Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Public Health

The Department of Health Services (DHS) delivers a broad range of public health programs. Some of these programs complement and support the activities of local health agencies in 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 that license health facilities.

The Governor's budget proposes $2.6 billion (all funds) for public health programs in the budget year, a 1.4 percent ($37 million) decrease from the previous year. The budget proposes $510 million from the General Fund in the budget year, a 6 percent ($30 million) decrease from the previous year. This decrease is largely due to reductions in DHS state operating costs, the Cancer Research Program, and the elimination of the Child Health and Disability Prevention (CHDP) program. Offsetting increases include augmentations to the Expanded Access to Primary Care (EAPC) community clinic program, California Children's Services (CCS), and Youth Antitobacco programs.

Significant changes in the Governor's proposed budget for public health programs include the following.

Childhood Lead Prevention Program (CLPP). The CLPP is the primary agency responsible for ensuring that children at an increased risk for lead poisoning are tested for the presence of lead in their blood. The CLPP also monitors the case management of children identified as having lead poisoning, tracks the extent of childhood lead poisoning throughout California, and works to reduce environmental exposure to lead.

Total state spending for the program is proposed at $26 million in 2002-03, an increase of $3.2 million from the revised spending level proposed by the Governor for the current year. However, General Fund support for the program would decline by about $3 million to a total of $1.4 million, due in part to a shift in program support to fees. Fees assessed on past and present manufacturers of lead products would be increased by $10 million to a total of $22 million, the maximum allowed under state law. The budget also requests eight additional staff. The Governor's proposal would (1) increase local assistance for lead poisoning prevention activities, (2) provide for increased testing of blood for lead contamination, and (3) increase local and state enforcement of lead abatement laws.

AIDS Drug Assistance Program (ADAP). The ADAP is a subsidy program for persons with HIV with incomes up to $50,000 annually, who have no health insurance coverage for prescription drugs and are not eligible for Medi-Cal. Eligible individuals receive drugs through participating local pharmacies under subcontract with the statewide contractor. Clients with incomes up to 400 percent of the federal poverty level (FPL) (about $34,360 for a single childless adult) pay no copayment or premium, individuals with incomes between 400 percent of FPL and $50,000 annually pay a sliding scale copayment.

The budget proposes about $191.4 million for the ADAP program in the budget year. General Fund support for ADAP would increase $20 million or 32 percent from the previous year. The increase is primarily due to ADAP caseload and drug price increases.

Women, Infants, and Children (WIC) Nutritional Program. The WIC Nutritional program provides nutritional support and education for low-income women, infants, and children who are at risk for malnutrition. Women can redeem food vouchers at authorized grocery stores throughout the state for specific foods. The WIC program is funded entirely with federal funds.

The budget requests authority for 9.5 new positions in the budget year to create an antifraud unit to prevent, detect, and prosecute WIC program fraud. The positions will be funded through the annual federal grant provided to the state. The request is made in response to an increase in the number of reported allegations of WIC abuse as well as the number of documented findings of program fraud.

California Children's Services. The CCS program provides medical diagnosis, case management, treatment, and therapy to financially eligible children and young adults under 21 years of age with specific medical conditions, including birth defects, chronic illness, genetic diseases and injuries due to accidents or violence.

The budget proposes about $101 million in total spending for the CCS program in the budget year, a $9 million or 14 percent increase in General Fund spending from the previous year, due primarily to caseload increases.

County Medical Services Program (CMSP). The CMSP provides medical and dental care to low-income adults between 21 and 64 years of age who are not eligible for the state's Medi-Cal Program and reside in one of 34 participating small California counties. Funds from the 34 counties are pooled to provide services to CMSP clients. The CMSP governing board sets eligibility requirements, benefit levels, and provider reimbursement rates, but contracts with DHS to administer a program offering uniform benefits and to provide claims processing functions.

Funding for CMSP includes realignment revenues (from the 1991-92 realignment), Proposition 99 revenues, county funds, and hospital settlements (audit recoveries for overpayments to hospitals). Until 1999-00, the state General Fund was also a fund source. Legislation was enacted in 1992 to cap the General Fund responsibility for CMSP at $20.2 million, which was the estimated amount needed for the program in 1991-92. The General Fund appropriation for CMSP was suspended in 1999-00, keeping intact the statutory $20.2 million General Fund commitment for subsequent fiscal years. However, there have been subsequent one-year suspensions of the state's contribution to CMSP in recognition that there were large reserve balances available to the program.

The Governor's budget proposes budget implementation legislation to permanently suspend the state's General Fund appropriation of $20 million to CMSP.

Expanded Access to Primary Care Program. The EAPC program, established in 1988 by Chapter 1331, Statutes of 1989 (AB 75, Isenberg), provides grant funds to primary care clinics for care to uninsured persons with incomes at or below 200 percent of the FPL. The clinics provide outpatient care, including preventive health services, diagnosis and treatment services, and laboratory services. They also provide case management services, including management of all physician services, arrangements for hospitalization, and follow-up care. Participating clinics bill for services on a per-visit basis until their allocation is exhausted. As a condition of receiving EAPC funds, clinics are required to provide, or arrange and pay for, medically necessary follow-up care for any condition detected as part of a CHDP health screen.

The budget proposes about $49 million for the EAPC program in the budget year. This includes an $18 million augmentation due to anticipated caseload increases at EAPC-funded and other community clinics as the result of the elimination of the CHDP program. This is discussed in greater detail later in this analysis.

In this section of the analysis, we also discuss proposals in the Governor's budget relating to CHDP and youth antitobacco programs.

Child Health and Disability Prevention Program

Background

The CHDP program was established by Chapter 1069, Statutes of 1973 (AB 2068, Brown), to provide preventive health, vision, and dental screens to uninsured children and adolescents in low-income families. It is modeled after the federal Medicaid benefit called Early and Periodic Screening, Diagnosis, and Treatment services. The CHDP program currently reimburses public and private providers for completing health screens and immunizations for children and youth less than 19 years of age with family incomes at or below 200 percent of the FPL.

The program is jointly administered by DHS and county health departments. The DHS provides statewide oversight of the program, including making payments to providers. The county health departments develop local plans to recruit CHDP providers, ensure CHDP provider outreach and education, and handle client referrals and follow-up. As a condition of receiving Proposition 99 funding for indigent health care, counties are required to provide treatment services for medical conditions detected as part of a CHDP health examination. An estimated 1.7 million screens will be provided in 2001-02.

In our January report, CHDP Fails as Gateway to Affordable Health Care, we found that CHDP missed opportunities to provide comprehensive health coverage for low-income children and use available federal funds to help pay for this care. We recommended several steps to address these problems, which are somewhat different from the Governor's budget proposal.

The Budget Proposal. The Governor's budget proposes to eliminate the CHDP program in the budget year and shift eligible children into the Healthy Families and Medi-Cal Programs. Children ineligible for these programs would be served by the EAPC program. The administration estimates the elimination of CHDP in the budget year would save the state $111.9 million, ($46.6 million General Fund).

The administration estimates that the elimination of CHDP would result in the enrollment of an estimated 99,000 additional children in Medi-Cal and about 20,700 additional children in Healthy Families by the end of the budget year at an estimated total cost of $42.3 million. For the 25 percent of CHDP children whom the administration estimates would not qualify for Medi-Cal or Healthy Families, the budget proposes a $17.5 million (Tobacco Settlement Fund [TSF]) augmentation to the EAPC program. In summary, these program shifts are estimated to result in a net savings of $52.4 million ($12.5 million General Fund and $39.9 million TSF) in the budget year. Figure 1 summarizes the estimated costs and savings of the proposal.

The Governor's proposal would also result in the elimination of six positions at DHS for an estimated state savings of $207,000 General Fund, and the redirection of four other DHS positions to the CCS and the Genetically Handicapped Persons programs to reduce the backlog of eligibility determinations in these programs.

Advantages of the Governor's Proposal

The Governor's proposal to eliminate the Child Health and Disability Prevention program and move eligible children into the Healthy Families and Medi-Cal Programs would eliminate duplicative eligibility and provide net budgetary savings, eliminate any double payment for children already enrolled in Medi-Cal or Healthy Families, maximize federal funds, and provide more comprehensive care for children moving into Medi-Cal and Healthy Families.

Most Children in CHDP Are Eligible for Medi-Cal or Healthy Families. The changing healthcare landscape has made CHDP eligibility duplicative for most children. When CHDP was established in 1973, the availability of subsidized health care for children was very limited. Changes in Medi-Cal eligibility and the implementation of the Healthy Families Program have expanded low-cost health coverage to infants and children in families with incomes up to 250 percent of the FPL, as shown in Figure 2.

As a result, children using CHDP are either (1) eligible to enroll for full Medi-Cal benefits, (2) eligible to enroll in Healthy Families, or (3) undocumented immigrants, and therefore ineligible for either of the other two programs. (Undocumented immigrants qualify for no-cost Medi-Cal, but only for emergency care, including labor and delivery services.)

Risk of Double Billing. The change in the health care environment resulted in the state establishing a new role for CHDP--as a "gateway" facilitating children's enrollment in the Healthy Families Program. Because the gateway was never fully established, some children receiving services through CHDP may in fact already be enrolled in the Medi-Cal or Healthy Families Programs. In some cases, it appears, the state is paying twice for the same services for these children by reimbursing CHDP providers for services that are included in the monthly health insurance premium the state pays for children enrolled in Medi-Cal and Healthy Families.

Medi-Cal, Healthy Families and Community Clinics Offer Comprehensive Care. The inability of CHDP to provide an effective gateway to other programs also has important consequences for the care received by children in the program because Medi-Cal and Healthy Families offer more comprehensive services than the CHDP program. Like CHDP, the Medi-Cal and Healthy Families Programs offer free or low-cost preventive health screenings and immunizations. Unlike CHDP, both programs offer a full range of benefits that include comprehensive drug coverage, vision services, and dental care. Community clinics that receive EAPC funding similarly provide a broader range of primary and preventive care services than does CHDP.

Proposal Would Maximize Federal Funds. The Governor's proposal would maximize the state's use of available federal funds by shifting an estimated 120,000 children from the state-supported CHDP program to the joint federal-state supported Medi-Cal and Healthy Families Programs. The federal government generally pays approximately a 50 percent and 65 percent share of costs, respectively, for health care services for children provided through the Medi-Cal and Healthy Families Programs. This means that shifting children from the CHDP program, which is supported almost entirely with state funds, to Medi-Cal and Healthy Families would result in significant net savings to the state. There would also be savings for counties that would otherwise have to spend county funds for CHDP follow-up treatment.

Governor's Proposal Needs Work

The Governor's proposal to eliminate the Child Health And Disability Prevention (CHDP) Program does not include sufficient detail about how it would be implemented, does not provide funding that would be needed for outreach and enrollment of CHDP children in Medi-Cal and Healthy Families, and does not adequately address access issues for children who would remain ineligible for the Medi-Cal or Healthy Families Programs.

Many Details of Proposal Are Missing. The administration has not determined many of the details regarding how this proposal would be implemented, making it difficult for the Legislature to assess whether it could be implemented as proposed. The administration recognizes that some details are lacking and has proposed to convene a "stakeholder" work group to solicit input on a more detailed plan to implement this proposal. The administration advises that more detailed information about how the Governor's proposal would be implemented will be presented to the Legislature at the time of the May Revision.

Dearth of CHDP Caseload Information. It is unclear how many children receive services through CHDP because funding for CHDP providers is allocated according to the number of health screens provided, not according to the number of children served. This lack of caseload data makes it difficult for the Legislature to evaluate whether the additional funding proposed by the Governor for shifting children receiving services through CHDP into Medi-Cal, Healthy Families, and EAPC is at the appropriate level.

Access for Some Children May Be Limited. The Governor's proposal recognizes that for undocumented immigrants who are not eligible for Medi-Cal or Healthy Families under state law, CHDP is an important "safety net" program. To address possible access issues, the administration proposes a $17.5 million augmentation to the EAPC program and also rescinds a prior proposal to reduce EAPC by $10 million.

The EAPC proposals are intended to expand the capacity of the community clinic system to provide services for children who would be ineligible for Medi-Cal and Healthy Families and, thus, would no longer have access to CHDP providers.

However, some children who now rely on CHDP for services may be geographically isolated from the EAPC network of clinics, particularly in those counties with no EAPC contractors (Alpine, El Dorado, Kings, Lake, Plumas, and Tehama). In contrast, there are currently CHDP providers in all 58 counties in the state. The elimination of CHDP could reduce access to health screenings and immunizations for children in areas where there are no EAPC-funded clinics. The administration has acknowledged that this is a potential problem, and has indicated that it intends to explore various solutions in its stakeholder group meetings.

Program Shifts Would Affect Clinics. The CHDP program provides funding for EAPC clinics as well as other community health clinics. Under the Governor's proposal, some of these clinics will lose CHDP funds thereby potentially placing them in a precarious financial condition. On the other hand, some clinics may gain additional funding. At the time this analysis was prepared, DHS was not able to provide information regarding how much funding clinics currently receive through CHDP. The lack of information makes it difficult for the Legislature to evaluate this aspect of the administration's proposal. Thus, the Governor's proposal could result in a net financial gain for some clinics through the EAPC augmentation, but could negatively affect others.

Proposal Lacks Transition Planning and Funding. In its current form, the Governor's proposal does not provide any additional resources that would help children now receiving services through CHDP to enroll in the Medi-Cal and Healthy Families Programs. For example, there is no funding in the Governor's proposal for outreach and enrollment activities even though the administration estimates that 75 percent of the children receiving services through CHDP are eligible for either of the programs. Resources for outreach and enrollment activities are even more important given the administration's proposed funding reduction in these areas in the Medi-Cal and Healthy Families Programs.

In addition, the Governor's proposal provides no additional resources to DHS for the increased administrative workload associated with an increase in the number of EAPC grants it will have to screen and approve. Instead, in order to help address the state's current budget problems, the budget proposes to eliminate one position in the EAPC program in the budget year. Absent additional resources, DHS may be unable to process applications for EAPC grants and oversee the allocation of such funds to clinics in a timely manner.

Finally, we are not certain whether it will be possible for DHS to implement all of these major program shifts in such a relatively short time--by July 1, 2002.

Analyst's Recommendation

While we agree in concept with the Governor's plan to shift children from the Child Health and Disability Prevention program to other health programs, we withhold recommendation on the budget proposal pending a more detailed report from the Department of Health Services at budget hearings on key issues relating to how the plan would actually be implemented. We also offer options the Legislature may wish to consider to improve the proposal.

Need For Implementation Plan. We recommend that DHS provide the Legislature with a detailed implementation plan for the elimination of the CHDP program that includes proposed funding and mechanisms for addressing the transition issues noted in this analysis. First, DHS should provide a more complete assessment of the time needed to complete the proposed transition, dismantle the CHDP program, enroll children in Medi-Cal and Healthy Families, and help a number of families find a new place for care.

An important element of these transition issues is enrollment of children in Medi-Cal and Healthy Families. We recommend that DHS specifically include information regarding the costs and mechanisms to encourage eligible children to enroll in Medi-Cal and Healthy Families. These may include increasing the number of application assistants in community clinics or creating an incentive program to encourage clinics and former CHDP providers to enroll eligible children.

Options for Improving Plan. If the Legislature, upon receiving this information, decides to accept the Governor's plan to eliminate CHDP, there are steps it could take to minimize the problems that could otherwise result from this change. For example, the Legislature could adopt supplemental report language directing DHS to assess the impact of the elimination of CHDP on community clinics, including EAPC clinics. This information would enable the Legislature to adjust clinic funding levels as appropriate. We believe such a post-implementation assessment is warranted because the lack of CHDP caseload data means it is unclear how many additional children will seek services through community clinics. That assessment would examine the impact the elimination of CHDP would have on individual clinics, and consider whether the $17.5 million EAPC augmentation was the sufficient and appropriate amount of funding needed for these clinics to deliver the health care services previously provided through CHDP.

Further, the Legislature should assess the extent to which the Governor's proposal to expand EAPC will address a possible reduction in access for children who are not eligible for Medi-Cal or Healthy Families. The Legislature should consider the extent to which other clinic programs, such as the Seasonal Agricultural and Migratory Workers Program or the Grants in Aid for Clinics programs should be used to assist children now served under CHDP.

Finally, given the proposed increase in EAPC grants, the Legislature should consider maintaining EAPC administrative staffing at current levels if it decides to accept the Governor's plan to abolish CHDP. Accordingly, if the Legislature chooses to eliminate the CHDP program we would recommend adoption of the following supplemental report language:

It is the intent of the Legislature that the Department of Health Services (DHS) report to the Chair of the Joint Legislative Budget Committee and the chairs of the fiscal committees of both houses of the Legislature, information regarding the effect of the elimination of the Child Health and Disability Prevention (CHDP) program. The DHS report shall include, but not be limited to, an assessment of the impact of the elimination of CHDP in regard to:

(a) Changes in the caseloads and financial condition of community clinics, including clinics that receive grants through the Expanded Access to Primary Care (EAPC) program. The DHS shall specifically evaluate whether the additional resources provided to clinics as part of the plan to close the CHDP program were sufficient and appropriate;

(b) The adequacy of health care being provided to children who were previously enrolled in CHDP, but who will no longer be served by that program. The DHS shall specifically evaluate the adequacy of health care provided to children formerly receiving CHDP services who are not eligible for either the Medi-Cal or Healthy Families Programs;

(c) The impact of the elimination of the program on the number of children receiving health screens and immunizations;

(d) Detailed information on how additional EAPC funding provided as a result of the elimination of the CHDP program was distributed, according to geographic area and any other factors deemed relevant by the department.

The DHS may conduct its assessment, in part, by examining what it deems to be a representative sample of community clinics and counties.

An initial report on the department's findings shall be provided to the Legislature by April 1, 2003, with a complete and final report of the department's findings provided by December 2003 .

Tobacco Prevention Programs

Background

Historically, tobacco tax revenues from Proposition 99 have been the state's main source of support for smoking prevention activities. Proposition 99 is a 1988 initiative that allocated revenues from an increase in taxes on tobacco products to various health, environmental, and research programs. The budget proposes to allocate about $134 million in Proposition 99 funds for antitobacco activities in 2002-03.

A 1998 multistate settlement of litigation with the major tobacco companies is now providing additional funding for tobacco prevention efforts in California. The settlement of the tobacco litigation is estimated to provide California state and local governments with $21 billion over 25 years, with one-half going to the state and one-half to the counties. There has been significant public and legislative interest in using these revenues for smoking cessation programs and other health care proposals. Last year, the state budget for the first time provided funding for youth antitobacco efforts from a new special fund, the TSF, that was created to receive the state's share of proceeds from the lawsuit settlement.

The Budget Proposal. The Governor's budget proposes a total of $35 million from the TSF for youth antitobacco programs in 2002-03. This includes continuation of the $15 million allocated from the TSF in the 2001-02 Budget Act for youth smoking prevention programs administered by DHS and allocation of an additional $20 million for these same purposes, in the budget year. Another $5 million provided in the 2001-02 Budget Act was a one-time allocation.

Specifically, the budget plan would provide an increase in funding for antitobacco activities targeted at 18- to 24-year olds, enforcement of local tobacco control laws, continuation of youth advocacy coalitions, enhancement of tobacco control interventions in special populations, technical assistance, evaluation and surveillance, and smoking cessation services.

The primary components of the proposal are summarized in Figure 3 and are discussed in greater detail below.

• Activities Targeting 18- to 24-Year Olds. The budget proposal would provide $8 million in the budget year, an increase of $2 million over the previous year, in grants to local agencies to conduct programs that target this population. Specific activities may include reducing the amount of tobacco marketing and promotion on college campuses and publishing antitobacco advertisements in the alternative press.
• Local Enforcement of Tobacco Laws. Under the proposal, a total of $4.2 million would be provided in 2002-03 to local law enforcement and health departments to enhance local law enforcement activities, such as undercover operations to prevent the sale of tobacco products to minors. This is an increase of $3.4 million from the current year.
• Youth Advocacy Coalitions. The administration proposes $910,000 to continue Youth Advocacy Coalition activities in 2002-03. Under this proposal, college and high school students form coalitions that undertake various activities aimed at reducing smoking in their communities. The coalitions are modeled after a program in Contra Costa County that worked to pass an ordinance restricting the marketing and sale of tobacco products to youth.
• Special Population Tobacco Control Interventions. The budget proposes $7 million, a $4 million increase over the current year, to focus tobacco control efforts in special populations including various racial and ethnic groups, gays and lesbians, military families, blue-collar workers, and new immigrants. To date, no contracts to provide tobacco control interventions in special populations have been secured.
• Technical Assistance. The proposal includes a total of $8.5 million in the budget year for technical assistance, a $4.9 million increase from the current year. Specifically, the proposal calls for $2.5 million in contracts with the University of California to provide technical assistance to the Tobacco Control Section of DHS and $6 million for technical assistance to various grantee agencies to help carry out new and existing tobacco control programs. Technical assistance includes coordination of activities and providing expertise about specific populations.
• Evaluation and Surveillance. The proposal calls for $3.5 million for evaluation and surveillance, an increase of $1.5 million over the current year. Proposed projects include an evaluation of tobacco use changes among special populations, and a survey of attitudes toward tobacco control among law enforcement.
• Direct Cessation Services. The budget proposes $3 million for new direct smoking cessation programs and to augment the California Smoker's Helpline. There is no funding in the current year for this proposal. The Helpline provides smoking cessation counseling in multiple languages via a toll-free hotline.

In addition to the $35 million in TSF money, the budget proposes another $134 million from Proposition 99 funds and $1.3 million from federal sources and private organizations for antitobacco activities in 2002-03. In sum, a total of $170 million is proposed from all sources in overall spending for antitobacco-related activities conducted by several state agencies including DHS.

Budget Year Program Expansion Not Justified

We recommend that the 2002-03 budget proposal to expand funding for youth smoking prevention efforts be reduced by $20.9 million given the lack of persuasive evidence that doubling funding for these programs will be effective in preventing or reducing youth smoking in California. (Reduce Item 4260-111-3020 by $20.9 million.)

Limited Evidence Specific Proposals Will Be Effective. In our Analysis of the 2001-02 Budget Bill, we noted that while it is well documented that tobacco control spending is generally cost-effective, the effectiveness of the proposed new programs had not been demonstrated. As a result, we recommended eliminating all but $2 million of the $20 million proposed for youth antitobacco activities.

Since that time, the department has provided more detailed information about program activities as well as information explaining the theoretical foundation for specific programmatic efforts. However, it has provided little evidence that an expansion of current efforts would be effective in preventing youth smoking. For example, while it has shown that there has been an increase in the rate of smoking prevalence among young adults, the department has no scientific data to validate the effectiveness of specific approaches it is taking to target smoking prevention to 18 - to 24-year olds. It has also provided little detail on how funding for activities targeting special populations and law enforcement activities would actually be used by local agencies.

Some Current-Year Funds Have Not Been Allocated. According to the department, $1.8 million in current-year funding from TSF has not been budgeted for specific youth antitobacco activities. In addition, none of the $3 million from TSF budgeted in the current year for tobacco interventions in special populations has been allocated, and the department does not expect their request for applications to be released until May 2002. Therefore, activities in this area will probably not begin until the budget year.

Analyst Recommendation. Given the serious fiscal constraints now faced by the state, we recommend that the Legislature not augment ongoing funding for youth smoking prevention programs that offer little evidence of efficacy at this time. Accordingly, we recommend that the Legislature provide $14.1 million to fund youth antitobacco programs in the budget year, a reduction of about $5.9 million from the funding level approved in the 2001-02 Budget Act and $20.9 million less than the Governor has proposed for the budget year. Our recommendations for specific allocations are summarized in Figure 3.

This level of funding would enable the department to continue, without any disruptions, antitobacco activities that have already been implemented in the current fiscal year. Increasing funding for such efforts could be reconsidered once these programs have been evaluated and the state's fiscal condition has improved.