Lawmakers Say Newsom Staff ‘Inflated’ Cost of Failed Health Care Bills

Lawmakers and advocates say Gov. Gavin Newsom’s administration is making inflated estimates about the cost of legislation, with some suggesting his subordinates have been trying to kill the bills without making the governor politically accountable for the outcome.

“While people are dying on the streets from a lack of access to behavioral health care treatment, state agencies continue to fabricate exorbitant cost estimates,” Sen. Dave Cortese, a Democrat from Campbell, told CalMatters after one of his mental health proposals died recently in the Assembly Appropriations Committee.

Sen. Scott Wiener, a Democrat from San Francisco who authored another mental health bill that died recently, said in a public hearing last month that the administration’s cost estimate of his bill was “extreme and outrageous.”

The pointed accusations from Democratic lawmakers and health care advocates who tend to be friendly with the Democratic governor are extraordinary because such criticism is rarely made in public. The examples also stand out because they challenge the administration’s response to one of the governor’s top priorities, mental health.

The administration did not accept an interview request with CalMatters and would not provide more detail — to CalMatters or to lawmakers — to explain the cost estimates. By email, however, a spokesperson insisted the costs were accurate and rejected the idea that they were intentionally inflated.

“It’s outrageous and inaccurate for anyone to suggest these numbers are fabricated or artificially inflated,” Rodger Butler, a spokesperson for Newsom’s Health and Human Services Agency, said in an email. “Legislative fiscal analyses from state government departments are informed by real-world, on-the-ground experience implementing legislative mandates.”

Whatever the motivations, four health care bills with controversial cost estimates died quietly earlier this month in the Senate and Assembly Appropriations committees even after each had advanced without a single “no” vote from a Democratic legislator.

The Appropriations Committees are focused on the cost of legislation, especially in a year when the state is struggling with a budget deficit. The four bills were moved to the committees’ “suspense files,” along with 263 other controversial or costly bills. Each committee then killed the bills in their respective suspense file with a single vote.

Mike Gatto, a former Democratic lawmaker from Los Angeles who chaired the Assembly Appropriations Committee, said inflated cost estimates from a governor’s administration are nothing new.

When an executive branch agency provides “a significantly exaggerated cost” on a piece of legislation, “it’s generally a big flashing light that the administration dislikes the bill and that the governor would likely veto it,” he said.

It can be advantageous for the governor when legislators quietly kill those bills, he said.

“Having the appropriations committee there to kill it and to take the arrows (of criticism), that is a tremendous benefit politically for any governor,” Gatto said.

Gatto has a hand-written note framed on his wall that former Gov. Jerry Brown gave him expressing Brown’s appreciation for keeping bills from reaching the governor’s desk.

In a corner of the note are two words: “Keep holding.”

But Thad Kousser, a former legislative staffer who’s now a professor of political science at UC San Diego, said the integrity of the legislative process is jeopardized if cost estimates are not accurate.

“You’ve got to have reasonable and realistic estimates that are not part of a political strategy in order for everyone to make informed decisions,” he said.

This year alone, according to the Digital Democracy database, lawmakers considered 2,522 bills, many of them with large potential costs to taxpayers.

Democrat calls costs ‘extreme and outrageous’

Sen. Wiener’s legislation, Senate Bill 294, would have required an automatic review of cases in which commercial health plans denied children and young people mental health treatment.

Wiener, the chair of the Senate’s mental health caucus, said in the public hearing last month that the measure “does nothing more than require health plans to provide the coverage that they’re required to provide and stop denying covered behavioral health care treatment to children.”

So he said it was “outrageous” when the Department of Managed Health Care estimated that the bill would cost $87.6 million per year by 2028 and would require 340 new employees. That’s a 55% increase over the 610 positions in the department’s budget for the 2022–23 fiscal year. A separate state office, the Department of Insurance, also said the bill would require it to hire an additional five positions by 2026 for $1.2 million. There is no description in the cost estimate about how the departments arrived at the estimate or what jobs the new positions would perform.

The estimate also was a surprise to supporters of Wiener’s bill. In June, they sent a three-page memo to the chair of the Assembly Appropriations Committee, Democrat Buffy Wicks from Oakland, saying that a similar bill that failed last year had a significantly lower cost estimate. They also noted that the pending bill was more narrow in scope.

Lishaun Francis, director of behavioral health for the advocacy group Children Now, told CalMatters the Department of Managed Health Care, which is intended to protect consumers, inflated the cost of Wiener’s bill, presumably to try to kill it.

“This is not an analysis in good faith,” she said. “The unfortunate thing here is that DMHC has fallen into a trap where they are trying to be here for consumers while also inflating costs to make sure bills don’t get to the governor when there is a tight budget year.”

Before the bill died, it passed the Senate and an Assembly committee without any Democrats voting against it, according to the Digital Democracy database.

Are there ‘multiple layers of fiscal review?’

The Department of Managed Health Care, which issued the cost estimates, is part of the state’s Health and Human Services Agency. Secretary Dr. Mark Ghaly, a Newsom appointee, oversees the agency.

CalMatters requested an interview with Ghaly or another top official to talk about the cost estimates, but the administration would not talk beyond providing the emailed statement from Butler at the Health and Human Services Agency.

“It’s important to note there are multiple layers of fiscal review throughout the process,” he said, citing the policy and appropriations committees in the Legislature and the governor’s Department of Finance.

However, Department of Finance spokesman H.D. Palmer told CalMatters, “We rely principally on (agencies and departments) to provide us with the personnel and fiscal estimates.”

Policy committees, meanwhile, don’t evaluate the costs of bills.

“To say that policy committees vetted the finances of a bill is almost uniformly incorrect,” said Gatto, the former Assembly Appropriations chair. “Policy committees don’t do that.”

That independent fiscal review is supposed to happen at the Assembly and Senate Appropriations Committees, whose staffers are widely regarded as some of the smartest people in the Capitol. Their job is to independently vet the administration estimate and provide their own cost estimates for bills, Kousser and Gatto said.

“These people are professionals,” Kousser said. “They’re trying to get it right.”

Yet when it came to these four disputed bills, the analysis written by the staffs of the Appropriations Committees described the administration cost estimates and nothing more. Each of the four analysis included language similar to SB 999, which said only: “The Department of Managed Health Care (DMHC) reports the total costs of this bill as follows:”

Luis Quinonez, chief of staff for Sen. Anna Caballero of Merced, who chairs the Senate’s Appropriations Committee, declined to discuss specific bills other than to say the committee’s consultants perform their own analyses.

Representatives for Assemblymember Wicks, who chairs the Assembly Appropriations Committee, did not return messages.

Another Democrat calls costs ‘exorbitant’

Regarding his mental health bill, Sen. Cortese said in an email he has “serious concerns about how the health care agencies are coming up with these cost projections.” Senate Bill 999 would have required health insurers to make sure they have mental health and addiction experts review claims for treatment, something advocates say is already required under state law.

This was the second time Cortese introduced the bill. A previous version made it through the Legislature in 2022 before Newsom vetoed it, saying the issue could be addressed by new regulations that would be issued soon.

After he felt draft regulations last year were inadequate, Cortese introduced a pared-down version of the 2022 bill. However, advocates were surprised to see the department’s cost estimate increase significantly to $18 million over five years and about $4 million annually after 2028 to pay for 13 permanent positions. The estimate does not explain how the department determined the number of positions needed or what jobs they would perform.

Advocacy groups supporting the bill noted that, in recent years, budget allocations, the Department of Managed Health Care already received millions of dollars to cover some of the costs of implementing the proposed rules, so it didn’t make sense that the costs would be so high.

“It’s sad to see some of these good faith efforts by advocates to try to bring accountability to the system kind of fall under the weight of a cost estimate that we don’t have a lot of insight into from the department,” said Lauren Finke, policy director for The Kennedy Forum, one of the bill’s sponsors.

Santa Cruz Democratic Assemblymember Gail Pellerin similarly couldn’t understand why there was such a high cost associated with her Assembly Bill 3260, which would have required health insurers to expedite reviews of mental health claims that doctors deem urgent.

The Department of Managed Health Care estimated the bill would cost nearly $140 million in the first five years and $32 million annually after 2029 to pay 144 new positions — a 23% increase in staff size, Pellerin said in an interview. The estimate, which also includes an additional $238,000 annually for the Department of Insurance, does not provide any further description of the need for the positions.

Sal Rosselli, president emeritus of the National Union of Healthcare Workers, which supported the bill, said in an email that his organization reached out to agency officials to ask for an explanation of the cost analysis, “but they declined to engage with us.”

Eleven other states, plus Washington, D.C., have already adopted similar laws, he said, with no evidence that those laws resulted in a major increase in workload.

Pellerin said she and her staff also couldn’t get an answer from the department about how it came up with what she called “inflated” numbers.

“Is this taxpayer-funded state department doing the job it is required to do?” she asked.

For Pellerin, the issue is personal. She knows firsthand how an urgent mental health crisis can spiral out of control. Her husband died by suicide in 2018.

“My family, we’ve experienced this kind of situation,” she told CalMatters.

Are agencies not showing their work?

Advocates for Health Access California also were frustrated by the cost estimates associated with Assembly Bill 236 by Pasadena Democratic Assemblymember Chris Holden. The bill would have given state regulators the authority to fine health insurers if their publicly available lists of in-network doctors and specialists aren’t accurate.

In testimony supporting the bill’s promises to crack down on so-called “ghost networks,” a therapist described having a patient end up in the emergency room from a suicide attempt after she called through a list of 50 mental health providers and couldn’t find one who’d see her.

The bill would have added teeth to a law that insurers and doctors are already supposed to follow and that state regulators are supposed to monitor.

The Department of Managed Health Care estimated its cost to be $3.5 million annually after 2029 for 14 new positions. In its one-sentence description, the Department of Health Care Services said its cost for the bill would be “approximately” $24 million. In an email, the department told CalMatters the bill would lead to “increased costs in the Medi-Cal managed care and behavioral health delivery systems and staffing requirements.”

“This $24 million is just mind-blowing,” said Rachel Linn Gish, a spokesperson for Health Access. “We do not understand how they came up with this number.”

Michael Genest spent four years as Gov. Arnold Schwarzenegger’s director of the Department of Finance. At CalMatters’ request, he reviewed the cost estimates of the four bills.

He said he could expect high costs for Wiener’s and Pellerin’s bills, but he said it wasn’t possible for him to independently evaluate the figures without more detail.

However, he said the other two estimates definitely seemed out of line based on the information the administration and the committees provided.

He said it wouldn’t surprise him if the agencies were inflating the projected costs of the bills to try to get more money to backfill their budgets — or if top officials in Newsom’s administration had told departments to oppose bills that weren’t the governor’s priorities.

Either way, he said the agencies should do a better job of explaining their cost projections.

“It’s poor practice,” he said. “It’s not a good thing that they’re not showing the detail.”

Genest worked in the Capitol when Willie Brown was Assembly speaker and when John Burton was president of the Senate. He said those leaders, known for their aggressive leadership styles, would never let the governor’s administration get away with blowing off lawmakers’ concerns. Back then, he said, lawmakers would have threatened to cut the departments’ budgets if they felt they were getting the runaround.

“If a member was disrespected to that extent by a member of the bureaucracy,” he said, “there would be consequences.”