BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          AB 301 (Pan)
          
          Hearing Date: 6/27/2011         Amended: 6/23/2011
          Consultant: Katie Johnson       Policy Vote: Health 9-0
          _________________________________________________________________
          ____
          BILL SUMMARY: AB 301 would prohibit, until July 1, 2016, 
          California Children's Services (CCS) program covered services 
          from being incorporated into Medi-Cal managed care contracts, 
          except for contracts within specified county organized health 
          systems and regional health authorities.
          _________________________________________________________________
          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           
          CCS carve-out          Continuation of current*         
          General/**
          sunset extension       expenditure levels               Federal

          *See Staff Comments.
          **CCS and Medi-Cal services are shared 50 percent General Fund, 
          50 percent federal funds.
          _________________________________________________________________
          ____

          STAFF COMMENTS: This bill may meet the criteria for referral to 
          the Suspense File.
          
          This bill would extend the sunset date on what is known as the 
          "CCS carve-out" from January 1, 2012, to July 1, 2016. Existing 
          law, created by SB 1371 (Bergeson), Chapter 917, Statutes of 
          1994, and extended by several policy and budget bills, 
          prohibits, until January 1, 2012, CCS covered services from 
          being incorporated into Medi-Cal managed care organization (MCO) 
          contracts. The most recent extension from August 1, 2008, to 
          January 1, 2012, was made by AB 2379 (Chan), Chapter 333, 
          Statutes of 2006. There are three types of MCO plans:  Two-Plan, 
          Geographic Managed Care (GMC), and County Organized Health 
          Systems (COHS). Existing statute exempts COHS and Regional 
          Health Authority in the following counties from this prohibition 
          where the services are "carved-in": San Mateo, Santa Barbara, 








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          Solano, Yolo, Marin, and Napa.

          Fiscal Effect of Carve-Out
          If the carve-out were to sunset, it would be at DHCS' option to 
          either continue or to end the carve-out. DHCS states that it 
          would continue the carve-out until the results of the evaluation 
          of the 2010 federal waiver CCS pilot projects, addressed below, 
          is completed and analyzed and a CCS redesign has been discussed 
          in consultation with stakeholders.

          There are three possible fiscal effects:
             1)   There would be no new cost above current expenditure 
               levels if this bill were to be moved forward, since it 
               would continue existing practice.
             2)   If this bill were to not move forward, there could be no 
               new cost above current expenditure levels, since DHCS 
               intends to continue the existing carve-out/carve-in system 
               and would likely choose to do so until the CCS pilot 
               projects evaluation is complete.
             3)   If this bill were to not move forward, contrary to their 
               stated intent, DHCS could decide to end or change the 
               current system, given their authority to set CCS program 
               guidelines and to negotiate the benefits available under 
               MCO contracts. It is unclear what DHCS would choose to 
               implement in lieu of the existing carve-out/carve-in 
               structure. It is also unclear what could prompt them to 
               deviate from their intent of continuing the system. 

          Thus, there could be potential costs, cost avoidance, or no 
          fiscal impact depending on the structure of the CCS program that 
          DHCS could develop when compared to extending the carve-out 
          sunset. The most likely outcome is that the effect of extending 
          the carve-out sunset would be the same as not extending the 
          sunset-no change in the delivery of CCS services because the 
          department's intent is the same as this bill's. However, since 
          DHCS would have the authority to alter the way CCS services are 
          delivered without this bill, extending the carve-out through 
          this bill could reduce some state-level financial flexibility 
          and potentially result in a cost if the department were to 
          choose to implement cost-containment measures instead of 
          continuing the carve-out when compared to maintaining the 
          current funding level.

          The state and federal government share Medi-Cal/CCS costs at a 








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          ratio of 50 percent General Fund and 50 percent federal funds 
          almost exclusively on a fee-for-service basis. The carve-out 
          makes it so that a MCO, with the exception of a COHS that 
          chooses to carve CCS in, is not at financial risk for managing a 
          child's CCS health care needs. In both carved-in and carved-out 
          counties, the county CCS program authorizes the provision of CCS 
          services. The difference is that provider payment is part of the 
          MCO's capitated per member per month payment in carved-in 
          counties whereas Medi-Cal pays paneled providers on a 
          fee-for-service basis for services rendered to children in 
          carved-out counties and in counties in the fee-for-service 
          system.

          CCS Background
          Effectively, the carve-out results in a bifurcated health care 
          delivery system where a child's non-CCS medical needs are 
          coordinated through a MCO and their CCS-related medical needs 
          are coordinated by the CCS program.

          CCS, originally established in 1927, provides health care 
          services, including diagnostic, treatment, dental, medical case 
          management, physical therapy and occupational therapy services, 
          to children from birth up to 21 years of age with CCS-eligible 
          medical conditions. Eligible medical conditions are defined in 
          state regulation and consist of both specific chronic and 
          episodic conditions including prematurity, hearing loss, cystic 
          fibrosis, cancer, congenital heart disease, and traumatic 
          injuries. A child is eligible if he or she is a Medi-Cal 
          beneficiary (Medi-Cal/CCS), a Healthy Families Program 
          subscriber (Healthy Families/CCS), or is ineligible for Medi-Cal 
          and Healthy Families, but who's family adjusted gross income is 
          less than $40,000 (CCS-only), and individuals whose families' 
          spend more than 20 percent of their income on treatment for the 
          CCS-eligible condition. Eligibility determination varies by 
          county, but is either determined by county medical staff or by 
          the state regional office staff.

          For FY 2011-2012, according to the May 2011 Estimate, the 
          estimated Medi-Cal/CCS caseload is 78 percent of the total CCS 
          enrollment, or 141,825 Medi-Cal/CCS out of a total CCS 
          enrollment of 182,384. These children are served by a network of 
          CCS-paneled specialty and subspecialty providers, hospitals and 
          special care centers; CCS paneled providers are also Medi-Cal 
          providers. Physicians who treat children with CCS conditions are 








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          paid 39.7 percent more than the standard Medi-Cal 
          fee-for-service rate, per state regulation. Comprehensive 
          medical case management services are provided for all children 
          enrolled in the program. 

          Waiver Pilot Projects
          In an effort to address the bifurcated case management system 
          for CCS enrollees, SB 208 (Steinberg), Chapter 714, Statutes of 
          2010, as part of the 2010 Bridge to Reform Section 1115(a) 
          Medicaid Demonstration waiver (federal 2010 waiver) requires the 
          Department of Health Care Services (DHCS) to establish models of 
          organized health care delivery systems for children eligible for 
          CCS by January 1, 2012, and permits them to require individuals 
          to enroll in the programs. DHCS released a request for proposal 
          in May 2011. Proposals are due July 15, 2011, and the pilots are 
          expected to commence in January 2012. Applicants may choose the 
          following for the structure of their pilot programs:

          (1) An enhanced primary care case management program.
          (2) A provider-based accountable care organization.
          (3) A specialty health care plan.
          (4) A Medi-Cal managed care plan that includes payment and 
          coverage for CCS-eligible conditions.

          The department is required to conduct an evaluation of the pilot 
          projects, in consultation with stakeholders, to assess the 
          effectiveness of each model in improving the delivery of health 
          care services for children who are eligible for CCS. This bill 
          states that it is the Legislature's intent to continue the 
          carve-out until the evaluation is completed. As noted above, 
          this is also DHCS' intent.

          The evaluation process is required to begin simultaneously with 
          the development and implementation of the model delivery systems 
          to compare the care provided to, and outcomes of, children 
          enrolled in the models with those not enrolled in the models. 
          The evaluation shall include, at a minimum, an assessment of all 
          of the following:

          (A) The types of services and expenditures for services.
          (B) Improvement in the coordination of care for children.
          (C) Improvement in the quality of care.
          (D) Improvement in the value of care provided.
          (E) The rate of growth of expenditures.








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          (F) Parent satisfaction.