HCAI outlines $1.9 billion BH Connect workforce plan, CalRx changes and diaper‑access proposal in May Revision

The Department of Health Care Access and Information (HCAI) presented several May Revision proposals to the Assembly Budget Subcommittee No. 1 on Health, including: a behavioral‑health workforce initiative under the BH Connect framework requiring substantial federal match and state funds; a CalRx adjustment redirecting $5,000,000 of previously deferred funds to high‑priority generic drugs while reverting $45,000,000 originally set for an in‑state insulin manufacturing facility; and a diaper access initiative that would provide an initial three‑month diaper supply for newborns under a phased rollout.

BH Connect workforce proposal: HCAI requested expenditure and reimbursement authority of up to $1,900,000,000 over five years and 57 positions to implement the BH Connect workforce initiative (including programs created under Senate Bill 326 and Proposition 1). HCAI said the package includes significant federal matching dollars; the department indicated $807,500,000 of general‑fund support is reflected in HCAI's built‑in budget assumptions and that much of the package will rely on federal reimbursements and offsets.

CalRx and priority drugs: HCAI said the May Revision retains $5,000,000 from a previously deferred $50,000,000 CalRx insulin appropriation and redirects that amount to immediate public‑health priorities — HCAI cited school albuterol access as an initial target and said it will issue a request for information to identify additional high‑impact drugs at risk of market failure. The administration is proposing to revert the remaining $45,000,000 that had been earmarked for an in‑state insulin manufacturing facility; HCAI and GoBiz concluded the proposed California manufacturing plant was not feasible within the timeline and costs originally anticipated.

Diaper access initiative: HCAI described a phased, universal‑approach diaper initiative, giving newborns a three‑month supply of diapers — $7.5 million in FY 2025–26 and $12.5 million in FY 2026–27 in the May Revision. HCAI said it issued an RFI to solicit comments on distribution approaches, and that hospitals and existing diaper banks were among stakeholders contacted. HCAI said preliminary feedback indicated storage constraints at hospitals would need to be addressed in program design.

Federal reporting and program adjustments: HCAI also requested funding to support new federal data reporting requirements for long‑term care staffing and to continue work on the Health Care Payments Data (HPD) program (the state's all‑payer claims database). HCAI said the HPD collects prescription data from payers but the May Revision includes adjustments to account for implementation timing and funding sources.

Legislative Analyst Office and members' questions: The LAO advised that substantial policy proposals with limited immediate budget impacts — such as PBM reforms (discussed elsewhere at the hearing) — are often better considered through the policy process, and it encouraged the committee to evaluate diaper policy alternatives that rely on existing networks (diaper banks, CalWORKs) as possible lower‑cost or more targeted approaches. Members asked HCAI how the diaper proposal would interact with existing diaper‑bank funding and how hospitals would participate; HCAI said the RFI is intended to resolve operational questions and that the department would coordinate with other agencies as needed.

Why it matters: The workforce request would be the state's largest direct behavioral health workforce investment in recent years and depends on multi‑year federal match; the CalRx adjustment closes an expensive feasibility gap in building local insulin manufacturing capacity while retaining funding for other drug‑market interventions; the diaper initiative attempts to address infant and maternal health burdens tied to diaper affordability.

Next steps: Committee members asked for further detail on program design, the RFI results for diapers, and the federal matching assumptions that underpin BH Connect. The subcommittee did not take final action and requested that HCAI and administration staff return with clarifying documentation.