BILL ANALYSIS Ó
AB 574
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 574 (Bonnie Lowenthal) - As Amended: March 23, 2011
SUBJECT : Program of All-Inclusive Care for the Elderly.
SUMMARY : Revises the provisions authorizing the California
Program of All-Inclusive Care for the Elderly (PACE) and
increases the maximum number of allowable contracts with PACE
organizations from 10 to 20. Specifically, this bill :
1)Requires the Department of Health Care Services (DHCS) to
establish the PACE program to provide community-based,
risk-based, and capitated long-term care services as an
optional benefit under the Medi-Cal state plan and deletes the
authority to establish a demonstration waiver.
2)Increases the number of allowable separate contracts with PACE
organizations from 10 to 20 and deletes the requirement that
establishing contracts under a State Plan is an alternative to
establishing a demonstration project.
3)Revises legislative findings regarding the PACE program citing
the insufficiency of existing services to meet the needs of
frail elderly at risk of institutionalization, that capitated
"risk-based" financing provides an alternative to traditional
fee-for-service (FFS) payment, citing the federal and state
history of the establishment of On Lok as a cost-effective
Medicare and Medicaid demonstration, the eventual replication
of the model as the PACE program and current authorization to
provide PACE risk-based, long term care services as a Medicaid
option.
4)Makes other clarifying and technical changes.
EXISTING LAW :
1)Creates, under federal law, PACE as a provider category
regulated by the Centers for Medicare and Medicaid Services
(CMS), and reimbursed under the Medicare and Medicaid
programs.
2)Establishes the federal PACE Provider Act as part of the
Balanced Budget Act of 1997, allowing for the transition of
AB 574
Page 2
PACE programs in California from demonstration status to
permanent provider status in November 2003.
3)Authorizes DHCS to establish the California PACE program and
contract with up to 10 demonstration projects to develop
risk-based long-term care pilot programs.
4)Requires DHCS to establish Medi-Cal capitation rates to be
paid to each PACE organization that are no less than 90% of
the FFS equivalent cost.
5)Establishes the DHCS Office of Long-Term Care as the oversight
entity for PACE programs in California and outlines the
administration and regulation of the programs.
6)Allows DHCS, and as applicable the California Department of
Aging, and the State Department of Social Services, to grant
exemptions from duplicative, conflicting, or inconsistent
requirements to PACE.
7)Permits DHCS to grant exemptions on a statewide basis as
appropriate, or to a PACE organization on an organization-wide
basis, in instances where an exemption for a single license is
expanded to other locations.
8)Prohibits the requirements of the PACE model, as provided
under federal law, from being waived or modified.
9)Allows DHCS to immediately suspend or revoke an exemption if
it determines that a PACE program granted an exemption is
operating in a manner contrary to the terms and conditions of
the exemption.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the purpose of
this bill is to establish the long-term implementation of the
PACE model in California by increasing the limit on providers
from 10 to 20. The author states that this bill is also
intended to modernize the statutes relative to the PACE
programs by deleting outdated references to its prior status
as a federal demonstration program.
AB 574
Page 3
2)BACKGROUND . PACE programs are comprehensive community-based
care model for frail, chronically ill older adults whose
significant functional and cognitive impairments make them
nursing home eligible. The first PACE program, On Lok,
started in the Chinatown section of San Francisco in 1971.
Begun as an alternative to nursing home care in the Chinese
community, where institutionalization was a culturally
unacceptable option, it was a day health center where older
adults could receive health care supervision, social services,
and hot meals, then return to their own homes in the evening.
In 1979, On Lok launched a Medicare-funded demonstration of the
consolidated model of long-term care. In this model, the
program's interdisciplinary team develops, coordinates, and
provides all medical and social services for participants. In
1997, PACE became a permanent provider type under both
Medicare and Medicaid. As of 2009, there were 72 PACE
programs in 30 states.
3)PACE MODEL . The PACE program is a unique model. The dual
recognition by Medicare and Medi-Cal allows integration of
comprehensive services including acute and long-term care.
PACE offers and manages all the medical, social and
rehabilitative services needs of the enrollees to preserve or
restore independence and to remain in their homes and
communities, and to maintain their quality of life. The PACE
service package must include all Medicare and Medicaid
services provided by that State. In addition, the PACE
organization provides any service determined necessary by the
interdisciplinary team. Minimum services that must be provided
in the PACE center include primary care services, social
services, restorative therapies, personal care and supportive
services, nutritional counseling, recreational therapy, and
meals. Services are available 24 hours a day, 7 days a week,
and 365 days a year. Generally, these services are provided
in an adult day health center setting, but may also include
in-home and other referral services that enrollees may need.
This includes such services as medical specialists, laboratory
and other diagnostic services, hospital, and nursing home
care.
Payment is also unique. PACE receives a fixed monthly payment
per enrollee from Medicare and Medicaid. The amounts are the
same during the contract year, regardless of the services an
enrollee may need. Persons enrolled in PACE also may have to
pay a monthly premium, depending on their eligibility for
AB 574
Page 4
Medicare and Medicaid. This is unlike any other managed care
plan in California. The closest equivalent is the Medi-Cal
County Organized Health Systems (COHS) such as CalOptima in
Orange County. In a COHS, long term care may be included in
the Medi-Cal capitation rate, but Medicare services are
provided separately and may be provided outside the plan. It
is also unlike most Medi-Cal plans and all commercial plans,
in that PACE plans are authorized to accept full risk
capitation without obtaining a Knox-Keene Health Care Service
Plan Act of 1975 license from the Department of Managed Health
Care.
California currently has five PACE organizations operating in in
Los Angeles, Oakland, Sacramento, San Francisco, San Jose, and
San Diego as follows:
---------------------------------------------------------------
| PACE Organizations | Counties Served | # of |
| | |Participants |
|----------------------+--------------------------+-------------|
|On Lok Lifeways |San Francisco, Alameda, | 1,010 |
| |Santa Clara | |
|----------------------+--------------------------+-------------|
|AltaMed Senior Buena |Los Angeles | 673 |
|Care | | |
|----------------------+--------------------------+-------------|
|Sutter Senior Care |Sacramento, Yolo | 212 |
|----------------------+--------------------------+-------------|
|Center for Elders |Alameda, Contra Costa | 436 |
|Independence | | |
|----------------------+--------------------------+-------------|
|St. Paul's Community |San Diego |105 |
|Eldercare | | |
---------------------------------------------------------------
According to DHCS, it has accepted and is now reviewing
applications from three urban providers and has received
letters of intent to submit applications from two more.
4)CARVE-OUTS . The Assembly Committee on Aging and Long-Term
Care conducted an Oversight Hearing of the PACE program in May
2010. According to the background material, the majority of
PACE participants are eligible for both Medi-Cal and Medicare
(dual eligibles). However, a significant number of PACE
participants are Medi-Cal only beneficiaries who are not
eligible for Medicare. For example, about 14% of PACE
AB 574
Page 5
participants served by Center for Elders Independence are only
eligible for Medi-Cal with 22% for AltaMed in Los Angeles and
St. Paul's PACE in San Diego.
a) Medi-Cal . In November of 2010, California received
approval from CMS to begin a mandatory enrollment of
approximately 600,000 seniors and persons with disabilities
into Medi-Cal managed care plans as part of a comprehensive
Section 1115 Medicaid waiver, entitled "Bridge to Reform."
Enrollees who do not select a plan are enrolled by default
based a numerical algorithm or past provider relationship.
Counties covered include all of the counties with PACE
Programs. The implementing legislation ÝSB 208
(Steinberg), Chapter 714, Statutes of 2010] specifically
includes the PACE program as a choice, if available, and if
the person is eligible.
b) Dual Eligible . The federal Affordable Care Act (ACA)
created the Center for Medicare and Medicaid Innovation
(CMMI) to test innovative payment and service delivery
models. The ACA states that goal is to test models to
reduce program expenditures and preserve or enhance the
quality of care and also improve coordination, quality and
efficiency. CMMI and the federal Office of the Duals are
working on a new initiative entitled "State Demonstrations
to Integrate Care for Dual Eligible Individuals." The
overall goal of the State Demonstrations to Integrate Care
for Dual Eligible Individuals is to identify and validate
delivery system and payment integration models that can be
rapidly tested and, upon successful demonstration,
replicated in other states. CMS plans to award contracts
to up to 15 states of up to $1 million each. The primary
outcome of the initial design period will be a
demonstration proposal that describes how the State would
structure, implement, and evaluate a model aimed at
improving the quality, coordination, and cost effectiveness
of care for dual eligible individuals. Applications were
due February 1, 2011.
SB 208 required DHCS to seek federal approval to establish a
Medicare, Medicaid or combination pilot project. DHCS is
further required to establish pilot projects that enable
dual eligibles to receive a continuum of services and
maximize the coordination of benefits. SB 208 required the
pilot projects to be established in up to four counties.
Mandatory enrollment for the enrollee's Medi-Cal benefits
AB 574
Page 6
was authorized with an option to enroll for Medicare
benefits. As in the Medi-Cal mandatory enrollment, PACE is
specifically called-out as an alternative option. Per SB
208, persons meeting requirements for PACE may select a
PACE plan if one is available in that county.
Additionally, DHCS may encourage potential contractors to
collaborate with local PACE sites. This plan was
originally part of the 1115 waiver, but is now proposed as
a response to the CMMI State Demonstration.
SB 208 requires at least one COHS and one two-plan model
county in the dual eligible pilot. According to the
briefing materials from the May 2010 oversight hearing of
the Assembly Aging and Long Term Care Committee, an
unintended barrier exists between PACE and COHS as a result
of a requirement in the federal statute authorizing COHS
that all Medicaid beneficiaries enroll in the COHS.
Federal PACE statutes require a direct relationship between
the PACE organization, CMS and the State Medicaid agency
for PACE to operate. As a result, PACE eligible older
adults cannot enroll in PACE and receive PACE services in a
COHS county unless the COHS becomes a PACE organization.
With the proposals to expand Medi-Cal managed care options
including COHS, California will have two options to ensure
access to PACE in COHS counties: i) a change in federal
statute to remove the barrier; or, ii) a waiver of the
federal statute.
5)SUPPORT : The Alzheimer's Association, in support of this bill
states that PACE has been remarkably successful program since
its inception. The supporters maintain that by creating a
truly integrated model of care and providing comprehensive
medical and long-term care services to individual with dynamic
health issues, PACE has made it possible for more than 90% of
its participants to remain at home. The supporters argue that
considering it costs the Medi-Cal Program two and a half to
three times more to care for somebody with dementia in a
nursing home than somebody without dementia; and, that the
number of California with Alzheimer's is projected to double
to over 1.1 million by 2030; the program offers significant
financial benefits as well.
6)PRIOR LEGISLATION .
a) AB 577 (Bonnie Lowenthal), Chapter 456, Statutes of
AB 574
Page 7
2009, provided additional clarification to the exemption
process and allowed DHCS to grant exemptions on an
organization-wide basis in addition to the individual
program exemptions allowed under AB 847 (below) and aligned
state law with federal PACE requirements.
b) AB 847 (Berg), Chapter 315, Statutes of 2005, authorized
DHCS to grant PACE sites exemptions to licensing and
regulatory requirements in order to streamline the
licensing process for sites with multiple centers.
c) AB 798 (Committee on Aging and Long-Term Care), Chapter
112, Statutes of 2003, established PACE as a Medi-Cal
benefit, making PACE a permanent provider in California.
d) AB 2583 (Shelley), Chapter 483, Statutes of 1998,
expanded the number of authorized sites in California from
five to 10.
e) AB 1601 (Connelly), Chapter 821, Statutes of 1990,
established authority for DHCS to contract with up to five
PACE demonstration projects.
7)DOUBLE REFERRAL . This bill is double-referred; it was heard
in the Assembly Aging and Long-Term Care Committee on April
12, 2010 and passed on a vote of 6-0.
REGISTERED SUPPORT / OPPOSITION :
Support
Aging Services of California
Alzheimer's Association
California Association of Physician's Groups
California Hospital Association
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
AB 574
Page 8