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 1 CONSULTANT: 2 Bain 9 7 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--- STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 2 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 STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 3 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. STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 4 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: STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 5 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 STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 6 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 STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 7 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. STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 8 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 STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 9 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 STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 10 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 STAFF ANALYSIS OF ASSEMBLY BILL 1297 (Chesbro) Page 11 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 --