Legislative Analyst's Office
Analysis of the 2003-04 Budget Bill
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 $2.5 billion (all funds) for public health programs in the budget year, a 4 percent ($113 million) decrease from the previous year. The budget proposes $412 million from the General Fund in the budget year, a 22 percent ($114 million) decrease from the current year. This decrease is largely due to the realignment of various public health grant programs.
Significant changes in the Governor's proposed budget for public health programs include the following.
Realignment of "Safety Net" Programs. The budget proposes to shift the administrative and fiscal responsibility for various public health grant programs from the state to the counties. The plan also proposes to provide counties with a dedicated revenue stream for the support of these programs. The proposal would shift $147 million in funding from several sources for public health programs to the counties, and would result in about $68 million in General Fund savings. The following programs are proposed for realignment: Adolescent Family Life, Black Infant Health, Local Health Department Maternal and Child Health, Expanded Access to Primary Care, Grants in Aid for Clinics, Indian Health Program, Rural Health Services Development, Seasonal Agricultural and Migratory Worker, California Health Care for Indigents Program, Rural Health Services, and Public Health Subvention. The counties would assume financial and operational responsibility for the programs and would have discretion to shift funds among programs in keeping with local priorities.
Please see "Part V" of The 2003-04 Budget: Perspectives and Issues, for a discussion of realignment and our recommendations in regard to the Governor's proposal.
Child Health and Disability Prevention Program (CHDP). The CHDP provides preventive health, vision, and dental screens to children and adolescents in families with incomes at or below 200 percent of the Federal Poverty Level (FPL). The Governor's budget proposes $16 million ($6.2 million General Fund) in total expenditures for the CHDP. This is an 84 percent ($83 million) decrease in all funds and an 81 percent ($26 million) decrease in General Fund expenditures from the previous year. This dramatic reduction is due to the implementation of the "CHDP Gateway" program.
We provide a more detailed discussion of the CHDP budget proposal later in this section.
Emergency Medical Services Authority (EMSA) Consolidated Into DHS. The EMSA's primary responsibilities include the development and review of local emergency medical services plans; coordination of medical and hospital disaster preparedness; and establishment of standards for the education, training, and licensing of EMS personnel. The agency also administers a program that allocates state funding for the support of trauma care centers. The Governor's budget proposes to consolidate the EMSA into the DHS for a reduction of five positions and $138,000 in General Fund savings in the budget year. Statutory changes are also proposed to shift EMSA operations into DHS. The EMSA will be a new division within DHS, and will maintain its current functions, except that the budget proposes to discontinue support allocations for the trauma care centers which amounted to $20 million from the General Fund in the current year.
AIDS Drug Assistance Program (ADAP). The ADAP is a drug 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. Currently, clients with incomes up to 400 percent of the FPL (about $35,440 for a single childless adult) pay no co-payment or premium, while individuals with incomes above that level pay a "sliding scale" copayment that increases with their income level. The budget proposes about $186 million ($61 million from the General Fund) for ADAP in 2003-04. While this would provide a $2.3 million increase in all funds for the program over the previous year, General Fund support for the program would decrease by $6.9 million.
Under the Governor's budget proposal, a General Fund reduction of $15.2 million would be offset by a proposed increase in client copayments. The budget proposes a three-tiered copayment system in which clients with federal adjusted gross incomes between 201 percent of the FPL (about $17,720 for a single childless adult) and $50,000 pay either $30, $45, or $50 per prescription, depending on income and family size. The ADAP budget also reflects program augmentations due to caseload increases, increases in the cost of drugs, and other factors.
Community Challenge Grant (CCG) Program. The CCG provides grants to community-based organizations for programs intended to reduce the number of teenage and unwed pregnancies and to promote responsible parenting. In the past, the federal funds to support CCG have been included within the budget of the Department of Social Services (DSS) and subsequently transferred to DHS for the operation of the program. However, the 2003-04 DSS budget does not provide the $20 million needed to continue CCG because of continued uncertainty about whether these federal funds will be available. The DSS indicates the matter may not be resolved until July 2003. The administration does not plan at this time to support the program from any other fund source.
Genetically Handicapped Persons Program (GHPP). The GHPP provides health coverage for Californians 21 years of age and older who have certain specific genetic diseases, including cystic fibrosis, hemophilia, and certain neurological and metabolic diseases. The GHPP also serves children under the age of 21 with GHPP-eligible medical conditions who are not financially eligible for California Children's Services. Although there are no maximum income eligibility requirements, families with incomes exceeding 200 percent of the FPL pay program fees based upon their family size and income.
The Governor's budget proposes $36 million ($28 million General Fund) for GHPP in 2003-04. This is a 7 percent decrease in overall program funding and a 9 percent ($3.6 million) decrease in General Fund spending from the previous year. This includes a funding augmentation of $316,000 for three additional staff and contract services to achieve program efficiencies in the budget year, and an augmentation of almost $2 million to accommodate an increase in the caseload and utilization of these services. The budget plan also assumes that the state will be able to reduce program expenditures due to rebates on its purchases of blood-clotting factor for treatment of persons with hemophilia, implementation of utilization controls for pharmaceuticals, increases in revenue from client fees, and reductions in provider rates.
Poison Control System. The Governor's budget proposes to reduce the Poison Control System budget by $3.6 million General Fund and offset it with an equal amount of funding from the State Emergency Telephone Number Account (911). For additional information and our recommendations regarding the administration's proposal to increase the 911 surcharge rate, please see our discussion of the State Emergency Telephone Number Account in the "General Government" chapter of this Analysis.
Consolidation of Domestic Violence Programs. The Governor's budget proposes to consolidate the domestic violence shelter programs currently administered by the Office of Criminal Justice Planning (OCJP) into DHS. The administrative and programmatic responsibility for the programs, as well as $730,000 from the General Fund and $9.1 million in federal funds, would be transferred from OCJP to the DHS Domestic Violence Shelter Program.
Proposition 50 Water Bond Projects. The budget proposes to increase the Division of Drinking Water and Environmental Management's budget by $112 million from the Proposition 50 resources bond approved by voters in November 2002. The funds are to be used for grants and loans to local water agencies to meet safe drinking water standards and for security protection of drinking water systems.
For additional information about the budget's proposal for Proposition 50 expenditures, please see the Fund Conditions for Resources Programs write-up in the "Resources" chapter of this Analysis.
Prostate Cancer Program. The Prostate Cancer Program provides prostate cancer treatment for men 18 years of age or older who do not have health insurance or any other means to pay for their care. The program is managed by the University of California (UC) at Los Angeles Department of Urology, which through subcontracts has established sites in several regions of the state to provide prostate cancer treatment services.
The Governor's budget proposes to reduce the $20 million appropriated for the program in the current year by $10 million, due to lower than anticipated program participation, and to revert the amount of funding that would be saved to the General Fund. In the budget year, funding for the program would be further reduced to $5 million, and program support would be shifted from the Tobacco Settlement Fund to the General Fund.
Women, Infants, and Children (WIC) Nutritional Program. The WIC 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 proposes to increase WIC's expenditure authority by an additional $15.5 million in 2002-03 and by $84.4 million in 2003-04 to reflect the availability of additional federal funds.
Cancer Research. The Cancer Research Program provides grant funding to a variety of institutions, including various institutions in the UC system, to help fund research on gender specific cancers, colorectal and other cancers. The DHS contracts with UC Davis to administer the program. The administration proposes to reduce the $12.5 million General Fund appropriation for the program in the current year by about half—$6.3 million—and to eliminate the remaining $6.2 million in the budget year. Funding would be phased out as existing research contracts expire.
Medical Screens and Immunizations Provided. The state CHDP program was established by Chapter 1069, Statutes of 1973 (AB 2068, Brown), to provide preventive health, vision, and dental screens to children and adolescents in low-income families who do not qualify for Medi-Cal. The CHDP program reimburses 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 the state 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.
Governor's Budget Proposal. The Governor's budget proposes the allocation of $99 million from all fund sources ($32 million from the General Fund) in the current year for an estimated 1.7 million CHDP health screens. The budget plan would provide $16 million from all fund sources ($6 million from the General Fund) in the budget year for the program, for an estimated 256,000 CHDP health screens. The dramatic decrease in proposed program expenditures is based upon the assumption that the CHDP gateway will be implemented beginning in July 2003 and that its implementation will significantly change the way the CHDP program is operated as discussed below.
Administration's Revised CHDP Gateway Proposal. Almost all children receiving CHDP services are eligible to enroll either in the Medi-Cal or Healthy Families Programs, unless they are ineligible for these programs mostly because they are undocumented immigrants. As a result, with the implementation of the Healthy Families Program in 1998 the state established a new role for CHDP as a gateway for eligible children receiving its limited screening and immunization services to enroll in more comprehensive coverage under the Medi-Cal and Healthy Families Programs.However, this gateway was never fully established, as we reported in our January 2001 report entitled, CHDP Fails as Gateway to Affordable Health Care.
The 2002-03 Budget Act provided funding and staffing to DHS for a new proposal intended to improve CHDP's role as a gateway to Medi-Cal and Healthy Families enrollment by establishing an Internet-based system to more systematically identify and bill the Medi-Cal and Healthy Families Programs for services to children who are already enrolled in those programs. The gateway program would also "pre-enroll" children in Medi-Cal who are not already enrolled in Medi-Cal or Healthy Families. For pre-enrolled children, the costs of the CHDP screen, as well as medical services would be paid through the Medi-Cal Program, with costs split equally between the state General Fund and federal funds. If the CHDP health screens and immunizations were paid for under CHDP, the state would pay for almost all of these costs.
The gateway program would aim to permanently enroll pre-enrolled children in either Medi-Cal or Healthy Families by providing families with an application for these programs and a referral to an application assistant. Children who were determined not to be eligible for coverage in either program would continue to be able to receive CHDP services consistent with the allowable number of doctor's visits. Moreover, the same children would be permitted to pre-enroll again in Medi-Cal each time they received a CHDP screen.
Budget Assumes the Gateway Reduces CHDP Expenditures. The Governor's budget plan assumes that, as the gateway takes effect, the cost of screenings and immunizations for many children would shift to the Medi-Cal and Healthy Families Programs and would no longer be borne by CHDP. Accordingly, the Governor's budget plan proposes to reduce the state budget for CHDP by $83 million (all funds) in 2003-04.
This reduction in the CHDP budget would be offset under the Governor's budget plan by increased expenses in the Medi-Cal and Healthy Families Programs. The budget provides $259 million in additional funds in the Medi-Cal budget ($126 million from the General Fund) and $20 million in the Healthy Families Program budget ($8 million from the General Fund) to fund these projected additional costs.
We concur with the Governor's budget proposal to implement the new Child Health and Disability Prevention gateway proposal, but recommend that the Department of Health Services report at budget hearings regarding the schedule for implementing this new system.
Caseload Shifts Could Be Overestimated. The administration estimates that about 1.3 million children will be temporarily pre-enrolled in Medi-Cal, about 296,000 children will be enrolled in ongoing Medi-Cal, and 37,115 children will be enrolled in the Healthy Families Program in the budget year as a result of the new gateway program. Our review indicates that the gateway will be successful in pre-enrolling children in Medi-Cal. We also believe that the administration's estimates of the number of children who would be enrolled in Medi-Cal and Healthy Families on an ongoing basis are reasonable. However, there are several aspects of the gateway implementation plan that could result in fewer children being enrolled than expected.Notably, the gateway process would not simplify application forms or take advantage of a new Internet-based application process, known as Health-e-App, to help move pre-enrolled children to Medi-Cal and Healthy Families. Nor would any new steps be taken to make enrollment assistance available to families of these children in the offices of CHDP providers. If the administration's caseload assumptions are overstated, state fiscal support for the Medi-Cal and Healthy Families Programs could be overbudgeted by tens of millions of dollars combined.
Implementation of the Gateway May Be Delayed. The gateway proposal includes the implementation of new information technology systems. As with major information technology projects, delays are possible. Notably, the Governor's 2003-04 budget plan indicates that the gateway project will experience a three-month delay from April 2003 to July 2003. Any further delay in system implementation would probably result in more health screens and immunizations being provided and funded through CHDP.
Analyst's Recommendation. We recommend approval of the CHDP budget, including the budget requests that are related to implementation of the gateway plan. However, because any variance from the implementation schedule for the gateway project would significantly affect the Medi-Cal, Healthy Families and CHDP Programs, we recommend that the Legislature direct DHS to report at budget hearings on the gateway implementation schedule.