BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 102
Author: Assembly Budget Committee
Amended: 6/8/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2011: Health
SOURCE : Author
DIGEST : This bill makes changes to the Medi-Cal Program
and related health care programs related to implementation
of the Budget Bill for
2011-12.
Senate Floor Amendments of 6/8/11 delete the prior version
of the bill relating to Public Safety elements of the
Budget Act of 2011, and implements language related to the
Medi-Cal and health care programs of the 2011 Budget Act.
ANALYSIS : This bill makes the following changes to the
Medi-Cal Program and related health care programs:
Fee-For-Service Option for Access for Infants and Mothers
Program. The Access for Infants and Mothers (AIM) Program
provides low cost insurance coverage to uninsured
low-income pregnant women with family incomes up to 300
percent of the federal poverty level, as well as to women
who must pay an insurance deductible over $500. There is
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a six-month residency requirement for enrollment into AIM.
AIM is supported with Proposition 99 Funds (Cigarette and
Tobacco Product Surtax Funds) deposited in a special
account, as well as federal funds to supplement the
participant's contribution to cover the cost.
Under AIM, the Managed Risk Medical Insurance Board is
authorized to negotiate contracts or enter interagency
agreement with entities that are not participating plans,
such as departments, to provide or pay for benefits to
subscribers of the AIM or Healthy Families Program.
This bill provides that health care coverage can be
provided through existing participating health plans, as
well as through an interagency agreement with the
Department of Health Care Services (DHCS) through the
Medi-Cal Fee-For-Service Program. This language reflects
the Governor's May Revision proposal to use Medi-Cal
Fee-for-Service on a reimbursement basis, as needed, to
deliver AIM benefits beginning October 1, 2011, in order to
control program expenditures and to ensure adequate
statewide program coverage. In addition, the bill makes
related conforming actions, including deletion of the
six-month residency requirement.
Technical Correction to Drafting. This bill corrects two
inadvertent drafting errors related to Hospital
reimbursement changes as contained in Senate Bill 90,
Statutes of 2011, and related to Medi-Cal Provider rates as
contained in AB 97, Statutes of 2011.
Specifically, SB 90 inadvertently repealed the requirement,
established through the Budget Act of 2010, to develop a
new diagnosis-related grouping reimbursement methodology
for Hospitals participating in the Medi-Cal Program by July
1, 2012. The Governor's May Revision proposed this
technical language to clarify that the July 1, 2012 date is
still applicable.
Further, language enacted in AB 97, Statutes of 2011,
related to the reduction of Medi-Cal reimbursement rates by
up to 10 percent needs to be clarified. Specifically, this
bill clarifies that a one percent rate reduction and a five
percent rate reduction which have been in effect since
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March 1, 2009, will remain in effect until the 10 percent
reduction is operative.
Pharmacy Reimbursement Changes. The Medi-Cal Pharmacy
reimbursement consists of two components -- a professional
dispensing fee and payment for drug ingredient costs.
The professional fee for dispensing is presently $7.25 per
prescription for most drugs, and $8 per prescription for
certain specialty drugs and long-term care facilities.
For the drug ingredient cost of this equation, DHCS relies
primarily on the Average Wholesale Price (AWP) benchmark
(AWP minus 17 percent). This is because the Average
Wholesale Price has been the only price readily available
for all drugs but its calculated value is based on
information supplied solely by drug manufacturers. Over
time, the Average Wholesale Price has been subject to
differing and variable interpretations, as evidenced by
legal actions relating to its calculation and use.
The primary sources of Average Wholesale Price are private
drug data compendia, with most Pharmacies and Third-Party
payers using First Data Bank or Med-Span. The DHCS
currently uses First Data Bank as its primary pricing
reference. However, in 2009, First Data Bank and the
McKesson Corporation (drug wholesaler) were found to have
wrongfully inflated the mark-up factor used to determine
the Average Wholesale Price for certain prescription drugs.
Subsequent to the settlement of that lawsuit, First Data
Bank announced that it would cease the publication of
Average Wholesale Price for drugs within two-years (as of
September 2011).
Further, recent federal regulation requires that any new
drug ingredient cost benchmark must be one that has a
genuine relationship to what Pharmacies are actually paying
for drug acquisition costs.
AB 97 (Committee on Budget), Statutes of 2011, enacted a 10
percent reduction on many Medi-Cal providers, including
Pharmacists.
This bill conforms to the Governor's May Revision proposal
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to establish an "Average Acquisition Cost" to represent the
actual acquisition cost paid for drugs by Medi-Cal Pharmacy
providers, including those that provide specialty drugs.
When fully implemented, this method would be used in lieu
of the existing AWP since this information is not reliable
or fully valid, and will likely no longer be available as
of September 2011 as noted.
Further, once this new "Average Acquisition Cost"
methodology is fully implemented, the 10 percent reduction
on Pharmacy providers, as enacted in AB 97, Statutes of
2011, shall no longer apply. This is because comparable
savings will be achieved through this new methodology.
Specifically, this bill makes the following key changes to
Pharmacy reimbursement in Medi-Cal:
Establishes the use of an "Average Acquisition
Cost" for drug ingredients which means the average
weighted cost determined by the DHCS as specified.
This information shall be subject to disclosure under
the California Public Records Act.
Provides for reimbursement to Medi-Cal Pharmacy
providers to not exceed the lower of either (1) the
estimated acquisition cost of the drug plus a
professional fee for dispensing; or (2) the Pharmacy's
usual and customary charge as defined in Section
14105.455 (which includes the 10 percent Pharmacy
reduction).
Provides that the AWP shall not be used to
establish the estimated acquisition cost of the drug
ingredient cost once the DHCS has determined that the
Average Acquisition Cost methodology is fully
implemented.
Provides that the DHCS may establish the Average
Acquisition Cost in one of the following ways: (1)
based on the volume weighted average acquisition cost
adjusted by the DHCS to ensure it represents prices
paid by retail pharmacies in California; (2) based on
an Average Acquisition Cost as calculated by a vendor
under contract to the DHCS; or (3) based on a national
price benchmark provided by the federal Centers for
Medicare and Medicaid.
Provides that prior to the implementation of an
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Average Acquisition cost methodology being
implemented, the DHCS shall collect data for purposes
of establishing a professional fee for dispensing in
compliance with federal Medicaid requirements.
Provides that if the DHCS determines that a change
in the professional fee for dispensing is necessary,
the DHCS shall establish a new dispensing fee through
the budget process and implement a new one.
Provides for the DHCS to contract with a vendor for
the purpose of obtaining drug price information and
collecting data from providers, wholesalers, or drug
manufacturers and calculating a proposed average
acquisition cost.
Requires Medi-Cal Pharmacy providers to submit drug
price information as specified.
Authorizes the DHCS to suspend a Medi-Cal Pharmacy
provider if information is not provided as specified.
Declares that the DHCS shall seek stakeholder input
as specified.
Requires the DHCS to update Actual Acquisition
Costs every three months after implementation to
ensure updated pricing information is being used.
Declares that any methodology must meet federal
requirements.
New Budget Methodology for County Administration . This
bill requires the DHCS to develop and implement, in
consultation with County representatives, a new budgeting
methodology for Medi-Cal County Administrative costs. This
new methodology is to be used to reimburse counties for
eligibility determinations for applicants and enrollees,
including one-time eligibility processing and ongoing case
maintenance.
The methodology shall include certain factors as specified.
The DHCS is to provide the new budget methodology to the
fiscal and policy committees of the Legislature by March 1,
2012, for review and discussion. This bill also provides
that the DHCS may use this new methodology in the May 2012
budget process.
Transition of the California Medical Assistance Commission
(CMAC). This bill conforms to the Governor's May Revision
for the CMAC to continue through June 30, 2012, after which
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time it shall be dissolved. Upon dissolution of CMAC, all
powers, duties, and responsibilities of the CMAC shall be
transferred to the Director of the DHCS.
This bill provides for the DHCS, DOF, and the Department of
Personnel Administration to consult with CMAC to develop a
staff transition plan that will be included in the
Governor's budget for 2012-13.
Inter-Governmental Transfer Processing Fee.
Inter-Governmental Transfers (IGT's) are used to provide
additional funds for the "non-federal" portion of
risk-based payments to Medi-Cal Managed Care Plans in order
to provide increased compensation to certain Providers who
provide health care services to Medi-Cal enrollees. The
IGTs are matched with federal funds and serve as an
additional funding source for Medi-Cal services. Funds for
IGTs come from "transferring entities" which include any
public entity, such as County, City, governmental unit, or
special district.
This bill conforms to the Governor's May Revision to
institute a new 20 percent fee on each voluntary IGT, as
specified, that is used to match federal funds to provide
Medi-Cal Managed Care rate increases, beginning July 1,
2011. The funds collected by the State will be used to
fund the Medi-Cal Program. The Budget Bill reflects
savings of $34.2 million (General Fund) from this action.
Transition of Community-Based Medi-Cal Mental Health. This
bill provides a framework for the transition of State
Administration of Medi-Cal specialty mental health managed
care; the Early and Periodic Screening, Diagnosis, and
Treatment program; and applicable functions related to
federal Medicaid requirements from the Department of Mental
Health to DHCS.
Specifically, this bill expresses the intent of the
Legislature to transfer by no later than July 1, 2012, and
for this transfer to occur in an efficient and effective
manner, with no unintended interruptions in service
delivery to clients, and families. This transfer is
intended to (1) improve access to culturally appropriate
community-based mental health services, including a focus
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on client recovery, social rehabilitation services and peer
support; (2) effectively integrate the financing of
services; (3) improve State accountabilities and outcomes;
and (4) provide focused, high-level leadership for
behavioral health services within the State administrative
structure.
Further, the bill requires a comprehensive transition plan
to be provided to the Legislature as soon as feasible but
no later than October 1, 2011. It specifies that
comprehensive stakeholder meetings are to occur and that
input from these meetings shall be incorporated into the
transition plan.
Shift of Federal Funds in the 1115 Medicaid Waiver. This
bill conforms to the Governor's May Revision for the DHCS
to obtain an amendment to the 1115 Medicaid Waiver to
redirect federal funds within the Health Care Coverage
Initiative of the Safety Net Care Pool to enable the State
to achieve its designated $400 million annual General Fund
savings from the Waiver and to enable Designated Public
Hospitals to fully utilize available federal funds within
the overall structure of the 1115 Medicaid Waiver.
Specifically, this bill identifies a mechanism for the
State to utilize "excess" certified public expenditures
from the Designated Public Hospitals which will be
voluntarily provided to the State to obtain federal funds
within the 1115 Medicaid Waiver. In turn, the State will
proceed with an amendment to the Waiver to provide for a
shift of federal funds to enable the Designated Public
Hospitals to obtain federal funds for uncompensated care.
Appropriation and Proposition 25 Language. This bill
appropriates $1,000 to the Department of Health Care
Services for State administration. It is a bill that meets
the meaning of subdivision (e) of Section 12 of Article IV
of the California Constitution, and has been identified as
related to the budget in the Budget Bill and shall take
effect immediately.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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CTW:nl 6/8/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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