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, AB 301 (Pan) Page 1 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 AB 301 (Pan) Page 2 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 AB 301 (Pan) Page 3 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. AB 301 (Pan) Page 4 (F) Parent satisfaction.