Prop 44 fails: Clinics defeat measures that would have restricted their spending

California voters have overwhelmingly rejected Proposition 44, which would have required community health clinics to spend at least 90% of their revenue on program services.

With 81.7% of voters against it on Tuesday, the measure was defeated as polling had indicated. A Public Policy Institute of California survey in October found only 25% of likely voters supported it.

The result is another loss at the ballot box for SEIU-United Healthcare Workers West, the labor union that sponsored the measure. Voters rejected the union’s three earlier measures on dialysis clinics in 2018, 2020 and 2022.

The outcome is a win for the California Primary Care Association, which led the opposition and an array of opponents in the healthcare industry, that collectively outspent the union 2 to 1.

“Today’s resounding defeat shows that health centers will not be bullied and that protecting the whole-patient, whole-community care we are known for will always be a priority,” Francisco Silva, president of the California Primary Care Association, said in a statement Tuesday night.

Proposition 44 would have required community clinics to spend at least 90% of their annual revenue on patient care or pay fines to the state. While spending varies by clinic, on average, clinics today spend about 80% of revenue on providing services, according to a nonpartisan analysis by the Legislative Analyst’s Office.

The labor union Service Employees International Union-United Healthcare Workers West placed Prop. 44 on the ballot. The union argued the measure would add a layer of accountability to how clinics spend taxpayer dollars. Clinics are the safety net for an estimated 7 million low-income Californians and are paid largely through reimbursements from public insurance programs and federal grants.

Union spokespeople pointed to “excessive” executive salaries — some of which recently became the subject of a complaint filed with the Internal Revenue Service — as an inappropriate use of taxpayer dollars.

“Money should not be directed towards excessive executive compensation or other non-essentials that we have seen within … our clinic system,” Renée Saldaña, a union spokesperson, said.

The opposition, led by clinics, raised $39 million to defeat the measure, more than double the $17 million supporters reported. Clinics argued they had a lot to lose, and so did their patients. An analysis commissioned by opponents estimated the measure could cost clinics about $1.7 billion in noncompliance penalties in the first year, forcing some of them to close or reduce services.

“This puts our patients in danger, limiting our patients' access to care,” Dr. Jerry Abraham of Kedren Health, a community clinic in South Los Angeles, said during a recent rally. “Unfortunately, that doesn't mean patients' need for care goes away. Guess where they are going to go? If they can’t come to clinics, they’re gonna go to the emergency department.”

Clinic leaders added that their health centers are already heavily regulated by state and federal health authorities.

A key question in this proposal was exactly what type of costs would qualify as appropriate healthcare spending.

Prop. 44 left the answer up to the state's attorney general, directing that office to issue guidance. Depending on those guidelines, clinics argued that they could have been penalized for spending on critical items such as medical equipment upgrades, support staff and construction projects, or for keeping money in their budget reserves.

Prop. 44 was the second attempt by the healthcare workers’ union to restrict clinic spending – a similar bill failed to advance last year.

The California Primary Care Association, which represents about 2,000 community clinics, sued the union twice. First, it sued to keep the measure off the ballot, but a federal judge dismissed that case over the summer. In September, the clinics filed a separate case accusing the union and its president, Dave Regan, of exploiting the ballot process to coerce clinics into accepting the union’s bargaining demands.

The union said the allegations were “categorically false.” This second lawsuit is still pending.

The union also backed Proposition 40, which would impose a one-time 5% tax on California residents worth $1 billion or more.

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.