BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 97
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          AB 97 (Budget Committee)
          As Amended  March 16, 2011
          2/3 vote.  Urgency
          |ASSEMBLY:  |     |(February 22,   |SENATE: |36-2 |(March 16,     |
          |           |     |2011)           |        |     |2011)          |
                         (vote not relevant)                

           SUMMARY  :  Contains necessary statutory changes to amend 
          appropriations contained in the 2011 Budget Act for the 
          Department of Developmental Services (DDS), Department of Health 
          Care Services (DHCS), and the Managed Risk Medical Insurance 
          Board (MRMIB). 

           The Senate amendments  delete the Assembly version of this bill, 
          and instead:

          1)Make various changes concerning the DHCS.  These proposals are 
            as follows:

             a)   Temporarily rescind a monthly premium increase in the 
               250% Working Disabled Program as it would violate the 
               existing maintenance of effort requirement under the 
               federal American Recovery and Reinvestment Act (ARRA), 
               thereby subjecting the state to substantial penalties;

             b)   Extend the sunset for one year on the state statute that 
               implements the federal "Roger's Amendment."  Enacted as 
               part of the Deficit Reduction Act of 2005, the Roger's 
               Amendment sets a limit on the amount that a Medicaid 
               (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 accept, as 
               payment in full, no more than the amounts that it could 
               collect under the fee-for-service Medicaid program.  In 
               2008, California enacted Welfare & Institutions Code 
               Section 14091.3, which sets the rate methodology for 
               non-contracted emergency inpatient services and 
               non-contracted post-stabilization services, thereby 
               implementing the federal Roger's Amendment.  Current 
               statute requires the DHCS to report to the Legislature on 
               the implementation of these rates by August 1, 2010 and the 


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               statute sunsets on January 1, 2012;

             c)   Implement a 10% rate reduction to Medi-Cal providers.  
               These reductions vary by provider type, due to the varying 
               statuses of prior provider payment reductions, some of 
               which have been enjoined by various Court actions and some 
               partially restored.  As such, the Budget enacts an 
               additional percentage reduction that varies depending on 
               this history, but when combined results in a 10% reduction. 
                These reductions affect most Medi-Cal providers, 
               including, but not limited to:  physicians, optometrists, 
               hearing aid dispensers, emergency and nonemergency medical 
               transportation providers, home health providers, and 

               The state is undergoing a rate study to determine the 
               impact that this and the following two rate reductions 
               would have on network adequacy.  This bill gives the DHCS 
               the authority to implement a rate reduction of less than 
               10% should the rate study results not support a full 10% 

             d)   Consistent with the provider rate reductions, this bill 
               implements a 10% rate reduction for 17 non-contract 
               hospitals for which the prior rate reduction was enjoined 
               by a court ruling.  Once implemented, these 17 hospitals 
               will experience a rate reduction equal to that already in 
               place for other hospitals;

             e)   Consistent with the rate reductions for providers and 
               hospitals, long-term care facilities would receive rate 
               reductions of up to 10%.  Long-term care facilities that 
               would experience rate reductions as a result of the Budget 
               Act include, but are not limited to: stand-alone skilled 
               nursing facilities ("1629 facilities"), nursing facilities 
               level A, Distinct Part Nursing Facilities level B, Distinct 
               Part Pediatric Subacute, and Intermediate Care 
               Facilities-Developmentally Disabled (ICF-DD).  1629 
               facilities will receive an approximately 2.4% increase in 
               2011-12 prior to the 10% reduction, thereby resulting in a 
               net reduction of 7.6%;

             f)   Require the state to collect rebates from pharmaceutical 
               companies for drugs dispensed through Medi-Cal Managed Care 
               Plans, as recently permitted under federal health care 


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             g)   Place a maximum annual dollar cap of $1,510 on hearing 
               aids for adult Medi-Cal beneficiaries;

             h)   Institute a "soft cap" on the number of physician office 
               and clinic visits for physician services provided by a 
               physician, or under the direction of a physician, to seven 
               visits per year.  This cap does not apply to:  pregnancy 
               care, mental health care, children, and long-term care in a 
               skilled nursing facility or ICF-DD.  Physician and clinic 
               visits exceeding seven per year must be certified by the 
               physician attesting that the care met at least one of the 

               i)     Will prevent the need for emergency department care;

               ii)                      Will prevent the need for 
                 inpatient hospital care;

               iii)                     Will avoid disruption to ongoing 
                 medical therapy; or,

               iv)                      Constitutes a diagnostic work-up 
                 in progress that would prevent the need for hospital 
                 care.  This bill requires physicians to maintain such 
                 certifications in the physician's office or clinic, 
                 subject to audit and inspections by the DHCS.  This soft 
                 cap applies to both managed care and fee-for-service 

             i)   Eliminate Medi-Cal coverage of over-the-counter cough 
               and cold products for adults;

             j)   Eliminate Medi-Cal coverage of over-the-counter enteral 
               nutrition products that are consumed orally, for adults.  
               Medi-Cal would still cover these products for adults who 
               must be tube-fed.  This bill authorizes the DHCS to provide 
               exemptions for patients for whom these products prevent 
               serious disability or death;

             aa)  Dependent on approval of a federal waiver, institute 


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               mandatory co-payments for all Medi-Cal enrollees, including 
               children, people in long-term care facilities, and pregnant 
               women, as follows:

               i)     Physician & Clinic Visits:$5
               ii)            Pharmacy:      $5 (brand-name), $3 (generic)
               iii)                     Hospital Emergency Rooms: $50 
                 (emergencies and non-emergencies)
               iv)                      Hospital Inpatient Care:$100 per 
                 day ($200 maximum per admission)
               v)     Dental Care:           $5

             bb)  Suspend the cost-of-living adjustment (COLA) for the 
               2011-12 budget year for counties for their administration 
               of eligibility functions for the Medi-Cal Program;  

             cc)  Eliminate Adult Day Health Care (ADHC) as a Medi-Cal 
               optional benefit.  This bill also establishes guidelines 
               for the DHCS to make funds included in the Budget Act 
               available to assist with transitioning ADHC beneficiaries 
               to other services and for more narrowly-defined services to 
               be provided under a new program, Keeping Adults Free from 
               Institutions (KAFI); and,

             dd)  Establish legislative intent to enact legislation by 
               August 1, 2011 that provides for the development of a new 
               reimbursement methodology using a pricing benchmark that 
               reflects actual acquisition costs.

          2)Make the necessary changes within the DDS to allow for 
            consumers transitioning from the Lanterman Developmental 
            Center, to receive Medi-Cal managed care health plan services 
            from any plan operating in the various counties, if the 
            consumer chooses to enroll, and requires that plans be paid by 
            a full-risk capitation payment. 

          3)Make various changes concerning MRMIB.  These proposals are as 

             a)   Increase family monthly premiums in the Healthy Families 
               Program.  These increases will be implemented only upon 
               receipt of federal approval and the bill authorizes the 
               MRMIB Board to issue emergency regulations to implement 
               these changes.  The new premiums are as follows:


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               i)     150-200% federal poverty level (FPL):

                  (1)       $30 per child, $90 family maximum; or

                  (2)       $27 per child, $81 family maximum (Family 
                    Value Pack).

               ii)    200-250% FPL:

               (1)    $42 per child, $126 family maximum; or

               (2)    $39 per child, $117 family maximum (Family Value 

             a)   Increase mandatory co-payments on hospital services.  
               The co-payments will increase from $15 to $50 for emergency 
               room visits (and waived if the beneficiary is 
               hospitalized), and from $0 to $100 per day (with a maximum 
               of $200) for hospital inpatient services.  These increases 
               do not change the existing maximum annual co-payment of 
               $250 per family.  These co-payment increases are dependent 

            i)     being consistent with co-payments implemented in the 
                 Medi-Cal program for children; and, 

            ii)    the state receiving federal approval for these changes 
                 to both programs.  The bill authorizes the MRMIB Board to 
                 issue emergency regulations to implement these changes.

             b)   Authorize the MRMIB Board to issue emergency 
               regulations, between March 1, 2011 and June 30, 2012, to 
               modify vision benefits, including, but not limited to, 
               restrictions on providers, benefits, or products and 
               materials, in order to achieve savings adopted in the 2011 
               Budget Act.

          4)Add an urgency clause allowing this bill to take effect 
            immediately upon enactment.
          AS PASSED BY THE ASSEMBLY  , this bill expressed the intent of the 
          Legislature to enact statutory changes relating to the 2011 
          Budget Act.


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          FISCAL EFFECT  :  This bill implements policy changes to achieve 
          approximately $1.5 billion in General Fund savings, as contained 
          in the 2011-12 Budget package.

           Analysis Prepared by :    Andrea Margolis / BUDGET / (916) 

                                                               FN: 0000084