The Department of Health Services (DHS) administers a broad range of public health programs. Some of these programs complement and support the activities of local health agencies controlling environmental hazards, preventing and controlling disease, and providing health services to populations who have special needs. Other programs are solely state-operated programs such as those which license health facilities.
The Governor's Budget proposes $1.5 billion (all funds) for public health local assistance. This represents an increase of $70 million, or 4.8 percent, from estimated current-year expenditures. The budget proposes $313 million from the General Fund, which is 1.3 percent above estimated current-year expenditures. This increase is due primarily to a proposed expansion of teenage pregnancy prevention programs.
We recommend enactment of legislation specifying the criteria and guidelines for the proposed allocation of new teenage pregnancy prevention grants in order to ensure that the grants are awarded in a manner consistent with legislative intent. We also recommend that the department report at budget hearings on how it plans to ensure coordination between the proposed new program and an existing teenage pregnancy prevention program administered by the State Department of Education. We further recommend the adoption of Budget Bill language requiring the department to contract for an evaluation of the teenage pregnancy prevention media campaign, from funds proposed for expansion of this program.
Budget Proposal. The budget proposes a $46 million General Fund augmentation, and a $5 million General Fund redirection from the Education Now and Babies Later (ENABL) program, to develop and expand teen pregnancy prevention strategies. Specifically, the budget proposes to fund the following programs:
Issues Concerning the Budget Proposal. Based on our review, we have identified the following issues concerning the proposal:
Recommendations. Establishing a new program such as this raises a number of implementation issues, as discussed above. We recommend enactment of legislation to specify the criteria and guidelines for the proposed allocation of teenage pregnancy prevention grants in order to ensure that the grants are allocated in a manner consistent with legislative intent and that the Legislature is provided with information and data on program performance. The model presented above could facilitate the development of criteria for the allocation of grants.
We also recommend that the department report, during budget hearings, on how it plans to coordinate the proposed foundation and an existing teenage pregnancy prevention program administered by the State Department of Education. We further recommend the adoption of Budget Bill language requiring that the department contract for an evaluation of the teenage pregnancy prevention media campaign, from funds proposed for expansion of this program. The following Budget Bill language is consistent with our recommendation:
We recommend deleting three existing positions and one proposed position for the Battered Women Shelter Program, for a General Fund savings of $250,000, because they are not justified on a workload basis. (Reduce Item 4280-001-0001 by $250,000.)
Background. The Battered Women Shelter Program (BWSP), established by Ch 140/94 (AB 167, B. Friedman), provides grants to battered women's shelters. Chapter 599, Statutes of 1994 (AB 801, B. Friedman) required that half of the $11.5 million (General Fund) appropriated for the program in 1994-95 be used to augment the existing 86 state-supported shelters, and that the remainder (less state operations) go towards expanding existing services or creating new ones. These services include (1) emergency shelter for women and children, (2) transitional housing programs that could offer counseling, classes, and job training and placement, (3) legal advocacy and other types of representation, and (4) other support services as identified by an advisory council.
Budget Proposal. The budget proposes a $5 million General Fund augmentation (a 43 percent increase over the current year) to establish a domestic violence prevention component of the program. This includes $250,000 for four new positions in the Department of Health Services, $2.9 million for a multi-media campaign against domestic violence, and $1.9 million for a community education and intervention grant program. The department currently has nine positions to administer the program. We recommend deleting four positions (three existing and one new position) for the following reasons.
Current Program Workload. Our review indicates that the Office of Criminal Justice Planning (OCJP) administers a domestic violence program similar to the BWSP, but with fewer staff. Like the BWSP, the OCJP program develops Requests for Proposals for grant awards, offers technical assistance to grantees, and monitors and evaluates local programs. In the current year, the OCJP program awarded 86 grants to shelters, compared to the 96 grants awarded by the BWSP. However, the OCJP administers its domestic violence program with five positions, compared to the DHS's current-year staffing of nine positions for the BWSP. Using the number of grants awarded as a workload indicator, we conclude that the existing BWSP could be staffed by six positions.
We also note that the workload required to maintain the existing BWSP in the budget year should be somewhat less than in the current year. This is because the program experienced some one-time start-up activities in the current year, which would not occur in the budget year. These one-time activities include the development of regulations and criteria for evaluating requests for proposals.
Based on these findings, we conclude that the ongoing component of the BWSP can be adequately staffed by six positions, or three less than proposed.
Prevention Component Needs Fewer Staff. The proposal to add a prevention component will increase workload to the BWSP, for which there is no OCJP counterpart. We believe that this additional workload would justify three new positions rather than the four proposed by the budget. Specifically, using the department's estimated number of grants to be awarded as a workload indicator (30 to 50 grants), we estimate the new workload represents between one-third and one-half of the current workload for the BWSP. Since we estimate that the current workload justifies six positions, we recommend approval of three positions for the new program component, or one less than proposed in the budget year.
Recommendation. In summary, we recommend deleting four of the 13 positions proposed for the BWSP because they are not justified by the program's workload. This would result in a General Fund savings of $250,000. We note that, alternatively, the Legislature could choose to redirect these monies for local assistance in the program.
We recommend that the department report at budget hearings on (1) its plan to evaluate the Battered Women Shelter Program and (2) the feasibility of expanding the evaluation to encompass the newly proposed prevention component of the program and the related domestic violence program administered by the Office of Criminal Justice Planning.
The department plans to contract in the next few months for an evaluation of the BWSP. As proposed, this evaluation will review the effectiveness of the department's shelter-based grant program, based on outcome measures developed by a DHS-sponsored "working group" comprised of shelter providers and researchers. The department intends to fund the evaluation by redirecting $250,000 that is expected to be unexpended in the current and budget years.
While we agree that an evaluation of the program has merit, we believe that the Legislature should consider the proposal during the budget hearings. In particular, we believe that the department's evaluation plan is too narrow in scope in that it omits the proposed prevention component of the program and the domestic violence program administered by the Office of Criminal Justice Planning (OCJP). Accordingly, we recommend that the department report at budget hearings on the evaluation plan and the feasibility (including estimated costs and potential funding sources) of expanding the evaluation to include these other programs.
We withhold recommendation on the budget for the AIDS Drug Assistance Program, pending review of updated expenditure data, because recent data suggest that the amount proposed may not be sufficient. Further, we recommend that the department report, during budget hearings, on whether it intends to add two recently-approved drugs to the program drug formulary and, if so, how this will affect program costs. Finally we present some options for the Legislature that could reduce the costs of the program.
The AIDS Drug Assistance Program (ADAP) provides AIDS drugs to HIV-infected persons with (1) incomes below 400 percent of the poverty level, (2) valid prescriptions from a California licensed physician, and (3) no coverage under Medi-Cal or other insurance. Persons with incomes between 400 percent of poverty ($29,880 for one individual) and $50,000 may also receive drugs through the ADAP at a share of cost.
The budget proposes a total of $17.5 million ($9.1 million General Fund) to support the ADAP in 1996-97. This is the same level of support estimated for the program in the current year.
Department Expands ADAP Formulary. Through an administrative decision in March 1995, the department added 18 drugs to the ADAP drug "formulary," bringing the total to 43 drugs. Although the department estimated that this expansion would cost $3.8 million annually, it did not expect to require additional funding because it projected (1) lower utilization of certain other AIDS drugs that were reported to be ineffective by some studies and (2) lower costs for certain AIDS drugs.
However, recent spending trends and reports from several counties indicate that utilization and costs of the ADAP have increased in the current year. This unexpected increase is primarily due to the following:
Options for the ADAP. Recognizing that the ADAP may outspend its budget in the current and budget years, we present below some options for addressing ADAP costs.
Legislation appropriating Proposition 99 funds sunsets June 30, 1996. The Governor proposes legislation to change the Proposition 99 funding formula in order to allocate funds in a manner similar to legislation that was enacted in 1995, but subsequently enjoined by the courts.
We present some options for the Legislature to consider in appropriating Proposition 99 funds for 1996-97.
Background. Proposition 99, the Tobacco and Health Protection Act of 1988, established a surtax on cigarette and tobacco products sold in California. The proposition allocates proceeds from the surtax to six accounts within the Cigarette and Tobacco Products Surtax Fund (C&T Fund) based on specified percentages. These funds are available for appropriation by the Legislature for a variety of purposes, including tobacco-related education and research, indigent health care, and habitat conservation.
In recent years, the state appropriated for various health services programs some of the Proposition 99 funds that would have otherwise gone for health education and research related to smoking. In September 1994, various organizations filed suit against the state for allegedly diverting C&T Fund monies to non tobacco-related purposes. In December 1994, the Sacramento Superior Court ruled, in American Lung Association v. Wilson, that use of tobacco tax monies from the Health Education account (HEA) and Research account (RA) for certain health services programs--as appropriated by legislation for 1994-95 and 1995-96--violated the terms of the proposition. The state has appealed this decision, but was not granted a stay to continue spending from the affected Proposition 99 accounts. As a result, the administration proposed, and the Legislature approved, a $36.7 million General Fund deficiency request for 1994-95 to fund three case-driven health services programs that had been supported by the challenged Proposition 99 funds.
In order to continue Proposition 99 funding for the affected health programs in 1995-96, the Legislature enacted Chapter 194/95 (SB 493, Maddy), which amended the Proposition 99 funding formula to permit the allocation of funds for health services programs as reflected in the appropriation for 1995-96. However, the Superior Court enjoined the implementation of Chapter 194. The state has appealed this ruling as well, but was not granted a stay. As a result, in December 1995 the administration proposed to fund the affected health programs in 1995-96 with a combination of $20.9 million in General Fund monies and higher-than-budgeted Proposition 99 revenues.
Budget Proposal. Chapter 195, Statutes of 1994 (AB 816, Isenberg), which appropriated C&T Fund monies for various programs in 1994-95 and 1995-96, sunsets on June 30, 1996. For the budget year, the administration proposes to appropriate Proposition 99 funds through the Budget Act, whereas in the past these funds have been appropriated through separate legislation.
The Governor's Budget proposes expenditures of $436.1 million from the C&T Fund in 1996-97, which represents a 2 percent reduction from the revised current-year expenditure level. This decrease is due to a projected reduction in C&T Fund revenues. The proposal includes $298 million for 14 DHS programs, which is $47.6 million, or 19 percent, above current-year estimated expenditures. This increase is related to a proposed change in the funding formula, as discussed below. Figure 21 (see next page) identifies the DHS programs receiving Proposition 99 funds and the proposed change in funding levels.
| Figure 21 Proposition 99 Funding for Department of Health Service Programs Governor's Budget, 1996-97 | ||
|---|---|---|
| (In Millions) | ||
| Program Description Use of Proposition 99 funds | Funding 1996-97 | Increase Over 1995-96 |
| County Health Services | ||
| California Health Care for Indigents Program | ||
| Covers uncompensated care services in large counties. | $119.1 | -- |
| County Medical Services Program | ||
| Extends the scope of indigent care services and supports emergency services provided to out-of-county indigent patients. | 12.0 | -- |
| Rural Health Services | ||
| Provides funds to CMSP counties for uncompensated care costs. | 2.8 | -- |
| Primary Care | ||
| Child Health and Disability Prevention Program | ||
| Preventive health screens and related treatment services to low-income, non-Medi-Cal children between the ages of 6 and 18 years. | $46.9 | $30.5 |
| Expanded Access to Primary Care (EAPC) | ||
| Primary care clinics that serve low-income persons. | 13.1 | 3.0 |
| Comprehensive Perinatal Outreach | ||
| Funds city and county health departments' comprehensive perinatal outreach efforts for low-income women and their infants. | 5.1 | 5.1 |
| California Children's Services | ||
| Treats serious medical conditions for low-income children under age 21. | 5.0 | 5.0 |
| Genetically Handicapped Persons Program | ||
| Medical services for low-income adults with certain genetic diseases. | 4.0 | 4.0 |
| Medi-Cal Perinatal Services | ||
| Perinatal services to low-income women and their infants. | 3.2 | -- |
| Children's Hospitals | ||
| Covers uncompensated care services provided to indigent children. | 1.1 | -- |
| Tobacco Education | ||
| Anti-smoking Media Campaign | ||
| Statewide media campaign to reduce tobacco use especially among youth, women, and ethnic and low-income populations. | $12.2 | -- |
| Local Lead Agencies | ||
| Provides funds for city and county health departments for a variety of tobacco education and prevention programs. | 10.1 | -- |
| Competitive Grants | ||
| Community-based tobacco education and prevention programs. | 9.8 | -- |
| Oversight Committee and Evaluation | ||
| Independent evaluation on the effectiveness of various tobacco education and prevention programs. | 3.1 | -- |
Budget Retains Pro Rata Reductions and Protected Programs. Under Chapter 195, the Director of the Department of Finance is required to reduce program funding on a pro rata basis if revenues are insufficient, except for the following "protected" programs: (1) Anti-smoking Media Campaign, (2) Access for Infants and Mothers (AIM) Program, (3) Major Risk Medical Insurance Program, (4) Medi-Cal Perinatal Program, (5) Child Health and Disability Prevention (CHDP) Program, and (6) County Medical Services Program (CMSP). The administration proposes continuation of the pro rata provision and the same protected programs for the budget year.
Funding Formula Change. The Governor proposes legislation to change the funding formula for allocating Proposition 99 revenues. Specifically, the Governor proposes to decrease the allocation for the HEA and RA accounts and increase the allocation for the Physician Services account (PSA) and Unallocated account (UA). This reallocation of Proposition 99 revenues among the accounts would be needed to permit the appropriation of Proposition 99 funds as proposed in the budget. The proposal essentially reflects the same distribution of funds encompassed in legislation appropriating Proposition 99 funds for 1995-96, but enjoined by the courts. This funding formula change requires a four-fifths vote of the Legislature.
Figure 22 (see next page) compares the allocation of estimated 1996-97 Proposition 99 revenues under the proposition as enacted and under the administration's proposal.
| Figure 22 Proposition 99 Account Allocations | |||
|---|---|---|---|
| (In Millions) | |||
| Account/Purpose | Proposition As Enacted | Governor's Proposal | Proposed Change |
| Health Education | |||
| To prevent and reduce tobacco use, primarily among children, through school and community health education programs. | $87 (20%) | $43.5 (10%) | -$43.5 |
| Hospital Services | |||
| To compensate hospitals for indigent care services rendered. | 152.3 (35%) | 152.3 (35%) | -- |
| Physician Services | |||
| To compensate physicians for indigent care services rendered. | 43.5 (10%) | 97.9 (22.5%) | 54.4 |
| Research | |||
| For tobacco-related disease research. | 21.8 (5%) | 4.4 (1%) | -17.4 |
| Public Resources | |||
| For (1) wildlife habitat protection, restoration, and enhancement and (2) state and local park land improvements. | 21.8 (5%) | 21.8 (5%) | -- |
| Unallocated | |||
| For any of the specific purposes described above.a | 108.8 (25%) | 115.3 (26.5%) | 6.5 |
| $435.2 (100%) | $435.2 (100%) | -- |
| a Proposition 117 (the "Mountain Lion Initiative," June 1990) requires that 10 percent of the Unallocated Account funds be transferred to the Habitat Conservation Fund. | |||
Options for the Budget Year. Below we present some options for consideration by the Legislature in appropriating Proposition 99 funds for 1996-97.
Under the third alternative, the Legislature would reduce or eliminate funding for some Proposition 99-funded programs to free up funds for programs it considers a higher priority. As we discuss in our analysis of the Proposition 99-funded AIM Program, one option would be to reverse the current-year administrative action that expanded the program eligibility to women whose incomes fall between 251 and 300 percent of the federal poverty level. The savings could then be used for other Proposition 99-funded programs (see page 75).
The Managed Risk Medical Insurance Board (MRMIB) administers several programs which provide health coverage to individuals through private health plans. These programs are (1) the Major Risk Medical Insurance Program (MRMIP), which provides health insurance to California residents unable to obtain it for themselves or their families because of pre-existing medical conditions, (2) the Health Insurance Plan of California (HIPC), which operates a health insurance purchasing pool for small employers, and (3) the Access for Infants and Mothers (AIM) Program, which provides coverage for women seeking pregnancy-related and neonatal medical care.
The budget proposes $96.4 million from all funds for support of the MRMIB programs in 1996-97, which is a decrease of $5.3 million, or 5.2 percent, from estimated current-year expenditures. This reduction is due to reduced spending for the MRMIP due to a reduction in fiscal resources.
The AIM Program is a health insurance program under which the state enters into contracts with private insurance plans to provide health services to pregnant women, and their infants to age one, who (1) have no health coverage for their pregnancy, and (2) have incomes between 201 percent and 300 percent of the federal poverty level. (The Medi-Cal Program provides coverage to pregnant women and their infants in families with incomes of up to 200 percent of the federal poverty level.)
Women enrolled in the AIM Program receive health coverage from the time of enrollment until 60 days after birth. Currently, program participants pay a fee of 2 percent of their family income toward the costs of services received by the mother and the infant. In 1995, for example, a single pregnant woman with an annual income of $20,061 (201 percent of the federal poverty level) would pay a fee of $401.
Under current law, the AIM Program is funded through revenues from the Cigarette and Tobacco Products Surtax (C&T) Fund established by Proposition 99. However, the AIM Program's funding will sunset on June 30, 1996 unless reauthorized by the Legislature. The budget proposes legislation to reauthorize the AIM Program and appropriate funding for the program through the Budget Act.
The AIM Program's caseload is estimated to be 5,200 cases in the current year. This is projected to increase 27 percent to 6,600 in the budget year due to expansion of program eligibility as of September 1995.
The Managed Risk Medical Insurance Board, through an administrative decision, expanded the Access for Infants and Mothers Program eligibility by increasing the income limit from 250 percent of the poverty level to 300 percent.
Program Expansion in Current Year. In September 1995, the MRMIB expanded AIM eligibility to include families with incomes between 251 percent and 300 percent of poverty (up to approximately $31,000 annually for a single mother and $45,000 for a married couple with one child).
The MRMIB made this policy change administratively, as permitted by current law, which allows the department to raise the income limit. The board estimates that it can expand eligibility without requiring additional funding beyond the current-year appropriation level because enrollment declined below budgeted levels in 1994-95.
Prior-Year Enrollment. Enrollment declined by 60 percent in 1994-95, from approximately 1,000 new monthly enrollees in 1993-94 to about 400 in 1994-95. This decrease was mainly due to a change in Medi-Cal eligibility which increased the number of pregnant women who were eligible for services under the Medi-Cal Program. Specifically, in September 1994 the state implemented: (1) a Medi-Cal asset waiver, which permitted all pregnant women (regardless of assets) with incomes up to 200 percent of the federal poverty level (FPL) to receive Medi-Cal services, and (2) the implementation of an income floor (at 200 percent of poverty) to exclude this newly Medi-Cal-eligible population from AIM eligibility.
As a result of lower enrollment, the AIM Program spent $4 million less than it received in Proposition 99 revenues in 1994-95.
Review AIM Eligibility. We estimate that in 1996-97 the cost of this expanded eligibility will be in the range of $11 million to $16.5 million from the Perinatal Insurance Fund (Proposition 99) to support an additional 100 to 150 women per month. We note that this revenue source--derived from a surtax on cigarette and tobacco products--is declining at a time when the demand for services funded by this resource is on the rise (see our analysis of Proposition 99 in Public Health). For this and other reasons detailed below, we believe that the Legislature might wish to review the decision to expand AIM eligibility.
In order to facilitate this review, we note that a 1994 evaluation of the program found that the AIM participants generally had better birth outcomes than uninsured women. Specifically, 4.7 percent of AIM mothers delivered low birthweight babies, compared to 7.2 percent of uninsured mothers. The report also indicates, however, that 4 percent of the women enrolled in Medi-Cal with incomes between 186 percent to 200 percent of poverty delivered low birthweight babies--a rate lower than that of the AIM Program.
These findings provide some insight into the benefits that can be derived from expanding the AIM Program. The evaluation suggests that for women not eligible for Medi-Cal, AIM could produce better outcomes than if they had no health insurance. We note, however, that the evaluation methodology precluded an assessment of the extent to which women in the AIM Program would have purchased other insurance in the absence of the program. In addition, data are not sufficient to compare the benefits of expanding the AIM Program to the benefits of alternative uses of the funds. For these reasons, we view this as a policy decision for the Legislature and make no recommendation.
We recommend reducing the proposed level of spending for the Access for Infants and Mothers Program by $15.5 million in the current year and $5.5 million in the budget year, for a corresponding savings to the Perinatal Insurance Fund (Proposition 99 revenues), to reflect more realistic caseload growth. (Reduce Item 4280-001-0309 by $5,460,000.)
Overbudgeting in Current Year. We estimate that the AIM Program is overbudgeted by $15.5 million in the current year due to lower than expected caseload growth. The budget estimates that $60.6 million will be spent for the program in 1995-96, to support a budgeted level of 550 new enrollees per month. However, the board estimates that the AIM enrollment for the current year will average 436 monthly enrollees--21 percent less than budgeted for the program. Therefore, based on the board's enrollment projections, the AIM Program will spend approximately $12.5 million less than budgeted in the current year.
We also believe, however, that the board's own estimate for the current year is too high. Figure 23 shows the monthly caseloads as estimated in the budget, by the board, and by our office. As the figure shows, actual caseloads were stable in the first three months of the fiscal year, and then increased significantly in October (25 percent), when the board expanded eligibility by increasing the income limit. The caseload continued to increase in November (the last month for which actual enrollment figures are available), but by a much lower rate of growth (2.1 percent). The board projects that caseloads will increase from 386 in November to 550 in March--a difference of 42 percent, or an average of over 9 percent per month--and remain at that level for the remainder of the fiscal year. We also note that in estimating the caseload for the program in the budget year, the board indicates that monthly enrollments will be within the range of 450 to 550.
| Figure 23 AIM Monthly Enrollment 1995-96 |
|||
|---|---|---|---|
| Month | Governor's Budget | MRMIB Estimate | LAO Estimate |
| July | 550 | 306a | 306a |
| August | 550 | 299a | 299a |
| September | 550 | 303a | 303a |
| October | 550 | 378a | 378a |
| November | 550 | 386a | 386a |
| December | 550 | 412 | 412 |
| January | 550 | 450 | 450 |
| February | 550 | 500 | 475 |
| March | 550 | 550 | 475 |
| April | 550 | 550 | 475 |
| May | 550 | 550 | 475 |
| June | 550 | 550 | 475 |
| 6,600 | 5,234 | 4,909 |
| 550 | 436 | 409 |
| a Actuals. | |||
While there is very limited data on caseload growth since the program expansion in September, we believe that the slowdown in November calls for a more modest projection than reflected in the board's projections. Consequently, we recommend assuming a rate of increase of roughly 5 percent per month through March, rather than the 9 percent assumed by the board. This would result in additional savings of $3 million (beyond the $12.5 million identified above) in the current year.
Overbudgeting in Budget Year. The budget proposal for 1996-97 is based on a caseload of 550 new AIM enrollees per month in 1996-97. As indicated, however, the MRMIB projects that enrollment will be between 450 and 550 per month. Based on our projections for the current year, we believe that it would be reasonable to estimate that average monthly enrollment in 1996-97 will be 500, which corresponds to the mid-point of the board's projections. Accordingly, we recommend that the budget proposal for 1996-97 be reduced by $5.5 million to reflect our caseload projections.
We will review additional caseload data as they become available, and will modify our recommendations, if necessary, during the budget hearings.
We recommend that the budget be adjusted to reflect a 5 percent reserve in the Perinatal Insurance Fund (Access for Infants and Mothers [AIM] Program) and that the excess balances (up to $33 million) be reverted from the Perinatal Insurance Fund to the Cigarette and Tobacco Products Surtax Fund because these funds are not needed to support the AIM Program in 1996-97. This action would make these funds available for appropriation to support other programs eligible for Proposition 99 funds.
As indicated previously, the AIM Program is supported by the Perinatal Insurance Fund, which consists of Cigarette and Tobacco Products Surtax Fund (Proposition 99) revenues. According to the Governor's Budget, the Perinatal Insurance Fund will have a fund balance of $15 million at the end of the budget year. This represents 25 percent of the proposed expenditures for the program--or roughly five times the amount that we would suggest for a fund reserve. Accordingly, we recommend that the year-end balance in excess of the amount needed for a 5 percent reserve (approximately $3 million) be reverted to the Cigarette and Tobacco Products Surtax Fund. This would make an additional $12 million (or $33 million if our overbudgeting recommendations discussed previously are adopted) available for appropriation to support other programs eligible for Proposition 99 funding.
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