BILL ANALYSIS
AB 1653
Page 1
CORRECTED - 06/02/2010 Technical change (Member name)
ASSEMBLY THIRD READING
AB 1653 (Jones)
As Introduced January 14, 2010
2/3 vote. Urgency
HEALTH 16-1 APPROPRIATIONS 12-5
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|Ayes:|Monning, Fletcher, |Ayes:|Fuentes, Ammiano, |
| |Ammiano, Carter, Conway, | |Bradford, |
| |Bradford, De Leon, Eng, | |Charles Calderon, Coto, |
| |Hayashi, Hernandez, | |Davis, |
| |Jones, | |Monning, Ruskin, Skinner, |
| |Bonnie Lowenthal, Nava, | |Solorio, |
| |V. Manuel Perez, Salas, | |Torlakson, Torrico |
| |Smyth | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Audra Strickland |Nays:|Conway, Harkey, Miller, |
| | | |Nielsen, Norby |
| | | | |
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SUMMARY : Establishes a quality assurance fee (QAF) on specified
private general acute care hospitals, as a condition of
participation in state funded health insurance programs other
than the Medi-Cal Program. Specifically, this bill :
1)Requires private general acute care hospitals to pay a QAF
from January 1, 2011 until June 30, 2011, as a condition of
participation in state-funded health insurance programs, other
than the Medi-Cal Program.
2)Exempts specified public district hospitals, county and
University of California hospitals small and rural hospitals,
and certain long-term care hospitals.
3)Provides for an unspecified method of calculating the fee
amount.
4)Requires the fee proceeds plus Federal Matching Assistance
Program (FMAP) funds, to be used exclusively for:
AB 1653
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a) Administrative costs incurred by the Department of
Health Care Services (DHCS) for implementation;
b) Health coverage for children up to $80 million per
quarter;
c) Grants to specified public hospitals and supplemental
payments to private acute care hospitals, as specified;
d) Increased payments to Medi-Cal managed care (MCMC) plans
to be passed through to hospitals;
e) Increased payments to Medi-Cal mental health plans to be
passed through to hospitals; and,
5)Requires the director of DHCS to seek federal approvals or
waivers as necessary and obtain federal financial
participation.
6)Requires the fee and all federal funds to be deposited in the
Hospital Quality Assurance Revenue Fund and to be continuously
appropriated.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)A one-time increase of $1 billion in federal funding for the
six-month period, January 1, 2011 through June 30, 2011. This
estimate is based on AB 1383, which is expected to generate an
annual $2 billion in federal funding, if approved by the
federal Centers for Medicare and Medicaid (CMS).
2)Unknown costs in the range of $200,000 (50% General Fund (GF))
to DHCS to administer the QAF until June 30, 2011.
3)Major GF pressure is created when the QAF expires. GF pressure
is created to continue increased Medi-Cal payments for
inpatient and outpatient rates paid to hospitals. The
increased rates under AB 1383 (Jones), Chapter 627, Statutes
of 2009, range from 50% to 100% of baseline rates.
4)This bill contains blanks for calculation of the fee charged
to hospitals as well as the distribution method of the
continuous appropriation. The author and sponsor indicate the
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specificity of information is pending until additional
direction from CMS about AB 1383 is provided. For example,
dates in AB 1383 may need to be modified because of delays in
implementation.
5)In late March of 2010 several hospitals in Arizona, Nevada,
and Oregon filed a lawsuit about AB 1383. The lawsuit
challenges the distribution of billions of dollars under AB
1383 to California hospitals without regard to these states on
California's borders that treat Medi-Cal patients. The case
is pending federal review. Regardless of the merits of the
plaintiff's suit, this legal action may delay and complicate
AB 1383 implementation.
COMMENTS : According to the author, the purpose of this bill is
to be prepared to take advantage of an extension of the enhanced
FMAP under the American Reinvestment and Recovery Act (ARRA), if
it is passed by the Congress and enacted into law by the
President. The author states that the specifics of the
extension cannot be determined until there is federal approval
of the pending State Plan Amendment (SPA) implementing the fee
enacted in AB 1383 (Jones), Chapter 627, Statutes of 2009.
AB 1383 requires hospitals that elect to participate in
state-funded health insurance programs other than Medi-Cal to
pay a hospital QAF. Certain hospitals are exempt from paying
the fee, including all public hospitals, long-term care
hospitals, small and rural hospitals, and certain specialty
hospitals. DHCS is authorized to alter the fee amount within
limitations if necessary to achieve federal approval. AB 1383
is estimated to generate $2 billion in annual fee revenue, a
portion of which is provided to public hospitals as grants. In
addition, there is $320 million annually for health coverage to
children and funds for DHCS to administer the program. The
remainder is matched with federal Medicaid funds at the ARRA
enhanced rate and is distributed as supplemental payments to
private hospitals based on the degree to which they serve
Medi-Cal and uninsured patients. AB 188 (Jones), Chapter 645,
Statutes of 2009, appropriates up to $15 billion for these
payments and provided the administrative funds to DHCS
immediately upon enactment in October of 2009.
Under federal law, health-care related provider fees and taxes
may only be imposed on 19 particular classes of health care
items or services. In addition, the assessment must be
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broad-based on all providers in the class, not just those who
serve Medi-Cal. Members of a class may not be exempted without
a waiver. The assessment must be uniform across the class.
Finally, states may not guarantee that providers are held
harmless. CMS may waive the broad-based and uniformity
requirements and allow exemptions if the state meets a complex
statistical test that measure whether high volume Medicaid
providers are bearing a disproportionate share of the fee.
The Governor's 2010-11 Budget assumes receipt of the AB 1383
funds before the end of the 2009-10 fiscal year. DHCS filed a
SPA on June 31, 2009 to preserve retroactive application and to
take maximum advantage of the enhanced FMAP under ARRA. However
it is uncertain how many quarters will be approved by CMS. As a
first step, CMS has agreed to amend the Section 1115 Hospital
and Uninsured Waiver terms that prohibited California from
imposing a hospital fee. CMS must still approve the terms of
the specific fee and payment structure and also the payments to
managed care plans.
The Governor's May revise assumes that enhanced federal funding
will be available through a six-month extension of ARRA. DHCS
has proposed Budget Trailer Bill language to extend the hospital
fee for six-months to take advantage of this extension with the
same distribution of funds. On May 27, 2010, the Assembly
Budget Committee, Sub-Committee 1 adopted the fiscal impact of a
six-month extension, but directed the accompanying legislation
to proceed through the policy legislation process.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0004651