BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 1468|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 1468
          Author:   Assembly Budget Committee
          Amended:  6/25/12 in Senate
          Vote:     21

           
           ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Budget Act of 2012:  Duals Demonstration 
          Project

           SOURCE  :     Author


           DIGEST  :    This bill implements the Duals Demonstration 
          Pilot Projects. These demonstration projects will achieve 
          $611.5 million General Fund savings in 2012-13, as 
          specified in the analysis below.

           ANALYSIS :    This bill includes the following provisions:

          1.  Dual Demonstration Projects  

             A.    Expands, from four to eight, the number of 
                counties in which dual demonstration sites may be 
                established.  Existing law authorizes the Department 
                of Health Care Services to establish dual 
                demonstration projects in up to four counties to 
                enable dual beneficiaries, who are eligible for both 
                Medicare and Medicaid services, to receive a 
                continuum of services that maximizes coordination of 
                benefits between Medicare and Medicaid programs.
                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          2


             B.    Provides that implementation of the demonstration 
                project in up to eight counties may not begin sooner 
                than March 1, 2013.  Requires that the department 
                director consult with the Legislature, federal 
                government, and stakeholders when determining the 
                implementation date.

             C.    States legislative intent for the demonstration 
                project to expand statewide within three years of the 
                start of the demonstration project.  Requires that 
                expansion beyond the initial eight counties is 
                contingent upon statutory authorization and a 
                subsequent budget appropriation.

             D.    Includes additional goals for the demonstration 
                project:

                (1)      Coordinate access to necessary and 
                   appropriate behavioral health services, including 
                   mental health and substance use disorders 
                   services.

                (2)      Improve the quality of care for dual 
                   eligible beneficiaries.

                (3)      Promote a system that is both sustainable 
                   and person- and family-centered by providing dual 
                   eligible beneficiaries with timely access to 
                   appropriate, coordinated health care services and 
                   community resources that enable them to attain or 
                   maintain personal health goals.

             E.    Requires the department to enter into a memorandum 
                of understanding with the federal government in 
                developing the process for selecting, financing, 
                monitoring, and evaluating the models for the 
                demonstration project.  Requires the completed 
                memorandum of understanding to be provided to the 
                Legislature and posted on the department's Internet 
                Web site.

             F.    Requires dual beneficiaries to be enrolled into a 
                demonstration site unless the beneficiary makes an 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          3

                affirmative choice to opt out of enrollment or is 
                enrolled in the Program of All-Inclusive Care for the 
                Elderly (PACE) or an AIDS Healthcare Foundation (AHF) 
                plan, as specified.

             G.    Allows beneficiaries who meet the requirements for 
                PACE or AHF to select either of these managed care 
                health plans for their Medicare and Medi-Cal benefits 
                if one is available in that county. Requires that in 
                areas where a PACE plan is available, the PACE plan 
                shall be presented as an enrollment option, included 
                in all enrollment materials, enrollment assistance 
                programs, and outreach programs related to the 
                demonstration project, and made available to 
                beneficiaries whenever enrollment choices and options 
                are presented. 

             H.    Requires that dual beneficiaries who opt out of 
                enrollment into a demonstration site may choose to 
                remain enrolled in fee-for-service Medicare or a 
                Medicare Advantage plan for their Medicare benefits, 
                but shall be mandatorily enrolled into a Medi-Cal 
                managed care health plan, with exceptions. 

             I.    Allows, to the extent federal approval is 
                obtained, the department to require that any 
                beneficiary, upon enrollment in a demonstration site, 
                to remain enrolled in the Medicare portion of the 
                demonstration project on a mandatory basis for six 
                months from the date of initial enrollment.  Includes 
                criteria for which a beneficiary may continue 
                receiving services from an out-of-network Medicare 
                provider for primary and specialty care services.  
                Requires the department to develop a process to 
                inform providers and beneficiaries of the 
                availability of continuity of services from an 
                existing provider and ensure that the beneficiary 
                continues to receive services without interruption.

             J.    Provides the following exemptions from enrollment 
                in the dual demonstration project:

                (1)      The beneficiary has a prior diagnosis of 
                   end-stage renal disease.  The exemption does not 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          4

                   apply to beneficiaries diagnosed with end-stage 
                   renal disease subsequent to enrollment in the 
                   demonstration project.

                (2)      The beneficiary has other health coverage, 
                   as specified.

                (3)      The beneficiary is enrolled in a home- and 
                   community-based waiver, as specified, except for 
                   persons enrolled in Community-Based Adult Services 
                   or Multipurpose Senior Services Program services.

                (4)      The beneficiary is receiving services 
                   through a regional center or state developmental 
                   center.

                (5)      The beneficiary resides in a geographic area 
                   or Zip Code not included in managed care.

                (6)      The beneficiary resides in one of the 
                   Veterans' Homes of California.

             K.    Allows beneficiaries who have been diagnosed with 
                HIV/AIDS to opt out of the demonstration project at 
                the beginning of any month.

             L.    Requires that for the 2013 calendar year, the 
                department shall offer federal "Medicare Improvements 
                for Patient and Providers Act of 2008" compliant 
                contracts to existing Medicare Advantage Special 
                Needs Plans (D-SNP plans) to continue to provide 
                Medicare benefits to their enrollees in their service 
                areas as approved on January 1, 2012.  Requires that 
                in the 2013 calendar year, beneficiaries in Medicare 
                Advantage and D-SNP plans shall be exempt from 
                mandatory enrollment in the demonstration project, 
                but may voluntarily choose to enroll in the 
                demonstration project.

             M.    Requires that for the 2013 calendar year, 
                demonstration sites shall not offer to enroll dual 
                beneficiaries eligible for the demonstration project 
                into the demonstration site's D-SNP.


                                                           CONTINUED





                                                              AB 1468
                                                                Page 
          5

             N.    Requires that the department shall not terminate 
                contracts in a demonstration site with AHF or PACE, 
                except as provided in the contract or pursuant to 
                state or federal law.

             O.    Requires that to the extent permitted under the 
                demonstration, demonstration sites shall pay 
                noncontracted hospitals prevailing Medicare 
                fee-for-service rates for traditionally Medicare 
                covered benefits and prevailing Medi-Cal 
                fee-for-service rates for traditionally Medi-Cal 
                covered benefits. 

             P.    Requires the department, in consultation with the 
                hospital industry, to seek federal approval to ensure 
                that Medicare supplemental payments for direct 
                graduate medical education and Medicare add-on 
                payments, including indirect medical education and 
                disproportionate share hospital adjustments continue 
                to be made available to hospitals for services 
                provided under the demonstration.  Requires the 
                department to seek federal approval to continue these 
                payments either outside the capitation rates or, if 
                contained within the capitation rates, and to the 
                extent permitted under the demonstration requiring 
                demonstration sites to provide this reimbursement to 
                hospitals.

             Q.    Requires that to the extent allowed under the 
                demonstration, the default rate for non-contracting 
                providers of physician services shall be the 
                prevailing Medicare fee schedule for services covered 
                by the Medicare program and the prevailing Medi-Cal 
                fee schedule for services covered by the Medi-Cal 
                program.

             R.    Includes requirements for payments to nursing 
                facility services.

             S.    Requires the department to enter into an 
                interagency agreement with the Department of Managed 
                Health Care to perform some or all of the 
                department's oversight and readiness review 
                activities, including providing consumer assistance 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          6

                to beneficiaries and conducting financial audits, 
                medical surveys, and a review of the adequacy of 
                provider networks of the managed care plans 
                participating in the demonstration. 

             T.    Requires the department to report to the 
                Legislature on the enrollment status, quality 
                measures, and state costs related to the 
                demonstration.

             U.    Requires the department to develop, in 
                consultation with the federal government and 
                stakeholders, quality and fiscal measures for health 
                plans. Requires the department to require health 
                plans to submit Medicare and Medi-Cal data to 
                determine the results of these measures.  Requires 
                the department to publish the results of these 
                measures, including via posting on the department's 
                Internet Web site, on a quarterly basis.

          2.  Enrollment of Dual Beneficiaries into Medi-Cal Managed 
             Care  

             A.    Requires that Medi-Cal beneficiaries who have dual 
                eligibility in Medi-Cal and the Medicare Program be 
                assigned as mandatory enrollees into new or existing 
                Medi-Cal managed care health plans for their Medi-Cal 
                benefits in counties participating in the dual 
                demonstration projects only.

             B.    Exempts dual beneficiaries from mandatory 
                enrollment in a managed care if the dual beneficiary:

                (1)      Has other health coverage, except in 
                   counties with county organized health systems.

                (2)       Receives services through a foster care 
                   program.

                (3)      Is under 21 years of age.

                (4)      Is enrolled in a home- and community-based 
                   waiver, as specified, except for persons enrolled 
                   in Community-Based Adult Services, Multipurpose 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          7

                   Senior Services Program services, or a Section 
                   1915(c) waiver for persons with developmental 
                   disabilities.

                (5)      Is not eligible for enrollment in managed 
                   care plans for medically necessary reasons 
                   determined by the department.

                (6)      Resides in one of the Veterans Homes of 
                   California.

                (7)      Is enrolled in PACE or AHF.


             C.    Allows a beneficiary who has been diagnosed with 
                HIV/AIDS from opting out of managed care enrollment 
                at the beginning of any month.

             D.    Requires that to the extent that mandatory 
                enrollment is required by the department, an 
                enrollee's access to fee-for-service Medi-Cal shall 
                not be terminated until the enrollee has selected or 
                been assigned to a managed care health plan.

             E.    Requires the department to suspend new enrollment 
                of dual beneficiaries into a managed care plan if it 
                determines that the managed care plan does not have 
                sufficient primary or specialty care providers and 
                long-term service and supports to meet the needs of 
                its enrollees.

             F.    Allows the department to implement an 
                intergovernmental transfer arrangement with a public 
                entity that elects to transfer public funds to the 
                state to be used solely as the nonfederal share of 
                Medi-Cal payments to managed care plans for the 
                provision of services to dual beneficiaries.

             G.    Requires that a managed care plan that contracts 
                with the department for the provision of services 
                shall ensure that beneficiaries have access to the 
                same categories of licensed providers that are 
                available under Medicare fee for service. Provides 
                that nothing shall prevent a managed care plan from 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          8

                contracting with selected providers within a category 
                of licensure.

          3.  Long-Term Services and Supports (LTSS) Integration  

             A.    Requires that, no sooner than March 1, 2013, all 
                Medi-Cal LTSS services, as defined, shall be services 
                that are covered under managed care plan contracts 
                and shall be available only through managed care 
                plans to beneficiaries residing in counties 
                participating  in the dual demonstration counties 
                only.

             B.    Defines LTSS services to include In-Home 
                Supportive Services (IHSS), Community-Based Adult 
                Services (CBAS), Multipurpose Senior Services Program 
                (MSSP), and skilled nursing facility services.

             C.    Defines "home- and community-based services (HCBS) 
                benefits" that may be covered services that are 
                provided under managed care plan contracts for 
                beneficiaries residing in counties participating in 
                the dual demonstration counties.

             D.    Requires that beneficiaries who are not 
                mandatorily enrolled in managed care pursuant to 
                current law exemptions or specified new exemptions 
                are not required to receive LTSS, other than CBAS, 
                through a managed care plan.

             E.    Exempts beneficiaries from receiving LTSS services 
                through managed care plans who meet the following:

                (1)      Has other health coverage, except in 
                   counties with county organized health systems.

                (2)      Receives services through a foster care 
                   program.

                (3)      Is under 21 years of age.

                (4)      Is enrolled in a home- and community-based 
                   waiver, as specified, except for persons enrolled 
                   in Community-Based Adult Services, Multipurpose 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          9

                   Senior Services Program services, or a Section 
                   1915(c) waiver for persons with developmental 
                   disabilities.

                (5)      Is not eligible for enrollment in managed 
                   care plans for medically necessary reasons 
                   determined by the department.

                (6)      Resides in one of the Veterans Homes of 
                   California.

                (7)      Is enrolled in PACE or AHF.


             F.    Allows the department to exempt other categories 
                of beneficiaries based on extraordinary medical needs 
                of specific patient groups or to meet federal 
                requirements, in consultation with stakeholders.

             G.    Allows beneficiaries who have been diagnosed with 
                HIV/AIDS to opt out of managed care enrollment at the 
                beginning of any month.

             H.    Requires that no sooner than July 1, 2012, CBAS 
                shall be a Medi-Cal benefit covered under every 
                managed care plan contract and available only through 
                managed care plans. This provision applies to all 
                counties, except in counties where Medi-Cal benefits 
                are not covered through managed care plans.

             I.    Requires that effective January 1, 2015, or 19 
                months after the commencement of beneficiary 
                enrollment in the dual demonstration project, or on 
                the date that any necessary federal approvals or 
                waivers are obtained, whichever is later, MSSP 
                services in counties where the dual demonstration 
                project is implemented shall transition from a 
                federal waiver to a benefit administered by managed 
                care plans. Includes various program requirements 
                regarding the transition.

             J.    Requires that no sooner than March 1, 2013, or on 
                the date that any necessary federal approvals or 
                waivers are obtained, whichever is later, nursing 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          10

                facility services and subacute facility services 
                shall be Medi-Cal benefits available only through 
                managed care plans in counties participating in the 
                dual demonstration project.

             K.    Allows the department director, after consulting 
                with the Director of Finance, stakeholders, and the 
                Legislature, to retain discretion to forgo provisions 
                of LTSS services integration into managed care if and 
                to the extent the director determines that the 
                quality of care for managed care beneficiaries, 
                efficiency, or cost-effectiveness of the program 
                would be jeopardized.

             L.    Requires the department to enter into an 
                interagency agreement with the Department of Managed 
                Health Care to perform some or all of the 
                department's oversight and readiness review 
                activities, including providing consumer assistance 
                to beneficiaries and conducting financial audits, 
                medical surveys, and a review of the adequacy of 
                provider networks of the managed care plans. 

             M.    Requires the department to report to the 
                Legislature on enrollment status, quality measures, 
                and state costs.

             N.    Requires the department to develop, in 
                consultation with the federal government and 
                stakeholders, quality and fiscal measures for health 
                plans. Requires the department to require health 
                plans to submit Medicare and Medi-Cal data to 
                determine the results of these measures. Requires the 
                department to publish the results of these measures, 
                including via posting on the department's Internet 
                Web site, on a quarterly basis.

          4.  Readiness Requirements  

             A.    Requires that before the department contracts with 
                managed care plans or Medi-Cal providers to furnish 
                Medi-Cal benefits and services under the dual 
                demonstration project, mandatory enrollment of dual 
                beneficiaries into Medi-Cal managed care, and LTSS 

                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          11

                integration, the department shall do all of the 
                following:

                (1)      Ensure timely and appropriate communications 
                   with beneficiaries.

                (2)      Require that managed care plans perform an 
                   assessment process.

                (3)      Ensure that managed care plans arrange for 
                   primary care.

                (4)      Ensure that managed care plans perform care 
                   coordination and care management activities.

                (5)      Ensure that managed care plans comply with 
                   network adequacy requirements.

                (6)      Ensure that managed care plans address 
                   medical and social needs.

                (7)      Ensure that managed care plans provide a 
                   grievance and appeal process.

                (8)      Monitor managed care plans' performance and 
                   accountability for provision of services.

                (9)      Develop requirements for managed care plans 
                   to solicit stakeholder and member participation in 
                   advisory groups for the planning and development 
                   activities relating to the provision of services 
                   for dual beneficiaries.


             B.    Requires the department to submit, to the 
                Legislature within specified timelines, the 
                following:

                (1)      Copy of any report submitted to the federal 
                   government, as specified.

                (2)      A transition plan developed together with 
                   the Department of Social Services, Department of 
                   Aging, Department of Managed Health Care, in 

                                                           CONTINUED





                                                               AB 1468
                                                                                        Page 
          12

                   consultation with stakeholders.

                (3)      Report on the readiness of managed care 
                   plans based on specified readiness evaluation 
                   criteria.

          5.  Medical Exemption Review  

             Requires the department to provide notice to the 
             requesting provider and any person in the Medi-Cal 
             program who is a senior or a person with a disability 
             when a request for a medical exemption from mandatory 
             enrollment into a Medi-Cal managed care plan is denied 
             and requires plans to maintain a dedicated liaison to 
             coordinate continuity of care. 

          6.  Other Provisions  

             A.    Revises the rate methodology for AHF plans.

             B.    Authorizes the department director to defer 
                payments to Medi-Cal managed care plans contracting 
                with the department, as specified, which are payable 
                to the plans during the final month of the 2012-13 
                state fiscal year.

             C.    Requires that in the event the department has not 
                received, by February 1, 2013, federal approval, or 
                notification indicating pending approval, of a mutual 
                ratesetting process, shared federal savings as 
                defined, and a six-month enrollment period in the 
                dual demonstration project, then effective March 1, 
                2013 the provisions of the dual demonstration 
                project, enrollment of dual beneficiaries into 
                Medi-Cal managed care, and LTSS integration become 
                inoperative.

             D.    Requires that the bill become operative only if AB 
                1496 or SB 1036 of the 2011-12 Regular Session of the 
                Legislature is enacted and takes effect.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes   
          Local:  No


                                                           CONTINUED





                                                               AB 1468
                                                                Page 
          13

          According to the Senate Budget and Fiscal Review Committee:

             Duals Demonstration Projects/Coordinated Care Savings
                             (dollars in millions)
           ----------------------------------------------------------- 
          |                                        |      General Fund|
          |----------------------------------------+------------------|
          |Medicare Shared Savings                 |            -$12.3|
          |----------------------------------------+------------------|
          |Long-Term Supports and Services         |             111.6|
          |Integration                             |                  |
          |----------------------------------------+------------------|
          |Defer Managed Care Payment              |            -635.5|
          |----------------------------------------+------------------|
          |Delay Check-write                       |             -75.2|
          |----------------------------------------+------------------|
          |Total                                   |-$611.5           |
          |                                        |                  |
           ----------------------------------------------------------- 


          CTW:k  6/26/12   Senate Floor Analyses 

                       SUPPORT/OPPOSITION:  NONE RECEIVED

                                ****  END  ****



















                                                           CONTINUED