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. -1- 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 -2- (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 -3- 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 -4- 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. -5- 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 -6- 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 -7- 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. -8- 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 -9- 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 -10- 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. -11-