BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 2608 AUTHOR: Bonilla AMENDED: May 25, 2012 HEARING DATE: June 20, 2012 CONSULTANT: Bain SUBJECT : Medi-Cal: local educational agency billing option. SUMMARY : Makes permanent and expands provisions relating to program improvement activities in the Medi-Cal Local Billing Option (LBO) program, through which Local Educational Agencies (LEA) can draw down federal funding for health care services provided to Medi-Cal-eligible students. Requires money collected for administrative activities for program improvement activities be proportionately reduced from federal Medicaid payments to all participating LEAs so that no one LEA loses a disproportionate share of its Medicaid payments. Requires DHCS to amend the Medicaid state plan and regulatory requirements pertaining to the provision of medical transportation services by LEAs so that they are no more restrictive than federal requirements. Existing law: 1.Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which qualified low-income persons receive health care benefits. 2.Requires specified services provided by a LEA are covered Medi-Cal benefits, to the extent federal financial participation is available, are subject to utilization controls and standards adopted by DHCS, and are consistent with Medi-Cal requirements for physician prescription, order, and supervision. 3.Requires DHCS to make various LEA program improvement activities, including: a. Amending the Medicaid state plan with respect to the LBO for services by LEAs to ensure that schools are reimbursed for all eligible services that they provide that are not precluded by federal requirements; b. Eliminating and modifying state plan and regulatory requirements that exceed federal requirements when they are unnecessary; Continued--- AB 2608 | Page 2 c. Consulting regularly with the Department of Education (DOE); representatives of urban, rural, large and small school districts; county offices of education, the local education consortium; and LEAs in order to assist DHCS in formulating the Medicaid state plan amendments; and d. Filing an annual report with the Legislature. 4.Requires LEA program improvement-related activities to be funded and staffed by proportionately reducing federal Medicaid payments allocable to LEAs. Prohibits the annual amount funded for program improvement activities from exceeding $1.5 million dollars. Requires funding received under this provision to derive only from federal Medicaid funds that exceed the baseline amount of LEA Medicaid billing option revenues for the 2000-01 fiscal year (FY). 5.Requires, as part of the LEA program improvement activities, DHCS to file an annual report with the Legislature regarding LEA that includes a state-by-state comparison of school-based Medicaid total and per child eligible claims and federal revenues; a summary of DHCS activities, a listing of all school-based services, activities, and providers approved for reimbursement by the federal government in other state plans that are not approved in California; any barriers to LEA reimbursement that are not imposed by federal requirements; and a description of the actions that have been and will be taken to eliminate them. 6.Authorizes DHCS to enter into a sole source contract to comply with these program improvement requirements. 7.Sunsets the LEA program improvement activity-related provisions January 1, 2013. This bill: 1.Makes the LEA program improvement provisions permanent by eliminating the January 1, 2013, sunset date. 2.Eliminates a requirement that LEAs receive a baseline Medicaid funding amount (the amount LEAs received in the 2000-01 fiscal year) before federal Medicaid moneys can fund administrative activities related to program improvements. 3.Requires money collected for administrative activities for program improvements be proportionately reduced from Medicaid payments to all participating LEAs so that no one LEA loses a disproportionate share of its federal Medicaid payments. AB 2608 | Page 3 4.Requires DHCS to amend the Medicaid state plan and regulatory requirements pertaining to the provision of medical transportation services by LEAs so that they are no more restrictive than federal requirements to allow LEAs to seek reimbursement for school transportation services that are not precluded by federal requirements. 5.Requires, as part of an existing report to the Legislature, DHCS to include an accounting of funds collected from federal Medicaid payments allocable to LEAs. Requires the report to detail amounts withheld from federal Medicaid payments to each participating LEA for the year. 6.Requires DHCS to collaborate with DOE to help ensure LEA compliance with state and federal Medicaid requirements and to help improve LEA participation in the Medi-Cal billing option for LEAs. FISCAL EFFECT : According to the Assembly Appropriations Committee: 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 DOE 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 (LAUSD), to the extent schools may be able to submit additional transportation services for federal reimbursement. PRIOR VOTES : Assembly Health: 18- 0 Assembly Appropriations:17- 0 Assembly Floor: 74- 0 COMMENTS : 1.Author's statement. AB 2608 would enable school districts to draw down more federal funds for transportation services for students with disabilities by expanding the Medi-Cal LBO program for LEAs. The LBO program allows school districts to claim federal reimbursement for health services for Medi-Cal eligible children. Although California has the largest number AB 2608 | Page 4 of eligible children in the nation, the amount of federal dollars claimed is well below other states. In an effort to address this problem, SB 231 (Ortiz), Chapter 655, Statutes of 2001, was enacted to increase the amount of Medicaid reimbursement received by California school districts through the LBO program. That legislation, however, is set to expire on January 1, 2013. AB 2608 eliminates the sunset clause and makes necessary changes to the LBO program to allow LEAs to obtain additional federal funds for health care services. Current state regulations are more restrictive than the federal rules. This bill expands the LBO program by aligning state and federal regulations for transportation reimbursement. Expanding the LBO program will generate millions of dollars statewide for necessary school transportation for students with disabilities. For example, LAUSD currently spends $77 million on transportation for 13,000 students with disabilities. However, under the current state rules, LAUSD is only able to receive $2 million in federal reimbursement. Given the state's fiscal challenges, and the uncertainty surrounding home-to-school transportation funding, this bill is necessary in order to maximize the amount of federal reimbursement school districts can receive. Additionally, this bill provides more transparency and accountability in the work performed by DHCS. DHCS is able to withhold certain amounts from the federal reimbursement dollars that go to schools in order to offset the costs to DHCS for administering the LBO program. Properly accounting for these withhold amounts ensures that schools are receiving the federal money they are due. 2.LEA. The LEA Medi-Cal LBO Program was established in 1993 to provide federal financial participation (FFP) through Medicaid reimbursement to LEAs (school districts, county offices of education, community colleges, and university campuses) for health-related services provided by qualified medical practitioners to students who are enrolled in Medi-Cal. DHCS indicates school-based health services reimbursed by the LEA Program are primarily provided to students with disabilities receiving special education services through an Individualized Education Plan or Individualized Family Service Plan. LEAs pay for health-related services and are reimbursed for 50 percent of their costs through Medicaid FFP. LEA services are delivered either through the LEAs (which employ practitioners who provide the services on site) or through local contracted practitioners. LEAs must annually certify that the public AB 2608 | Page 5 funds expended for LEA services provided are eligible for FFP. Subject to specified conditions, LEA covered services can include the following: § Health and mental health evaluations and health and mental health education; § Medical transportation; § Nursing services; § Occupational therapy; § Physical therapy; § Physician services; § Mental health and counseling services; § School health aide services; § Speech pathology services; § Audiology services; and § Targeted case management services for children with an individualized education plan or an individualized family service plan. In 2009-10, there were 391,919 LEA claims, total federal Medicaid reimbursement was $220 million and average reimbursement per claim was $122. Medi-Cal reimbursement in the LEA Program has increased by 84 percent, growing from $59.6 million in FY 2000-01 to $109.9 million in FY 2008-09. 1.Funding for LBO administrative costs in LEA. Funding for DHCS administrative activities and contractor costs are currently governed by both law and practice through the DHCS Provider Participation Agreement. Administrative funding is as follows: a. DHCS administrative and processing services costs related to the management of the LEA Medi-Cal LBO, not to exceed one percent of the amount payable to the LEA submitting the claim. This fee is in the Provider Participation Agreement and is not codified. b. DHCS audit administration and associated audit resources costs to ensure fiscal accountability of LEA Medi-Cal LBO and to comply with the Medicaid State Plan, not to exceed one percent of the amount payable to the LEA submitting the claim. The total amount collected from this fee is capped at $650,000 through the 2010-11 Budget Act. c. DHCS costs required to fund and support the program improvement activities in existing law using a contractor, not to exceed a program wide amount of $1.5 million annually. Current law specifies this fee is collected on amounts in excess of a 2000-01 baseline amount ($60 million in practice) received by LEAs. This fee is capped in AB 2608 | Page 6 statute at $1.5 million and is collected through a 2.5 percent fee against individual LEA paid claim amounts. 2.DHCS proposed budget trailer bill language and AB 2608. DHCS proposed budget trailer bill language (TBL) on the LEA LBO, which has three main components: (a) it deletes the January 1, 2013, sunset date on the program improvement provisions; (b) it eliminates the requirement that a baseline LBO funding amount must be met prior to funding LBO contractor costs for program improvements; and (c) it removes the maximum annual funding amount of $1.5 million for DHCS administrative and contractor costs. Both (a) and (b) are contained in this bill. Instead of (c), the TBL proposes the funding be an amount agreed upon by DHCS and an Ad Hoc LEA Workgroup Advisory Committee. This bill does not make either of these changes. The Budget Committees rejected the proposed TBL, so the policy changes could be made in this bill. This bill also contains additional provisions that the TBL does not include. These include a specific requirement that DHCS align state rules with federal requirements for medical transportation reimbursement (current law already contains a similar provision), additional DHCS reporting requirements, a requirement that money collected for administrative activities for program improvement activities be proportionately reduced from federal Medicaid payments to all participating LEAs so that no one LEA loses a disproportionate share of its Medicaid payments, and a requirement that DHCS to collaborate with DOE to help ensure LEA compliance with state and federal Medicaid requirements and to help improve LEA participation in the Medi-Cal billing option for LEAs. 3.Prior legislation. SB 870 (Ducheny), Chapter 712, Statutes of 2010, the 2010-11 Budget Bill required DHCS to withhold 1 percent of LEA reimbursements, not to exceed $650,000, for the purpose of funding the work and related administrative costs associated with the audit resources approved in a specified budget change proposal to ensure fiscal accountability of the LEA Medi-Cal LBO and to comply with the Medi-Cal State Plan. AB 1540 (Committee on Health), Chapter 298, Statutes of 2009, extended the LEA LBO program improvement provision sunset date from January 1, 2010, to January 1, 2013. AB 131 (Committee on Budget), Chapter 80, Statutes of 2005, the 2005 health budget trailer bill, sunset the LEA program AB 2608 | Page 7 improvement provisions January 1, 2010. SB 231 (Ortiz), Chapter 655, Statutes of 2001, enacted the LEA program improvement activities requirements, required DHCS to obtain a state plan amendment to accomplish various goals to enhance reimbursement for Medi-Cal services provided at school sites and student access to those services, and sunset various provisions of that bill January 1, 2006. SB 256 (Maddy), Chapter 654, Statutes of 1993, established the LEA LBO program by requiring that services provided by a LEA are a Medi-Cal-covered benefit. 4.Support. This bill is sponsored by the LAUSD to continue and improve the LEA Medi-Cal LBO program improvement activities set to expire in 2013. LAUSD states that almost $110 million in federal funds going to California schools to support essential health and mental health related services to students are provided through the LBO, and since 2001, LAUSD has received $120 million of federal funding through the program. LAUSD states this bill makes a number of improvements to the LBO to generate millions of dollars statewide for necessary school transportation for students with disabilities by requiring state rules and regulations that are overly restrictive be better aligned with federal rules that allow for reimbursement for transportation of students with disabilities. Additionally, LAUSD states greater transparency and accountability in the work performed by DHCS is needed, as DHCS is able to withhold certain amounts from the federal reimbursement dollars that go to schools in order to offset DHCS administrative costs. LAUSD argues proper accounting for these withhold amounts ensures that schools are receiving the federal money they are due. 5.Policy issue. This bill requires DHCS to amend the Medicaid state plan and regulatory requirements pertaining to the provision of medical transportation services by LEAs so that they are no more restrictive than federal requirements to allow LEAs to seek reimbursement for school transportation services that are not precluded by federal requirements. Current law already requires DHCS to eliminate and modify state plan and regulatory requirements that exceed federal requirements when they are unnecessary. However, state Medi-Cal regulations govern the scope of the medical transportation benefit generally (not specific to LEAs) and it AB 2608 | Page 8 is not clear that the state can expand the scope of the Medi-Cal medical transportation only for LEAs when LEAs are putting up the required federal matching funds. If Medi-Cal medical transportation services can be expanded for LEAs for purposes of drawing down federal matching funds, the author may wish to consider (in lieu of requiring DHCS to adopt regulations) adding language to this bill to override the current regulatory requirement relating to Medi-Cal medical transportation services so as to avoid the time and workload to modify the regulation, as DHCS indicates it typically takes 18 to 24 months to complete regulations. Alternatively, this bill could provide DHCS with emergency regulation authority to make the regulatory change to the school transportation service regulatory provisions. SUPPORT AND OPPOSITION : Support: Los Angeles Unified School District (sponsor) Oppose: None received. -- END --