BILL ANALYSIS                                                                                                                                                                                                    






                             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---



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             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.




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          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 




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            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 




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            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 




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            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 --