BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 208
                                                                  Page  1

          Date of Hearing:   August 4, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                  SB 208 (Steinberg) - As Amended:  August 2, 2010 

          Policy Committee:                             Health Vote:13-0

          Urgency:     Yes                  State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill establishes parameters to implement a Medi-Cal waiver  
          under Section 1115 of the federal Social Security Act. Section  
          1115 allows states to receive federal Medicaid funding without  
          meeting typical federal funding requirements. Under current law,  
          a five-year Medi-Cal waiver, codified by SB 1100 (Perata),  
          Chapter 560, Statutes of 2005, ends September 1, 2010.  
          Specifically, this bill: 

          1)Authorizes the California Department of Health Care Services  
            (DHCS) to phase-in mandatory enrollment of seniors and people  
            with disabilities (SPDs) into a Medi-Cal managed care plan or  
            county alternative organized system of care after obtaining  
            federal approval or after February 1, 2011, whichever is  
            later. This bill establishes parameters related to alternative  
            delivery systems, enrollment and outreach, health plan  
            readiness, access to and continuity of care, data and  
            reporting, payment rates, sanctions, and enforcement.

          2)Requires DHCS to seek federal approval to establish pilot  
            programs to deliver health care services to individuals  
            eligible for both Medi-Cal and Medicare (dual eligibles).  
            Requires DHCS to identify program models by April 1, 2011 and  
            to develop timelines related financing, monitoring, and  
            evaluating pilot projects. 

          3)Requires DHCS to establish local Coverage Expansion and  
            Enrollment Demonstration (CEED) projects after September 1,  
            2010, but not later than January 1, 2011, or 180 days after  
            federal approval is received. The CEED projects are required  
            to provide health care benefits for uninsured adults age 19 to  
            64 with income up to 200% of the federal poverty level (FPL)  
            who are not eligible for Medi-Cal or Medicare.







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          4)Requires DHCS to establish, by January 1, 2012, alternative  
            health care delivery models for youth enrolled in the  
            California Children's Services (CCS) program via contracts on  
            a bid or negotiated basis and requires capitated or risk-based  
            contracts to be actuarially sound. Authorizes the use of  
            statewide contracts. 

           FISCAL EFFECT  

           1)DHCS staffing costs  . The governor proposed increased staffing  
            of $9.5 million ($4.1 million GF) in DHCS for 56 positions for  
            waiver implementation in the 2010-11 budget. The waiver  
            generates significant workload for DHCS. The Budget Conference  
            Committee recently adopted a compromise to provide 39  
            positions with a $1.6 million GF cost. 


           2)Waiver federal funding  . California has recently submitted the  
            waiver proposal to the federal government with a $10 billion  
            request for federal funds based on budget neutrality estimates  
            over the five-year waiver period. The waiver request is  
            currently under review. Budget neutrality, a waiver concept,  
            means the federal government cannot approve a California  
            Section 1115 waiver proposal that results in a higher level of  
            federal spending than otherwise would have been the case.  
            Establishing budget neutrality requires comparing costs under  
            the proposed waiver over a five-year period and the spending  
            trend line without waiver changes. 

           3)Health reform enhanced federal funding  . By establishing  
            statewide enrollment of low-income adults up to 200% of FPL,  
            this bill helps position California to maximize enhanced  
            funding opportunities available in 2014. California will  
            receive 100% federal funding for 2014, 2015, and 2016 for up  
            to two million new Medi-Cal beneficiaries with incomes up to  
            133% FPL. Between 2017 and 2020, federal funding support drops  
            from 100% to 90% of total costs. 

           COMMENTS  

           1)Rationale  . This bill enacts state law changes to enable  
            California to proceed with renewal of a five-year Section 1115  
            waiver under federal law. Section 1115 of the Social Security  
            Act allows Centers for Medicare and Medicaid Services (CMS) to  
            approve innovative research and demonstration projects. The  







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            federal government uses these waivers to expand health  
            coverage without increasing federal support. According to the  
            author, this bill creates numerous opportunities to test  
            innovative approaches, expand coverage to low-income  
            Californians, improve delivery of care, and prepare California  
            for implementation of federal health reform. 

           2)Renewal of the Medi-Cal Waiver  will be broader in focus than  
            the current waiver, which is primarily focused on inpatient  
            hospital and indigent health funding. Waivers can encompass a  
            relatively small portion of the Medi-Cal program or the entire  
            program. The waiver renewal for 2010-2015 covers a broad  
            funding and programmatic landscape and provides a focus for  
            California to establish a bridge to a major Medi-Cal expansion  
            under federal health reform, the Patient Protection and  
            Affordable Care Act (PL-111-148). The new waiver focuses on  
            specified patient populations, including the uninsured, those  
            with significant health needs, and those who account for  
            significant portions of Medi-Cal spending. 

           3)Recent Amendments  make changes related to increase  
            implementation specificity, modify timelines, and address  
            concerns of stakeholders. 

           4)Mandatory Enrollment into Managed Care  . This bill authorizes  
            the DHCS to establish the mandatory enrollment of specified  
            seniors and persons with disabilities into new and existing  
            managed care plans. The bill authorizes counties not operating  
            a County Organized Health System to establish a county  
            alternative to enroll seniors and persons with disabilities.  
            Under current law, California utilizes three managed care  
            delivery models to provide health care to about half of the  
            total Medi-Cal enrollees statewide. These models are:

             a)   The County Organized Health System (COHS) model (800,000  
               enrollees in 11 counties),
             b)   The Two-Plan model (2.6 million enrollees in 12  
               counties)
             c)   Geographic Managed Care (400,000 enrollees in 2  
               counties)  

          5)Dual Eligibles  . This bill establishes pilot projects to  
            evaluate models of integrating health care and finance  
            approaches for beneficiaries enrolled in both Medi-Cal and  
            Medicare. Known as dual eligibles, these individuals are among  
            the most vulnerable of populations. They are low-income, in  







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            poor health, and have considerable health care needs.  
            Nationally, dual eligibles account for 25 % of total Medicare  
            spending and 46 % of Medicaid spending. Medi-Cal spending in  
            California on 1.1 million dual eligibles was $8 billion in  
            2007-08, or 25 % of total Medi-Cal expenditures. In 2007,  
            Medi-Cal spending on long term care for this patient  
            population was $3.2 billion, or 75 % of total Medi-Cal long  
            term care costs. Total Medi-Cal and Medicare spending on dual  
            eligibles was $21 billion.

           6)Coverage Expansion and Enrollment Demonstration Project  . As a  
            part of the current waiver, 10 counties have been provided  
            $180 million in federal funding for each of the past three  
            years to expand health coverage to indigent adults. The 10  
            programs certify their local expenditures to claim federal  
            Medicaid funds.  This bill authorizes a statewide expansion of  
            this approach to enroll insured adults up to 200% FPL.  
            According to research, uninsured adults with incomes at or  
            below 200% FPL are a diverse group, but include many poor and  
            sick individuals for whom coverage is currently unavailable. 
           
          7)The California Children's Services program  provides a range of  
            medical services, including in-patient hospital stays to  
            children from low-income families (less than $40,000 per year)  
            with major medical conditions such as congenital heart disease  
            and sickle cell anemia. Children receive services in one of  
            three enrollment pathways: (a) CCS-Medi-Cal in which 130,000  
            children are enrolled, (b) CCS-Healthy Families in which  
            26,000 children are enrolled, and (c) CCS-only in which 20,000  
            children are enrolled.  

          8)Concerns  . Numerous groups have positions of support in  
            concept, support if amended, oppose unless amended, and  
            concerned. Concerns vary. For example, consumer groups would  
            like to see stronger patient protections. Certain provider  
            groups seek stability in the public safety net. Private  
            hospitals would like to see an expanded financing role in the  
            pending waiver. Insurers have concerns with specific network  
            and reporting requirements. 
           
          9)Related Legislation  . AB 342 (J. Perez), pending in the Senate,  
            is identical to SB 208. 

          SB 1100 (Perata), Chapter 560, Statutes of 2005 implemented  
            Section 1115 waiver change for the current waiver that expires  
            this fall. The current waiver includes more than $3 billion in  







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            annual federal spending and replaced a funding system that had  
            been in place for 15 years. The new waiver, addressed in SB  
            208, will include significantly more federal funding by  
            expanding the scope of patients and settings in which the  
            waiver programming will be implemented.

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081