state funding stream.