BILL ANALYSIS Ó SB 73 Page 1 SENATE THIRD READING SB 73 (Budget and Fiscal Review Committee) As Amended March 14, 2011 2/3 vote. Urgency SENATE VOTE :Vote not relevant SUMMARY : Contains necessary statutory changes to amend appropriations contained in the 2011 Budget Act for the Department of Developmental Services (DDS), Department of Health Care Services (DHCS), and the Managed Risk Medical Insurance Board (MRMIB). Specifically, this bill : 1)Makes various changes concerning the DHCS. These proposals are as follows: a) Discontinues one of two existing options for counties to assess fines on criminal offenses, relating to alcoholic beverages and violations of the vehicle code, for the collection of revenue to support emergency departments, emergency physicians, and county emergency services. These funds are often referred to as "Maddy Funds" and this bill specifically addresses the second optional assessment added to state law through 2006 legislation authored by Senator Alarcón. Specific to these fines, this bill ends the county option and instead requires all counties to assess these fines and deposit them into a newly established state fund to support Medi-Cal services. The bill preserves funding for counties for pediatric trauma care. This bill extends the existing sunset from 2014 to 2016; b) AB 1422 (Bass), Chapter 157, Statutes of 2009 extended the gross premium tax on insurers to Medi-Cal Managed Care Plans for the purpose of raising additional revenue for the State's Healthy Families Program. Current law includes a sunset of July 1, 2011 and this bill extends that sunset to January 1, 2014; c) Temporarily rescinds a monthly premium increase in the 250% Working Disabled Program as it would violate the existing maintenance of effort requirement under the federal American Recovery and Reinvestment Act (ARRA), thereby subjecting the state to substantial penalties; SB 73 Page 2 d) Extends the sunset for one year on the state statute that implements the federal "Roger's Amendment." Enacted as part of the Deficit Reduction Act of 2005, the Roger's Amendment sets a limit on the amount that a Medicaid (Medi-Cal) managed care plan can reimburse a non-contracted hospital that provides emergency services to one of the plan's members. It requires hospitals to accept, as payment in full, no more than the amounts that it could collect under the fee-for-service Medicaid program. In 2008, California enacted Welfare & Institutions Code Section 14091.3, which sets the rate methodology for non-contracted emergency inpatient services and non-contracted post-stabilization services, thereby implementing the federal Roger's Amendment. Current statute requires the DHCS to report to the Legislature on the implementation of these rates by August 1, 2010 and the statute sunsets on January 1, 2012; e) Implements a 10% rate reduction to Medi-Cal providers. These reductions vary by provider type, due to the varying statuses of prior provider payment reductions, some of which have been enjoined by various Court actions and some partially restored. As such, the Budget enacts an additional percentage reduction that varies depending on this history, but when combined results in a 10% reduction. These reductions affect most Medi-Cal providers, including, but not limited to: physicians, optometrists, hearing aid dispensers, emergency and nonemergency medical transportation providers, home health providers, and pharmacies. The state is undergoing a rate study to determine the impact that this and the following two rate reductions would have on network adequacy. This bill gives the DHCS the authority to implement a rate reduction of less than 10% should the rate study results not support a full 10% reduction; f) Consistent with the provider rate reductions, this bill implements a 10% rate reduction for 17 non-contract hospitals for which the prior rate reduction was enjoined by a court ruling. Once implemented, these 17 hospitals will experience a rate reduction equal to that already in place for other hospitals; SB 73 Page 3 g) Consistent with the rate reductions for providers and hospitals, long-term care facilities would receive rate reductions of up to 10%. Long-term care facilities that would experience rate reductions as a result of the Budget Act include, but are not limited to: stand-alone skilled nursing facilities ("1629 facilities"), nursing facilities level A, Distinct Part Nursing Facilities level B, Distinct Part Pediatric Subacute, and Intermediate Care Facilities-Developmentally Disabled (ICF-DD). 1629 facilities will receive an approximately 2.4% increase in 2011-12 prior to the 10% reduction, thereby resulting in a net reduction of 7.6%; h) Requires the state to collect rebates from pharmaceutical companies for drugs dispensed through Medi-Cal Managed Care Plans, as recently permitted under federal health care reform; i) Places a maximum annual dollar cap of $1,510 on hearing aids for adult Medi-Cal beneficiaries; j) Institutes a "soft cap" on the number of physician office and clinic visits for physician services provided by a physician, or under the direction of a physician, to seven visits per year. This cap does not apply to: pregnancy care, mental health care, children, and long-term care in a skilled nursing facility or ICF-DD. Physician and clinic visits exceeding seven per year must be certified by the physician attesting that the care met at least one of the following: i) will prevent the need for emergency department care; ii) will prevent the need for inpatient hospital care; iii) will avoid disruption to ongoing medical therapy; or, iv) constitutes a diagnostic work-up in progress that would prevent the need for hospital care. This bill requires physicians to maintain such certifications in the physician's office or clinic, SB 73 Page 4 subject to audit and inspections by the DHCS. This soft cap applies to both managed care and fee-for-service Medi-Cal. aa) Eliminates Medi-Cal coverage of over-the-counter cough and cold products for adults; bb) Eliminates Medi-Cal coverage of over-the-counter enteral nutrition products that are consumed orally, for adults. Medi-Cal would still cover these products for adults who must be tube-fed. This bill authorizes the DHCS to provide exemptions for patients for whom these products prevent serious disability or death; cc) Dependent on approval of a federal waiver, institutes mandatory co-payments for all Medi-Cal enrollees, including children, people in long-term care facilities, and pregnant women, as follows: i) Physician & Clinic Visits:$5 ii) Pharmacy: $5 (brand-name), $3 (generic) iii) Hospital Emergency Rooms: $50 (emergencies and non-emergencies) iv) Hospital Inpatient Care:$100 per day ($200 maximum per admission) v) Dental Care: $5 dd) Suspends the cost-of-living adjustment (COLA) for the 2011-12 budget year for counties for their administration of eligibility functions for the Medi-Cal Program; ee) Eliminates Adult Day Health Care (ADHC) as a Medi-Cal optional benefit. This bill also establishes guidelines for the DHCS to make funds included in the Budget Act available to assist with transitioning ADHC beneficiaries to other services and for more narrowly-defined services to be provided under a new program, Keeping Adults Free from Institutions (KAFI); and, ff) Establishes legislative intent to enact legislation by August 1, 2011 that provides for the development of a new reimbursement methodology using a pricing benchmark that reflects actual acquisition costs. SB 73 Page 5 2)Makes the necessary changes within the DDS to allow for consumers transitioning from the Lanterman Developmental Center, to receive Medi-Cal managed care health plan services from any plan operating in the various counties, if the consumer chooses to enroll, and requires that plans be paid by a full-risk capitation payment. 3)Makes various changes concerning MRMIB. These proposals are as follows: a) Increases family monthly premiums in the Healthy Families Program. These increases will be implemented only upon receipt of federal approval and the bill authorizes the MRMIB Board to issue emergency regulations to implement these changes. The new premiums are as follows: i) 150-200% federal poverty level (FPL): (1) $30 per child, $90 family maximum; or (2) $27 per child, $81 family maximum (Family Value Pack). ii) 200-250% FPL: (1) $42 per child, $126 family maximum; or (2) $39 per child, $117 family maximum (Family Value Pack). a) Increases mandatory co-payments on hospital services. The co-payments will increase from $15 to $50 for emergency room visits (and waived if the beneficiary is hospitalized), and from $0 to $100 per day (with a maximum of $200) for hospital inpatient services. These increases do not change the existing maximum annual co-payment of $250 per family. These co-payment increases are dependent on: i) being consistent with co-payments implemented in the Medi-Cal program for children; and, ii) the state receiving federal approval for these changes SB 73 Page 6 to both programs. The bill authorizes the MRMIB Board to issue emergency regulations to implement these changes. b) Authorizes the MRMIB Board to issue emergency regulations, between March 1, 2011 and June 30, 2012, to modify vision benefits, including, but not limited to, restrictions on providers, benefits, or products and materials, in order to achieve savings adopted in the 2011 Budget Act. 4)Adds an urgency clause allowing this bill to take effect immediately upon enactment. FISCAL EFFECT : This bill implements policy changes to achieve approximately $1.8 billion in General Fund savings, as contained in the 2011-12 Budget package. Analysis Prepared by : Andrea Margolis / BUDGET / (916) 319-2099 FN: 0000069