BILL ANALYSIS Ó
AB 2608
Page 1
Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2608 (Bonilla) - As Amended: March 29, 2012
Policy Committee: HealthVote:18-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill amends provisions relating to required program
improvement activities in the Local Billing Option (LBO) program
through which Local Educational Agencies (LEA) can draw down
federal funding for certain services provided to Medi-Cal
eligible students, and removes a sunset on these provisions.
Specifically, this bill:
1)Requires the Department of Health Care Services (DHCS) to
amend the Medicaid state plan and regulatory requirements
pertaining to the provision of medical transportation services
by LEAs to be no more restrictive than federal requirements.
2)Codifies and categorizes funding that can be withheld for
administrative, auditing, and contractor costs, requires DHCS
to withhold funds proportionately from participating LEAs, and
requires DHCS to provide an accounting of funds withheld in an
annual report.
3)Requires DHCS to collaborate with the California Department of
Education (CDE) to help ensure LEA compliance with state and
federal Medicaid requirements.
FISCAL EFFECT
1)One-time minor, absorbable costs to DHCS to modify regulations
to be no more restrictive than federal requirements. Ongoing
costs for additional reporting and collaboration with CDE
should also be minor and absorbable.
2)New federal funding for schools, potentially in millions of
dollars according to the Los Angeles Unified School District
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(LAUSD), to the extent schools may be able to submit
additional transportation services for federal reimbursement.
3)This bill codifies three administrative funding streams,
leading to the following impacts:
a) Contractor Costs . According to DHCS, the $1.5 million
current set-aside for contractor costs has not increased
since 2001 and may not be adequate to cover these costs
going forward as required by current law. If the funding
is inadequate, DHCS indicates, the LBO program may fail to
comply with federal and state requirements. As explained
below, proposed trailer bill language would eliminate this
cap.
b) Audit-Related Costs . This bill's provision instituting a
$650,000 cap on LEA audit funding may constrain the
department from funding LEA audit activities at projected
levels. This provision is codifying current practice, as a
$650,000 cap is currently in place pursuant to an agreement
with schools. However, audit activities have been budgeted
at $1.6 million total in recent years, which would require
an $820,000 match level. Due to salary savings and
increased federal match rates, actual expenditures have
been below a $650,000 match level, but an $820,000 match
level will be required in 2012-13 to fund necessary
audit-related activities.
c) DHCS Administrative Costs . Potential for increased GF
costs associated with limiting the funding for DHCS
administration and claims processing to 1% of claimed
funds. Currently, pursuant to an agreement with the LEA Ad
Hoc Workgroup Advisory Committee that advises DHCS on the
LBO program, the department withholds 1% of the claimed
federal funding amount to support DHCS administrative
costs. However, DHCS indicates total administrative costs
slightly exceed the funding available pursuant to the 1%
limit for fiscal year 2011-12. These costs were $2.7
million (50% federal, 50% local match), but matching
funding was only $1.2 million, leaving a deficit of
$150,000 in matching funds that has been funded with GF
dollars. The GF could similarly be at risk going forward
to the extent DHCS administrative costs exceed the 1% cap.
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COMMENTS
1)Rationale . According to the author, this bill is necessary to
prevent school districts from losing federal funds for health
services that school districts are required to provide. In
addition, the author points out, existing state policies
prevent school districts from seeking federal reimbursement
for certain school transportation that is otherwise
reimbursable under federal guidelines. Finally, the author
states that greater transparency and accountability in the
work performed by DHCS is also needed. This bill is sponsored
by the LAUSD, which contends the bill is needed to continue
DHCS efforts to increase the amount of Medicaid reimbursement
received by California schools.
2)Background . According to DHCS, California established the LBO
program in 1993 to allow school districts to claim federal
reimbursement for, and match local education dollars already
being spent on, health services for Medi-Cal children. SB 231
(Ortiz), Chapter 655, Statutes of 2001, required DHCS to take
on additional program improvement responsibilities in response
to a 2000 review of LBO programs in which California ranked in
the bottom quartile. In order to fund LBO program activities,
DHCS withholds certain amounts from the federal reimbursement
dollars that go to schools in order to offset LBO program base
administrative costs, as well as the program improvement
activities undertaken pursuant to SB 231.
DHCS works directly with an LEA Ad Hoc Workgroup Advisory
Committee (Committee) to identify barriers for existing and
potential LEA providers and to recommend new LBO program
services. This committee, organized in 2001, is composed of a
number of key state and local stakeholders.
3)Funding for LBO administrative functions is currently governed
by both law and practice. The 1993 statute creating the LBO
option does not explicitly allow DHCS to set aside federal
reimbursement funds for administrative activities. This bill
attempts to codify current practice, but does so imperfectly.
According to DHCS, there are currently three categories of
administrative activities, and only the first has ever been
codified. They are as follows:
a) Contractor Activities . Research, consulting, reporting,
rate development and other activities associated with
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program improvement undertaken pursuant to SB 231 are
currently performed by a contractor. This contract is
funded at $1.5 million. Current law specifies a set-aside
for these purposes of a percentage of dollars in excess of
a 2000-01 baseline, subject to a $1.5 million cap. In
practice, this translates to a 2.5% set-aside above a
baseline of $60 million, up to $1.5 million total.
b) Audit-Related Activities . Audit-related activities are
currently funded by a 1% set-aside, subject to a $650,000
cap. This is currently not codified but operationalized
pursuant to an agreement between DHCS and the Committee.
c) DHCS Administrative Activities . DHCS administrative
activities, including claims processing and federal
compliance, are currently funded by a set-aside of 1% of
all funds, are not subject to a cap. This is also not
codified.
By attempting to codify these categories of funding consistent
with current practice and by requiring DHCS to report
annually, school districts are seeking increased
accountability. However, as indicated above, it may result in
inadequate program resources and fiscal risk to the state.
1)Potential Conflict With Trailer Bill . As part of the
Governor's 2012-13 budget, DHCS has proposed budget trailer
bill language (TBL) modifying the same code section as this
bill. Both the TBL and this bill would remove the January 1,
2013 sunset on SB 231 program improvement activities and
remove a requirement that administrative funding for the
program be derived from federal funds that exceed a 2000-01
baseline amount. The term "administrative funding" in
statute, according to current practice, refers only to the
contractor costs described in (a) above. This bill and the TBL
proposal differ in the following major ways:
a) The TBL proposal allows funding for administrative
(contractor) costs to increase annually by an amount agreed
upon by DHCS and the LEA Ad Hoc Workgroup Advisory
Committee, while this bill preserves the $1.5 million
maximum limit and specifies additional limits on funding
for audits and DHCS processing costs.
b) This bill contains provisions that the TBL does not,
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including a specific requirement that DHCS align state
rules with federal requirements for medical transportation
reimbursement, enhanced DHCS reporting requirements, and
provisions codifying the other two categories of
administrative funds.
The Department of Finance assumes no GF impact related to the
TBL proposal. On March 22, 2012, Senate Subcommittee #3
adopted the TBL provisions that remove the sunset, as well as
restrictions related to 2000-01 baseline funding, but rejected
DHCS's proposal to remove the maximum annual funding amount of
$1.5 million for administrative costs in deference to this
bill moving through the policy process. Assembly Subcommittee
#1 has not yet taken action on this issue.
5)A budget change proposal related to the LBO program was also
provided to the Legislature as part of the 2012-13 budget.
This BCP would make 14 limited-term positions associated with
LEA audit operations permanent. As explained above, given it
contains a $650,000 cap for audit activities, it appears that
this bill would constrain the ability of DHCS to fund these
activities at their current levels.
6)Transparency . LAUSD indicates it has had difficulty receiving
accurate information about DHCS's administrative costs and the
level of funding withheld for these purposes. This bill would
increase transparency by providing a single fund for all LEA
administrative activities. It codifies administrative
set-aside funding and also subjects the set-aside funding to
Welfare and Institutions Code 14115.8(g)(1), which requires
the funds be used only to support DHCS to meet the LBO program
requirements. It would also require funds for all LEA-related
purposes to be deposited into the LEA Medi-Cal Recovery Fund
within the Special Deposit Fund (currently, some of the funds
are instead deposited into the GF). This change should
provide increased accountability for funds withheld.
7)Fiscal Concerns . Given DHCS's assertion that the limits agreed
to may need to be increased in order to adequately fund the
program, codifying the limits pursuant to current practice
could result in GF risk or risk that the program will not be
able to comply with all federal requirements. The author may
wish to consider adjusting the limits, or providing DHCS with
more flexibility to adjust these limits, based on actual cost
experience to date.
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Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081