CSAC Bulletin Article

Health and Human Services 02/18/2011

Governor Proposes Streamlining State Oversight of Mental Health Services Act Funds

The Department of Finance (DOF) released a letter to Senate Budget and Fiscal Review Committee Chair Mark Leno yesterday seeking to simplify state oversight of the Mental Health Services Act (MHSA, or Proposition 63 of 2004) by amending the statute to allow counties to receive MHSA funds directly. 

The letter also outlines the Governor’s intent to more clearly define the roles of the Mental Health Services Oversight and Accountability Commission (OAC), the Department of Mental Health (DMH), and other state entities. The first efficiency would be to eliminate the state’s (OAC and DMH) role in reviewing and approving county three-year MHSA plans. Also, DMH would no longer be required to contract with counties for the administration of MHSA programs, administer the Mental Health Services Fund, or provide technical support to counties. 

As for allowing the State Controller to allocate MHSA funding directly to counties, the Governor indicates that he would work with counties to determine a new allocation method. 

If all of the above changes were implemented, the DOF estimates it would reduce state administrative spending by $30.5 million and eliminate 143.2 state positions. Furthermore, the DOF maintains that all of the proposals outlined in the letter can be implemented through a two-thirds vote in the Legislature, because they “further the intent of the MHSA by increasing funding for mental health services at the local level.”

Counties will need to examine the Governor’s proposals to streamline MHSA administration and funding in the context of his tandem budget realignment proposal, which would give counties full responsibility for administration and funding of three mental health programs – the Early Periodic Screening, Diagnosis and Treatment (EPSDT) Program, mental health managed care, and mental health services for special education students (AB 3632) to save the state about $861 million General Fund.

HHS Budget Update

The Senate Budget and Fiscal Review Committee made a significant dent in the state budget deficit by adopting about $6.7 billion in “solutions” this week. The committee will examine the Governor’s realignment proposals, the Governor’s proposed CalWORKs cuts, and adult day health care later today. We will report on today’s action in next week’s CSAC Bulletin; below are specific actions related to health and human services issues from the previous two days. 


Limit Prescriptions and Doctor Visits. The Senate rejected Governor Brown’s proposal to limit the number of prescriptions and doctor visits to control costs. Specifically, the Administration wants to limit prescriptions – except life-saving drugs – to six per month to save the state $11.1 million in 2011-12. Doctor visits would be limited to ten per year to save the state an estimated $196.5 million. 

Increase Co-Pays. The Senate adopted the proposal to change state law and obtain a federal waiver to impose co-payments on Medi-Cal beneficiaries by October 1, 2011. Specifically, this would mean a new $5 co-payment for physician, clinic, dental, and pharmacy services, with a $3 co-payment for lower-cost preferred drugs. This is estimated to save the state $294 million in 2011-12. Please note that the dental co-payment would go into effect earlier than the others, on May 1, 2011. The Governor would also institute $50 co-payments for emergency room services and $100 a day copayment for hospital stays, with a $200 maximum on the latter. This is estimated to save the state $112 million and $151 million in 2010-11, respectively. 

Caps on Supplies and Equipment. The Senate rejected some of the caps on supplies and equipment. The Senate rejected the following caps: durable medical equipment – $1,604; incontinence supplies - $1,659; urological supplies – $6,435; and wound care – $391; the Senate adopted the cap on hearing aids – $1,510. The Administration estimated that these measures would save the state $9.8 million in 2011-12.

Eliminate reimbursement for OTC Drugs. The Senate adopted the Governor’s proposal to eliminate over-the-counter (OTC) cough and cold medications and nutritional supplements as Medi-Cal benefits, which is consistent with federal law. The state estimates this will preserve $556,000 in 2010-11 and $16.6 million in 2011-12. 

Reduce Provider Payments. The Senate adopted 10 percent reductions to the payments the state provides to physicians, pharmacies, clinics, medical transport companies, home health providers, Adult Day Health Care, certain hospitals, and nursing facilities for serving Medi-Cal beneficiaries. The Administration also proposes a 10 percent reduction in state payments to long-term care facilities, including nursing homes, but this would first require federal approval. If all parts of the rate reductions were implemented, the state would save an estimated $9.5 million in the current year and $709 million in 2011-12. 

Shift Proposition 10 Funding for Medi-Cal. The Governor proposed a ballot measure to shift $1 billion in Proposition 10 funding from the state and local commissions in order to fund Medi-Cal services for children up to age five in 2011-12. In addition the Administration proposed that the ballot measure would divert 50 percent of the First 5 revenue to the state General Fund on an ongoing basis. The Senate adopted a one-time diversion of $1 billion ($50 million state; $950 million county funds) in 2011-12. This would be a statutory proposal and not require voter approval.

In addition to the Governor’s proposal, the Senate adopted additional budget savings, including nearly $78 million in fund sweeps:

  • Medi-Cal Inpatient Payment Adjustment Fund –the $45.2 million in this fund to offset General Fund support in Medi-Cal. The balance comes from Intergovernmental Transfers (IGTs) made by transferring entities during 1995 to 1998 that can no longer be identified.
  • The Private Hospital Supplemental Fund has a balance of $32.7 million attributable to California’s receipt of enhanced federal funds obtained through the American Reinvestment and Recovery Act.

Healthy Families Program

The Senate adopted HFP premium increases proposed by the Governor. 

  • HFP Premium Increase. All proposed changes would take effect on June 1, 2011 and would save the state $1.9 million in the current year and $22.2 million in 2011-12:
  1. Under 150 percent FPL: No change. 
  2. 150-200 percent FPL: Premiums would increase by $14 per child (from $16 currently to $30) and the maximum limit for a family with three or more children would increase by $42 for a family maximum of $90.
  3. 201-250 percent FPL: premiums would increase by $18 per child (from $24 currently to $42) and the maximum limit for a family with three or more children would increase by $54 for a family maximum of $126.

The Senate also adopted increases to monthly premiums for children enrolled in HFP. The Governor proposed increasing HFP co-payments for emergency room visits from $15 to $50 and institute inpatient co-pays of $100 a day with a $200 maximum. These proposals would take effect on October 1, 2011 and result in an estimated savings of $5.5 million. 

The Senate modified the Governor’s proposal to eliminate the vision benefit. In lieu of elimination, the Senate adopted a $3 million reduction to expenditures associated with both glass frames and lenses and at a lower fee schedule. Complete elimination of the benefit would save the state $11 million in 2011-12.


The Senate examined the Governor’s proposal to eliminate the local Multipurpose Senior Service Program (MSSP) for a savings of $19.9 million in 2011-12. This program serves 11,798 clients a month at 41 sites across the state. The LAO suggested an alternative: reduce the MSSP program by only $5 million and seek additional federal funding to maintain the MSSP infrastructure, especially as it relates to services received by IHSS recipients. The committee adopted the LAO recommendation.

Health Care Emergency Preparedness

The Senate approved a $5.8 million reduction in state funds for health care surge capacity, which includes field hospitals and stockpiles of medical supplies to be used in the event of a disaster. The Senate also cut $506,000 from the Department of Public Health that was related to the health care surge project and $32,000 in local assistance funds within the Environmental Management Program.

Child Support

The Senate adopted the Governor’s proposal to suspend the county share of child support collections in 2011-12. The county share of collections is estimated to be $24.4 million in 2011-12. The proposal allows the entire non-federal portion of child support collections to benefit the state General Fund.

Child Welfare Services

The Senate did not enact the Governor’s proposed reduction of $19 million General Fund in 2011-12 for the Transitional Housing Program-Plus (THP-Plus). The reduction would have impacted services for 18- and 19-year olds in the THP-Plus program. The Senate instead enacted a $5 million reduction and directed staff to include language in the budget bill that no THP-Plus beds should be lost due to the reduction. 

Supplemental Security Income/State Supplemental Payment (SSI/SSP)

The Senate approved the Governor’s proposal to reduce monthly SSP grants for individuals to the federally required minimum payments standard, reducing grants for individuals by $15 per month (from $845 to $830) beginning June 1, 2011. The proposal would save $14.7 million in 2010-11 and $177.3 million in 2011-12.

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