BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
542 (Feuer)
Hearing Date: 8/2/2010 Amended: 8/2/2010
Consultant: Katie Johnson Policy Vote: Health 6-2
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BILL SUMMARY: AB 542 would require the Department of Health Care
Services (DHCS) to convene a technical working group to evaluate
options for implementing nonpayment policies and procedures for
hospital acquired conditions for fee-for-service Medi-Cal
consistent with federal laws and regulations and to submit
recommendations to DHCS, the California Health and Human
Services Agency, and the Legislature by February 1, 2011. The
bill would also require both DHCS and the Managed Risk Medical
Insurance Board to implement non-payment policies and procedures
for Medi-Cal and the Healthy Families Program and, when doing
so, to strongly consider the workgroup's recommendations.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
DHCS workgroup staff $100 $0 $0 General/*
and contracts Federal
DHCS and MRMIB likely in the hundreds of
General/**
implementation thousands to millions of dollarsFederal
recommendations commencing in FY 2011-2012 and
going through FY 2012-2013
to the extent exceeds federal
requirements
Potential savings due potentially in the hundreds ofGeneral/
to non-payment thousands to millions of dollars
Federal
commencing after reforms are in place
*Medi-Cal shares costs approximately 50 percent General Fund, 50
percent federal funds
**Healthy Families shares funds approximately 35 percent General
Fund, 65 percent federal funds
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill would require DHCS to convene a technical working
group to evaluate options for implementing nonpayment policies
and procedures for hospital acquired conditions (HACs) for
Medi-Cal consistent with federal laws and regulations, including
the Patient Protection and Affordable Care Act (ACA), and to
submit recommendations to DHCS, the California Health and Human
Services Agency, and the Legislature by February 1, 2011.
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AB 542 (Feuer)
The working group would provide opportunity for public comment
and would include consumer advocates, HAC nonpayment experts,
physicians, hospital representatives, representatives of the
Department of Managed Health Care, representatives of the Office
of Statewide Health Planning and Development, health care
service plans and insurers, and representatives of large
employers that purchase group health coverage. Staff recommends
that MRMIB be included in the technical working group. Costs to
DHCS to establish the working group, to contract with necessary
experts, and to produce recommendations would be approximately
$100,000 in FY 2010-2011. Provisions related to this working
group would sunset February 1, 2015.
The bill would also require both DHCS and the Managed Risk
Medical Insurance Board (MRMIB) to implement non-payment
policies and procedures for both Medi-Cal and the Healthy
Families Program that are consistent with federal regulations
promulgated pursuant to ACA, and, when doing so, to strongly
consider the workgroup's recommendations. ACA does not require
that Healthy Families be included in implementing non-payment
policies.
To the extent that DHCS and MRMIB choose to implement HAC
nonpayment policies and procedures that go beyond the constructs
of federal law, such as the requirement that the Healthy
Families Program institute nonpayment policies and procedures,
there could be significant costs to the state in the amount of
hundreds of thousands to millions of dollars in General Fund and
federal funds.
Commencing October 2008, Medicare instituted nonpayment of 11
HACs. Medicare billing is done on a "diagnosis-related group" or
DRG payment process that allows Medicare to in essence build a
payment for a particular patient's inpatient hospital visit.
Unlike Medicare, California Medi-Cal providers, are not
reimbursed through a DRG system, but are instead reimbursed on
either a cost-based interim rate or a negotiated per diem rate
that is not patient or diagnosis specific.
This bill would be implemented only to the extent that federal
financial participation is available and is not jeopardized.
Federal Law
Section 2702 of PPACA requires the federal Secretary of Health
and Human Services (HHS) to promulgate Medicaid regulations for
the nonpayment of HACs to become effective July 1, 2011. As of
the writing of this analysis, HHS has yet to complete these
regulations and will not provide funding to states to implement
system changes.