BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 73| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 73 Author: Senate Budget and Fiscal Review Committee Amended: 3/14/11 Vote: 27 - Urgency PRIOR SENATE VOTES NOT RELEVANT ASSEMBLY FLOOR : Not available SUBJECT : Budget Act of 2011: Health Programs SOURCE : Author DIGEST : This bill makes various changes to statutes related to Medi-Cal, the Healthy Families Program, and the Maddy Fund in order to implement the 2011-12 Budget Act. Assembly Amendments delete the prior version of the bill and inserts the current language to make various changes to statutes related to Medi-Cal, the Healthy Families Program, and the Maddy Fund. ANALYSIS : This is the Omnibus Health Trailer Bill for 2011-12. It contains necessary changes to enact modifications in the Budget Bill for 2011-12. It makes the following key changes: Establishment of a State Emergency Services Fund. A series of laws provide revenues to compensate physicians, hospitals and others for emergency services. The first of CONTINUED SB 73 Page 2 these laws (Maddy), Chapter 1240, Statues of 1987, allows for counties to establish Emergency Medical Services Funds. Although counties are not required to establish "Maddy Funds," at least 49 counties have done so. Counties have several sources of revenue for their "Maddy Funds," derived from county penalty assessments on various criminal offenses, motor vehicle violations, and traffic violator school fees. SB 1173 (Alarcon), Chapter 841, Statues of 2006, authorized counties to elect to levy an additional $2 dollars for every $10 dollars in based fines (above the Maddy Fund) for purposes of supporting local emergency medical services and to provide for specified pediatric trauma services. This bill modifies statute associated with changes enacted in SB 1173, Statutes of 2006. Specifically, this bill provides for up to $9 million for local emergency medical services and specified pediatric trauma services as intended under the original enabling legislation. In addition, effective as of July 1, 2011, it applies the additional $2 penalty for every $10 dollars in base fines, as established by SB 1173, Statutes of 2006 on a statewide basis, previously a county board of supervisors could elect to levy this penalty. These additional funds, anticipated to be about $55 million, are to be used to offset $55 million in General Fund support in the Medi-Cal Program. These funds can be used to match federal funds available under the Medi-Cal Program whereas previously at the local level, they were not eligible for a federal fund match. Healthy Families Program. This bill makes three changes to the Healthy Families Program which provides health, vision and dental services to children from 133 percent to 250 percent of federal poverty. These changes are as follows: A. Increase to Premiums. The Budget Bill reflects the Governor's proposal to increase premiums for low-income families enrolled in the Healthy Families Program. For families with income from 151 percent to 200 percent of poverty, an increase of $14 per child (total of $30 per month), with a family maximum of $90 per month for three or more children, was approved. For families with SB 73 Page 3 income from 201 percent to 250 percent of poverty, an increase of $18 per child (total of $42 per child per month), with a family maximum of $126 per month for three or more children was approved. A total of $63.3 million ($22.2 million General Fund) is reflected in the Budget Bill from this action. B. Vision Benefit Change. In lieu of eliminating Vision coverage for children, as proposed by the Governor, this bill modifies how both eye-glass frames and lenses are designed by the Healthy Families Program. The Budget Bill reflects a reduction of $3 million (General Fund) from this action. C. Conform to Medi-Cal Mandatory Copayment for Hospital Services. This bill makes changes to the Healthy Families statute to conform to changes in the Medi-Cal Program related to mandatory copayments for hospital services. These are: (1) Emergency Room visits which do not result in hospitalizations or outpatient observation would increase from $15 to $50; and (2) Hospital Inpatient days would have a copayment of $100 per day, with a maximum of $200 per day. The Budget Bill reflects a reduction of $15.9 million ($5.3 million General Fund) from this action. Medi-Cal: Extension of AB 1422 (Bass), Chapter 157, Statutes of 2009. The Medi-Cal provider gross premium tax, authorized by AB 1422, Statutes of 2009, establishes a funding source for essential preventative and primary health care services provided through the Healthy Families Program and Medi-Cal Program by adding Medi-Cal Managed Care Plans to the list of insurers subject to California's gross premiums tax of 2.35 percent. Existing statute sunsets as of June 30, 2011. This bill extends the sunset to January 1, 2014. The Budget Bill appropriates a total of $194.4 million from this special fund, including $97.2 million for the Medi-Cal Program and $97.2 million for Healthy Families. Medi-Cal: Managed Care and Transition from Lanterman Developmental Center. The Budget Bill reflects baseline expenditures related to the provision of Medi-Cal Managed SB 73 Page 4 Care services provided to people with developmental disabilities who have transitioned from Agnews Developmental Center or Lanterman Developmental Center. This bill provides clarifying language to enable the Department of Health Care Services to reimburse for all Medi-Cal services provided under contract with health plans that are not reimbursed by the federal Medicare Program (related to the "dual eligible" population). It also clarifies that Medi-Cal reimbursement shall be paid at full-risk capitation levels as specified for this unique population. Medi-Cal: 250 Percent Working Disabled Program. This bill temporarily rescinds a monthly premium increase in this program since it could violate existing maintenance of effort (MOE) requirements under the federal American Recovery Act of 2009 provisions. The language requires that if the Director of Health Care Services determines that federal ARRA MOE requirements no longer apply, the Director shall give notice to the Joint Legislative Budget Committee and DOF, as well as post this information on the DHCS website. Medi-Cal: Extend Roger's Amendment for One-Year. The Budget Bill reflects a reduction of $6.4 million (General Fund) by extending the sunset date of Section 14091.3 of Welfare and Institutions Code by one-year (to January 2013). This bill provides for the extension. 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. Medi-Cal: Technical Sunset for Previous Rate Reduction. SB 73 Page 5 This bill provides a sunset as of June 1, 2011 for previous Medi-Cal rate reductions enacted in prior budgets as noted in Section 14105.191 of the Welfare and Institutions Code. Medi-Cal: Intermediate Care Facilities Rate Reduction. ICF-DD facilities provide 24-hour care to individuals with developmental disabilities. The Budget Bill reflects a reduction of $41.1 million ($20.5 million General Fund) by reducing Medi-Cal Provider reimbursement by up to 10 percent for Intermediate Care Facilities for the Developmentally Disabled (ICF-DD). This bill reflects necessary statutory changes for this action. Medi-Cal: Legislature's Intent and 10 Percent Provider Reduction. The Budget Bill reflects a reduction of $1.1 billion ($537.1 million General Fund) in 2011-12 through enactment of Medi-Cal Provider Payment reductions of up to 10 percent, effective as of June 1, 2011. This reduction is applicable to both Medi-Cal Fee-for-Service and Medi-Cal Managed Care providers. The Medi-Cal Provider Payment reductions vary by Provider Type. The general intent of this reduction is to reflect an overall 10 percent ongoing reduction. DHCS intends to conduct rate analyses and studies where necessary in order to obtain federal Centers for Medicare and Medicaid (CMS) approval. The bill specifies the Legislature's findings and declarations, including the following key aspects: In order to minimize the need for drastically cutting enrollment standards or benefits during times of economic crisis, it is crucial to find areas within the program where reimbursement levels are higher than required under the standard provided in Section 1902(a)(30)(A) of the federal Social Security Act and can be reduced in accordance with federal law. The setting of rates within the Medi-Cal program is complex and is subject to close supervision by the United States Department of Health and Human Services. As the single state agency for Medicaid in California, the DHCS has unique expertise that can inform decisions that set or adjust reimbursement SB 73 Page 6 methodologies and levels consistent with the requirements of federal law. It is the intent of the Legislature for the DHCS to analyze and identify where reimbursement levels can be reduced consistent with the standard provided in Section 1902(a)(30)(A) of the federal Social Security Act and consistent with federal and state law and policies, including any exemptions contained in the provisions of the act that added this section, provided that the reductions in reimbursement shall not exceed 10 percent on an aggregate basis for all providers, services and products. This bill provides that the Director of the DHCS shall adjust provider payments by up to 10 percent as specified for Medi-Cal Fee-for-Service, Medi-Cal Managed Care, and certain non-Medi-Cal Programs as specified. This bill provides discretion to the Director of the DHCS to be able to adjust the payments as specified with respect to one or more categories of Medi-Cal providers, or for one or more products or services rendered, or any combination thereof, so long as the resulting reductions to any category of Medi-Cal providers, in the aggregate, total no more than 10 percent. This bill specifies that payment reductions and adjustments shall be implemented only if the Director determines that the payments that result from the application of this section will comply with applicable federal Medicaid reimbursements and that federal financial participation will be available. The Director shall determine whether the payments comply with applicable federal Medicaid requirements, including those set forth in Section 1396a(a)(30)(A) of Title 42 of the United States Code. This bill specifies that certain services, facilities, and payments are exempt from the payment reductions. Medi-Cal: Managed Care Drug Rebate. The federal Patient Protection and Affordable Care Act authorized states to begin collecting rebates on drugs dispensed through SB 73 Page 7 Medicaid managed care plans. The Budget Bill reflects savings of $64 million (General Fund) by having the DHCS collect additional drug rebates for drugs dispensed through Medi-Cal Managed Care Plans. The DHCS was also provided 15 state positions for this purpose. This bill provides DHCS authority to make these collections and clarifies the meaning of "State rebate". Medi-Cal: Legislative Intent to Develop New Reimbursement Methodology. This bill contains findings and declarations that the Legislature recognizes that a new pharmacy reimbursement rate, based on a pricing benchmark that reflects actual acquisition costs, needs to be developed. It is the intent of the Legislature to enact legislation by August 1, 2011, that provides for development of a new reimbursement methodology that will enable the DHCS to achieve savings while continuing to reimburse pharmacy providers in compliance with federal law. It also recognizes that the DHCS may require providers, manufacturers, and wholesalers to submit any data the Director determines necessary or useful in preparing for the transition from a methodology based on average wholesale price to a methodology based on actual acquisition cost. Medi-Cal: Legislative Intent and 10 Percent Reduction on Long-Term Care. The Budget Bill reflects a reduction of $392.9 million ($172 million General Fund) in 2011-12 through enactment of a reduction of up to 10 percent, effective as of June 1, 2011, for Long-Term Care facilities as specified. The bill specifies the Legislature's findings and declarations, including the following key aspects: In order to minimize the need for drastically cutting enrollment standards or benefits during times of economic crisis, it is crucial to find areas within the program where reimbursement levels are higher than required under the standard provided in Section 1902(a)(30)(A) of the federal Social Security Act and can be reduced in accordance with federal law. SB 73 Page 8 The setting of rates within the Medi-Cal program in complex and is subject to close supervision by the United States Department of Health and Human Services. As the single state agency for Medicaid in California, the DHCS has unique expertise that can inform decisions that set or adjust reimbursement methodologies and levels consistent with the requirements of federal law. It is the intent of the Legislature for the DHCS to analyze and identify where reimbursement levels can be reduced consistent with the standard provided in Section 1902(a)(30)(A) of the federal Social Security Act and consistent with federal and state law and policies, including any exemptions contained in the provisions of the act that added this section, provided that the reductions in reimbursement shall not exceed 10 percent on an aggregate basis for all providers, services, and products. This bill provides for the Director of the DHCS to reduce by up to 10 percent the Medi-Cal reimbursement provided to Long-Term Care facilities as specified. It provides the Director authority to adjust the percentage reduction as along as the resulting reductions in the aggregate total no more than 10 percent. This bill specifies that payment reductions and adjustments shall be implemented only if the Director determines that the payments that result from the application of this section will comply with applicable federal Medicaid reimbursements and that federal financial participation will be available. The Director shall determine whether the payments comply with applicable federal Medicaid requirements, including those set forth in Section 1396a(a)(30)(A) of Title 42 of the United States Code. Medi-Cal: Hearing Aid Cap. Hearing Aids are a benefit in Medi-Cal when supplied by a Hearing Aid Dispenser through the prescription of an Otolaryngologist or attending Physician. The Budget Bill reflects a reduction of $507,000 (General Fund) by capping the maximum expenditures SB 73 Page 9 per Medi-Cal enrollee for Hearing Aid expenditures at $1,510 annually. This cap includes expenditures for the Hearing Aid, ear molds, and repairs. This dollar limit applies to Adults. It is anticipated that about 10 percent of Medi-Cal enrollees, or 2,293 people, may be above this expenditure cap. The average amount expended by this 10th percentile group is $1,579 annually, or about $80 higher than the proposed cap. This bill places the $1,510 annual limit in statute and assumes an implementation date of 60 days after the date the DHCS secures all necessary federal approvals. Children (21 years and under), pregnant women and people in Long-Term Care Facilities are exempt. The bill states that this benefit cap will only be implemented to the extent permitted by federal law. Medi-Cal: Physician "Soft Cap" After 7 Visits. The Budget Bill reflects a reduction of $44.9 million (General Fund) through implementation of a "soft cap" on Physician Services provided under the Medi-Cal Program. This "soft cap" would apply to Adults. Children (aged 21 years and under), pregnant women, and residents in Long-Term Care facilities are exempt. The "soft cap" would apply to both Medi-Cal Fee-for-Service and Managed Care plans. It affects outpatient primary care and specialty care provided under the direction of a Physician in the following general settings: Hospital Outpatient Department; Outpatient Clinic; Federally Qualified Health Centers (FQHCs); Rural Health Centers; and Physician Offices. This bill implements a cap of seven visits on the total number of Physician Office and Clinic Visits for Physician Services provided by a Physician, or under the direction of a Physician, that are covered under the Medi-Cal Program. For the purpose of this limit, a visit includes Physician SB 73 Page 10 Services provided at any FQHC, Rural Health Clinic, community clinic, outpatient clinic, and hospital outpatient department. Visits exceeding the seven per Medi-Cal beneficiary will be required to be certified by the Physician, or medical professional under the supervision of a Physician, attesting that one or more of the following circumstances is applicable: Will prevent deterioration in a beneficiary's condition that would otherwise result in an admission to an emergency department; Will prevent deterioration in a beneficiary's condition that would otherwise result in inpatient admission; Will prevent disruption in ongoing medical therapy or surgical therapy, or both, including but not limited to medications, radiation, or wound management; Are necessary for diagnostic workup in progress that would otherwise result in inpatient or emergency department admission; or Are necessary for the purpose of assessment and form completion for Medi-Cal recipients seeking or receiving in-home supportive services. The certification is a written declaration as specified in the legislation. The certification is to be maintained onsite at the medical location as specified. Services not subject to this 7 visit cap limit include: (1) Specialty Mental Health Services as specified; (2) any pregnancy-related visit as specified. The 7 visit cap limit shall not apply to the following Medi-Cal beneficiaries: (1) Children (aged 21 and under) in the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Program; and (2) an individual residing in a Long-Term Care facility as defined. For Managed Care Plans, except for the Senior Care Action Network, or AIDS Healthcare Foundation, payment shall be reduced by the actuarial equivalent amount of the benefit SB 73 Page 11 reductions from the implementation of the benefit cap amounts. The bill states that the DHCS may seek input from consumer organizations and the provider community, as applicable, prior to implementation. Implementation is to occur no sooner than 60 days after the date the DHCS secures all necessary federal approvals. Medi-Cal: Over-the-Counter Drug Change. The Budget Bill reflects a reduction of $2.2 million (General Fund) by eliminating non-prescription cough and cold products for Adults. Specifically, these are "over-the-counter" products such as Nyquil, Robitussin, Alka-Seltzer, and similar cough and cold products. This bill specifies that non-legend acetaminophen containing products are no longer covered benefits, except for Children (aged 21 years and under) enrolled in the EPSDT Program. Medi-Cal: Limit to Enteral Nutrition. The Budget Bill reflects a reduction of $14.5 million (General Fund) by limiting Enteral Nutrition products provided to Adults. Specifically, these products would only be provided for Adults who must be tube-fed. Conditions which require tube feeding include, but are not limited to, anatomical defects of the digestive tract or neuromuscular diseases. This bill specifies that enteral nutrition products are limited to, those products to be administered through a feeding tube, including, but not limited to, a gastric, nasogastric, or jejunostomy tube. Patients with diagnoses, including but not limited to, malabsorption and inborn errors of metabolism, if the product has been shown to be neither investigational nor experimental when used as part of a therapeutic regimen to prevent serious disability or death, will be exempt. Medi-Cal: Legislative Intent and Mandatory Copayments. The Budget Bill reflects reductions by implementing mandatory copayments for specified services in Medi-Cal. The reductions are as follows: SB 73 Page 12 $152.8 million (General Fund) by implementing mandatory copayments of $5 per visit at the point of service. $140.3 million (General Fund) by implementing mandatory copayments of $3 per prescription for preferred drugs (Generics) and $5 per prescription for non-preferred (Brand) at the point of service. $262.8 million (General Fund) by implementing mandatory copayments of (1) $50 for Non-Emergency Room use of an Emergency Room; (2) $50 for Emergency Room use; and (3) $100 for an Inpatient Day, with a maximum of $200 per Inpatient stay. $27.9 million (General Fund) by implementing mandatory copayments of $5 per Dental Office visit. The bill specifies the Legislature's findings and declarations, including the following key aspects: In order to minimize the need for drastically cutting enrollment standards or benefits during times of economic crisis, it is crucial to find areas within the program were beneficiaries can share responsibility for utilization of health care whether they are participating in the Fee-for-Service or Managed Care model of service delivery; As the single State agency for Medicaid in California, the DHCS has a unique expertise that can inform decisions that set or adjust cost sharing responsibilities for Medi-Cal beneficiaries receiving health care services; It is the intent of the Legislature for the DHCS to obtain federal approval to implement cost-sharing for Medi-Cal beneficiaries and permit providers to require that individuals meet their cost-sharing obligation prior to receiving care or services. This bill requires Medi-Cal beneficiaries to make copayments as described. The copayments shall be set by SB 73 Page 13 the DHCS, at the maximum amount provided for as noted, except that each copayment amount shall not exceed the maximum amount allowable pursuant to State Plan Amendments or other federal approvals. Medi-Cal: County Administration Suspension of Cost-of-Doing-Business. The Budget Bill reflects a reduction of $11.8 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. Medi-Cal: Legislative Intent and Cessation of Adult Day Health Care Services and Transition Program. The Budget Bill reflects (1) elimination of Adult Day Health Care Services as a Medi-Cal Optional Benefit; and (2) provides $85 million (General Fund), and federal matching funds to provide for a transition for existing ADHC enrollees to other Medi-Cal appropriate services, and to facilitate when applicable transition to newly-developed federal Waiver services once implemented. This bill specifies the Legislature's findings and declarations, including the following key aspects: During times of economic crisis, it is crucial to find areas within the Medi-Cal Program where efficiencies can be achieved while continuing to provide community-based services that support independence. Adult Day Health Care has been vulnerable to fraud and despite attempts to curtail and prevent fraud, including but not limited to, a moratorium on new facilities and onsite treatment authorization request review, fraud continues in this area. California has added services and programs to enable vulnerable populations to remain in the community, as specified. There are alternative services to meet the needs of Medi-Cal beneficiaries utilizing ADHC, including in-home supportive services, physical, occupational, SB 73 Page 14 and speech therapies, nonemergency medical transportation, and home health services. It is the intent of the Legislature for the DHCS to obtain federal approval to eliminate ADHC as a Medi-Cal Optional Benefit. This bill states that notwithstanding any other provision of law related to the Medi-Cal program or to Adult Day Health Care, Adult Day Health Care is excluded from coverage under the Medi-Cal Program. This shall become implemented on the first day of the first calendar month following 90 days after the effective date of the act that adds this section or on the first day of the first calendar month following 60 days after the date the DHCS secures all necessary federal approvals to implement this section, whichever is later. This bill provides that as a result of enactment to eliminate Adult Day Health Care as an Optional Benefit, the DHCS shall implement a short-term program to fund organizations to assist individuals receiving ADHC services to transition to other Medi-Cal services, social services, and respite programs, or to provide social activities and respite assistance for individuals who were receiving ADHC services at the time the services were eliminated. The goal of this funding is to minimize the risk of institutionalization by identifying needed services available in the community and providing beneficiaries assistance in accessing those services. This bill requires existing ADHC centers to provide relevant participant information as specified to ensure a smooth transition. This bill provides the DHCS certain public contract code exemptions to enable the DHCS to contract with public or private entities as specified to enter into contracts for the purposes of implementing this article and providing for a smooth transition. This bill states that the specified short term program to assist individuals receiving ADHC services to transition to other Medi-Cal services, social services, and respite SB 73 Page 15 programs, or to provide social activities and respite assistance for individuals who were receiving ADHC services at the time the services were eliminated, is subject to an appropriation in the annual Budget Act. Medi-Cal: Legislative Intent for Legislation on Federal Waiver. This bill states that during the 2011-12 Regular Session of the Legislature, legislation will be adopted to create a new program called the Keeping Adults Free from Institutions Program. This program will provide a well-defined scope of services to eligible beneficiaries who meet a high medical acuity standard and are at significant risk of institutionalization in the absence of such community-based services. As prescribed by subsequent statute the DHCS shall develop a federal Waiver to maximize federal reimbursement for this program to the extent permitted by federal law. The Budget Act of 2011 incudes funding for the KAFI program. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes CTW:kc 3/15/11 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END ****