SB 172
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
Senate Bill 172 (Senator Hayes, et al.)
Budget and Taxation and Finance Health and Government Operations
Maryland Health Equity Resource Act
This emergency bill establishes a process for designation of “Health Equity Resource
Communities” (HERCs) to target State resources to specific areas of the State to reduce
health disparities, improve health outcomes and access to primary care, promote prevention
services, and reduce health care costs and hospital admissions and readmissions. An HERC
Advisory Committee and HERC Reserve Fund are established; incentives are authorized
for health care practitioners or community health workers (CHWs) that practice in an
HERC. In fiscal 2023 through 2025, the Governor must transfer $15.0 million from the
Maryland Health Benefit Exchange (MHBE) Fund to the HERC Reserve Fund as an
appropriation in the State budget. The Maryland Community Health Resources
Commission (MCHRC) must establish a Pathways to Health Equity Program to provide
the foundation and guidance for a permanent HERC program and provide grant funding to
specified entities. The bill also establishes a Pathways to Health Equity Fund. Provisions
regarding the Pathways to Health Equity Program and Fund terminate June 30, 2023.
Fiscal Summary
State Effect: Special fund expenditures from the MHBE Fund increase by $15.0 million
in FY 2023 through 2025; special fund revenues for the HERC Reserve Fund increase
accordingly. The Pathways to Health Equity Fund is capitalized with up to $14.0 million
in FY 2021 (not reflected); expenditures from the fund increase by up to a total of
$14.0 million in FY 2022 and 2023 for grants, staff, and technical assistance (not reflected).
MCHRC special fund expenditures from the Community Health Resources Commission
(CHRC) Fund increase by $169,400 in FY 2023 for staff; future years reflect ongoing staff
costs from this fund. Special fund grant awards and HERC incentives are not reflected
below. This bill establishes a mandated appropriation beginning in FY 2023.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
SF Revenue $0 $15,000,000 $15,000,000 $15,000,000 $0
SF Expenditure - $15,169,400 $15,250,400 $15,259,400 $268,600
Net Effect ($-) ($-) ($-) ($-) ($268,600)
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: Revenues and expenditures may increase in local jurisdictions associated
with grants from the Pathways to Health Equity Program in FY 2022 and 2023 and for
designation as an HERC in FY 2023 through 2025.
Small Business Effect: Meaningful.
Analysis
Bill Summary:
Pathways to Health Equity Program
The program must provide grant funding to reduce health disparities, improve health
outcomes, improve access to primary care, promote primary and secondary prevention
services, and reduce health care costs and hospital admissions and readmissions. MCHRC
must issue a request for proposals (RFP) for applicants that meet specified criteria. Grants
awarded through the program must be for two years. MCHRC must give special
consideration to proposals from areas previously designated as a Health Enterprise Zone
(HEZ). One additional staff must be added to MCHRC, specifically to staff the program.
Chesapeake Regional Information System for our Patients (CRISP) must provide technical
assistance to MCHRC by maintaining a data set and supporting program evaluation for the
program.
By December 1, 2021, MCHRC must issue an interim report to the Governor and the
General Assembly on grants awarded. By January 1, 2023, MCHRC must issue a final
report to the Governor and the General Assembly on (1) grants awarded; (2) options to
develop, sustain, and establish a permanent HERC program in the Maryland Department
of Health (MDH); (3) cost-effective ways to measure the impact of an HERC;
(4) workforce and recruitment strategies to be used by an HERC; and (5) any
recommendations, including legislative recommendations, related to HERCs.
Pathways to Health Equity Fund
The purpose of the fund is to implement the Pathways to Health Equity Program through
grant funding and staff support. The special, nonlapsing fund consists of (1) $14.0 million
authorized for MCHRC under Chapter 39 of 2021 and (2) any other money from any other
source. The fund is subject to audit by the Office of Legislative Audits. The fund may be
used only to implement the Pathways to Health Equity Program and evaluate the impact of
grants awarded under the program. Money expended from the fund is not intended to
supplant funding appropriated to MCHRC, as specified. The fund may not be comingled
or combined with the CHRC Fund.
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Health Equity Resource Communities
“Health Equity Resource Community” means a contiguous geographic area that
(1) demonstrates measurable and documented health disparities and poor health outcomes;
(2) is small enough to allow for the incentives offered under the bill to have a significant
impact on improving health outcomes and reducing health disparities, including racial,
ethnic, geographic, and disability-related health disparities; (3) is designated by MCHRC
as specified; and (4) has a minimum population of 5,000 residents.
The Office of Minority Health and Health Disparities must provide technical assistance to
MCHRC in implementing HERCs. At the request of MCHRC, any other unit in MDH must
also provide technical assistance. Two additional staff must be added to MCHRC,
specifically to implement HERCs.
Designation of Health Equity Resource Communities: To receive a designation as an
HERC, a nonprofit community-based organization, a nonprofit hospital, an institution of
higher education, a federally qualified health center (FQHC), or a local government agency
must (1) apply to MCHRC on behalf of the area to receive the designation and (2) include
FQHCs or other community-based organizations to provide health or wraparound support
services within the HERC. The application must contain specified plans and components.
By October 1, 2022, MCHRC must issue an RFP to designate areas as HERCs in
accordance with the bill. In designating HERCs, MCHRC must consider geographic
diversity, among other factors. Following receipt of all applications, MCHRC must report
to the Senate Finance Committee and the House Health and Government Operations
Committee on the names and geographic areas of applicants. MCHRC must give priority
to applications that demonstrate specified factors, including previous designation as an
HEZ. The decision to designate an HERC is a final decision with a five-year term that may
be renewed. However, MCHRC may revoke a designation as an HERC for failure to meet
specified objectives.
Reporting Requirements: Each HERC must periodically submit a specified report to
MCHRC in accordance with a schedule determined by MCHRC. By December 15 each
year, MCHRC must submit a specified report on HERCs.
Health Equity Resource Community Advisory Committee
MCHRC must establish an HERC Advisory Committee by July 1, 2021. The bill specifies
the membership, required expertise, terms, and duties of the advisory committee. The
advisory committee must meet by January 1, 2022, and at least once every six months
thereafter. A member of the advisory committee may not receive compensation but is
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entitled to reimbursement for expenses under the Standard State Travel Regulations, as
provided in the State budget.
MCHRC may convene working or advisory groups to facilitate implementation of HERCs
that must include individuals who reside in an area that has been or may be designated as
an HERC.
Incentives for Health Care Practitioners and Community Health Workers
A health care practitioner or CHW that practices in an HERC may receive loan repayment
assistance, as provided for in the application for designation as an HERC.
A health care practitioner or CHW may also apply to MCHRC for a grant to defray the
costs of capital or leasehold improvements to, or medical or dental equipment to be used
in, an HERC, as specified.
Health Equity Resource Community Reserve Fund
The special, nonlapsing fund consists of (1) money appropriated in the State budget to the
fund in fiscal 2023 through 2025 from the MHBE Fund; (2) interest earnings; and (3) any
other money from any other source.
The fund may be used only to (1) support areas designated as HERCs by providing grants
to specified entities to reduce health disparities, improve health outcomes, provide drug
treatment and rehabilitation, and reduce health costs and hospital admissions and
readmissions and (2) provide supplemental funding for specified behavioral health
programs. Money expended from the fund to support HERCs is supplemental to and is not
intended to supplant funding for those purposes.
Maryland Health Benefit Exchange Fund
The purpose of the MHBE Fund is expanded to include providing funding for the
establishment and operation of HERCs. In addition to current uses, the fund may be used
for appropriations to the HERC Reserve Fund. In each of fiscal 2023 through 2025, the
Governor must transfer $15.0 million from the MHBE Fund to the HERC Reserve Fund
and include the funds in the annual budget bill as an appropriation to HERC Reserve Fund.
Current Law: Chapter 3 of 2012, the Maryland Health Improvement and Disparities
Reduction Act of 2012, established a process for designation of HEZs to target State
resources to reduce health disparities, improve health outcomes, and reduce health costs
and hospital admissions and readmissions in specific areas of the State. The Act authorized
specified incentives for “Health Enterprise Zone practitioners” who practice in an HEZ,
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including tax credits against the State income tax. The HEZ initiative was funded with a
$4.0 million annual appropriation through the Maryland Community Health Resources
Commission. The Act terminated at the end of fiscal 2016.
Chapter 39 (the Recovery for the Economy, Livelihoods, Industries, Entrepreneurs, and
Families (RELIEF) Act), among other actions, establishes a Recovery Now Fund to which
the Governor may transfer $306.0 million from the Rainy Day Fund. On the Governor’s
approval of a budget amendment, up to $14.0 million from the fund may be authorized for
MCHRC in fiscal 2021. MCHRC may retain any funds that remain unspent at the end of
fiscal 2021 into fiscal 2022. MCHRC must use these funds to provide grants to reduce
health disparities, improve health outcomes, improve access to primary care, promote
primary and secondary prevention services, and reduce health care costs and hospital
admissions and readmissions.
MHBE was created during the 2011 session to provide a marketplace for individuals and
small businesses to purchase affordable health coverage. The MHBE Fund may be used
only for the operation and administration of MHBE and for the establishment and operation
of the State Reinsurance Program. The MHBE Fund consists of revenues from a 1%
assessment on all amounts used to calculate an entity’s premium tax liability for the
immediately preceding calendar year. The assessment runs through calendar 2023.
Based on 2019 and 2020 health insurance provider fee assessment collections, the
estimated balance of the MHBE Fund is $446.0 million. As of July 2020, annual revenues
to the fund are estimated by the Maryland Insurance Administration to be $112.6 million
in calendar 2021, $118.9 million in calendar 2022, and $125.6 million in calendar 2023
(the assessment ends after calendar 2023).
For additional information about health disparities, please see the Appendix – Health
Disparities.
State Fiscal Effect:
Pathways to Health Equity Fund
Although the Pathways to Health Equity Fund is capitalized in fiscal 2021 with up to
$14.0 million due to the transfer of monies from the Recovery Now Fund, as authorized in
Chapter 39, net special fund revenues for the State are not affected. Chapter 39 authorizes
these monies to be retained into fiscal 2022 if not expended in fiscal 2021; however, this
analysis assumes that, since the monies are being distributed to a special, nonlapsing fund,
they actually remain available for expenditure through fiscal 2023, when the new fund
terminates.
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Accordingly, a total of up to $14.0 million is available to fund the Pathways to Health
Equity Program beginning in fiscal 2021; however, this analysis assumes expenditures are
not incurred until fiscal 2022 and 2023. Again, total spending does not change from that
assumed in Chapter 39, but the timing of expenditures differs. Specifically, up to
$14.0 million in MCHRC special fund expenditures from the Pathways to Health Equity
Fund are incurred in fiscal 2022 and 2023 combined to award grants, reimburse CRISP for
technical assistance (including maintaining a data set and supporting program evaluation),
and hire staff. This estimate reflects the cost of hiring one full-time project director
(beginning July 1, 2021) to issue an RFP, award grants, provide technical assistance,
evaluate the impact of grants awarded under the program, and prepare reports for the
Governor and the General Assembly, including a final report that must include options for
a permanent HERC program in MDH, cost-effective ways to measure the impact of
HERCs, and workforce and recruitment strategies for HERCs. It includes a salary, fringe
benefits, one-time start-up costs, ongoing operating expenses, and costs for technical
assistance from CRISP, as well as residual funding being used for grant awards.
FY 2022 FY 2023
New Position 1.0 –
Grant Awards $6,510,985 $6,817,156
CRISP Technical Assistance 396,000 99,000
Salary and Fringe Benefits 87,270 83,189
One-time Start-up Expenses 5,090 -
Ongoing Operating Expenses 655 655
Total Pathways to Health Equity Fund Expenditures $7,000,000 $7,000,000
Based on estimated staff costs, MCHRC may award grants of up to $13.3 million over
these two fiscal years combined, after accounting for personnel and other expenses. This
analysis reflects relatively even distribution of grant awards over the two fiscal years,
assuming one-half of the available funding is expended each year; however, actual
expenditures depend on grants awarded.
Although the Pathways to Health Equity Program and Fund terminate at the end of
fiscal 2023, MCHRC advises that, based on prior experience with the HEZ program, a
permanent rather than a contractual position is required to ensure the commission is able
to fill the position.
Future year expenditures reflect a full salary with annual increases and employee turnover
and ongoing operating expenses. As the purpose of the Pathways to Health Equity Fund is
to implement the program through grant funding and staff support, this analysis assumes
monies from the special fund are used to cover administrative expenses (including
technical assistance from CRISP in fiscal 2022 and 2023, and remaining funds are used for
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grants. Beginning in fiscal 2024, MCHRC special fund expenditures from the CHRC Fund
continue to support the position, which transitions to assist MCHRC with other functions.
Health Equity Resource Community Reserve Fund
Special fund revenues for the HERC Reserve Fund increase by $15.0 million in fiscal 2023
through 2025, reflecting transfer of funds from the MHBE Fund and the bill’s mandated
appropriation.
Special fund expenditures increase by up to $15.0 million in fiscal 2023 through 2025 to
support areas designated as HERCs by providing grants and to provide supplemental
funding for specified behavioral health programs. Aside from the mandated appropriation
to the fund, actual expenditures cannot be reliably estimated at this time and will depend
on, among other things, the number of HERCs certified and the number and value of
incentives provided under the bill.
Any costs associated with the HERC advisory committee are assumed to be minimal and
absorbable within existing budgeted resources.
To the extent the bill’s provisions reduce health care costs in HERCs, State expenditures
may decline over time.
Maryland Community Health Resources Commission Staff Expenditures
The bill specifies that two additional staff must be added to MCHRC, specifically to carry
out the bill’s HERC provisions. Thus, MCHRC special fund expenditures increase by
$169,429 in fiscal 2023. This estimate reflects the cost of hiring two full-time staff
(one grade 17 and one grade 19) to implement the HERC program. As MCHRC must issue
an RFP to designate areas as HERCs by October 1, 2022, this analysis assumes these
two positions are hired beginning July 1, 2022. The estimate includes salaries, fringe
benefits, one-time start-up costs, and ongoing operating expenses.
Positions 2.0
Salaries and Fringe Benefits $157,939
One-time Start-up Expenses 10,180
Ongoing Operating Expenses 1,310
Total FY 2023 CHRC Fund Expenditures $169,429
Future year expenditures reflect full salaries with annual increases