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. SB 208 Page 2 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 SB 208 Page 3 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 SB 208 Page 4 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 SB 208 Page 5 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