BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 853| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 853 Author: Senate Budget and Fiscal Review Committee Amended: 10/6/10 Vote: 27 - Urgency PRIOR VOTES NOT RELEVANT ASSEMBLY FLOOR : Not available SUBJECT : Health Budget Trailer Bill SOURCE : Author DIGEST : Assembly Amendments delete the Senate version of the bill which expressed the intent of the Legislature to enact statutory changes relating to the Budget Act of 2010, and add the current content relating to health. This bill is now the Health Budget Trailer bill which contains provisions necessary to implement the 2010-11 Budget. ANALYSIS : This is the Omnibus Health Trailer Bill, which contains necessary changes to enact modifications in the Budget Bill for 2010-11. It makes the following key changes: Department of Health Care Services 1. Skilled Nursing Facility Quality Assurance and CONTINUED SB 853 Page 2 Accountability . This bill reauthorizes the Quality Assurance Fee on nursing homes, established through AB 1629 (Frommer), Chapter 875, Statutes of 2004, and makes the following changes which are General Fund neutral: A. Rate Increases . Provides for a two-year rate adjustment of up to 3.9 percent in 2010-11 and up to 2.4 percent in 2011-12 by extending the sunset of the Quality Assurance Fee to July 30, 2012. Provides for a larger revenue base in which to apply the Quality Assurance Fee by trending forward the net revenue of nursing facilities, including Medi-Cal, Medicare, and private pay, using historical increases in net revenue. B. Continuing Care Retirement Communities . This bill continues to exclude these facilities from paying any Quality Assurance Fee. These entities operate under a different type of license and serve few Medi-Cal patients. C. Multi-Level Residential Community (MLRC) Facilities . As contained in the Governor's May Revision, this bill extends the Quality Assurance Fee to MLRC facilities for those beds that are licensed and certified to provide nursing home level care. This will affect approximately 76 facilities. These facilities have received rate increases as a result of AB 1629, Statutes of 2004, but have not previously been required to pay the Quality Assurance Fee. As such, other nursing homes have been subsidizing the MLRC rate increases. Specifically, the Department of Health Care Services (DHCS) states that over 50 percent of the MLRCs are reimbursed by Medi-Cal and in the aggregate have received approximately $46 million in rate increases since 2004 without paying the fee. This bill also expresses the Legislature's intent that consistent with current law, a Multi-Level Residential Facility that has been assessed a Quality Assurance Fee shall pay the fee within 60 days of the CONTINUED SB 853 Page 3 date rates are increased in accordance with Section 1322.28 of the Health and Safety Code and paid to these facilities. D. Limits Medi-Cal Reimbursement for Legal Costs . As proposed by the Administration, this bill limits reimbursement of legal fees incurred by nursing facilities engaged in the defense of legal actions filed by governmental agencies or departments against the facilities where any of the following apply: (1) a decision has been rendered in favor of the governmental agency or department; (2) the determination of the governmental agency or department otherwise stands; and (3) a settlement or similar resolution has been reached, as specified. E. Limits Medi-Cal Reimbursement for Liability Insurance . This bill limits Medi-Cal reimbursement for liability insurance to the 75th percentile computed on a specified geographic peer group basis. F. Labor-Driven Operating Allocation (LDOA) . This bill eliminates the LDOA since quality assurance and accountability measures will be phased-in. G. Quality Assurance and Accountability Provisions . This bill begins to phase-in a Quality Assurance and Accountability Supplemental Payment System to provide supplemental payments to nursing facilities that improve the quality and accountability of care rendered to residents and penalizing those facilities that do not meet measurable standards. This bill provides specific methodologies to be used in calculating the supplemental payments to be made and the penalties to be imposed. The quality benchmarks established in this bill include a 3.2 nursing hours-to-patient ratio; immunizations; physical restraints; facility-acquired pressure ulcers; direct care retention; and resident and family satisfaction surveys. Additional benchmarks will be added, including federal health care reform measures identified by the CONTINUED SB 853 Page 4 federal Centers for Medicare and Medicaid Services, the use of chemical restraints, and direct care staff retention if not addressed in 2011-12. This bill also establishes a stakeholder work group to provide assistance to the Administration to develop recommendations regarding the Quality Assurance and Accountability Payment System. H. 3.2 Nursing Hours-to-Patient Ratio . This bill requires that nursing homes that do not meet this existing ratio and are in non-compliance will be assessed a penalty of $15,000 for noncompliance on five percent to 49 percent of audited days, and $30,000 for noncompliance on 49 percent or more of audited days. I. Establishes Special Funds for Quality Assurance and Accountability System . This bill creates the Skilled Nursing Facility Minimum Staffing Penalty Account and requires the Department of Public Health (DPH) to deposit penalty payments collected from nursing facilities into the account. DPH is required to transfer, on a monthly basis, moneys in the account to the Skilled Nursing Facility Quality and Accountability Fund. It establishes the Skilled Nursing Facility Quality and Accountability Fund and beginning in 2011-12; one percent of the rate increase will be allocated to this Fund. The Skilled Nursing Facility Quality and Accountability Fund is continuously appropriated to DHCS to provide supplemental payments to nursing homes; provide for specified administrative support; and provide $1.9 million for the Long-Term Care Ombudsman Program activities. If supplemental payments are not made by May 1, 2012, then funds accumulated in the Skilled Nursing Facility Quality and Accountability Fund will be allocated back into nursing home rates. CONTINUED SB 853 Page 5 J. Long-Term Care Ombudsman . This bill expresses the Legislature's intent that the $1.9 million (Skilled Nursing Facility Quality and Accountability Fund) appropriation contained in the bill is in addition to the $4.168 million proposed in the Governor's May Revision for 2010-11. It also directs the DHCS to seek approval from the federal Centers for Medicare and Medicaid Services to obtain federal Medicaid funds for this purpose. 2. Medi-Cal Program: Hospital Rate Freeze and Transition to Diagnosis-Related Groups . This bill freezes Medi-Cal reimbursement paid to Private Hospitals for one-year, retroactive to January 1, 2010. It establishes a process for implementation of a new rate setting methodology which uses Diagnosis-Related Groups. This is to save $169 million ($84.5 million General Fund) for 2010-11. 3. Medi-Cal Program: Physician Administered Drug Rate Reduction . This bill authorizes DHCS to implement a new Medi-Cal reimbursement rate for physician administered drugs, to be the lower of (1) the Medi-Cal reimbursement for pharmacy providers (i.e., Average Wholesale Price minus 17 percent); or (2) the federal Medicare rate (Average Sales Price plus six percent), unless federal law requires a higher reimbursement level. This becomes effective as of February 1, 2011, and is to save $12.8 million ($6.4 million General Fund). 4. Medi-Cal Program: Radiology Rate Reduction . This bill reduces Medi-Cal reimbursement for radiology services to 80 percent of federal Medicare rates, effective October 1, 2010, to save $27.2 million ($13.6 million General Fund). 5. Medi-Cal Program: Roger's Amendment Sunset Extension . This bill extends the sunset for one year (to January 2012) on the State statute that implements the federal "Roger's Amendment", enacted as part of the Federal Deficit Reduction Act of 2005. It sets a limit on the amount that a Medi-Cal Managed Care plan can reimburse a non-contracted hospital that provides emergency services to one of the plan's members. It requires hospitals to CONTINUED SB 853 Page 6 accept as payment in full no more than the amounts that it could collect under the Fee-for-Service Medi-Cal Program. The DHCS estimates that annual savings are as much as $19.7 million (total funds) from this action. 6. Medi-Cal Program: County Medi-Cal Eligibility Administration . This bill establishes a process for DHCS and county welfare departments to exchange information and develop a methodology for the administration of Medi-Cal eligibility processing. It also suspends the cost-of-doing business for 2010-11 for a savings of $21.6 million ($10.8 million General Fund). 7. Medi-Cal Program: Limit on Non-Legend Acetaminophen . Under federal law, non-legend drugs ("over-the-counter") are considered an optional benefit under Medicaid (Medi-Cal). Medi-Cal has covered over-the-counter drugs for many years as an inexpensive alternative to prescription drugs. This bill provides that non-legend acetaminophen (such as Adult Tylenol) products selected by DHCS would no longer be a covered benefit under Medi-Cal. There are prescription substitutions available for the acetaminophen-containing products and these would continue to be a covered benefit in Medi-Cal. Dual eligibles individuals (Medicare and Medi-Cal) could obtain these products with a prescription through Medicare Part D, as well. Children's liquid Tylenol would not be affected by this change and will continue to be a covered Medi-Cal benefit. Cough and cold medications also continue as a Medi-Cal benefit as is current practice. The Budget Bill assumes a savings of $3.1 million (General Fund) from this change. 8. Medi-Cal Program: Payment of Medicare Part B Premiums. Prior to September 2008, DHCS paid federal Medicare Part B premiums for individuals who qualify for both Medi-Cal and Medicare (dual eligibles) even when they had not met their share-of-cost within the Medi-Cal Program. To address a budget deficit, AB 1183 (Assembly Budget CONTINUED SB 853 Page 7 Committee), Chapter 758, Statutes of 2008, eliminated Medicare Part B premium payments for elderly and disabled enrollees having an unmet share-of-cost in excess of $500. This bill, as proposed by the Governor, eliminates DHCS payment of Medicare Part B premiums for individuals who do not meet their share-of-cost obligation for the remainder of the program (i.e., unmet share-of-cost of $500 or less). Approximately 951 average monthly eligibles would be affected by this change. The Budget Bill reflects a reduction of $1 million (General Fund) from this action. 9. Medi-Cal Program: Annual Eligibility for Children . The Budget Act of 2008 adopted semi-annual eligibility reporting requirements for children in Medi-Cal shortened from annual eligibility renewal requirements, with a sunset of July 1, 2011. Annual eligibility was restored in 2009 in response to maintenance-of-effort requirements included in the federal American Reinvestment and Recovery Act (ARRA), but set to sunset at the time that federal ARRA was originally designated to sunset (i.e., December 31, 2010). The federal Patient Protection and Affordable Care Act (H.R. 3590) of 2010 provides for similar maintenance-of-effort requirements. Specifically, it requires States to maintain Medicaid (Medi-Cal) eligibility standards, methodologies, and procedures until a Health Insurance Exchange is operational in the State. This bill clarifies that annual eligibility for children will remain in effect to meet the federal maintenance-of-effort requirements. This conforms to the Governor's May Revision. 10. Medi-Cal Program: Family Planning, Access, Care, and Treatment (FPACT) Program . This program presently operates under a federal waiver which is set to end as of August 31, 2010. Recent federal law changes would enable California to operate this program under a Medi-Cal State Plan Amendment which would provide savings of $5.0 million General Fund. This bill provides for the FPACT Program to be operated under a CONTINUED SB 853 Page 8 State Plan Amendment in lieu of a waiver. 11. Medi-Cal Program: Managed Care Rates . DHCS administratively implemented a risk-adjustment factor for the 2009-10 rate year in the Two-Plan Counties and the affected plans did not realizes the full impact of this adjustment until December 2009. This risk-adjustment factor warrants additional analysis before it is further expanded. This bill establishes that prior to October 1, 2011, the Medi-Cal risk-adjusted countywide capitation rate being used by DHCS shall comprise no more than 20 percent of the total capitation rate paid to each Medi-Cal Managed Care plan establishes that prior to October 1, 2011, the Medi-Cal risk-adjusted countywide capitation rate being used by the DHCS shall comprise no more than 20 percent of the total capitation rate paid to each Medi-Cal Managed Care plan. 12. Medi-Cal Program: Extension of AB 1422, Statutes of 2009 . The Medi-Cal provider gross premium tax, authorized by AB 1422 (Bass), Chapter 157, Statutes of 2009, establishes a funding source for essential preventative and primary health care services provided through the Healthy Families program by adding Medi-Cal Managed Care plans to the list of insurers subject to California's gross premiums tax of 2.35 percent for the period of January 1, 2009, through December 31, 2010. This bill extends the sunset to June 30, 2011. 13. Medi-Cal Program: Geographic Managed Care Rate Negotiations Reassigned to DHCS . This bill reassigns the responsibility for negotiating Medi-Cal Geographic Managed Care rates from the California Medical Assistance Commission to DHCS. 14. Medi-Cal Program: Timely Filing Rule for Medi-Cal Providers . Federal law requires that when a Medicaid enrollee has third party health care coverage or insurance, the State Medicaid agency shall be the payer of last resort. When other coverage is identified, DHCS and its vendors determine which claims Medi-Cal paid that were eligible for reimbursement under that CONTINUED SB 853 Page 9 coverage. Federal and State law authorizes DHCS to seek reimbursement for claims up to three years after the date of service. Upon notification of claims subject to other coverage, providers should submit claims for payment to the insurer. However, some insurers are denying claims based on "timely filing" restrictions - typically 30 to 180 days - delineated in each individual contract with the provider. When an insurer denies a claim as untimely, DHCS loses revenue due to its inability to recoup Medi-Cal moneys from the provider. This bill requires a three-year "look back" when providers submit claims which were originally paid by Medi-Cal. This statutory change is a cost avoidance measure that retains $10 million (total funds) in savings. 15. California Discount Prescription Drug Program . This program, established by AB 2911 (Nunez), Chapter 619, Statutes of 2006, has never been implemented due to budget constraints. This bill delays implementation and sunsets the program in 2015. 16. Medi-Cal Program: State Administrative Support for 1115 Medi-Cal Waiver . This bill authorizes the Department of Managed Health Care (DMHC) to assess managed care plans a total of $994,000 for deposit into the existing Managed Care Fund to support positions authorized in the Budget Bill for DMHC to administer specified components of the 1115 Medi-Cal Waiver which will provide California approximately $10 billion in federal funds over a five-year period. This bill also requires DHCS and DMHC to have an interagency agreement to coordinate specified activities related to the mandatory enrollment of seniors and persons with developmental disabilities into Medi-Cal Managed Care. 17. Medi-Cal Program: Reporting on Waivers . This bill requires DHCS to provide the fiscal and policy committees of the Legislature with updates in March and October of each year on all of California's Medi-Cal Waivers. CONTINUED SB 853 Page 10 18. Medi-Cal Program: Oversight of California Medi-Cal Management Information System (CA-MMIS) . DHCS is procuring a new Fiscal Intermediary for Medi-Cal referred to as the California Medi-Cal Management Information System (CA-MMIS). In order to have oversight of this system implementation, this bill requires DHCS to submit quarterly reports to the Legislature, Legislative Analyst's Office, Office of the State Chief Information Officer (OCIO), and the Bureau of State Audits. This bill also makes the project subject to review by the OCIO, and requires the Bureau of State Audits to review all project documents and reports and make recommendations as necessary.' 19. Medi-Cal Program: Legislative Intent Language for Hospital Quality Assurance Fee . This bill expresses the Legislature's intent to utilize the Quality Assurance Fee paid by specified hospitals to expand children's health care services in future years, if and when the Quality Assurance Fee is in effect in strong budget and economic times. 20. DHCS: California Children's Services (CCS) Program . This bill requires DHCS to seek foundation funding to develop studies of the CCS Program to be provided to the Legislature and stakeholders by May 2011. These studies are to address (1) systems analysis of core business processes and practices; (2) provider certification and enrollment processes; (3) medical eligibility processing; (4) oversight of quality of care; (5) best practices for case management; and (6) use of advanced information technology tools. Department of Public Health 21. DPH: HIV Rapid Testing . This bill deletes the requirement that HIV testing sites must receive funding from the DPH in order to conduct rapid HIV tests. Current law requires sites to receive State funding; however, reductions to the Office of AIDS due to Governor's vetoes in 2009 have affected approximately 40 counties and their ability to conduct rapid HIV tests as they have lost all of their State funding. This change CONTINUED SB 853 Page 11 will enable them to continue to provide rapid HIV testing. The Administration concurs with this change. 22. DPH: AIDS Drug Assistance Program in Use as Certified Public Expenditure . This bill requires DHCS and DPH to ensure the integrity of the AIDS Drug Assistance Program (ADAP) in meeting its maintenance of effort requirements to receive federal funds and to obtain all drug rebates, in the event that State expenditures for the ADAP are identified to be used as a certified public expenditure for the purpose of obtaining federal financial participation under the Medi-Cal Program for purposes of the 1115 Medicaid Waiver. 23. DPH: Required Estimate Packages . This bill requires DPH to include in the Governor's January and May Revision budget submittals to the Legislature detailed estimate packages for the following programs: (a) Women, Infant and Children's Supplemental Food Program; (2) Licensing and Certification Division; and (3) the Every Woman Counts Program. 24. DPH: Every Woman Counts Program . This bill requires DPH to provide the Legislature with quarterly reports that include expenditure data available for this program. 25. DPH: Vacancy Report . This bill requires DPH to provide the fiscal committees of the Legislature and the Legislative Analyst's Office with an annual vacancy report by no later than January 20th of each year. Managed Risk Medical Insurance Board (MRMIB) 26. Children's Health Insurance Program Reauthorization Act (CHIPRA) of 2009 . As proposed by the Administration, this bill provides MRMIB with emergency regulation authority for purposes of implementing the federal CHIPRA and related program activities through 2011-12, in order to facilitate prompt completion of tasks and avoid delays. The emergency regulation authority applies specifically and only to CHIPRA activities. Department of Developmental Services (DDS) CONTINUED SB 853 Page 12 27. DDS: Additional 1.25 Percent Reduction (total of 4.25 percent) . Existing law requires Regional Centers to reduce Purchase of Services payments made to providers by three percent from February 1, 2009 to June 30, 2011, inclusive. Existing law also provides exemptions from reduction for certain services, including Supported Employment, the SSP (State Supplementary Payment) supplement for independent living, and services with usual and customary rates as established in regulation. Other services may be exempt from this reduction if a Regional Center demonstrates that a non-reduced payment is necessary to protect the health and safety of a consumer and DDS has granted approval. As proposed in the Governor's May Revision, this bill increases this reduction by 1.25 percent for a total of 4.25 percent, and continues the above existing law exemptions. In addition, this bill permits a Regional Center, with certain restrictions as specified, to temporarily modify personnel requirements, functions, qualifications, or staff training requirements of providers. The 4.25 percent reduction in the Purchase of Services reimbursement saves $141 million ($70.4 million General Fund) for 2010-11. It should be noted that Regional Center Operations expenditures are also reduced by 4.25 percent for a savings of $22.4 million ($15.4 million General Fund) as reflected in the Budget Bill. 28. DDS: Intermediate Care Facilities for Developmentally Disabled (ICF-DD) Facility Billing to Obtain Additional Federal Funds . The Budget Act of 2007 required DDS and DHCS to obtain federal CMS approval to reconfigure (bundle) the rate paid to ICF-DD facilities to include Day Program and Transportation services expenditures received by residents of these facilities for the purpose of receiving federal fund support. Federal CMS approval was recently obtained and resolution of a billing mechanism for past-years has just occurred. A net reduction of $53.5 million (General Fund) is reflected in the Budget Bill for this CONTINUED SB 853 Page 13 purpose. Due to this availability of federal funding, this bill provides for the liquidation until June 30, 2011, certain funds appropriated in the Budget Act of 2007, and authorizes DDS to make specified supplemental payments to ICF-DD providers for day treatment and transportation services. This bill also makes related conforming changes to ensure the integrity of the Individual Program Plan process, to capture all federal funds available, and to clarify the roles and responsibilities of the billing process. 29. DDS: Lanterman Developmental Center . The Administration has submitted a transition plan for Lanterman Developmental Center to the Legislature through the budget process. (The Administration submitted the Agnews Developmental Center closure using this same approach as contained in existing state statute.) It is anticipated that closure of Lanterman will take at least two or more years. Through a public and collaborative process, the Administration and Budget Committees have developed statute language to include references to Lanterman Developmental Center, as was done with Agnews Developmental Center. This includes the following: A. Requires the Secretary of Health and Human Services to verify protocols as specified for the health and human safety of individuals transitioning from Lanterman. B. Requires DHCS to provide appropriate reimbursement to health plans participating in Medi-Cal and serving consumers transitioned from Lanterman to ensure health care coverage. C. Provides for State staff to work in the community as specified to ensure continuity of care for the consumers. Specifically, for the Lanterman Developmental Center, the use of department employees is in effect for up to two years following the transfer of the last resident of Lanterman, unless a CONTINUED SB 853 Page 14 later enacted statute deletes or extends this provision. D. Allows for DDS to operate an outpatient clinic throughout the transition of Lanterman. E. Provides for the expansion of Adult Residential Facilities for Persons with Special Health Care Needs so this residential model can specifically be used for the orderly closure of Lanterman Developmental Center. 30. DDS: Written Notice for Exemption or Exception . As a result of reductions in the Budget Act of 2009 and the Budget Bill of 2010-11, it was agreed that consumers participating in the Regional Center system needed to be informed of the Regional Center's exemption process for the purchase of services. This bill requires each Regional Center to notify consumers receiving services at their Regional Center regarding the purchase of services exemption process, as specified. Department of Mental Health 31. DMH: Office of Patients Rights Contract . This bill extends the contract length for the Office of Patients Rights from three years to five years in order to increase efficiency and reduce costs for the State. 32. DMH: Mental Health Services Act (MHSA) Report on State Administration . This bill requires DMH to include in its Proposition 63 reports to the Legislature a detailed accounting of the proposed MHSA funds for State Administration. 33. DMH: State Hospitals . This bill allows for DMH to contract with providers for the provision of emergency health care services for patients residing at the State Hospitals and specifies maximum reimbursement rates of payment for these services, including those provided under contract with the DMH and those that are not under contract. The Budget Bill reflects savings of $2 CONTINUED SB 853 Page 15 million (General Fund) for this purpose. California Health and Human Services (CHHS) Agency 34. CHHS Agency: Health Information Exchange and Federal Funds . The CHHS Agency received a four-year $38.7 million federal grant for California's Health Information Exchange. The majority of these funds are to be available in the first two years of the grant, based on the State's performance in spending funds and building health information exchange capacity. Under California's plan, the CHHS Agency is the federal grantee and retains responsibility for administering the grant and all grant deliverables. The CHHS Agency is to coordinate electronic health activities in the State and work with the Legislature, State departments, and stakeholders to support and recommend policy needs for Health Information Technology in California. Cal eConnect (CeC) is California's "governance entity" which is a nonprofit responsible for meeting the requirements the CHHS Agency sets in contract and subsequent amendments. CeC was selected through a Request for Information process. Generally, CeC will be responsible for establishing ground rules by which health information can be exchanged appropriately among clinicians, hospitals, health plans, patients, and government agencies. SB 337 (Alquist), Chapter 180, Statutes of 2009, established a framework in statute for the functions outlined above. This bill further clarifies the duties of the CHHS Agency and the governance entity by modifying the membership of the initial governing board. This bill requires an implementation plan to be developed and submitted to the Legislature by November 1, 2010, and also specifies certain annual reporting requirements to the Legislature regarding expenditures and plan implementation status. This bill provides that all deliverables, as defined in CONTINUED SB 853 Page 16 the scope of work, shall upon delivery and acceptance by the CHHS Agency become the property of the State and may be copyrighted by the State. This bill requires the CHHS Agency to require the State-designated entity to develop specified policies and procedures to provide the public with transparency of the actions of the entity. This bill also specifies that the State governance entity shall establish and begin providing health information exchange services no later than January 1, 2012. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes CTW:mw 10/6/10 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED