BILL ANALYSIS                                                                                                                                                                                                    Ó






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                       Senator Ed Hernandez, O.D., Chair


          BILL NO:       AB 1297                                     
          A
          AUTHOR:        Chesbro                                     
          B
          AMENDED:       June 9, 2011                                
          HEARING DATE:  June 29, 2011                               
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          CONSULTANT:                                                
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          Bain                                                       
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                                     SUBJECT
                                         
                            Medi-Cal: mental health
                                         

                                    SUMMARY  

          Requires, for purposes of federal reimbursement for 
          specialty mental health services, the provider 
          reimbursement amounts to be consistent with federal 
          Medicaid requirements for calculating federal upper payment 
          limits (UPL).  Requires the reimbursement methodology to be 
          based on certified public expenditures (CPEs) and to 
          conform to Medicaid requirements.  Requires claims for 
          reimbursement for service to be submitted within longer 
          timeframes required by federal Medicaid requirements and 
          the approved Medicaid State Plan and waivers, instead of 
          shorter timeframes in state regulation.  This bill would 
          also delete the requirement that administrative costs be 
          claimed separately and be limited to 15 percent of the 
          total cost of direct client services.  


                             CHANGES TO EXISTING LAW  

          Existing law:
          Establishes the Medi-Cal program, administered by the 
                                                         Continued---



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          Department of Health Care Services (DHCS), under which 
          qualified low-income persons are provided with health care 
          services, including mental health services.  The Medi-Cal 
          program is partially governed and funded under federal 
          Medicaid provisions.  Under existing law, the Department of 
          Mental Health (DMH) is required to provide specialty mental 
          health services for Medi-Cal recipients. 
          
           Standards and guidelines
           Existing law makes legislative findings and declarations 
          that there is a need to establish a standard set of 
          guidelines that governs the provision of managed Medi-Cal 
          mental health services at the local level, consistent with 
          federal law.  Existing law requires, in order to ensure 
          quality and continuity, and to efficiently utilize mental 
          health services under the Medi-Cal program, that MHPs to be 
          developed for the provision of mental health services that 
          are consistent with guidelines established by DMH. 

          This bill would require the guidelines to be based on 
          federal Medicaid requirements and the approved Medicaid 
          State Plan and waivers, to ensure full and timely federal 
          reimbursement to mental health plans (MHPs) for services 
          that are rendered and reimbursed consistent with federal 
          Medicaid requirements. 

          Existing law requires, to the extent permitted by federal 
          law, MHPs to be governed by the following guidelines:

          § State and federal Medi-Cal funds identified for the 
            diagnosis and treatment of mental disorders must be used 
            solely for those purposes. 
          § Administrative costs must be clearly identified and must 
            be limited to reasonable amounts in relation to the scope 
            of services and the total funds available. 
          § Administrative requirements cannot impose costs that 
            exceed the funds available for administrative purposes.

          This bill would also require the administrative 
          requirements to be based on and limited to federal Medicaid 
          requirements and the approved Medicaid State Plan and 
          waivers. 

           Medi-Cal mental health reimbursement changes 
           Existing law requires counties to provide services to 




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          Medi-Cal beneficiaries and to seek the maximum federal 
          reimbursement possible for services rendered to mentally 
          ill patients.  Existing law requires the standards and 
          guidelines for the administration of mental health services 
          to Medi-Cal eligible persons to be based on federal 
          Medicaid requirements.

          This bill would delete the requirement that the standards 
          and guidelines be based on federal Medicaid requirements, 
          and instead require the standards and guidelines to be no 
          more restrictive than federal Medicaid requirements, as 
          specified in the approved Medicaid State Plan and 
          applicable waivers, to ensure full and timely federal 
          reimbursement to counties for services that are rendered 
          and claimed consistent with federal Medicaid requirements. 

          Existing law requires, subject to the approval of the 
          director of the Department of Health Care Services (DHCS), 
          the director of DMH to establish the amount of 
          reimbursement for services provided by county mental health 
          programs to Medi-Cal eligible individuals.

          This bill would require, for purposes of federal 
          reimbursement, the reimbursement amounts to be consistent 
          with federal Medicaid requirements for calculating UPLs, as 
          specified in the approved Medicaid State Plan and waivers. 

          Existing law requires the rate-setting methodology to 
          contain incentives relating to economy and efficiency in 
          service delivery.

          This bill would instead require the reimbursement 
          methodology to be based upon CPEs, which encourage economy 
          and efficiency in service delivery.

          Existing law requires DMHC and DHCS to jointly develop a 
          new rate-setting methodology for use in the Short-Doyle 
          Medi-Cal system that maximizes federal funding and 
          utilizes, as much as practicable, federal Medicare 
          reimbursement principles. Existing law requires DHCS and 
          DMH to work with the counties and CMS in the development of 
          the required methodology.  Existing law requires rates 
          developed through the methodology to apply only to 
          reimbursement for direct client services.





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          This bill would instead require reimbursement amounts 
          developed through the methodology to conform to federal 
          Medicaid requirements and the approved Medicaid State Plan 
          and waivers.

           Administrative cost claiming and limitation
           Existing law requires administrative costs in the 
          Short-Doyle Medi-Cal system to be claimed separately, and 
          to be limited to 15 percent of the total cost of direct 
          client services. 

          This bill would delete the requirement that administrative 
          costs be claimed separately and be limited to 15 percent of 
          the total cost of direct client services.  This bill would 
          instead require administrative costs incurred by counties 
          for activities necessary for the administration of the MHP 
          to be reimbursed in a manner consistent with federal 
          Medicaid requirements and the approved Medicaid State Plan 
          and waivers. 

          Existing law requires the cost of performing utilization 
          review to be claimed separately, and not to be included in 
          administrative costs.

          This bill would also require quality assurance to be 
          reimbursed separately, and not to be included in 
          administrative costs.

           Reimbursement timeframes
           Existing regulations require claims for specialty mental 
          health services to be submitted to DMH no later than six 
          months after the month of service, except for good cause.

          This bill would require claims for reimbursement for 
          service to be submitted by MHPs within the timeframes 
          required by federal Medicaid requirements and the approved 
          Medicaid State Plan and waivers.  (Federal Medicaid 
          regulations require providers to submit claims no later 
          than 12 months from the date of service.)


                                  FISCAL IMPACT  

          According to the Assembly Appropriations Committee 
          analysis:




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          1)Costs to DMH, not likely to exceed $50,000, to modify 
            regulations governing reimbursement to county Medi-Cal 
            MHPs.

          2)Unknown, significant increased federal funding to 
            counties from loosening state restrictions on leveraging 
            federal funds.  Counties estimate that statewide, they 
            may be able to claim additional federal funding in the 
            range of $50 to $100 million.  

                            BACKGROUND AND DISCUSSION  

          This bill is sponsored by the California Mental Health 
          Directors Association (CMHDA) to eliminate unnecessary 
          state imposed Medi-Cal requirements in the provision of 
          Medi-Cal specialty mental health services, and to ensure 
          that the state accesses all available federal resources, 
          particularly during these economically challenging times.  
          CMHDA notes that California has established a number of 
          state-specific requirements for county MHPs to follow in 
          their provision of these services and these state-specific 
          requirements needlessly limit the amount of federal 
          Medicaid reimbursement that is available.  CMHDA adds that 
          these requirements contradict existing state law, which 
          requires counties to maximize available federal funds for 
          services rendered to mentally ill Medi-Cal beneficiaries.  
          This bill is intended to simplify the state's standards and 
          guidelines for these services, including federal 
          reimbursement amounts and claims submission timelines, to 
          ensure that they are consistent with federal Medicaid 
          requirements and California's approved Medicaid State Plan 
          and waivers.  CMHDA estimates that the changes in this bill 
          will help counties capture an additional $50 to $100 
          million in federal fund for mental health services.

          Background  
          Specialty mental health services are "carved out" in the 
          Medi-Cal Program and provided by MHPs.  Specialty mental 
          health services are services that are provided by mental 
          health specialists, such as psychiatrists, psychologists, 
          licensed clinical social workers, licensed marriage and 
          family therapists, or psychiatric technicians, rather than 
          by a primary care physician or other physical health care 
          provider.  Individuals are entitled to specialty mental 




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          health services if the service is both covered under the 
          Medi-Cal program and deemed medically necessary.  Services 
          include mental health assessments, group or individual 
          therapy, medication support services, intensive day 
          treatment, crisis intervention and stabilization, and 
          residential treatment services.

          Each county MHP is responsible for maintaining a provider 
          network, authorizing services, determining provider payment 
          rates, and paying most providers.  Providers bill on a 
          fee-for-service basis and are paid directly by each MHP.  
          MHPs submit claims to DMH for processing.  A MHP submits a 
          form to DMH certifying that it incurred the expenditures 
          associated with submitted claims.  DMH compares the claimed 
          amount to a schedule called the State Maximum Allowance 
          (SMA) that describes the maximum amount a county may be 
          reimbursed for each specialty mental health service 
          function described above, and approves the lower of what is 
          billed or the SMA.

          DMH then submits the batch of edited claims to DHCS for 
          further processing.  DHCS processes the claims to determine 
          whether the services provided meet federal and state 
          requirements.  DHCS determines whether the claims are 
          approved, denied, or suspended. Once determination is made, 
          DHCS electronically returns the entire batch of claims to 
          DMH with a determination of how much federal reimbursement 
          is due to the MHPs.  DHCS then submits an invoice to the 
          State Controller for federal funds.  Once federal 
          reimbursement funds are received by DHCS, it passes them 
          through DMH back to the MHPs.

          

          Statewide Maximum Allowance
          SMAs are published annually by DMH to provide the maximum 
          amount a county may be reimbursed for each specialty mental 
          health service function.  Counties are alerted to the SMAs 
          through information notices sent by DMH.  For example, 
          DMH's most recent information notice reflects that 
          counties' current federal reimbursement for 24-hour 
          hospital inpatient services is set at a maximum of 
          $1,172.71 per day.  According to CMHDA, this amount may not 
          reflect the actual costs to counties to provide this 
          service, and it does not take into consideration that CMS 




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          does not set a maximum dollar amount for this service or 
          any other type of Medi-Cal service mode. 

          CMHDA notes that the SMAs for all services (except 
          inpatient, psychiatric health facility, and adult crisis 
          residential) have been frozen since fiscal year 2006-07 in 
          order to limit state General Fund (GF) payments for the 
          Early and Periodic Screening, Diagnosis, and Treatment 
          Program (EPSDT), which provides physical and mental health 
          services to Medi-Cal beneficiaries under the age of 21.  

          This bill seeks to eliminate the use of SMAs in determining 
          the federal reimbursement due to counties.  Instead, this 
          bill would require reimbursement amounts to be consistent 
          with federal Medicaid requirements for calculating federal 
          UPLs.  Federal UPLs are the maximum amount a provider can 
          be paid under Medicare payment principles.  In addition, 
          this bill would require the reimbursement methodology for 
          MHPs to be based on CPEs and to conform to Medicaid 
          requirements.  CPEs enable government providers to certify 
          and receive federal reimbursement for costs that they incur 
          that above the amounts the provider receives from Medicaid 
          reimbursement.

          Claims submission timelines
          DMH regulations specify that counties must submit claims 
          for specialty mental health services within six months, 
          except when there is good cause.  However, federal 
          regulations require Medi-Cal claims to be submitted no 
          later than 12 months from the date of service.  This bill 
          eliminates DMH's use of the state's 
          administratively-established submission deadline of six 
          months for these claims and, instead, requires counties to 
          submit claims within the 12-month timeframe specified in 
          federal Medicaid requirements. 

          Administrative costs
          Existing law, as enacted by AB 218 (Farr), Chapter 788, 
          Statutes of 1993, requires administrative costs to be 
          claimed separately, and to be limited to 15 percent of the 
          total cost of direct client services.  According to DMH, 
          the 15 percent limit was created to demonstrate a cost 
          containment effort to the federal government, and to make 
          Short-Doyle Medi-Cal rates for direct services more 
          comparable to the rates paid by Medicare Part B.




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          This bill would delete the requirement that administrative 
          costs be claimed separately and be limited to 15 percent of 
          the total cost of direct client services.  Instead, this 
          bill would require administrative costs incurred by 
          counties for activities necessary for the administration of 
          the MHP to be reimbursed in a manner consistent with 
          federal Medicaid requirements and the approved Medicaid 
          State Plan and waivers.  CMHDA argues that counties, as the 
          government entities that certify the full public 
          expenditure of funds in order to draw down federal 
          financial participation, counties are entitled to be fully 
          reimbursed by the federal government for the cost of 
          providing services, that the 15 percent cap is arbitrary, 
          that federal law establishes limits on what can be claimed 
          as county administrative costs, and that eliminating the 15 
          percent cap does not affect the state GF.

          If a county's actual administrative costs are less than 15 
          percent of direct service costs, DMH indicates FFP is 
          calculated using the county's actual administrative costs.  
          If the county's actual administrative costs are more than 
          15 percent of direct service costs, FFP is calculated using 
          15 percent of direct service costs, meaning the county does 
          not receive FFP for those costs in excess of the 15 percent 
          cost limit.  DMH data from 2008-09 (some of which has not 
          yet been reconciled) indicates 24 of the state's 58 
          counties exceed the 15 percent cost limit.  County 
          administrative costs vary significantly by county.  Total 
          statewide spending on administration was 12 percent in 
          2007-08, but 3 counties (Fresno, Inyo, and Napa) had 
          administrative costs equal to or exceeding 30 percent, and 
          8 counties (Amador, El Dorado, Marin, Merced, Placer, San 
          Joaquin, San Mateo and Santa Barbara) had administrative 
          costs of between 20 and 26 percent) while 12 counties 
          (Alpine, Del Norte, Glen, Lake, Los Angeles, Madera, 
          Mendocino, Nevada, Riverside, Santa Clara, Sonoma, and 
          Tehama) had administrative costs at or below 10 percent.

          Related Bills
          AB 102 (Committee on Budget), the second health budget 
          trailer bill of this year's session, would, among other 
          provisions, transfer from DMH to DHCS the state 
          administration of Medi-Cal specialty mental health managed 
          care, EPSDT and applicable functions related to federal 




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          Medicaid requirements, effective July 1, 2012.  DHCS, with 
          DMH, by July 15, 2011, is required to convene a series of 
          stakeholder meetings and forums to receive input from 
          clients, family members, providers, counties, and 
          representatives of the Legislature concerning the 
          transition and transfer of Medi-Cal specialty mental health 
          managed care and the EPSDT Program to inform the creation 
          of a state administrative transition plan and a 
          programmatic transition plan.  AB 102 passed both houses of 
          the Legislature and is currently in engrossing and 
          enrolling.

          Arguments in support  
          The California State Association of Counties (CSAC) writes 
          that this bill will ensure timely federal reimbursement to 
          counties for their provision of specialty mental health 
          services by aligning state requirements with existing 
          federal requirements to help maximize federal funds for 
          these services, all without impacting the state's GF.  CSAC 
          adds that expanding the timeframe for counties to submit 
          specialty mental health claims from the state's six month 
          limit to the federal standard of 12 months will give 
          counties the flexibility in submitting claims that complex 
          health care scenarios demand.     


                                  PRIOR ACTIONS

           Assembly Health:19- 0
          Assembly Appropriations:17- 0
          Assembly Floor:70- 0


                                     COMMENTS
           
          1.  Administrative cost limit.  Existing law requires 
          administrative costs to be claimed separately, and to be 
          limited to 15 percent of the total cost of direct client 
          services.  This bill would delete the requirement that 
          administrative costs be claimed separately and be limited 
          to 15 percent of the total cost of direct client services.  
          Instead, this bill would instead require administrative 
          costs incurred by counties for activities necessary for the 
          administration of the MHP to be reimbursed in a manner 
          consistent with federal Medicaid requirements and the 




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          approved Medicaid State Plan and waivers. 

          Following discussions between the author's office, staff 
          and the sponsor, the author is instead proposing to amend 
          this bill to retain the requirement that administrative 
          costs be claimed separately and the 15 percent cap, but to 
          instead require the cap be based on the total actual cost 
          of direct client services, instead of the total cost of 
          direct client services in existing law.

          2.  Certified public expenditures and the required match.  
          This bill requires the reimbursement methodology for 
          Medi-Cal specialty mental health services to be based upon 
          CPEs.  Additionally, this bill requires, for purposes of 
          federal reimbursement, the reimbursement amounts to be 
          consistent with federal Medicaid requirements for 
          calculating federal UPL, as specified in the approved 
          Medicaid State Plan and waivers.  The use of CPEs and 
          references to the federal UPL will enable county MHP to 
          drawn down additional federal funds.  In order to ensure 
          that the state match for these federal additional funds 
          (generated by CPEs) to pay up to the federal UPL is 
          provided by county funds, staff recommends an amendment to 
          clarify that the match used to draw down federal matching 
          funds comes from county funds.

          3.  Drafting provision.  This bill uses different phrasing 
          relating to compliance with federal Medicaid requirements 
          and the approved Medicaid State Plan.  For example, this 
          bill requires the standards and guidelines for the 
          administration of mental health services to Medi-Cal 
          eligible persons to be no more restrictive than federal 
          Medicaid requirements, while another provision of this bill 
          requires, for purposes of federal reimbursement, the 
          reimbursement amounts to be consistent with federal 
          Medicaid requirements.  Committee staff recommends 
          conforming the language to the "consistent with" standard.


                                    POSITIONS  
                                        
          Support:  County Mental Health Directors Association 
          (sponsor)
                    Advanced Medical Technology Association
                    California Alliance of Child and Family Services




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                    California Council of Community Mental Health 
               Agencies
                    California Psychiatric Association
                    California State Association of Counties
                    County Alcohol and Drug Program Administrators 
                         Association of California
                    Los Angeles County Board of Supervisors
                    National Association of Social Workers, 
             California
                    Regional Council of Rural Counties
                    Sacramento County Board of Supervisors
                    San Mateo County Board of Supervisors

          Oppose:   None on file.


                                   -- END --