BILL ANALYSIS                                                                                                                                                                                                    Ó






                  SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
                                Mark Leno, Chair
                                        
          Bill No:       AB 1467
          Author:        Committee on Budget
          As Amended:    June 13, 2012
          Consultant:    Michelle Baass
          Fiscal:        Yes
          Hearing Date:  June 14, 2012
          
          Subject:  Budget Act of 2012

          Summary:  This is the Omnibus Health Trailer Bill for 
          2012-13.  It contains necessary changes to enact 
          modifications in the Budget Bill for 2012-13 to achieve 
          over $430 million in General Fund savings.  It makes the 
          following key changes:

            1. California Children's Services (CCS) Program and 
             Educationally Related Therapy.  This bill requires that 
             all services assessed and determined as educationally 
             necessary by the Individualized Education Program (IEP) 
             team and contained in the child's IEP shall be provided 
             in accordance with the federal Individuals with 
             Disabilities Education Act (IDEA), rather than the CCS 
             program.  This change provides for $24.6 million in 
             savings ($12.2 million General Fund and $12.4 million 
             county funds).  This reflects that 5,352 children would 
             now be covered using special education funds with annual 
             cost per child at a Medical Therapy Unit (MTU) of 
             $4,595. This estimate is based on 75 percent (or 10,705) 
             of the 14,273 children with an IEP receiving therapy at 
             an MTU that is included in their IEP and of these 
             children, 50 percent (or 5,352) of therapy is included 
             in the IEP and covered under federal special education 
             law.

            2. Extends the CalOHII Sunset Date.   This bill extends the 
             sunset date of the California Office of HIPAA (CalOHII) 
             from January 1, 2013 to June 30, 2016, so that 
             continuing and changing federal Health Insurance 
             Portability and Accountability Act (HIPAA) requirements 
             are effectively implemented within the state.

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            3. California Health Facilities Financing Authority 
             (CHFFA) Competitive Grant Program.  This bill creates a 
             competitive grant program with $6.5 million from CHFFA's 
             reserve for one or more projects to demonstrate new or 
             enhanced methods of delivery of health care services to 
             improve access and health outcomes for vulnerable 
             populations or communities, or both that are effective 
             at enhancing health outcomes and improving access to 
             quality health care and preventive services. Those funds 
             not awarded as a competitive grant would revert back to 
             the fund balance on January 1, 2020.
                
             4. Transfers Direct Health Service Programs to DHCS.  This 
             bill transfers three direct services programs from the 
             Department of Public Health (DPH) to the Department of 
             Health Care Services (DHCS) effective July 1, 2012.  
             These programs are the Every Women Counts (EWC) Program, 
             the Prostate Cancer Treatment Program, and the Family 
             Planning Access Care and Treatment (FPACT) Program.  
             These programs would be transferred to the Health Care 
             Benefits and Eligibility Division at DHCS.
               
             These three programs provide direct health care services 
             to individuals and have eligibility requirements 
             designed to serve low-income Californians, thus aligning 
             more closely with the scope of services provided by 
             DHCS.  Additionally, as federal health care reform is 
             implemented, the transferring of these programs to DHCS 
             will facilitate a more seamless transition to Medi-Cal 
             enrollment and maximize opportunities to leverage 
             federal Medicaid funds to cover the costs currently 
             supported with state funds.

            5. Establishes the Long-Term Care Quality Assurance Fund.   
             This bill establishes the Long-Term Care Quality 
             Assurance Fund effective August 1, 2013.  Revenues from 
             the AB 1629 nursing home quality assurance fee, 
             Intermediate Care Facility/Developmental Disabilities 
             (ICF/DD) quality assurance fee, ICF/DD 
             transportation/day care quality assurance fee, and 
             freestanding pediatric subacute facility quality 
             assurance fee would be deposited into this fund.

            6. Eliminates the Genetically Handicapped Persons Program 
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             (GHPP) Advisory Committee.  This bill eliminates the GHPP 
             Advisory Committee.  This committee was established in 
             the 1970s and has never convened.

            7. Establishes Office of Health Equity.   This bill creates 
             the Office of Health Equity (OHE) at the Department of 
             Public Health (DPH).  The OHE is a consolidation of 
             functions of the Office of Women's Health at the 
             Department of Health Care Services (DHCS), the Office of 
             Multicultural Services at the Department of Mental 
             Health, the Office of Multicultural Health at DPH, the 
             Health in All Policies Task Force at DPH, and the 
             Healthy Places Team at DPH.
               
             The OHE would take a more comprehensive and integrative 
             approach to address the issues of health and mental 
             health disparities and inequities and promote healthy 
             communities.

            8. Department of Public Health - Special Fund 
             Efficiencies.  This bill eliminates the Retail Food 
             Safety and Defense Fund and directs the deposit of user 
             fees (about $21,000) for retail food related activities 
             collected by the Department of Public Health (DPH) to 
             the existing Food Safety Special Fund.  This bill also 
             eliminates the Recreational Health Fund and Program 
             which was set to sunset in 2014, as work has been 
             completed by DPH.

            9. Seismic Retrofitting Notification Date.   This bill 
             provides for a six month extension (from March 2012 to 
             September 2012) by which hospitals need to notify the 
             state on seismic retrofitting to reflect agreements 
             associated with the hospital quality assurance fee.
                
             10.   Creates a New Deputy Director for Mental Health and 
             Substance Use Disorders Services at DHCS.   This bill 
             creates a new Deputy Director for Mental Health and 
             Substance Use Disorders Services at DHCS.  This position 
             is subject to confirmation by the Senate.

            11.   Transfers Caregiver Resource Centers Program to 
             DHCS.   This bill transfers the Caregiver Resource 
             Centers program from the Department of Mental Health to 
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             DHCS, as the Department of Mental Health is eliminated 
             in the 2012 Budget.

            12.   Changes to the Mental Health Services Act.  This 
             bill transfers Mental Health Service Act (MHSA) 
             functions from Department of Mental Health (DMH) to the 
             Department of Health Care Services (DHCS) and the Office 
             of Statewide Health Planning and Development (OSHPD). 
             Requires county mental health program and expenditure 
             plans to be adopted by the county board of supervisors 
             and submitted to the Mental Health Services Oversight 
             and Accountability Commission (OAC), and requires county 
             plans to be certified by the county mental health 
             director and the county auditor controller as complying 
             with the MHSA.  Authorizes the OAC, in collaboration 
             with DHCS and in consultation with specified entities, 
             to work in designing a comprehensive joint plan for a 
             coordinated evaluation of client outcomes in the 
             community-based mental health system, and requires the 
             Health and Human Services Agency (Agency) to lead this 
             comprehensive joint plan effort.  Permits prevention and 
             early intervention funds to be used to broaden the 
             provision of community-based mental health services, and 
             codifies Innovation Program project requirements.

            13.   Medi-Cal: Closes Prior Supplemental Funds for 
             Disproportionate Share Hospitals.  This bill adds sunset 
             dates for the following special funds that are no longer 
             used:
                               The Emergency Services and 
                      Supplemental Payments Fund
                               The Medi-Cal Medical Education 
                      Supplemental Payment Fund
                               The Large Teaching Emphasis Hospital 
                      and Children's Hospital Medi-Cal Medical 
                      Education Supplemental Payment Fund
                               The Small and Rural Hospital 
                      Supplemental Payments Fund

            1. Medi-Cal: Rates for Non-Contract Hospitals.  This bill 
             extends the Rogers Amendment sunset date from January 1, 
             2013, to July 1, 2013, for capitation rates (known as 
             Rogers Rates) paid to non-contract hospitals for 
             emergency inpatient and post-stabilization services 
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             provided to Medi-Cal managed care plan (Plan) enrollees.
                
              Specifically, this code section is based on federal law 
             and regulation (known as the Roger's amendment) that 
             requires state Medicaid Programs (Medi-Cal) to establish 
             separate payment amounts for emergency services and 
             post-stabilization services.  The intent of the law is 
             to establish a basis for Medi-Cal Managed Care Plans to 
             make reasonable payments to Hospitals who are 
             "out-of-network" for these services.  Historically, some 
             hospitals have litigated payments from Managed Care 
             Plans that were high enough for the federal CMS to 
             determine them to be unreasonable for the services 
             provided.

            2. Medi-Cal: Provides for Supplemental Payments to Primary 
             Care Providers.   This bill conforms to the federal 
             Affordable Care Act which requires Medi-Cal to increase 
             certain physician primary care service rates to no less 
             than 100 percent of the Medicare rate for specific 
             services beginning January 1, 2013 to December 31, 2014. 
              For services furnished during this time period, the 
             federal Centers for Medicare & Medicaid Services (CMS) 
             provides for 100 percent federal funding for the 
             differential between Medi-Cal baseline rates (the level 
             of payment in effect on July 1, 2009) and Medicare 
             rates.  Regular federal matching applies for any payment 
             amounts above the minimum requirement or for any 
             increases necessary to achieve the July 2009 rate.  

            3. Medi-Cal: County Administration Suspension of 
             Cost-of-Doing-Business.   The Budget Bill reflects a 
             reduction of $13.1 million (General Fund) by eliminating 
             the cost-of-doing-business for Medi-Cal eligibility 
             administration conducted by the counties.  This bill 
             contains language for this suspension.  

            4. Medi-Cal: California Medical Assistance Commission 
             transfer to DHCS.   This bill creates a transition plan 
             for the staff of the California Medical Assistance 
             Commission (CMAC) and redirects the twelve 
             non-commissioner positions, in their exempt status, to 
             DHCS on July 1, 2012. These positions would be funded 
             with $658,000 General Fund and $657,000 federal funds.
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             The CMAC staff will continue to operate the Selective 
             Provider Contracting Program (SPCP) until the new 
             inpatient hospital payment system based on 
             diagnosis-related groups (DRG) is implemented.  Upon 
             implementation of the DRG payment system, the twelve 
             exempt positions will be abolished, at which point the 
             CMAC staff shall be transferred into civil service 
             classifications, for which they are eligible, within 
             DHCS. 
           
           5. Medi-Cal: Laboratory Services Rate Reduction.   This 
             bill provides DHCS with the authority to establish a 
             reimbursement rate methodology for setting Medi-Cal 
             rates of reimbursement for clinical lab services 
             provided to Medi-Cal beneficiaries. The proposed 
             methodology would develop rates that are based on the 
             lowest amounts other payers are paying for similar 
             clinical laboratory services.  Until the implementation 
             of the new methodology, payments for clinical laboratory 
             services would be subject to an additional 10 percent 
             provider payment reduction.  This achieves $7.7 million 
             in General Fund savings.

            6. Medi-Cal Copays for Non-Emergency Emergency Room Usage.  
              This bill makes the definition of emergency and 
             nonemergency services for purposes of copays consistent 
             in law. The budget includes the implementation of a $15 
             copayment for non-emergency use of the emergency room 
             (ER).  This copayment would be implemented in the 
             managed care setting and would not apply to those who 
             are in the Family Planning, Access, Care, and Treatment 
             program.  The hospital would collect the $15 copayment 
             from enrollees at the time of service, and the hospital 
             would be reimbursed the appropriate Medi-Cal 
             reimbursement rate minus the $15 copayment.  This copay 
             would result in $7.1 million General Fund savings in the 
             budget year.

            7. Medi-Cal: Redirect Unpaid Hospital Stabilization 
             Funding.   This bill redirects all unpaid private and 
             nondesignated public hospitals' stabilization funding 
             for fiscal years 2005-06 through 2009-10 (including the 
             extension period of the Medi-Cal Hospital/Uninsured 
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             Demonstration through October 31, 2010) for purposes of 
             General Fund savings.  Of the $54.7 million unpaid 
             funding, $11.89 million will be paid to a hospital that 
             incorrectly received underpayments in 2005-06 and 
             2006-07.    The difference, $42.8 million, would be used 
             to offset General Fund expenditures.  
               
            8. Medi-Cal: Changes Non-Designated Public Hospitals 
             Payment Methodology.  This bill changes the 
             reimbursement methodology of non-designated public 
             hospitals (NDPHs).  Currently, NDPHs receive either the 
             California Medical Assistance Commission (CMAC) 
             negotiated per diem rates or cost-based reimbursement 
             for inpatient Medi-Cal fee-for-service (FFS).  These 
             reimbursements are paid with 50 percent General Fund and 
             50 percent federal funds.  With the proposed change in 
             methodology, NDPHs would be funded for their inpatient 
             Medi-Cal FFS in the same manner as Designated Public 
             Hospitals in that they would use their certified public 
             expenditures (CPEs) to draw down federal funds. This 
             would result in $94.4 million General Fund savings (as 
             General Fund would no longer be used to reimburse 
             NDPHs).

             In addition, qualified NDPHs receive supplemental 
             reimbursements from the NDPH Supplemental Fund, which is 
             funded with 50 percent General Fund and 50 percent 
             federal funds.  This supplemental reimbursement would no 
             longer be available, resulting in a General Fund savings 
             of $1.9 million.

             Finally, NDPHs would no longer be eligible for the 
             supplemental payments authorized by AB 113 (Statutes of 
             2011), which are funded by intergovernmental transfers 
             and federal funds.  

             These changes would be contingent on DHCS receiving 
             federal approval (via a waiver amendment) to increase 
             Safety Net Care Pool (SNCP) and Delivery System Reform 
             Incentive Pool (DSRIP) funding available to California.  
             The additional funds would be made available to NDPHs to 
             offset their uncompensated care costs and to support 
             their efforts to enhance the quality of care and the 
             health of the patients and families they serve. NDPHs 
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             are currently not eligible for these funds.

            9. Medi-Cal: Changes Hospital Quality Assurance Fee 
             Allocations.   This bill changes hospital quality 
             assurance fee revenue allocations for a total of $150 
             million General Fund savings.  These changes include:  
                      Redirecting $150 million in hospital fee 
                 revenue in 2012-13 to the General Fund.  This 
                 revenue was intended to fund supplemental payments 
                 to private hospitals by managed care plans. 
                     Redirecting $95 million in fee revenue in 
                 2013-14 to the General Fund.  Under current law, 
                 this funding would be provided to managed care plans 
                 ($75 million would have supported supplemental 
                 payments to private hospitals and $20 million for 
                 supplemental payments to designated public 
                 hospitals). 
                     Eliminating direct grants to designated public 
                 hospitals in 2013-14 ($21.5 million) and would 
                 instead use the funds for children's health coverage 
                 under Medi-Cal.

            1. Medi-Cal: Rollover of Unexpended Public Hospital Waiver 
             Funds.   This bill provides a mechanism for the state to 
             retain 50 percent of the federal funding attributable to 
             the Health Care Coverage Initiative (HCCI) rollover that 
             would have gone to Designated Public Hospitals (DPHs).  
             There is a total of $218 million in rollover.  This 
             would result in $100 million in General Fund savings in 
             2012-13.

             Designated Public Hospitals (DPHs) would voluntarily 
             utilize their certified public expenditures (CPE) to 
             claim the additional Safety Net Care Pool Uncompensated 
             Care (SNCP) and allow the state to obtain 50 percent of 
             this federal funding. This proposal relies on DPHs 
             spending their CPEs to draw down federal funds, of which 
             the state is proposing to take 50 percent.

             Additionally, this bill would allow the state to utilize 
             DPHs' excess certified public expenditures to achieve 
             its designated General Fund savings of $400 million for 
             SNCP.

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            2. Medi-Cal: Increases Interest Rates on Medi-Cal 
             Overpayments.   This bill requires DHCS to assess 
             interest against Medi-Cal provider overpayments at the 
             Surplus Money Investment Fund (SMIF) rate or seven 
             percent per year (annum), whichever is higher.  The 
             legislation would also require DHCS to pay interest at 
             the same rate to a provider who prevails in an appeal of 
             a payment disallowed by DHCS. This would result in $1.5 
             million ($750,000 General Fund) savings in 2012-13 and 
             $3 million ($1.5 million General Fund) savings in 
             2013-14.

            3. Medi-Cal: Medi-Cal Dental Managed Care - Sacramento and 
             Los Angeles counties.  This bill provides for the 
             establishment of a stakeholder advisory committee to 
             provide input on the delivery of oral health and dental 
             care services in Sacramento County.  It also provides 
             the Director of DHCS with the authority to establish a 
             beneficiary dental exception process in which Medi-Cal 
             beneficiaries mandatorily enrolled in dental health 
             plans in Sacramento County can move to fee-for-service 
             Denti-Cal.  This bill also establishes a list of 
             performance measures to ensure that dental health plans 
             meet quality criteria.

            4. Medi-Cal: Default Assignment Algorithm.   This bill 
             directs DHCS to consult with the Auto Assignment 
             Performance Incentive Program stakeholder workgroup to 
             develop cost factor disregards related to safety net 
             providers.  The budget includes the addition of health 
             plan costs as a factor in the default assignment 
             algorithm and achieves $2.4 million General Fund 
             savings.

            5. Medi-Cal: Medi-Cal Electronic Health Records Incentive 
             Payment Program.  This bill allows up to $200,000 
             General Fund to be used for state support of the 
             Medi-Cal Electronic Health Records Incentive Payment 
             Program.

            6. Medi-Cal: Expand Medi-Cal Managed Care to Rural 
             Counties.  This bill provides for the expansion of 
             Medi-Cal managed care into the 28 rural counties that 
             are now fee-for-service. This proposal would result in 
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             General Fund savings of $2.7 million in 2012-13.
                
             7. Medi-Cal: Low Income Health Program and Public 
             Hospitals.  Current law allows Low Income Health Programs 
             (LIHPs) to be reimbursed under a capitated model.  It 
             also requires an LIHP to agree to a capitated rate with 
             DHCS during a given demonstration year.  That rate may 
             then be implemented retroactively back to the first day 
             of the demonstration year if it is agreed upon during 
             the same demonstration year. 

             Public hospital systems are evolving their Low Income 
             Health Programs from feeforservice to riskbased programs 
             to using capitated rates.  This bill contains technical 
             language to preserve the states option under the 
             existing 1115 Medi-Cal Waiver with the federal 
             government to utilize a capitation rate under the LIHP.  
             It is necessary to take this action before June 30, 
             2012.
                
            8. Medi-Cal: Hospital Quality Assurance Fee Accounting.   
             This bill allows hospitals to book hospital quality 
             assurance fee revenue generated from fee-for-service for 
             accounting purposes without having to wait for federal 
             approval of the managed care component of the hospital 
             quality assurance fee.

            9. Cash Flow Loan for County Medical Services Program 
             (CMSP).   This bill would permit the Director of Finance 
             to approve no more than $100 million General Fund in 
             cash flow loans in fiscal years 2012-13 and 2013-14 for 
             County Medical Services Program (CMSP) Governing Board 
             expenditures associated with a Low Income Health Program 
             (LIHP) operated by the CMSP Governing Board.  Any cash 
             flow loans made would be considered short term and would 
             not constitute General Fund expenditures.  The loans and 
             their repayment would not affect the General Fund 
             reserve.  Interest on this loan would be charged at the 
             Pooled Money Investment Account rate.
                
              The CMSP Governing Board elected to administer a LIHP; 
             however, due to the fiscal challenges its member 
             counties currently face, it requires a loan to bridge 
             the time between when it will be required to pay out its 
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             first claims and when federal funds will begin to flow 
             back to the program.  This proposal would allow the CMSP 
             Governing Board, upon approval from the Director of 
             Finance, access to a cash flow loan of no more than $100 
             million over two fiscal years, 2012-13 and 2013-14, in 
             order to ensure the Board's ability to maintain a 
                        financially solvent LIHP.

            10.   Transition of Ryan White Clients to the Low Income 
             Health Program.   This bill strengthens consumer 
             protections for Ryan White Clients (e.g., AIDS Drug 
             Assistance Program clients ÝADAP]) as they transition to 
             the Low Income Health Program.  It requires the 
             Department of Public Health and the Department of Health 
             Care Services to consult with community representatives 
             to obtain expert advice on policy decisions regarding 
             the transition of clients living with HIV/AIDS from Ryan 
             White funded programs to LIHP.  This bill also requires 
             the Department of Public Health to report to the 
             Legislature if the assumptions it used to determine the 
             transition of ADAP clients to LIHP may result in an 
             inability to provide ADAP services to eligible ADAP 
             clients.  
           



















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