BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 574 (Lowenthal)
Hearing Date: 8/25/2011 Amended: 8/15/2011
Consultant: Katie Johnson Policy Vote: Health 9-0
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BILL SUMMARY: AB 574 would increase the maximum number of
allowable contracts between the Department of Health Care
Services (DHCS) and the Program for All-Inclusive Care for the
Elderly (PACE) from 10 programs to 15 programs and would update
statute to reflect PACE's status change from a demonstration
project to a state optional benefit.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
DHCS administration $100 - $200$200 - $400 $200 -
$400General/*
Federal
Potential increase or unknown, potentially significant
costsGeneral/**
decrease in costs to or cost avoidance Federal/
transition beneficiaries Private
to a PACE program from
fee-for-service or
Medi-Cal managed care
*50 percent General Fund, 50 percent federal funds
**Medi-Cal costs shared 50 percent General Fund, 50 percent
federal funds; Medicare funded 100 percent federal funds;
beneficiary premiums when appropriate.
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STAFF COMMENTS: SUSPENSE FILE.
Existing state law establishes the Program for All-Inclusive
Care for the Elderly (PACE) as a demonstration project. The
program is unique in that it combines Medicaid (Medi-Cal in
California) and Medicare programs and their respective funding
AB 574 (Lowenthal)
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streams to provide a comprehensive medical and social service
delivery system of preventive, primary, acute, and long-term
care services to individuals who would otherwise be served by
the Medi-Cal fee-for-service or managed care systems. PACE
participants must be certified to be eligible to be in a nursing
home. Medi-Cal costs are shared 50 percent General Fund and 50
percent federal funds and Medicare funded 100 percent federal
funds. In some instances, the beneficiary also pays a share of
the cost.
Existing state law authorizes up to 10 PACE demonstration
projects within specific geographical boundaries within
California to develop risk-based, capitated long-term care pilot
programs, and prescribes that those services are an optional
Medi-Cal benefit; there are currently 5 PACE programs in
existence in California. The Department of Health Care Services
(DHCS) indicates that it is currently reviewing applications
from three urban providers and has received letters of intent to
submit applications from two more.
The federal Balanced Budget Act of 1997 made the PACE model a
permanent provider under Medicare and a state option under
Medicaid. This bill would update state statute to reflect the
change from a demonstration project to a Medi-Cal state option.
California PACE programs are currently governed by an existing
state plan amendment (SPA). The SPA does not limit the number of
PACE programs, but it does limit the number of PACE participants
to 5,850. There are currently 2,436 PACE participants.
Fiscal Effect
Federal regulation requires that monthly capitation payments be
less than the amount that would otherwise have been paid under
the State Medicaid Plan if the participants were not enrolled in
PACE. Medi-Cal capitation payments for a PACE participant
certified for placement in a nursing facility are less than the
amount paid under the state plan for a beneficiary who resides
in a nursing facility. Existing state law, the health budget
trailer bill from 2006, AB 1807, Chapter 74, Statutes of 2006,
required that PACE rates be set at not less than 90 percent of
what it would have cost to care for an individual in the
fee-for-service system. PACE rates are currently between 90 and
95 percent of the geographically adjusted upper payment level
for fee-for-service costs of Medi-Cal beneficiaries who reside
in nursing facilities.
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It is unclear when and how many PACE programs would come online
beyond the three currently under review and the two that have
stated their intent to apply. To the extent that new PACE
programs are approved by DHCS, there could be Medi-Cal costs or
cost avoidance depending on the number of PACE enrollees who
would otherwise have entered a nursing home outside of the PACE
program.
Additionally, DHCS would need staffing resources in the amount
of up to $200,000 - $400,000 annually to approve and monitor the
increased number of programs. Actual staffing costs would depend
on the number of applications and new PACE programs. Those
expenses would be shared 50 percent federal funds and 50 percent
General Fund.