BILL ANALYSIS Ó
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 677
S
AUTHOR: Hernandez
B
AMENDED: March 22, 2011
HEARING DATE: April 27, 2011
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CONSULTANT:
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Bain
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SUBJECT
Medi-Cal: eligibility
SUMMARY
This bill would prohibit the Department of Health Care
Services (DHCS) from applying an assets or resources test
for purposes of determining eligibility for Medi-Cal,
except for certain populations. This bill would also
require DHCS to use the modified adjusted gross income
(MAGI) of an individual, or the household income of a
family, if applicable, for the purposes of determining
income eligibility for Medi-Cal, except for certain
populations. The provisions of this bill would be
implemented to the extent required by federal law, and
would become operative on January 1, 2014.
CHANGES TO EXISTING LAW
Existing federal law:
Federal health care reform, known as the Patient Protection
and Affordable Care Act (PPACA) (Public Law 111-148), as
amended by the federal Health Care and Education
Continued---
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Reconciliation Act of 2010 (Public Law 111-152), prohibits
the use of an assets or resources test (also known as an
asset test) in state Medicaid programs (Medicaid is known
as Medi-Cal in California), except for certain individuals
described below.
PPACA also requires the use of MAGI in determining Medi-Cal
eligibility, except for certain individuals described
below. MAGI is based on adjusted gross income (AGI), which
is defined under the Internal Revenue Code (IRC) as gross
income minus certain deductions, including: trade and
business deductions, losses from the sale or exchange of
property, alimony, retirement savings, moving expenses,
interest on educational loans, higher education expenses,
and health savings accounts. AGI is then increased by:
§ Foreign income earned outside the U.S. that is excluded
from gross income by the federal IRC;
§ Housing costs for individuals living outside the U.S.
that are excluded from gross income pursuant to IRC; and,
§ Any amount of interest received or accrued by a taxpayer
that is tax exempt.
PPACA exempts the following groups from the asset test and
MAGI provisions, thereby continuing to apply the current
income and asset rules:
§ Individuals eligible for Medicaid on a basis that does
not require a determination of income by the Medicaid
state agency (for example, foster care children, or
individuals receiving Supplemental Security Income
ÝSSI]);
§ Individuals who have attained age 65;
§ Individuals who qualify for Medicaid on the basis of
being blind or disabled without regard to whether the
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individual is eligible for SSI;
§ Medically needy individuals; and,
§ Individuals dually eligible for Medicare and Medicaid.
Existing state law:
Establishes the Medi-Cal program, administered by DHCS,
under which health care services are provided to qualified
low-income persons.
Requires each Medi-Cal applicant who is not a recipient of
aid under the California Work Opportunity and
Responsibility to Kids Act (CalWORKS) or Supplemental
Security Income/State Supplementary Payment (SSI/SSP) to
file an affirmation setting forth such facts about his or
her annual income and other resources and qualifications
for eligibility, as may be required by DHCS.
Pursuant to state regulations, defines income and personal
property for purposes of determining Medi-Cal eligibility
under a specified Medi-Cal eligibility category.
This bill:
States legislative intent to implement the provisions of
federal health care reform that prohibit the use of an
assets or resources test in the Medi-Cal program for
certain individuals and that require the use of MAGI in
determining Medi-Cal eligibility for certain individuals.
Prohibits DHCS from applying an assets or resources test
for purposes of determining eligibility for Medi-Cal,
except for individuals described in federal law,
notwithstanding any other provision of state law and to the
extent required by federal law.
Requires DHCS to use the MAGI of an individual and, in the
case of an individual in a family, the household income of
the family for the purposes of determining income
eligibility for Medi-Cal when a determination of income is
required, and when determining premiums and cost-sharing
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under Medi-Cal.
Requires DHCS to establish income eligibility thresholds
for populations eligible for Medi-Cal that are not less
than the effective income eligibility levels that are
applied under Medi-Cal on March 23, 2010.
Requires DHCS, during the transition to the use of MAGI
and household income, to work with the federal Secretary
of the Department of Health and Human Services (DHHS) to
establish an equivalent income test that ensures
individuals eligible for Medi-Cal on March 23, 2010 (the
effective date of PPACA) do not lose coverage under
Medi-Cal for purposes of the federal Medicaid maintenance
of effort.
Exempts from the provisions of this bill the same
individuals who are exempt under federal law from the new
MAGI and asset test provisions (for example, individuals
age 65 and over, and individuals dually eligible for
Medicaid and Medicare).
Prohibits any type of expense, block, or other income
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disregard (an income disregard is income that is
"disregarded" or not counted for Medi-Cal eligibility
purposes) from being applied by DHCS to determine income
eligibility for Medi-Cal, or for any other purpose
applicable under Medi-Cal for which an income determination
is required, except for the five percent income disregard
in PPACA.
Makes the provisions of this bill operative on January 1,
2014.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, this bill is needed to conform
California Medi-Cal law to the recently enacted Medicaid
federal health care reform requirements on the prohibition
against using an asset test and the requirement to use MAGI
in determining eligibility for Medi-Cal, except for certain
individuals. This bill is needed because the California
Constitution requires state departments to follow state law
unless an appellate court has made a determination that the
enforcement of the state law is prohibited by federal law
or federal regulation.
Medi-Cal eligibility standards
Federal health care reform makes numerous changes to
Medicaid, including expanding eligibility to adults without
minor children with incomes equal to or less than 133
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percent of the federal poverty level (FPL), disregarding
(or not counting) an additional five percent in income
(making Medicaid income eligibility effectively 138 percent
of the FPL), and eliminating the asset test and switching
to MAGI for certain populations. According to a recent
study in the health policy journal Health Affairs, an
additional 1.7 million individuals are estimated to be
enrolled in Medi-Cal in California in 2016 at full
implementation of federal health care reform.
In California, individuals or families can qualify for
Medi-Cal coverage through a variety of Medi-Cal programs.
Some individuals have automatic eligibility for Medi-Cal
because they receive cash assistance from other programs,
such as CalWORKs, SSI/SSP, Foster Care or Adoption
Assistance, and no separate application for Medi-Cal is
required in addition to the application for these benefits.
Other individuals qualify for Medi-Cal if the individual
is in a Medi-Cal coverage category (such as individuals who
are age 65 or older, a child, or a family with children)
and has income and resources below the prescribed limit for
the coverage category.
The income and asset eligibility standards currently vary
across states, and different standards apply to different
groups within states. For example, children and pregnant
women in California are eligible for Medi-Cal without an
asset test, while families under the 1931(b) coverage
category have an asset test. Section 1931(b) Medi-Cal is
the largest Medi-Cal coverage category. It provides no
cost Medi-Cal for CalWORKs beneficiaries as well as those
families who do not receive CalWORKs but who would meet the
income and resource standards for Aid to Families with
Dependent Children (AFDC) as it existed prior to federal
changes to welfare in 1996. If the applicant family's
income is at or below 100 percent of the federal poverty
level and meets other Medi-Cal requirements, the family is
eligible for 1931(b) Medi-Cal.
In determining income under for Section 1931(b) Medi-Cal,
certain types of income are exempt (not counted) for
recipients and applicants in determining Medi-Cal income
eligibility. Examples of exempt income include public
assistance payments (CalWORKs, CalWORKs diversion payments,
foster care payments, general relief, SSI) and the
employment earnings of a child under age 14, or a child
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under age 19 if the child is a full-time student or a
part-time student who is not employed full-time.
In addition to exempting certain types of income, Section
1931(b) Medi-Cal also allows for income deductions for
purposes of determining Medi-Cal eligibility. Deductions
are amounts subtracted from an applicant's income. For
applicants, monthly deductions include $90 of earned income
per working person, dependent care costs with a maximum of
$200 per month per child under 2 years and $175 per month
if the child is older than two, court-ordered child support
or alimony paid by the applicant, educational expenses
(including tuition, books, fees, supplies, travel and child
care), and self-employed business expenses.
In addition to having to meet income eligibility
requirements, beneficiaries eligible for Section 1931(b)
Medi-Cal must also have assets below specified property
limits. Assets include cash, savings, stocks, bonds,
mutual funds, property, and life insurance policies with a
face value of less than $1,500. Certain property is
exempt, including a home, clothing, and the first $4,650
value of a car. Property limits vary with family size.
For a family of two persons, the property limit is $3,000.
Effective January 1, 2014, PPACA requires states to change
the way they calculate income for purposes of determining
Medi-Cal eligibility. Under federal health care reform,
state income disregards and asset or resource tests would
no longer apply when calculating income eligibility (except
for specified groups, such as seniors and individuals
eligible for Medicaid on a basis that does not require
determination of income by the Medicaid state agency).
Instead, the income eligibility for an individual or a
family would be measured based on MAGI. MAGI is defined as
the IRC's AGI, which allows a number of income deductions,
including trade and business deductions, losses from the
sale of property, and alimony payments. MAGI is increased
by tax-exempt interest and income earned by U.S. citizens
or residents living abroad.
The shift to MAGI and the elimination of the asset test
will affect beneficiaries differently, depending upon the
assets, income, deductions and exemptions that apply to
each individual or family. For example, MAGI does not
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include income disregards used by a majority of state
Medicaid programs (including California), such as earned
income and child care disregards. These disregards
effectively make more individuals and families eligible for
Medi-Cal, and their elimination may cause some individuals
to lose Medi-Cal eligibility. On the other hand, the
elimination of the asset test will make more individuals
eligible for Medi-Cal and will simplify the application
process. PPACA also requires MAGI to be used to determine
income for any other purposes applicable under Medicaid
(such as determining cost-sharing amounts), and to
determine eligibility for premium and cost-sharing
subsidies in the newly created California Health Benefits
Exchange, and in the Children's Health Insurance Program
(known as the Healthy Families Program in California).
State Constitutional requirement
The California Constitution prohibits an administrative
agency from having the power to declare a statute
unenforceable, or to refuse to enforce a statute on the
basis that federal law or federal regulations prohibit the
enforcement of such statute unless an appellate court has
made a determination that the enforcement of such statute
is prohibited by federal law or federal regulations.
Because PPACA places new requirements on health plans and
public programs (such as the Medi-Cal and Healthy Families
Programs) that in some instances differ from current
program requirements in statute or regulation, state
legislation is needed to conform California law to the
federal requirements so California departments can
implement the federal requirements.
Related bills
AB 43 (Monning) would require DHCS to expand, by January 1,
2014, income eligibility for Medi-Cal up to 133 percent of
the FPL for adults without minor children who are under 65
years of age (who are not pregnant, not entitled to, or
enrolled in, benefits under Medicare Part A, or enrolled in
benefits under Medicare Part B, or as otherwise specified).
AB 43 would also permit DHCS, to the extent permitted by
federal law, to phase in coverage for those individuals.
In addition, this bill would require DHCS to prepare and
submit for approval to the federal Centers for Medicare and
Medicaid Services (CMS) an initial transition plan, as
specified. Finally, AB 43 would require DHCS to submit the
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initial transition plan to the appropriate policy and
fiscal committees of the Legislature. AB 43 is scheduled
for hearing in the Assembly Health Committee on April 26,
2011.
Prior legislation
AB 1249 (Chan) of 2005 would have required DHCS, beginning
January 1, 2006, to allow an individual eligible for
benefits under the 1931(b) Medi-Cal category to
self-certify his or her countable resources (commonly
referred to as an assets test). This certification must be
made under penalty of perjury. Implementation of this
provision would have been contingent upon federal financial
participation. AB 1249 was held on the Assembly
Appropriations suspense file.
AB 1722 (Gallegos) of 2000 would have eliminated the
Medi-Cal assets test to the extent that federal financial
participation was available. Governor Davis vetoed the
bill, stating that it was "inconsistent with the
eligibility rules agreed upon as part of the Budget Act of
1999 and related budget trailer bill language."
Arguments in support
Western Center on Law & Poverty (WCLP) writes in support of
this bill that it would simplify the Medi-Cal eligibility
rules by 2014 as required by PPACA. WCLP writes that this
bill rightly requires California to establish income levels
using the MAGI rules that are not less than the effective
income levels today. WCLP states that many complain that
Medi-Cal administration and eligibility determinations are
too cumbersome and complicated, and this bill would
importantly simplify income and assets rules, thus allowing
for a more efficient and streamlined program. WCLP
concludes that this bill would also achieve alignment of
the Medi-Cal income, assets, and household rules with the
rules in the California Health Benefit Exchange (Exchange)
as needed for a streamlined application and enrollment
system.
COMMENTS
1. PPACA minimum eligibility. PPACA expands Medi-Cal
eligibility to 133 percent of the federal poverty level
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(effectively 138 percent of the federal poverty level after
the 5 percent federal income disregard). PPACA also
requires states to establish income eligibility thresholds
individuals using MAGI and household income that are not
less than the effective income eligibility levels that
applied under the state's Medicaid State Plan on the date
of enactment of PPACA (March 23, 2010). This bill mirrors
this federal requirement for effective income eligibility
levels, and charges DHCS with making this determination.
There are several significant policy and fiscal issues
associated with this provision for states. Depending upon
federal guidance, California may have to increase income
eligibility above the effective federal Medicaid
eligibility standard of 138 percent of the FPL in order to
meet the federal requirement that states establish income
eligibility thresholds that are not less than the effective
income eligibility levels that applied on March 23, 2010.
The reason a higher income eligibility threshold would be
required is current state income deductions and exemptions
(which vary by Medi-Cal eligibility category) effectively
make more individuals eligible than if only income is used
as a basis for determining eligibility. For example, in
the 1931(b) Medi-Cal eligibility category, a single parent
with an infant with an income of 99 percent of the FPL can
effectively have an income of 142 percent of the FPL
because the family can deduct $90 of earned income, $200
for child care, and $240 a month in disability-based
income.
In addition, if the Legislature delegates implementation of
this federal requirement to DHCS, DHCS would either have to
adopt regulations, or would need an exemption from
regulations to allow the change to be adopted through all
county letters or similar instructions.
How the state establishes this income eligibility provision
will affect what health coverage program low-income
individuals and families will be eligible for, whether
these individuals will pay premiums for coverage (in
Medi-Cal versus the newly created Exchange), how much these
individuals will pay at the point of service (in
co-payments or deductibles), how many individuals will
enroll in the Exchange versus Medi-Cal, the number of
individuals receiving federal premium and cost-sharing
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subsidies, and state General Fund Medi-Cal costs.
2. Federal guidance on MAGI forthcoming. In March 2011,
the federal CMS stated the conversion to a MAGI-equivalent
income standard required under PPACA is designed to ensure
that individuals who meet the eligibility requirements in
effect as of March 23, 2010 do not lose eligibility as a
result of the shift to MAGI. CMS stated guidance will be
provided by the federal Secretary of DHHS regarding how
states can accomplish the required conversion, and once the
new MAGI-equivalent income standard has been determined,
the federal maintenance of effort requirements required by
PPACA will be applied to such converted standard, using the
MAGI methodologies to determine an individual's income, as
required under the PPACA.
POSITIONS
Support: American Federation of State, County and
Municipal Employees
California Mental Health Directors Association
California State Association of Counties
County Health Executives Association of
California
County Welfare Directors Association
Urban Counties Caucus
Western Center on Law & Poverty
Oppose: None on file.
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