BILL ANALYSIS Ó
SB 484
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 484 (Rubio) - As Amended: June 8, 2011
SENATE VOTE : 34-4
SUBJECT : Public records: health care services contract records:
health care spending.
SUMMARY : Authorizes the Legislative Analyst's Office (LAO) to
have the same access to the California Department of Corrections
and Rehabilitation (CDCR) health services contracts that the
Joint Legislature Audit Committee (JLAC) and the Bureau of State
Audits (BSA) have under existing law, and requires CDCR to
establish health care cost reductions, as specified.
Specifically, this bill :
1)Requires CDCR, using 2010 statewide prison health care costs
as a baseline, to develop targets and implement a plan based
on the targets to achieve a reduction in prison health care
spending while maintaining an adequate level of care.
2)Requires CDCR, when setting these targets, to seek ways of
achieving a goal of spending no more per inmate on health care
than the state pays per patient for Medi-Cal services by 2015.
3)Requires progress made towards the specified goals to be
reviewed as part of the annual budget process.
4)Requires CDCR to report to the Legislature by January 1, 2013
and annually thereafter until January 1, 2017, to provide
updates on accomplishing the specified goals.
5)Provides that, notwithstanding any restrictions imposed by
law, CDCR records relating to health care services contracts,
or any amendments thereto, shall be open to inspection to the
LAO, and that the LAO shall maintain the confidentiality of
any contract and amendment until the contract or amendment is
fully open to inspection by the public.
EXISTING LAW :
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1)Requires, under the California Public Records Act (PRA), that
all public agency documents be disclosed to the public, unless
a specific statutory exemption applies.
2)Provides that, notwithstanding any restrictions imposed by
law, that CDCR records relating to health care services
contracts, or any amendments, shall be open to inspection by
JLAC and the BSA, and that JLAC and BSA shall maintain the
confidentiality of any contract and amendment until the
contract or amendment is fully open to inspection by the
public.
3)Requires CDCR to consult with the California Medical
Assistance Commission (CMAC) to assist CDCR in planning and
negotiating contracts for the purpose of health care services
and negotiating with providers.
4)Prohibits CDCR from reimbursing hospital services at a rate
that exceeds 130%, physician services at a rate that exceeds
110%, and ambulance services at a rate that exceeds 120% of
the Medicare Fee Schedule.
5)Establishes the Medi-Cal Program, administered by the
Department of Health Care Services (DHCS), which provides
comprehensive health benefits to low-income children, their
parents or caretaker relatives, pregnant women, elderly, blind
or disabled persons, nursing home residents, and refugees who
meet specified eligibility criteria.
FISCAL EFFECT : This bill, as amended, has not been analyzed by
a fiscal committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, prison health
care costs are currently skyrocketing. The author cites the
LAO finding of a dramatic increase in spending on adult prison
health care: from $1.2 billion in 2005-06 to $2.5 billion in
2008-09. According to the LAO, last year, California spent an
average of $16,000 per inmate on health care services. By
comparison, the author argues, Texas, which is the only state
prison system comparable in size to California, only spends
about $3,650 per inmate annually on health care services.
According to the author, the LAO directly attributes the
growing health care costs to greater usage of contract medical
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services. In March 2010, Texas-based consulting firm
NuPhysicia indicated that California has significantly higher
staffing levels than all other states. The report found that
California had an administrative staff nearly seven times that
of Texas. The author argues that based on these numbers, it
is clear that there is room for significant and immediate
reductions in prison health care spending.
The author also states that despite the growing costs in prison
health care, the LAO and the Legislature are kept in the dark
about exactly how much is being spent on health contracts
because all health care contracts and records under the CDCR
are exempt from the PRA. The author points out that the
details of the prison contracts do not become public until
three years after the contract has been in place.
According to the author, as California faces a multi-billion
dollar deficit, we must do everything in our power to ensure
that taxpayer dollars are spent wisely and actively work to
reduce prison health costs. The author asserts that this bill
would significantly improve the oversight and disclosure of
prison health care contracts, which currently cost taxpayers
billions of dollars, and direct CDCR to meet specified goals
for reducing prison health costs. The author points out that
while the Receiver agreed to an $820 million cut to inmate
medical services for Fiscal Year 2010-11 these goals have not
been met. The author concludes that it is certainly time for
the Legislature to take direct action and establish strict
benchmarks for reducing prison health care spending relative
to Medi-Cal per patient care.
2)BACKGROUND . In February 2006, the federal court in Plata v.
Schwarzenegger , Case No. C-01-1351 TEH (N.D. Cal. July 23,
2007), pertaining to inmate medical care appointed a Receiver
to take over the direct management and operation of the
state's prison medical health care delivery system from the
CDCR. (A nonprofit corporation was subsequently created as a
vehicle for operating and staffing the Receiver's operation.)
Almost two years later, the court appointed a new Receiver to
continue and expand the efforts initiated by the first
Receiver in bringing prison medical care up to federal
constitutional standards. In June 2008, the current Receiver
submitted and the federal court approved his so-called
Turnaround Plan of Action for ensuring that inmates receive
constitutionally adequate care. Specifically, this plan
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identified various deficiencies in the existing prison medical
care system, as well as measurable goals to address these
deficiencies. Some of these goals include reducing the number
of inmate deaths, reducing the vacancies in certain clinical
positions, constructing new prison health care facilities, and
developing a medical information technology infrastructure.
In order to implement his plan, the Receiver made significant
operational changes over the past two years. For example, he
established new policies related to emergency medical
response, primary and chronic care delivery, and inmate
medical screening and classifications. Currently there are
four major health care class actions (Armstrong, Coleman,
Perez, and Plata) pending against the CDCR and the Receiver
files coordinated Tri-Annual Reports in the four federal
courts.
3)COST CONTAINMENT . The Corrections Budget Trailer Bill of 2009
ÝSB 13 (Ducheny), Chapter 22, Statutes of 2009, 4th
Extraordinary Session] authorized CDCR to contract with health
plans and health care providers and limited the reimbursement
rate for noncontracting providers to a maximum rate that was
based on the rate paid by Medicare. For hospital services the
limit was 130%, physician services cannot exceed 110% and
ambulance services cannot exceed 120% of the Medicare Fee
Schedule.
According to the Governor's 2011-12 Budget, actual spending on
adult inmate medical services have started to trend down from
a high of $1.98 billion in 2008-09 to $1.74 billion in 2009-10
to a proposed $1.46 billion in 2011-12. The California Prison
Health Care Service (CPHCS), CDCR's medical services program,
cites medical services contracts as one of the major cost
drivers. According to CPHCS, in the beginning of 2009-10,
medical services contracts expenditures were projected to
increase to $993 million from $845 million in 2008-09. CPHCS
cites as a significant accomplishment the implementation of
various cost containment measures and the successful reduction
of medical services contracts expenditures, ending the year at
$653 million, a decrease of $340 million from the $993 million
projection.
CPHCS also cites the following:
a) Medical services contracts expenditures decreased from
$845 million in 2008-09 to $653 million in 2009-10, a
decrease of $192 million.
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b) Cost containment measures in 2009-10 resulted in a $340
million cost avoidance in contract medical expenditures.
c) For 2010-11, projected medical services contracts
expenditures are $500 million, a decrease of $153 million
from 2009-10.
According to the Receiver's Seventeenth Tri-Annual Report
filed May 15, 2011, CPHCS entered into a partnership with
Health Net Federal Services, LLC (Health Net) to develop and
maintain a statewide Prison Health Care Provider Network of
health care providers for California's 33 correctional
facilities. CPHCS and Health Net developed a plan to
streamline CPHCS' ability to provide enhanced access to care
and improved quality of care in the institutions and the
community at sustainable rates. On January 1, 2011, Health
Net fulfilled the requirements for Phase One of the plan by
having 66% of the provider network in place while ensuring
patient-inmates' access to and continuity of care. In
addition, a robust listing of network medical service
providers was made available to institution staff statewide
through a web-based directory for scheduling of
patient-inmates. According to CPHCS this Medical Contracts
Program continues to ensure access to medical care services in
the interim of Health Net completing Phase Two by June 30,
2011, when 100% of the provider network will be in place. The
CPHCS Medical Contracts Program is continuing to work with
providers to execute service contracts at the statutory rate
to ensure a consistent and equitable rate for reimbursement
for services rendered. These continued efforts have resulted
in the following for this reporting period:
a) Execution of 34 new and amended statewide contracts for
hospital, specialty physician and ambulance services.
b) Execution of 29 amended competitively bid medical
contracts and four competitively bid ambulance contracts
through centralized coordination with Medical Program
Services and individual institutions.
4)MEDI-CAL . Medi-Cal, the California Medicaid Program, is
currently funded with state, county, federal, and private
provider fee funds. The projected expenditures for 2010-11
are $55 billion in federal, General Fund (GF), and other
nonfederal funds through the Budget Act. There are estimated
to be 7.5 million eligible beneficiaries. Traditionally,
Medi-Cal was a shared federal/state program with each entity
contributing approximately 50%. The Federal Medical
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Assistance Percentages (FMAP) is the percentage of the program
paid by federal funds. The state's share was primarily from
the GF. For a variety of reasons, the state's share has been
substantially reduced over the past six years. The most
significant has been the replacement of GF with Certified
Public Expenditures (CPEs) as the matching funds for inpatient
and outpatient medical services provided by the 21 county and
University of California designated public hospitals (DPH).
This allowed the state to reduce GF support.
Using CPEs to draw down increased federal funds decreased the
amount of uncompensated costs from low Medi-Cal reimbursement
rates and the high volume of uninsured.
Under federal law, Medicaid providers are required to be
reimbursed for their reasonable costs in an amount sufficient
to guarantee that there is an adequate network for enrollees,
but no more than the cost would be under Medicare. However,
due to the tight fiscal constraints in California, most
provider rates are actually between 40% and 60% of Medicare.
For example the Medi-Cal rate for certain ambulance services
is $255 whereas the comparable service in Medicare is
reimbursed at a rate of $521. A number of proposals to use
CPEs and other local entity funds through intergovernmental
transfers are currently pending to allow Medi-Cal providers
such as ambulance providers to receive supplemental funds that
will bring their reimbursement rates closer to the Medicare
upper limit. Under federal law, specified categories of
providers may assess themselves a fee that is also used to
draw down federal funds to provide for supplemental payments
without using GF. Currently California uses this mechanism
for a hospital provider fee and nursing home quality assurance
fee.
The American Recovery and Reinvestment Act of 2009 (ARRA)
enacted an increase in FMAP from October 1, 2008 thru December
31, 2010. ARRA increased California's FMAP by 11.59% from a
base of 50% to 61.59%. The Education, Jobs, and Medicaid
Assistance Act extended the availability of increased FMAP but
phased it out over an additional six months by providing an
increased FMAP of 8.77% for January thru April 2011 and an
increased FMAP of 5.66% for April thru June 2011.
5)OPPOSE UNLESS AMENDED . The California Hospital Association
(CHA) writing in opposition, unless amended states that CHA is
opposed to the requirement in the bill that CDCR pay providers
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Medi-Cal rates for health care services. CHA supports CDCR
seek ways to reduce prison health care spending but not by
simply paying rates as low as the Medi-Cal rates to providers.
CHA proposes that this language be replaced with "The
Department will consider collaboration with local hospitals
and physicians that will provide prison patient inmates a
care/case management and payment system that can generate
savings to the state and produce higher quality care."
According to CHA, California's community hospitals,
particularly those located near one or more state prisons, are
on the front lines of providing around-the-clock care to
inmates who often have complex cases accompanied by chronic
diseases and health conditions related to drug abuse,
alcoholism, and violence. CHA argues that the prison
population is notably different than the Medi-Cal population;
thus, capping hospital reimbursement for inmate care based on
the Medi-Cal payment system is inappropriate. According to
CHA, prisoners often have past medical history and secondary
health conditions (such as HIV, and smoking and alcohol
related illnesses) that contribute to their medical cases
being comparably more complex and expensive. CHA also states
that beyond the costs associated with delivering patient care,
there are other costs that need to be taken into consideration
by our community hospitals related to treating inmates. CHA
cites, for instance, if a prisoner is in a hospital room with
two patient beds, the second patient bed must remain empty for
security reasons. Emergency rooms in particular are often at
full capacity, and this security requirement prevents the
hospital from using the vacant bed to treat patients.
6)OPPOSITION . The Association of California Healthcare
Districts (ACHD) writes in opposition that undoubtedly,
per-inmate health care costs are substantially greater than
for individuals covered by Medi-Cal, and these costs have
increased substantially during the past decade. However,
according to ACHD, the typical California prison inmate is in
far worse physical condition than the typical Medi-Cal
enrollee. ACHD states that the incidence of severe, chronic
conditions such as AIDS, Hepatitis-C, chronic obstructive
pulmonary disease, heart diseases, and other ailments is much
higher among California's inmate population that it is for
those who have not been incarcerated. ACHD asserts that the
high cost of treating inmates with these disorders is a major
factor behind the increasing cost of delivering health care
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services to this population. ACHD concludes by stating that
while they understand the author's concern regarding
sky-rocketing costs associated with the delivery of prison
health care services, they believe that this bill would impose
completely unrealistic cost containment guidelines, undermine
the federal mandate to improve the quality of care for
California's inmate population and would likely be
unenforceable.
7)PREVIOUS LEGISLATION .
a) AB 1628 (Committee on Budget), Chapter 729, Statutes of
2010, allows for the development, by CDCR and the DHCS, of
a process to maximize federal financial participation for
the provision of inpatient hospital services rendered to
individuals who, but for their institutional status as
inmates, are otherwise eligible for Medi-Cal or for the
Coverage Expansion and Enrollment Demonstration Project
through the Section 1115(a) Medi-Cal Demonstration.
b) AB 1785 (Galgiani) of 2010 would have required CDCR to
maintain a statewide telemedicine services program, would
have required an operational telemedicine program at each
institution, and expanded existing telemedicine services
and encounters. AB 1785 died in the Assembly
Appropriations Committee.
c) AB 1817 (Arambula), would have required CDCR to maintain
a statewide utilization management program, ensured that
each adult prison employ the same program, and annually
reported to the Legislature, as specified. AB 1817 was
vetoed by Governor Schwarzenegger.
d) AB 2233 (Nielsen) of 2010 would have required CDCR to
create a preferred provider organization or health
maintenance organization for health care delivery in an
effort to reduce costs while at the same time providing a
constitutional level of care. AB 2233 failed passage in
Senate Public Safety Committee.
e) AB 2747 (Bonnie Lowenthal) of 2010, would have required
CDCR to maintain and operate a comprehensive pharmacy
services program for those facilities under its
jurisdiction, that incorporates a statewide pharmacy
administration system, as specified. AB 2747 was vetoed by
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Governor Schwarzenegger.
f) AB 1289 (Galgiani) of 2009 would have required CDCR to
establish guidelines and performance targets for the prison
telemedicine program and to require prisons to use
telemedicine for all medical consultations that are
appropriate for telemedicine. AB 1289 died on the Assembly
Appropriations Committee Suspense File.
g) AB 2119 (Galgiani) of 2008 would have applied Medi-Cal's
methodology for determining maximum allowable reimbursement
rates for durable medical equipment to CDCR and would have
required CDCR to establish a pilot project to deliver
health care via telemedicine, as defined. AB 2119 was held
in Assembly Appropriations Committee.
8)DOUBLE REFERRAL . This bill is double referred. It was heard
in the Assembly Judiciary Committee and passed out on a 7-1
vote.
9)POLICY QUESTIONS .
a) Is this bill timely ? This bill was referred to this
committee due to recent amendments requiring prison health
costs to be comparable to Medi-Cal costs. In view of
language ambiguity, changing fiscal conditions in both
systems, the number of policy issues, need for additional
data and the legislative deadline is it appropriate for
this provision to move forward at this time?
b) What is meant by the term "state pays" ? This bill
requires CDCR to attempt a goal of spending no more per
inmate on health care than the state pays per patient for
Medi-Cal. It is not clear what is meant by what the state
pays. Medi-Cal funding is a mix of federal, state GF,
local CPEs, realignment funds and private provider fees.
Does the author intent to count only state GF which are
approximately 18% of the total funds appropriated in the
Medi-Cal budget? This definition also would not include
over $3 billion in realignment and waiver funds spent on
Medi-Cal mental health services.
c) Per patient . It is not clear what is meant by "per
patient." Does the author intent that the total Medi-Cal
budget be divided by the number of beneficiaries or is it
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to be determined by service category? This bill does not
specify the year that is to be used as a baseline for
comparison. The total Medi-Cal budget is not readily
determinable without significant research and includes
multiple assumptions that change over time. For instance,
Congress has changed the FMAP three times since 2009.
Provider fees change every year. How would rate reductions
that were enacted as part of the budget but have been
enjoined by litigation be treated?
d) Difficulty in determining Medi-Cal per patient costs .
The California HealthCare Foundation (CHCF) has calculated
an estimate of annual Medi-Cal spending per beneficiary
based on 2005-06 data. However, it does not include
payments to disproportionate share hospitals, county
administration costs, and the Medicare buy-in program. It
is also not clear how much this number includes of local
mental health expenditures and CPEs. Furthermore, it is a
snapshot that is used to compare expenditures to those in
other states and does not reflect expenditures by person,
service, condition, or other category.
e) Changes to Medi-Cal . A further complication to any
attempt to use Medi-Cal as a basis for comparison is the
fact that the Program has been transitioning over time from
a fee for service (FFS) to a managed care system. The
CPHCS system relies solely on FFS and does not use the
capitated risk-based system of Medi-Cal managed care. In
the Medi-Cal capitated system, the plan is paid a capitated
payment based on the category of the enrollee, such as a
family or a person with AIDS and is at risk to arrange all
necessary medical services. Until now, the managed care
population was primarily families but Medi-Cal is in the
process of adding seniors and people with disabilities.
Not only is comparison difficult, because of these
differences, but Medi-Cal costs and data is in a state of
flux during this transition.
f) Spending comparison by service delivery category . An
accurate assessment of the possibility of using Medi-Cal as
a benchmark requires a much more detailed analysis than is
possible given the current time constraints and readily
available public information. For instance there is no set
"rate" or rate schedule for hospital inpatient services in
Medi-Cal. The rate differs depending on whether the
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hospital contracts with CMAC, with a Medi-Cal managed care
plan, is paid FFS, is a DPH, receives Disproportionate
Share Hospital payments, receives hospital provider fee
payments, or other supplemental payments or waiver funding.
Furthermore, some of these contracted rates are not
publicly available such as the rate negotiated by a managed
care plan. By comparison, the current requirements that
base reimbursement rates on Medicare are more easily
discernible as Medicare publishes a fee schedule for each
service.
g) Is it appropriate to use Medi-Cal as a benchmark ?
According to the CHCF data for 2005-06, California spent
the lowest amount per beneficiary annually among the five
largest states at $4,528. Texas was the next lowest at
$4,563. The highest was New York at $9,656. According to
CPHCS for 2009-10 the total expenditures per inmate per
month were $1,235. There are too many variations in the
two data sources to make comparisons. The CHCF data are
five years old and do not include all of the Medi-Cal
expenditures. Even if it was comparable, in view of the
fact that the entire CDCR health care system has been found
to be unconstitutionally inadequate and is being operated
under a federal court-appointed receivership, is it
feasible to attempt to reduce costs to such a low level?
Will CPHCS be able to arrange a network that meets the
federally mandated levels?
h) Population Differences . Use of Medi-Cal as a cost basis
may also be difficult because of the population
differences. Approximately half of the Medi-Cal enrollees
are mothers and children and the other half is seniors and
people with disabilities who are more likely to have
chronic and serious illnesses. The prison population, on
the other hand is primarily men, many of whom abused drugs
or alcohol and would not be eligible for Medi-Cal even if
not in prison. The average age of prisoners is 38.
Medi-Cal costs are estimated based on the utilization
within each group and none of the existing categories is
equivalent to the prison population.
i) Disruption of current efforts . According to the
Receiver's most recent report to the federal courts in the
four pending class actions, the implementation of the
Budget Trailer Bill provisions of 2009 are resulting in
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substantial cost reductions. In June 2010 CPHCS entered
into a contract with Health Net to serve as a third party
administrator through a competitive bid process. Health
Net is in the process of negotiating a provider network at
reasonable rates. Providers who refuse to contract will be
paid the statutory limits. The contracts with hospitals
are reported to be reducing the hospital inpatient rates
from an estimated 200% of Medicare to 130% or below. The
estimated savings for fiscal year 2010-11 is $153 million.
It seems preferable to allow this process sufficient time
to produce evidence that can be used to assess its
effectiveness rather than change course in midstream.
j) Network Stability . The contract with Health Net is
barely a year old and has already yielded significant
savings. The providers who have signed contracts, in some
cases multi-year, are now relying on a patient and income
stream at a set rate. Most of the prisons are in rural and
remote areas and the providers are small community
hospitals, rural clinics or small private providers. These
providers are probably already stressed financially because
of the poverty and high uninsured rates in these areas. Is
it good policy to add uncertainty and the threat of further
reimbursement reductions? Will these providers be able to
survive such disruption?
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
Association of California Healthcare Districts
California Hospital Association (Oppose unless amended)
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097