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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