AB173 - Health.

Amended IN Senate August 28, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 173 Introduced by Assembly Member Gabriel Committee on Budget (Assembly Members Gabriel (Chair), Addis, Ahrens, Alvarez, Bennett, Bonta, Caloza, Connolly, Fong, Haney, Hart, Jackson, Lee, Ortega, Patel, Petrie-Norris, Quirk-Silva, Ramos, Rogers, Schiavo, Schultz, Sharp-Collins, Solache, Stefani, Ward, and Wilson) January 08, 2025 An act relating to the Budget Act of 2025. An act to amend Sections 53123.1.5, 53123.2, 53123.3, and 53123.4 of, and to add Sections 53123.7 and 53123.8 to, the Government Code, to amend Sections 1280.3, 32121, and 120956 of, to add Section 130206 to, and to add Chapter 3.5 (commencing with Section 131325) to Part 1 of Division 112 of, the Health and Safety Code, to amend Sections 41030, 41031, 41135, and 41136 of the Revenue and Taxation Code, and to amend Sections 14005.11, 14005.36, 14007.5, 14007.8, 14043.2, 14043.27, 14043.28, 14043.36, 14043.55, 14107.11, 14132.26, and 14184.201 of the Welfare and Institutions Code, relating to health, and making an appropriation therefor, to take effect immediately, bill related to the budget. LEGISLATIVE COUNSEL'S DIGEST AB 173, as amended, Committee on Budget. Budget Act of 2025. Health. (1) Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal program is in part governed by, and funded pursuant to, federal Medicaid program provisions. Existing law sets forth qualifications and procedures for the enrollment of providers in the Medi-Cal program, including the completion of a provider agreement and disclosure of certain information as required in federal Medicaid regulations or by the department. Under existing law, failure to disclose the required information, or the disclosure of false information, results in denial of the application for enrollment or makes the provider subject to temporary suspension from the Medi-Cal program, as specified. This bill would require the department, subject to receipt of necessary federal approvals, to deny an application for enrollment or to terminate the enrollment of a provider if the applicant or provider discloses an affiliation within the previous 5 years with any person or entity that has experienced a disclosable event, as defined, if the department determines that the affiliation poses an undue risk of fraud, waste, or abuse to the Medi‑Cal program. The bill would require the department to apply certain factors set forth in federal regulations for purposes of the risk determination. The bill would authorize the department to take action, regardless of a disclosure, if the affiliation poses the above-described undue risk. Existing law sets forth various provisions relating to the termination of provisional provider status that is granted to an applicant or provider. This bill would also apply those provisions to an applicant or provider that is granted preferred provisional provider status or full-enrollment status. The bill would make conforming changes to related provisions. The bill would change existing criteria, and would impose additional criteria, for compliance and grounds for denial, suspension, or termination. Under existing law, if it is discovered that a provider is under investigation by the department or any state, local, or federal government law enforcement agency for fraud or abuse, the provider is subject to temporary suspension from the Medi-Cal program. This bill would remove the qualification that the agency be a law enforcement agency and would specify that the provision applies to any local, state, or federal program, at the department’s discretion. Existing law requires the Director of Health Care Services to notify the provider of the temporary suspension and deactivation of the provider’s number, which takes effect 15 days from the date of the notification. This bill would instead make the temporary suspension and deactivation effective on the date the department sends the notification. The bill would set forth certain procedures based on the notification delivery method. Existing law authorizes the department to implement a 180-day moratorium, with potential extensions, on the enrollment of providers, with an exception for certain clinics, health facilities, or natural persons licensed or certified as certain health care professionals, when the director determines that this action is necessary to safeguard public funds or to maintain the fiscal integrity of the program. This bill would remove the above-described exception for the specified providers. The bill would require the department to provide written notice to the Joint Legislative Budget Committee, and to provide a new notification every 180 days that a moratorium is in effect, as specified. The bill would make other changes to related provisions regarding verification of a credible allegation of fraud. (2) Existing law requires the department to develop a program that requires a waiver of federal law to test the efficacy of providing an assisted living benefit to beneficiaries under the Medi-Cal program, as specified. This bill would authorize the department to implement those provisions through all-county letters or similar instructions, without taking any further regulatory action. (3) Existing law requires the department to standardize applicable covered Medi-Cal benefits provided by Medi-Cal managed care plans under comprehensive risk contracts with the department on a statewide basis and across all models of Medi-Cal managed care, in accordance with the Terms and Conditions of the California Advancing and Innovating Medi-Cal (CalAIM) initiative. Existing law requires that Community-Based Adult Services (CBAS) continue to be available as a capitated benefit for a qualified Medi-Cal beneficiary under a comprehensive risk contract with an applicable Medi-Cal managed care plan. This bill would require the department and the California Department of Aging to collaborate with certain entities to understand CBAS center closures. The bill would require the department, on or before March 1, 2029, to update the Legislature and the Legislative Analyst’s Office on CBAS center closures, as specified. (4) Under existing law, until October 1, 2026, an individual who is not a citizen or a national of the United States who has a specified immigration status is eligible for the full scope of Medi-Cal benefits. Under existing law, beginning October 2, 2026, and until June 30, 2027, that individual is eligible for the full scope of Medi-Cal state-funded benefits, subject to certain service limitations relating to dental care. This bill would restructure those provisions and would state that, beginning October 1, 2026, the above-described individual would only be eligible for the full scope of Medi-Cal benefits if that individual meets any of certain criteria. The bill would specify that, beginning October 1, 2026, and through June 30, 2027, the individual, if not described in certain federal provisions, would be eligible for the full scope of Medi-Cal state-funded benefits. The bill would exempt, from the above-described service limitations relating to dental care, individuals who are pregnant or entitled to postpartum medical assistance. The bill would make conforming changes or other technical changes to various Medi-Cal provisions. To the extent that the bill would create new duties for counties relating to Medi-Cal eligibility, the bill would impose a state-mandated local program. Under the bill, effective October 1, 2026, for certain individuals under restricted-scope Medi-Cal, maintenance dialysis services medically necessary for the treatment of chronic dialysis and end-stage renal disease, as specified, would be covered services regardless of whether the treatment meets the definition of an emergency medical condition. To the extent that federal financial participation is unavailable for those services, the bill would require the department to fund those services subject to an appropriation, as specified. The bill would require the department to issue guidance to Medi-Cal fee-for-service providers implementing these provisions. (5) Existing law provides for the licensure and regulation of various health facilities, including general acute care hospitals, acute psychiatric hospitals, and special hospitals, by the State Department of Public Health. If the department determines that any of those specified facilities has violated a certain regulation relating to nurse-to-patient ratios, existing law requires the department to assess an administrative penalty, as specified. Under existing law, a general acute care hospital is not subject to that penalty if the hospital demonstrates to the satisfaction of the department certain criteria, including that prompt efforts were made to maintain required staffing levels. This bill would extend that penalty exemption to acute psychiatric hospitals. (6) Under existing law, all rebates collected from drug manufacturers on drugs purchased through the AIDS Drug Assistance Program and interest earned on those moneys are deposited in the continuously appropriated AIDS Drug Assistance Program Rebate Fund exclusively to cover costs related to any of certain expenditures. Among those expenditure categories is, to the extent that funding is available, housing support for individuals living with HIV who are eligible for the Housing Opportunities for Persons with AIDS program based on income, but are otherwise ineligible for the program, and are current residents of California. For purposes of the above-described category, this bill would qualify the program eligibility of the population as being based on income and HIV status. (7) Existing law establishes, within the California Health and Human Services Agency, the Center for Data Insights and Innovation to ensure the enforcement of state law mandating the confidentiality of medical information. This bill would make all personal information obtained or maintained by the center confidential. Under the bill, among other privacy protections, personal information collected by the center from other state entities would generally be exempt from the disclosure requirements of the California Public Records Act. The bill would prohibit the use of any collected or obtained information for determinations regarding individual patient care or treatment or for any individual eligibility or coverage decisions or similar purposes. (8) Existing law, the Local Health Care District Law, authorizes the organization and incorporation of local health care districts and specifies the powers of those districts, including, among other things, the power to establish, maintain, and operate, or provide assistance in the operation of, one or more health facilities or health services. Existing law authorizes a local health care district to transfer, at fair market value, any part of its assets to one or more corporations to operate and maintain the assets, subject to voter approval for transfers of 50% or more of the district’s assets, as specified. Existing law also authorizes a local health care district to transfer its assets to one or more nonprofit corporations to operate and maintain the assets for the benefit of the communities served by the district without adequate consideration upon specified conditions being satisfied, subject to voter approval for transfers of 50% or more of the district’s assets. This bill, notwithstanding those provisions, would authorize Palomar Health District to transfer its assets to the Palomar UC San Diego Health Authority if certain conditions are satisfied, including that the board of directors of Palomar Health District adopts a resolution approved by a majority of the board authorizing the execution, delivery, and performance of the operative agreements necessary for the transfer of Palomar Health District assets to the authority and that related agreements contain enforceable covenants requiring that the authority operate and maintain the transferred assets for the provision of health care services for not less than 10 years from the effective date of the transfer of the assets, as specified. The bill would make this authorization apply retroactively to any transfer of Palomar Health District assets to the authority that was approved by the board on or after January 1, 2025, and that, at the time of the board’s approval, would have satisfied specified conditions. If Palomar Health District does not execute a transfer agreement with the authority on or before December 31, 2028, the bill would make the authorization to enter into a transfer agreement expire on December 31, 2028. The bill would prohibit the authority from transferring, selling, leasing, or otherwise conveying all or substantially all of the assets transferred to it pursuant to these provisions by Palomar Health District without the prior approval of the board of directors. At least 30 days prior to the transfer of all or substantially all of its assets pursuant to these provisions, the bill would require the authority to hold at least 2 public hearings, as specified. Within 30 days of any transfer of Palomar Health District assets, the bill would require Palomar Health District to report to the Attorney General specified information, including, among other things, a description of the assets transferred and a summary of the consideration received. The bill would make legislative findings and declarations as to the necessity of a special statute for Palomar Health District. (9) Existing federal law, the National Suicide Hotline Designation Act of 2020, designates the 3-digit telephone number “988” as the universal number within the United States for the purpose of the national suicide prevention and mental health crisis hotline system operating through the 988 Suicide & Crisis Lifeline. Existing law, the Miles Hall Lifeline and Suicide Prevention Act, requires, among other things, the California Health and Human Services Agency (agency) to create, no later than December 31, 2024, a set of recommendations to support a 5-year implementation plan for a comprehensive 988 system. Existing law requires the agency to convene a state 988 advisory group for purposes of advising the agency on the set of recommendations and requires the recommendations to include specified information. Existing law requires the advisory group to meet at least once per quarter until December 31, 2024. Existing law authorizes the agency to disband the advisory group on or after January 1, 2025. Existing law requires the agency, until December 31, 2029, to post regular updates, no less than annually, regarding the implementation of 988 on its public internet website. This bill would require the advisory group to meet at least once per quarter until Decem [Text truncated for display. 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