From the Capitol – September 2018

• OVERVIEW
• LEGISLATURE SENDS BUDGET TO THE GOVERNOR AND HE SIGNS IT
  • DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHHS)
  • TRANSPORTATION
  • ENVIRONMENTAL QUALITY
  • TALENT AND ECONOMIC DEVELOPMENT
  • LICENSING AND REGULATORY AFFAIRS
  • NATURAL RESOURCES
  • TREASURY
• HEALTH POLICY
  • WILL MEDICAID EXPANSION SURVIVE?
  • DRUG TRANSPARENCY
  • PRIOR AUTHORIZATION
• CRIMINAL JUSTICE
• INSURANCE
• POLITICS
  • GOVERNOR
  • SECRETARY OF STATE
  • ATTORNEY GENERAL
  • SUPREME COURT
  • STATE BOARDS
  • STATE BOARD OF EDUCATION
  • MICHIGAN STATE UNIVERSITY BOARD OF TRUSTEES
  • WAYNE STATE BOARD OF GOVERNORS
  • UNIVERSITY OF MICHIGAN BOARD OF REGENTS
  • U.S. CONGRESS
  • STATE SENATE
  • STATE HOUSE OF REPRESENTATIVES

After recessing for the summer, the Michigan Legislature returned on September 4. The House was in session that week, and will meet again the last week in September and the first week in October, before breaking to campaign for the November 6 general election. The Senate will meet more often, but is roughly on the same schedule. As of this date, a “lame duck” session is scheduled to begin on November 7 and will last until December 18. This year, all state elected officeholders and candidates face the voters. Democrats hope to gain the Governor’s office, the majority in the House of Representatives, seats in the State Senate and possibly a seat on the State Supreme Court. Prior to the November general election, nominees were chosen by the major political parties on August 7 at the primary election for the office of Governor, U.S. Senator, U.S. House, members of the State Senate and State House. Nominees for the offices of Lt. Governor, U.S. Senate, U.S. Congress, Attorney General and Secretary of State, Supreme Court and members of governing boards of Michigan’s three major universities and the State Board of Education were chosen at the party conventions held recently. For the eighth straight year, the Legislature enacted a budget and presented it to the Governor in June. It also attempted to:

• Address the opioid crisis;
• Revise the auto no-fault law;
• Establish work requirements for those enrolled in the State’s Medicaid expansion program;
• Repeal the fifty year old prevailing wage statute;
• Respond to the sexual abuse scandal at one of the State’s major universities;
• Begin negotiations on pharmaceutical price transparency and protection from prior authorization for certain drugs;
• Begin consideration of updating the process to expand the State’s wireless and broadband infrastructure;
• Begin consideration of revisions to the State’s Solid Waste Management Act; and
• Overhaul the method the State uses to finance its Medicaid program, to name a few.

The following is a summary of actions taken by the Legislature and the executive branches of state government during the beginning of the year. The Legislature enacted a budget of over $54 billion for fiscal year 2018 – 2019, which begins October 1. Of that amount, almost $40 billion was appropriated for the departments of state government, and of that $40 billion, over $25 billion was appropriated to the Department of Health and Human Services (DHHS) which administers and oversees the State’s Medicaid and Medicaid expansion programs. The Governor signed this Omnibus Budget Bill with no line item vetoes. Here are some of the highlights included in the budget. DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHHS) Clearly, this budget is the largest in state government, consisting of nearly 50 percent of all state spending. Some of the highlights include:

• A 2.5 percent increase in rates for Medicaid health plans in an effort to achieve actuarial soundness.
• Protection from prior authorization in the Medicaid program for drugs used for the treatment of mental illness, seizures, HIV/AIDS and organ transplant therapy, while at the same time requiring DHHS to account for the cost of such a “carve out” from prior authorization.
• A requirement that those enrolled in Michigan’s Medicaid expansion program for 48 months undergo a health assessment and curtail unhealthy behaviors like smoking.

TRANSPORTATION The Legislature appropriated over $4.5 billion for the transportation budget, of which over $3.1 billion came from State restricted funds, and over $1.3 billion came from federal funds. Highlights include:

• Increased funding for roads due to the special road-funding package approved earlier, including $56 million from MDOT, almost $78 million from County Road Commissions, over $43 million from Cities and Villages, $1.2 million from the Transportation Economic Development Fund, and nearly $18 million from the Local Bridge Program;
• State Trunkline Fund (STF) increases for the maintenance of bridges, culverts and program delivery and development;
• An increased appropriation for material costs and maintenance of 49 STF lane miles;
• An additional $300 million for improvement of roads, payment of which to be split among MDOT, County Road Commissions, and Cities and Villages; and
• A new section of boilerplate directing the design, engineering and repair of a passenger rail line connecting Ann Arbor and Traverse City.

ENVIRONMENTAL QUALITY The total gross appropriation for the Department of Environmental Quality (DEQ) was just over $447.5 million, which is approximately $104 million less than last year. Highlights include:

• A one-time appropriation of $25 million toward clean-ups under Part 201 of the Natural Resources and Environmental Protection Act; and
• A one-time appropriation of $500,000 for the Michigan Geological Society.

TALENT AND ECONOMIC DEVELOPMENT The Department of Talent and Economic Development’s budget incorporated several reductions. They include:

• Removal of one-time appropriations totaling over $5.5 million.
• Removal of over $35 million in Michigan Enhancement grants and funds for marketing, totaling $15 million.

LICENSING AND REGULATORY AFFAIRS The Department of Licensing and Regulatory Affairs (LARA) has a broad oversight responsibility for a wide variety of activity regulated by the State. The Legislature appropriated over $80 million more for LARA in this budget. Some of the major initiatives in this budget are:

• Approximately $84 million for the Michigan Indigent Defense Commission grants, including grants to local government defense systems to implement initial minimums established by the Commission.
• An increase of $3.4 million to annualize the First Responder Fund.

NATURAL RESOURCES The Legislature appropriated over $24 million more in the upcoming budget from the current DNR budget.

• The House and Senate included in their budget and the Governor approved $10 million.
• Additional funding for waterway projects, off-road vehicle trail improvement and improvement to forest access.

TREASURY

• Based on the May 2018 Revenue Estimating Conference, the Legislature appropriated over $835 million for constitutional revenue sharing, a 2.8 percent increase over the revised current amount.
• The Department received a small increase in appropriations over the current year.

WILL MEDICAID EXPANSION SURVIVE? Nearly 20 percent of Michigan’s citizens are now enrolled in the State’s Medicaid program. The program, meant to give health care coverage to people with incomes between 100-130 percent of the federal poverty level, was enacted in 2011 over strong objection by conservatives. In order to secure legislation passage with some conservative Republicans, a few initiatives were added. The most important of these was a requirement that enrollees would be required to undergo a health risk assessment and adopt healthy behaviors such as quitting smoking or losing weight. The Medicaid expansion program, called the Healthy Michigan Plan, was wildly successful to the point of now insuring approximately 675,000 people. In order to control the growth of the program, legislators offered work or work related requirements for those who have been enrolled in the program 48 months or longer. SB 897 required “able bodied” enrollees in the Healthy Michigan Plan for 48 months or longer to work or be engaged in work training or volunteer activities for a minimum of 80 hours per month. The bill did, in fact, have a number of exceptions for those who could not or were unable to work, but the legislation still met with opposition from Democrats and several consumer advocates. The bill also required an enrollee after 48 months to pay up to five percent of his/her income toward premiums. Since these requirements were a deviation from Medicaid requirements, the legislation also required DHHS to file for and obtain a waiver from the federal Centers for Medicare and Medicaid Services (CMS). Without the waiver the Healthy Michigan Plan would eventually cease to exist. The Governer signed the SB 897 on June 22 and is Public Act 208 of 2018. Meanwhile, in D.C. federal district court, a case was pending involving a Kentucky statute that had very similar work and premium payment requirements for Medicaid expansion enrollees and a waiver granted to the program by CMS. Opponents of the waiver and the Kentucky statute argued the work requirements violated the intent and purpose of the Affordable Care Act and the Medicaid program. On June 29, 2018, just one week after Governor Snyder had signed work requirements for Michigan’s Medicaid expansion into law, the federal court ruled that the waiver granted by CMS was invalid because, among other things:

• CMS had not adequately considered the impact work requirements would have on enrollees.
• CMS had not followed proper procedures required by the Administrative Procedures Act.
• Work requirements like those found in the Kentucky statute violated and were contrary to the whole purpose of the Medicaid program.

This last finding of the court has great implications for many states who, like Kentucky and Michigan, have imposed work requirements on enrollees. Meanwhile, Michigan’s DHHS has held two public hearings already on the State’s waiver requirement to CMS and still plans to file a waiver application prior to October 1, 2018, as required by the new enactment. The U.S. Justice Department did not file an appeal of this ruling, as CMS evidently believes it can rectify the district court’s decision through administrative action. If the federal government does not satisfactorily respond to the court’s decision, the Healthy Michigan Plan is at risk because of the built in statutory “kill switch” in the event the Michigan waiver, which was filed with CMS on September 10, is not approved. Stay tuned. DRUG TRANSPARENCY For some time, legislators have been hearing from their constituents about the high cost of drugs. Moreover, the state’s Medicaid program has been feeling the fiscal strain of the cost of pharmaceuticals, even though pharmaceutical companies give the state significant rebates and supplemental rebates. In response, pharmaceutical companies and advocacy groups say the alternative, a hospital stay and/or corrective surgery is more costly. Earlier this year, Rep. Hank Vaupel (R-Fowlerville), the chair of the House Health Policy Committee, sponsored HB 5223 which requires drug companies to disclose their costs related to manufacture, marketing and advertising if the drug costs $10,000 or more at one time or during the course of treatment. Drug companies have objected because they say there are many factors in the distribution chain, such as wholesalers, retailers and pharmacy benefit managers (PBMs).  Consequently, Rep. Vaupel has enlarged the scope of his bill to include PBMs. At this stage, given the limited number of days left in this session, chances of enactment of this pricing transparency legislation appear slim. PRIOR AUTHORIZATION One of the major complaints among consumers and providers is the use of “prior authorization” techniques to discourage the use of certain drugs and medical procedures by health insurance companies and health plans. Health plans and insurance companies view prior authorization techniques as a necessary tool to control costs, and is typically used for very expensive therapy and diagnostic testing. Providers and certain consumer advocacy groups complain that drugs and testing subject to prior authorization is arbitrary and there are no standards for implementation of the procedure. Moreover, advocacy groups complain that prior authorization techniques all too often act as a barrier for the most vulnerable to obtain needed medication. This past spring, Sen. Margaret O’Brien (R-Portage) introduced legislation which would make it clear that certain drug classifications were exempt from prior authorization by insurance companies and health plans. SB 823 protects drugs used for the treatment of epilepsy, mental health conditions, organ transplants and HIV/AIDS from prior authorization. Ironically, the Department of Health and Human Services, in its Medicaid contracts with health plans and insurance companies, already requires these drugs to be exempt from prior authorization.  Moreover, budget boilerplate language does the same thing. Nonetheless, advocates believe placement of such protection in statute, the Social Welfare Act specifically, will ensure protection. In May, the Senate Health Policy Committee held a hearing on the bill and another one is anticipated prior to the end of session. However, since boilerplate language already offers such protection, there does not appear to be any urgency for legislative enactment prior to the end of the year. A growing concern within the medical community is the use of prior authorization to limit such things as diagnostic testing. The concern is similar to that in other areas of health care, such as pharmaceuticals, and will probably come to a head next legislative session. SMALL WIRELESS COMMUNICATIONS FACILITIES DEPLOYMENT ACT In an effort to expand the footprint of wireless networks to provide better access to emergency services, advanced technology and information, and enhance the state’s competitiveness in a global economy, lawmakers are considering legislation to overhaul the placement of a wireless infrastructure. The need is particularly acute in growing urban areas and rural Michigan. Consequently, Sen. Joe Hune (R-Hamburg Twp.) introduced SB 637, which creates the Small Wireless Communications Facilities Development Act. Among other things, the bill:

• Defines a “small cell wireless facility;”
• Prohibits an authority from prohibiting, regulating or charging for the collection of small cell facilities;
• Regulates wireless providers within public rights-of-way for deployment of small cell wireless facilities and associated new or modified utility poles;
• Allows an authority to require a permit to co-locate a small cell wireless facility;
• Prohibits an authority from entering into an exclusive relationship with any “person,” including a governing body of a municipality for the right to attach authority poles; and
• Places a cap on allowable rates for co-location of small cell wireless facilities on authority poles.

Along with SB 637, Sen. Mike Nofs (R-Battle Creek) introduced SB 894, which amends Michigan’s Zoning Enabling Act to make zoning ordinances subject to and superseded by the Small Wireless Communications Facilities Deployment Act. The bill was introduced to alleviate concerns that similar provisions found in a previous version of SB 637 violated the constitutional prohibition against incorporating one statute by reference. The bills passed overwhelmingly in the Senate over the objections of the County Road Association of Michigan and other local government interests. The bills were then referred to the House Committee on Energy. The chair of that committee held a hearing prior to the summer legislative recess and has scheduled another for October 4. These bills will probably be enrolled in a lame duck session. In response to the sexual assault scandal involving young female gymnasts, the Legislature enacted a series of bills that, among other things:

• Eliminates the statute of limitations period for second-degree criminal sexual conduct involving a victim under 18.
• Expands the statute of limitations period to 30 years for third degree criminal sexual conduct involving a victim under 18 years, or by the victim’s 48^th birthday.
• Extends reporting requirements for individuals employed in a professional capacity at a post-secondary institution.

Senate bills 871–875 and 877–880 received bipartisan support and sponsorship. The bills were signed into law in June. Again, this session, as has been the case in the last three sessions, the Legislature failed to pass comprehensive auto no-fault revisions. While the Senate is ready and willing to overhaul the 40-year-old statute, the House still cannot be persuaded. Specifically, several Republican members, especially from Oakland County and other parts of southeast Michigan, have teamed up with Democrats to oppose rollback of key provisions of the current law, most notably, the unlimited medical benefits for catastrophic injury provision. Several GOP state representatives from Oakland County and surrounding areas oppose revision because of the serious opposition from Republican Oakland County Executive L. Brooks Patterson. To complicate matters, there is a crack – but not a break – in the House Democratic opposition. That crack was developed by Detroit Mayor Mike Duggan, who finds the auto insurance rates for Detroiters too high and totally unacceptable. Recently, the Senate passed and sent to the House two bills, which will purportedly give some rate relief to seniors. SB 787 amends the Insurance Code to, among other things:

• Require individuals 65 or older to select a $50,000 maximum limit on the personal injury benefits when applying for a policy;
• Require a person 65 or older to attest to their age and specify the medical benefits desired;
• State that a $50,000 limit selected by the individual would apply only to benefits payable as a result of accidental bodily injury to the individual or his/her spouse; and
• Specify that a person who suffered accidental bodily injury from a motor vehicle accident who was not covered by the policy would have to claim benefits under the Assigned Claim Plan.

The SB 1014 also amends the Insurance Code to:

• Require the Secretary of State to provide auto insurance policy information to the Michigan Automobile Insurance Placement Facility;
• Place limits on the amount paid for attendant care in the home;
• Limit the liability of an insurer of an out of state resident;
• Create the Michigan Automobile Insurance Fraud Authority within the Department of Attorney General to provide support for law enforcement investigating fraud;
• Require auto insurers to report automobile insurance fraud data to the Authority to publish an annual report; and
• Dissolve the Authority on January 1, 2024.

Whether this, or a comprehensive auto no-fault revision will be considered in a lame duck session, are still an open question, chances are Republicans will give a revision one last shot. On August 7, Michigan held its Primary election to determine the political party nominees for statewide office, members of Congress, state senators, state representatives, numerous local offices and many judgeships. For many offices contained within a district, such as state senator, state representative or county offices, the winner of the primary is almost a lock to win in November because most districts slant significantly toward one political party or another. GOVERNOR: The pollsters were right from the very beginning. In the Republican Primary, Attorney General Bill Schuette coasted to a convincing win over his nearest rival, Lt. Governor Brian Calley. The Attorney General had, from the get-go, endorsed President Donald Trump once the President secured the Republican nomination in 2016. The Lt. Governor, on the other hand, refused to endorse Trump. In the end, Republican voters opted for the Attorney General, not only because of his close ties to President Trump, but perhaps also because he has been a fixture in GOP political circles for over 30 years. Approximately two weeks after his primary victory, Schuette selected Kent County Clerk Lisa Posthumus Lyons as his running mate for Lt. Governor. Posthumus Lyons is a former state representative and the daughter of former Senator and Lt. Governor Dick Posthumus, who is Governor Snyder’s Chief Legislative Advisor. The selection of Posthumus Lyons is viewed as an effort by the Attorney General to unify the Party and to get Governor Snyder on board since the Governor had endorsed Lt. Governor Calley in the primary. On the Democratic side, former State Democratic Leader Gretchen Whitmer was the runaway victor over her competitors, getting over 51 percent of the vote. Senator Whitmer’s opponents came from the left or “progressive” wing of the Party in the form of Detroit Medical Officer Abdul El Sayed and businessman Shri Thanedar. About a week prior to the Democratic State Party Convention, Sen. Whitmer chose political unknown Garlin Gilchrist from Detroit for Lt. Governor. The choice of Gilchrist rounds out a Democratic Party ticket consisting of three women and Gilchrist. It also provides diversity, as Gilchrist is African American. With the top of the ticket set, the nominees for other statewide offices were decided at the Party Conventions: U.S. CONGRESS Michigan has 14 U.S. House members and two U.S. Senators. Senator Debbie Stabenow will face the Republican nominee President Trump backed, John James, who defeated businessman Sandy Pensler in the primary. As of today, Stabenow is the prohibitive favorite to be reelected. In the House, Republicans hold a 9–5 edge and Democrats are hoping to flip at least two seats in November. Those seats are the 8^th and 11^th Districts in suburban Detroit. In the 8^th, incumbent Mike Bishop of Rochester is the favorite over the Democratic nominee Elissa Slotkin, a veteran of the Iraq war who also served in the CIA. The district stretches from northern Oakland County and includes all of Livingston and Ingham Counties. This district has a 53 percent Republican base, but Democrats are hoping the anticipated “blue wave” carries Slotkin to a win. The Democrats think they might be able to flip the 11^th District, which encompasses western Oakland County and is currently represented by Republican David Trott who is retiring after only two terms. Businesswoman Lena Epstein emerged as the Republican nominee and defeated a popular State Senate Majority Floor Leader and State Representative.  The Democratic nomination went to a former U.S. Treasury official, Haley Stevens, who defeated an impressive list of contenders, which included a former State House Democratic Leader and the brother of a CNN television personality. Michigan will have a new member of Congress and the first Muslim female in the U.S. House. Rashida Tlaib, a former state representative, won a hotly contested Democratic Primary in this 80 percent Democratic district. SECRETARY OF STATE For the Republicans, Mary Treder Lang of Grosse Pointe was nominated. Her nomination was made easier when her chief rival, Stan Grot of Shelby Township, withdrew from the race. For the Democrats, law professor Jocelyn Benson was nominated. This will be Benson’s second try for the office, as she lost in the big Republican year of 2010 to the eventual winner, Ruth Johnson, who is now term limited. ATTORNEY GENERAL The race for the Republican nomination for Attorney General was hotly contested between current House Speaker Tom Leonard of Dewitt and Senator Tonya Schuitmaker of Lawton in Van Buren County. In the end, the convention delegates chose Leonard, who has a significant edge in resources and organization. For the Democrats, Dana Nessell, a former assistant prosecurtor and a civil rights attorney, received a recommendation from the Party in April and was formally nominated at the Convention. SUPREME COURT Michigan has a rather unique system of picking Supreme Court Justice nominees. Candidates are chosen at the Party conventions, but run as “non-partisan.” For the Republicans, incumbent Justices Kurtis Wilder and Elizabeth Clement were formally nominated. Both were appointed by Governor Snyder to fill vacancies and are running statewide for the first time. Justice Clement’s nomination was subject to some dissent due to her vote with the majority to allow an amendment to the Constitution to be placed on the ballot, which would significantly diminish political party influence in reapportionment. On the Democratic side, University of Michigan law professor Samuel Bagenstos and appellate attorney Megan Kathleen Cavanagh were nominated. Cavanagh is the daughter of former Michigan Supreme Court Justice Michael F. Cavanagh. STATE BOARDS Political parties also nominate their candidates for State Board of Education, Michigan State University, Wayne State University and the University of Michigan STATE BOARD OF EDUCATION Currently the State Board of Education has a 4–4 split between the two major political parties. Democrats nominated Tiffany Tilley and Judy Pritchett to replace Republican incumbent Richard Zeile and newly nominated Tami Callone. MICHIGAN STATE UNIVERSITY (MSU) BOARD OF TRUSTEES The MSU Board of Trustees, like the State Board of Education, is evenly split with four Democrats and four Republicans. Democrats nominated two candidates, vowing to push for a cultural change at MSU in light of the recent sexual abuse scandal. Brianna Scott and Kelly Tebay were nominated among a field of several candidates. Ms. Scott is an attorney in private practice and Ms. Tebay works for United Way in southeastern Michigan. Ms. Tebay informed Convention delegates that she had been the victim of sexual assault while a student on campus, so the issue and the need for a culture change were personal to her. The two Republicans up for reelection have opted not to run again. In uncontested races, the GOP nominated businessman David Dutch and Mike Miller. WAYNE STATE BOARD OF GOVERNORS Democrats currently hold a 5-3 majority on this board. For the Democrats, Anil Kumar, a Bloomfield Hills surgeon, and Bryan Barnhill, chief talent officer for Detroit Mayor Mike Duggan, were nominated in a contested race. The Republicans nominated incumbent Diane Dunaskiss, a former special education teacher and school administrator from Lake Orion and David Nicholson, CEO of PVS Chemical, who is from Grosse Pointe. UNIVERSITY OF MICHIGAN BOARD OF REGENTS Democrats currently hold a 5–3 majority on this board. Democrats nominated Huntington Woods attorney Jordan Acker, and Paul Brown from Ann Arbor, a partner in a venture capital fund. The Republicans nominated incumbents Andrea Fisher Newman, a former Delta Airlines executive and Andrew Richner, a former state representative from Grosse Pointe. STATE SENATE The GOP currently holds a 27–10 lead in the state senate, with one seat currently vacant. Democrats hope to make significant gains to be a viable minority. The Senate will have at least 28 new members, out of a total of 38, due to term limits and the incredible upset of Sen. David Knezek of Dearborn Heights. Knezek lost the primary to political unknown Betty Jean Alexander, who had signed an affidavit with the Secretary of State’s Office saying she would not raise or spend more than $1,000 in the race. At this stage, the conventional thinking is the Democrats will pick up four to six seats. STATE HOUSE OF REPRESENTATIVES The Republicans currently hold a 63–46 lead in the Michigan House with one seat, which is statistically Democratic, currently vacant. The primary saw two incumbents defeated, one Republican and one Democrat. The Democrats hope to pick up a number of seats in “swing” districts, but obtaining a majority is right now a 50/50 proposition. All of these races will, to a great extent, be dependent upon turnout and which group of voters are “motivated” to vote. At this stage, most pundits believe the Democrats are highly motivated, based on a number of factors, which include being the Party out of power in both Washington and Lansing. Other factors include the fact that the President is unpopular among certain groups in addition to which issues will be placed on the ballot. Two ballot questions, one increasing the minimum wage and the other imposing mandatory sick leave time, could inspire Democratic turnout even more, will be rendered moot as the Republican majority in both Houses used its constitutional authority to adopt the proposals, thus not sending them to the voters. Once the election is over, the GOP leadership hopes to amend, in a “lame duck” session, the initiatives it adopted. The Democrats are crying foul, saying it denies the people’s right to initiate legislation and that it would be illegal to amend an initiated act which has been adopted by the legislature in the same session. Nevertheless, two ballot proposals remain that may spur voter turnout. The first is to amend the State Constitution to create a 13 member citizens redistricting commission. The proposal, called “voters not politicians,” would change the way legislative and congressional districts are drawn, removing that function from the legislation to the bipartisan/nonpartisan commission. The other proposal would amend the State Constitution to make the use of cannabis plants lawful, allowing for its agricultural, recreational and commercial use, and nullifying all state laws prohibiting cannabis in any form.