BILL ANALYSIS Ó
AB 1 X1
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Date of Hearing: February 25, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1 X1 (John Perez) - As Introduced: January 28, 2013
Policy Committee: Health Vote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill implements provisions of the Affordable Care Act (ACA)
(PL 111-148, as amended by PL 111-152) related to Medi-Cal
eligibility. Specifically, this bill:
1)Implements numerous federally required eligibility rules and
related state options designed to simplify and streamline
Medi-Cal eligibility determination, enrollment, and renewal,
including:
a) Converting the existing income determination standard to
one based on Modified Adjusted Gross Income (MAGI).
b) Eliminating the asset test for most categories of
applicants.
c) Requiring state programs to accept self-attestation
rather than requiring paper documentation of age, family
size, income and residency, with data matched verification
through state and federal databases.
2)Expands Medi-Cal to include childless adults with incomes up
to 138% of the federal poverty level (FPL) who are citizens or
qualified immigrants.
3)Extends Medi-Cal coverage for former foster youth to age 26,
regardless of income or assets.
4)Provides full-scope Medi-Cal benefits to pregnant women
currently eligible for pregnancy-related services only.
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FISCAL EFFECT
State and local fiscal impacts of this bill are complex and
subject to substantial uncertainty. This stems from imprecision
inherent in projecting future-year costs based on numerous
assumptions about factors such as the number of people who will
be newly eligible for Medi-Cal and the number who will actually
enroll, as well as from uncertainty related to outstanding state
and federal policy decisions.
The fiscal effects are divided into two categories:
1)The effect of optional Medi-Cal eligibility expansion to all
adults below 138% FPL.
2)The effect of other state options.
1)Effect of optional Medi-Cal eligibility expansion to adults
below 138% of federal poverty level
a) Health care services costs for newly eligible
individuals are funded 100% by the federal government for
calendar years 2014, 2015, and 2016. Beginning in 2017,
the state will have a 5% share of total health care
services costs, and the state's share will increase
gradually to 10% by 2020.
If 1.2 million newly eligible adults enroll by 2016, the
state's share would be in the range of $120 million, with
the federal government paying the remainder of the $4.7
billion total for 2016-17, and $275 million in state GF
(out of $5.0 billion total funds) in 2017-18. This cost is
projected to increase to $600 million GF annually by
2020-21, which is the state's 10% share of $6 billion total
funds based on enrollment growth, medical inflation, and
the state's increased share of total medical services
costs.
b) Administrative costs for newly eligible individuals are
shared equally by the state and federal government. The
addition of the optional population is expected to result
in half-year administrative cost pressure in the range of
$12 million GF ($24 million total funds) beginning in
2013-14, and full-year cost pressure in the range of $30
million GF ($60 million total funds) annually beginning in
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2014-15. This estimate is uncertain, as administrative
funding is provided as a lump sum to counties as part of
the annual Medi-Cal budget and total funding does not
directly grow based on enrollment numbers. In addition,
per capita administrative costs for counties may change
significantly in future years as new systems and processes
are implemented.
c) Reduced costs for other state-funded programs, such as
the Genetically Handicapped Persons Program (GHPP) and the
Breast and Cervical Cancer Treatment Program (BCCTP), to
the extent some people receiving services in these types of
targeted medical programs become eligible for Medi-Cal.
d) Potential reductions in inmate health care spending of
up to $60 million GF annually, beginning after January 1,
2014, to the extent the state implements a process for
identifying and claiming enhanced federal funding for
eligible inpatient services provided to inmates newly
eligible for Medi-Cal.
2)Effect of other state options .
Several eligibility-related provisions in this bill appear to go
beyond what is minimally required to comply with federal rules,
and may have the effect of increasing Medi-Cal costs. In some
cases, additional federal guidance or approval would be required
in order to evaluate whether a provision goes beyond what is
required for strict compliance with federal rules.
Key provisions that may exceed what is minimally required for
federal compliance, and may have associated costs, include the
following:
a)Requiring adoption of the current Medi-Cal benefit package for
populations with income eligibility determined by MAGI.
b)Requiring DHCS to develop specific procedures that ensure
continued Medi-Cal eligibility for eligible foster youth.
c)Expanding the scope of benefits provided to pregnant women
with income between 138% and 200% of the federal poverty level
from pregnancy-only benefits to full-scope coverage, unless
federal approval for fewer services is granted after January
1, 2014.
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d)Requiring DHCS to adopt specific income eligibility
verification procedures that take into account projected
future changes in income and family size, in order to deem
certain individuals Medi-Cal eligible who would not be found
eligible based on current monthly income.
e)Requiring the state to use self-attestation as verification
for any documentation for which self-attestation is allowable
under federal rules.
f)Modifying the definition of residency for purposes of
establishing Medi-Cal eligibility.
Given the ambiguity about whether these provisions exceed what
is minimally required for federal compliance and how they
compare with alternative means of compliance that could also
meet federal standards, as well as uncertainty related to how
these provisions will impact enrollment and retention, specific
fiscal impacts of these provisions are unknown.
COMMENTS
1)Rationale . This bill has two major objectives. First, it
expands Medi-Cal eligibility to all adults under 138% of the
federal poverty level. Expansion of Medi-Cal to this
population is at state option, but forms the foundation for
the broad expansions of health insurance coverage envisioned
by the ACA. Essentially, the ACA envisioned that beginning
January 1, 2014, Medicaid will cover individuals with incomes
up to 138% of poverty, and all other individuals with incomes
below 400% of poverty would qualify for federal tax subsidies
to purchase coverage through state-based health insurance
exchanges. Choosing to expand Medi-Cal also takes advantage
of very generous federal funding available for coverage of
this so-called "newly eligible" population. The federal
government will pay 100% of this population's health care
services costs for the first three years and not less than 90%
on an ongoing basis.
Secondly, this bill intends to align state law with numerous
federal requirements designed to streamline the complex
Medi-Cal enrollment and eligibility determination process.
Federal rules promulgated pursuant to the ACA require numerous
changes to the state's current standards and processes for
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determining eligibility, including implementation of the
simplified MAGI eligibility standard as well as process
improvements such as electronic data verification. This bill
attempts to align state law with these new federal rules.
2)Background: Optional Expansion . The ACA establishes a new
eligibility category for all non-Medicare-eligible adults
under age 65 who are not otherwise eligible for Medicaid
(Medi-Cal in California), and requires minimum Medicaid
coverage at 133% of the federal poverty level. (Technically,
eligibility is extended to 138% of the FPL using a
standardized income disregard of 5% established in the ACA.)
As indicated in the fiscal comments above, the federal
matching rate for Medi-Cal enrollees made newly eligible
through the optional expansion is significantly higher than
the state's current rate. For 2014 through 2016, health care
services for the newly eligible population are 100% federally
funded; the federal matching rate gradually decreases to 90%
for 2020 and beyond. This rate only applies to the newly
eligible population; expenditures for individuals enrolled
under current eligibility categories are matched at the
state's current rate of one federal dollar for every state
dollar.
Following a June 28, 2012 Supreme Court ruling that found the
ACA's mandatory expansion of Medicaid unduly coercive of
states, expansion of Medicaid to the new eligibility category
described above became optional for states. On December 10,
2012, the federal Secretary of Health and Human Services
issued guidance indicating states can only take advantage of
the enhanced federal matching rates described above if they
expand their Medicaid programs to 138% of poverty as
envisioned by the ACA. This decision essentially made the
Medi-Cal expansion an all-or-nothing choice for states, as any
partial expansion would not receive the significant benefit of
an enhanced federal match.
If the state were to forego the Medi-Cal expansion, serious
questions would arise about the impact on California's safety
net for people who could theoretically buy their own health
insurance without regard to health status but will likely not
do so because of costs.
3)Background: Streamlining Medi-Cal eligibility and enrollment .
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The ACA and federal rules promulgated pursuant to the ACA
require numerous changes to streamline and simplify Medicaid
eligibility and enrollment. Key requirements include the
following:
a) Financial eligibility for most groups will be based on
modified adjusted gross income (MAGI), as defined in the
federal Internal Revenue Code, and a standard income
disregard will be applied.
b) Current Medicaid eligibility groups are consolidated
into broader, simplified categories.
c) A single streamlined application must be used for all
insurance affordability programs (including Medi-Cal and
Covered California, the state's health insurance exchange).
d) States must rely on electronic data matches with trusted
third party sources to verify information provided by
applicants.
e) States must use a 12-month renewal period for MAGI-based
Medicaid beneficiaries.
These changes require the state to adapt current systems and
processes. Many provisions in this bill will inform the
design of the California Healthcare Eligibility, Enrollment
and Retention System (CalHEERS) IT system, which is being
developed to implement the single streamlined application
process for Medi-Cal and Covered California, the state's new
health insurance exchange. The provisions in the bill will
also inform the design of work flow at county eligibility
offices, as the changes are implemented.
The new changes adopted by this bill are also likely to
facilitate increased enrollment and retention in Medi-Cal by
simplifying eligibility, enrollment, and renewal processes.
In addition, other factors will also increase Medi-Cal
enrollment, including an individual mandate to obtain health
care coverage, significant advertising and outreach to
eligible populations, and an improved electronic interface and
automatic data matching that reduces the need for paper
verification.
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1)Administration Proposal in 2013-14 Budget . The 2013-14 budget
proposes to expand Medi-Cal to adults with incomes up to 138
percent of FPL, but does not include any related fiscal
estimates. The budget proposes two options for this
expansion: a state-based option that would build on the
existing state-administered Medi-Cal program and managed care
delivery system, and a county-based option that would build on
existing county infrastructure. This bill expands Medi-Cal
statewide.
2)Effect of Medi-Cal Enrollment Growth on Current State
Programs . The state currently administers a variety of health
care coverage programs serving specific populations. Many of
the individuals served by these programs will either be
eligible for Medi-Cal in 2014, or eligible to purchase
subsidized, comprehensive coverage through Covered California.
For example, many current enrollees in the state's AIDS Drug
Assistance Program (ADAP) will be able to procure
comprehensive coverage through Medi-Cal. Other programs that
may experience significant savings based on a reduction in
demand associated with Medi-Cal enrollment growth include the
GHPP, BCCTP, Every Woman Counts, and the Family Planning,
Access, and Care and Treatment Program (Family PACT).
3)Effect of Medi-Cal Enrollment Growth on Current Providers of
Uncompensated Care. Under Section 17000 of the California
Welfare and Institutions Code and a substantial body of case
law, counties are the health care providers of last resort for
individuals with no other source of health coverage. In
addition to county indigent care programs, clinics and
hospitals provide uncompensated care to those who cannot
afford to pay. As Medi-Cal enrollment increases due to the
numerous eligibility changes in this bill, these entities will
experience reduced demand for uncompensated care as the number
of uninsured individuals decreases.
However, the fiscal impact on various entities is uncertain
and depends on numerous policy, implementation, and health
care market factors. In particular, the fiscal impact on the
12 counties that operate public hospitals is highly complex.
Given uncertainty regarding the rates counties will receive to
care for a larger Medi-Cal population, the ongoing level of
uncompensated care they will provide, potential reductions in
ongoing federal support, significant regional variation, their
payer mix, and other market factors, fiscal impacts on
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counties that operate public hospitals from a large increase
in Medi-Cal enrollment are difficult to estimate. Fiscal
impacts on clinics and other hospitals will similarly depend
on numerous factors. In general, counties that do not operate
public hospitals are likely to see reductions in demand for
county-based indigent care programs and associated cost
savings.
4)Previous and Related Legislation .
a) SB 1 X1 (Ed Hernandez and Steinberg) is identical to
this bill and will be heard in the Senate Health Committee
on February 27, 2013.
b) AB 2 X1 (Pan) and SB 2 X1 (Ed Hernández) reform
California's health insurance market for individual
purchasers as required by the ACA. In general, these bills
require insurers to sell health coverage to individuals
without regard to health status. AB 2X1 is pending before
this committee and SB 2 X1 recently passed out of the
Senate Appropriations Committee. These bills also contain
cleanup provisions to AB 1083 (Monning), Chapter 852,
Statutes of 2012, relating to small group insurance market
rules to reflect new regulatory guidance
c) SB 3 X1 (Ed Hernandez) states legislative intent to
create a bridge option that allows low-cost health coverage
to be provided to individuals within the Exchange. SB 3
X1 is pending referral in the Senate Rules Committee.
d) SB 20 (Ed Hernandez) states legislative intent to
establish the Basic Health Program described in the ACA.
SB 20 is pending referral in the Senate Rules Committee.
e) SB 28 (Ed Hernandez and Steinberg) implements various
provisions of the ACA regarding Medi-Cal eligibility and
program simplification including the use of the MAGI and
expansion of eligibility in the Medi-Cal program. SB 28 is
currently in the Senate Health Committee.
f) AB 50 (Pan) implements various provisions of the ACA
related to allowing hospitals to make a preliminary
determination of Medi-Cal eligibility, allows forms for
renewal to be prepopulated with existing available
information, and requires the process for Medi-Cal
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enrollees to choose a plan to be coordinated with the
Exchange. AB 50 is currently in the Assembly Health
Committee.
g) AB 43 (Monning) and SB 677 (Ed Hernández) of 2012
contained Medi-Cal eligibility reforms consistent with the
ACA; both bills reached the floor of the second house but
were not heard.
h) AB 1296 (Bonilla), Chapter 641, Statutes of 2011, the
Health Care Eligibility, Enrollment, and Retention Act,
requires the California Health and Human Services Agency,
in consultation with other state departments and
stakeholders, to undertake a planning process to develop
plans and procedures regarding these provisions relating to
enrollment in state health programs and federal law. AB
1296 also requires that an individual have the option to
apply for state health programs through a variety of means.
Analysis Prepared by : Lisa Murawski / Debra Roth / APPR. /
(916) 319-2081