BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  AB 1 X1
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          AB 1 X1 (John A. Pérez)
          As Introduced January 28, 2013
          Majority vote 

           HEALTH              13-6        APPROPRIATIONS      12-5        
          |Ayes:|Pan, Ammiano, Atkins,     |Ayes:|Gatto, Bocanegra,         |
          |     |Bonilla, Bonta, Chesbro,  |     |Bradford,                 |
          |     |Gomez,                    |     |Ian Calderon, Campos,     |
          |     |Roger Hernández,          |     |Eggman, Gomez, Hall,      |
          |     |Lowenthal, Mitchell,      |     |Holden, Pan, Quirk, Weber |
          |     |Nazarian, V. Manuel       |     |                          |
          |     |Pérez, Wieckowski         |     |                          |
          |     |                          |     |                          |
          |Nays:|Logue, Maienschein,       |Nays:|Harkey, Bigelow,          |
          |     |Mansoor, Nestande,        |     |Donnelly, Linder, Wagner  |
          |     |Wagner, Wilk              |     |                          |
          |     |                          |     |                          |
           SUMMARY  :  Enacts statutory changes necessary to implement the  
          coverage expansion, eligibility, simplified enrollment and  
          retention provisions of the Patient Protection and Affordable  
          Care Act of 2010 as amended by the Health Care and Education  
          Reconciliation Act of 2010 (collectively referred to as the  
          Affordable Care Act or ACA) related to the Medicaid Program  
          (Medi-Cal in California) and the California Children's Health  
          Insurance Program.  Specifically,  this bill  :

          1)Expands, effective January 1, 2014, Medi-Cal coverage as  

             a)   Expands eligibility for Medi-Cal coverage to citizen and  
               qualified immigrant non-disabled adults who are under age  
               65, not pregnant and not otherwise currently eligible for  
               Medi-Cal coverage, with family incomes up 138% of the  
               Federal Poverty Level (FPL).

             b)   Establishes a benchmark benefits package that includes  
               all benefits provided to other adults, supplemented by  
               benefits, services, and coverage included in the essential  
               health benefits package adopted by the state for the  


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               population eligible for Covered California through the  
               Health Benefits Exchange (Exchange).

             c)   Transitions persons currently enrolled in a Low-Income  
               Health Program (LIHP) under California's Bridge to Reform  
               Section 1115(b) waiver to the new Medi-Cal expansion  

             d)   Extends coverage to any person under age 26, regardless  
               of income or assets who was in foster care in the state at  
               age 18 and who is not otherwise eligible.  Provides, to the  
               extent federal financial participation is available, the  
               adolescent shall be deemed eligible without interruption  
               and without requiring a new application.  

             e)   Provides that pregnant women with income up to 200% of  
               FPL who are currently eligible for pregnancy related and  
               postpartum services in the Medi-Cal program shall be  
               eligible for full-scope Medi-Cal services provided to other  
               eligible adults.  Revises the period of coverage for  
               pregnant women in the Access for Infants and Mothers (AIM)  
               Program from 60 days after the end of the pregnancy to the  
               end of the month in which the 60th day occurs, effective  
               January 1, 2014, in order to align eligibility with open  
               enrollment in Covered California.

          2)Simplifies and streamlines effective January 1, 2014, the  
            Medi-Cal application, eligibility and redetermination process  
            by enacting the following changes to existing law:

             a)   Requires the Department of Health Care Services (DHCS)  
               to convert the existing income eligibility standard to a  
               Modified Adjusted Gross Income (MAGI)-based income  
               equivalency level (as defined in the Internal Revenue Code)  
               as applied to families, children and non-disabled adults  
               under age 65.  Eliminates the deprivation requirement and  
               any assets or resources limit for the MAGI population.  

             b)   Establishes a minimum MAGI eligibility level at 133%  
               FPL, plus a standardized 5% income disregard in effect  
               setting the 133% FPL standard at 138%.  Provides that the  
               maximum eligibility level shall be established at a level  
               that is not less than the equivalent amount in effect on  
               March 23, 2010, to ensure that any population eligible for  


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               Medi-Cal, AIM, or the Healthy Families Program does not  
               lose coverage. 

             c)   Establishes procedures to be used for cases of  
               fluctuating income or family size to ensure that eligible  
               individuals do not lose or are denied eligibility.

             d)   Repeals the requirement that adults file mandatory  
               semiannual status reports regardless of whether there have  
               been any changes in income, family size, or other factors  
               that affect continued eligibility for the MAGI-based  

             e)   Requires all state health subsidy programs, (Medi-Cal,  
               AIM, enrollment in a qualified health plan through the  
               Exchange and a Basic Health Plan, if there is one) to  
               accept self-attestation, instead of requiring production of  
               documentation for age, date of birth, family size,  
               household income, state residency, pregnancy, and any other  
               applicable criteria permitted under the ACA.  

             f)   Revises provisions related to state residency as applied  
               to a person 21 years of age or older or if under 21 is  
               emancipated or married, by replacing the requirement of a  
               demonstrated intent to remain with the requirement that he  
               or she lives in the state and either intends to reside in  
               the state or has entered the state with a job commitment or  
               to seek employment.  Specifies that the individual is not  
               required to have a fixed address or to be currently  

             g)   Conforms the residency determinations to federal  
               requirements, for individuals under 21, not covered by c)  
               above, not in the foster care program or linked to another  
               public program, by providing that residency is established  
               if the child lives in the state (no fixed address is  
               required) or the child resides with a parent, parents, or  
               caretaker relative who meet the requirements of c) above  
               and provides that for an individual who is incapable of  
               stating intent or who is living in an institution the state  
               of residency is determined by applicable federal  
               regulations.  Conforms provisions relating to the  
               reinstatement of a person who maintains a residence outside  
               the state. 


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             h)   Specifies that a person applying for or renewing an  
               application may do so on his or her own behalf, on behalf  
               of the family, allows for authorized representatives as  
               specified and other designated entities or individuals to  
               be allowed to assist or represent the individual. 

             i)   Repeals the requirement of an annual reaffirmation and  
               provides that the Medi-Cal eligibility is to be renewed  
               annually and no more frequently than once every 12 months  
               for individuals whose financial eligibility is determined  
               by use of the MAGI-based standard.

             j)   Revises the process for Medi-Cal eligibility  
               redetermination by adding requirements, as specified in  
               federal regulations, that information useful to verifying  
               financial eligibility, such as wages or enrollment or  
               eligibility in other similar income based programs, should  
               be obtained from other state and federal agencies or  
               electronically from federal and state databases prior to  
               contacting the individual.  

             aa)  Revises procedures in the case of incomplete  
               applications to require additional attempts to contact the  
               individual and extends from 30 to 90 days the period for  
               rescission of a termination if the individual submits a  
               completed form.

             bb)  Requires, in the case of an individual establishing  
               eligibility on the basis of disability, the county to  
               consider blindness and disability to be continuing until a  
               determination otherwise as specified. 

          3)Makes other conforming and technical changes. 

           FISCAL EFFECT  :  According to the Assembly Appropriations  

          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  


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          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; and,

          2)The effect of other state options.

           Effect of optional Medi-Cal eligibility expansion to adults  
          below 138% of federal poverty level
          1)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 General Fund (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.  
          2)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 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.  

          3)Reduced costs for other state-funded programs, such as the  
            Genetically Handicapped Persons Program and the Breast and  


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            Cervical Cancer Treatment Program, to the extent some people  
            receiving services in these types of targeted medical programs  
            become eligible for Medi-Cal.

          4)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.   

           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  

          1)Requiring adoption of the current Medi-Cal benefit package for  
            populations with income eligibility determined by MAGI.   

          2)Requiring DHCS to develop specific procedures that ensure  
            continued Medi-Cal eligibility for eligible foster youth.

          3)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.  

          4)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.

          5)Requiring the state to use self-attestation as verification  
            for any documentation for which self-attestation is allowable  
            under federal rules.  


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          6)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  :  On January 24, 2013, Governor Brown issued a  
          proclamation to convene the Legislature in Extraordinary Session  
          to consider and act upon legislation necessary to implement the  
          ACA in: 1) the areas of California's private health insurance  
          market, rules and regulations governing the individual and small  
          group market; 2) California's Medi-Cal program and changes  
          necessary to implement federal law; and, 3) options that allow  
          low-cost health coverage through Covered California,  
          California's Exchange, to be provided to individuals who have  
          income up to 200% of the FPL.  This bill along with SB 1 X1 (Ed  
          Hernandez) addresses the second of the three areas identified in  
          the Governor's proclamation, that is to adopt the provisions of  
          the ACA related to changes in Medi-Cal.  Specifically, the bill  
          adopts the state option of expanding Medi-Cal coverage to  
          non-disabled citizen and qualified resident childless adults,  
          between the ages of 19 and 65 who are not currently eligible for  
          other full-scope Medi-Cal programs and provides a full scope  
          benefit package, as allowable under federal law.  This category  
          is limited to those with income under 138% of the FPL and the  
          person must meet other citizenship and immigration status  
          requirements.  This bill also enacts the ACA requirement that  
          the state Medicaid program extend coverage to former foster  
          youth until age 26, without regard to income or assets.  The ACA  
          establishes a new simplified income standard for families,  
          children and the new expansion population.  It does not apply to  
          seniors or person with disabilities.  This bill includes  
          provisions necessary to convert to the new MAGI methodology and  
          income standard.  Finally the bill includes a number of  
          provisions that implement the goal of the ACA of reducing the  
          number of uninsured by creating a continuum of coverage options  
          for individuals with family incomes up to 400% FPL, streamlining  
          and simplifying eligibility determinations and increasing  
          reliance on electronically available data. 


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          According to a model of California insurance markets known as  
          the California Simulation of Insurance Markets, 5.6 million  
          Californians were without health insurance in 2012 or 16% of the  
          population under age 65.  A recent study estimates that when  
          California implements the Medi-Cal provisions, more than 1.4  
          million of these individuals will be newly eligible, of which  
          between 750,000 and 910,000 are expected to be enrolled at any  
          point in time by 2019.  This study, Medi-Cal Expansion under the  
          Affordable Care Act: Significant Increase in Coverage with  
          Minimal Cost to the State, published by UC Berkeley Center for  
          Labor Research and Education and UCLA Center for Health Policy  
          Research in January 2013, also finds that about 2.5 million  
          Californians are already eligible for Medi-Cal but not enrolled  
          and between 240,000 and 510,000 of them are expected to be  
          enrolled at any point in time by 2019 as a result of  
          implementing the ACA.  According to this report, most of the  
          increase will happen regardless of the expansion due to the  
          other mandatory provisions such as the individual minimum  
          coverage requirements, simplified eligibility and enrollment  
          processes and improved awareness of coverage. 

          As written, the ACA included a provision that would have allowed  
          the federal government to withhold a state's Medicaid funding if  
          the state did not adopt the expansion.  In National Federation  
          of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012), the  
          United States Supreme Court determined this provision violated  
          the Constitution by threatening states with the loss of their  
          existing Medicaid funding if they decline to comply with the  
          expansion.  However, because of the Severability Clause, the  
          constitutional violation was fully remedied by precluding the  
          federal Secretary of Health and Human Services (HHS) from  
          applying the provision to withdraw existing Medicaid funds for  
          failure to comply with the expansion requirements, but instead  
          allowing the expansion as a state option.  The ACA provides that  
          for this population the federal share will be 100% for 2014,  
          2015, and 2016; decreasing to 95% in 2017; 94% in 2018; 93% in  
          2019; and 90% thereafter.  Recent guidance from HHS clarified  
          that states will only receive the enhanced 100% matching rate in  
          2014 through 2016 if they expand eligibility all the way up to  
          138% of the FPL.  HHS will consider partial expansions to a  
          lower income level, but states exercising this option would only  
          receive the regular federal matching rate which is 50% in  


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          Currently Governors in 20 states have expressed their intent to  
          adopt this state option.  The most recent, Florida was one of  
          the states that sued to block the law.  In announcing his  
          position reversal, Governor Rick Scott said that the federal  
          government is committed to paying 100% of the cost; therefore he  
          could not in good conscience deny Floridians needed access to  
          health care.  As he put it, the only other option is that  
          Floridians would be paying (through federal income tax) to fund  
          the program in other states while denying health care to its own  
          citizens.  According to the Urban Institute, even when the  
          federal share drops below 100%, for every dollar it spends,  
          Florida would receive $12 in return from the federal government.  
           Governor Scott now joins the Republican governors of Arizona,  
          Michigan, Nevada, New Mexico, North Dakota and Ohio, who have  
          decided to join the Medicaid expansion.  Some, like Governor Jan  
          Brewer of Arizona, were also staunch opponents of President  
          Obama's overall health care law.

          With regard to California, the January 2013 UC Berkeley study  
          and others have pointed out numerous benefits of adopting the  
          expansion.  For instance, there will be substantial savings to  
          counties and providers of last resort, such as hospitals and  
          clinics, due to the reduction in uncompensated care and  
          providers as a whole would receive more revenue.  This in turn  
          has a positive impact on the economy by creating new jobs and  
          increasing tax revenue.  Research has also shown that health  
          insurance coverage can improve educational outcomes and worker  
          productivity.  California's Legislative Analyst Office (LAO) is  
          also in agreement.  In a recent analysis Examining the State and  
          County Roles in the Medi-Cal Expansion, February 2013, the LAO  
          stated that in the short term, fiscal savings to the state would  
          far outweigh costs.  The LAO also pointed out that even after a  
          decade, when the enhanced federal match is reduced from 100% to  
          90%, the overall savings to the state as a whole, including  
          local governments, would likely continue to outweigh costs.  The  
          LAO concluded, in support of its recommendation to adopt the  
          expansion, that despite the significant uncertainty about  
          long-term costs and savings associated with the expansion, on  
          balance, the policy merits of the expansion and the fiscal  
          benefits that are likely to accrue to the state as a whole  
          outweigh the costs and potential fiscal risks. 

          Governor Brown's Budget as introduced for 2013-14 outlines two  
          alternatives to the optional expansion - a state-based approach  


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          or a county-based approach.  The state-based option is described  
          as a standardized, statewide benefit package comparable to the  
          existing Medi-Cal benefit package but would exclude long-term  
          care.  The county-based option is described as building on the  
          LIHPs with the counties acting as the fiscal and operational  
          entity responsible for the expansion.  No additional details of  
          either proposal have been released.  The Governor's Budget  
          Summary states that implementation will require a broader  
          discussion about the future of the state-county relationship  
          with the goal to strengthen local flexibility, fairly allocate  
          risk, and clearly delineate the respective responsibilities of  
                   the state and the counties.  The Brown Administration has  
          recently begun convening stakeholders to discuss possible  
          options and has requested that stakeholders offer suggestions on  
          implementation.  The Director of the DHCS recently testified at  
          a Senate Budget and Fiscal Review Committee hearing that it was  
          their intent that this issue be considered as part of the budget  
          and not in the Special Session.  

          The LAO also made a recommendation with regard to the two  
          alternate proposals, finding that the state is in a better  
          position than the counties to effectively organize and  
          coordinate the delivery of health services to the newly eligible  
          population and to successfully implement the expansion by  
          January 1, 2014.  Among the reasons stated were that a  
          consolidated state-administered program would decrease churning  
          among a multitude of programs and would reduce administrative  
          complexity and duplication.  The LAO also pointed out that the  
          proposal suffered from program detail uncertainties such as how  
          a county-based expansion would be implemented state-wide if not  
          all the counties were willing or capable of participating and  
          that federal approval was problematic. 

          Effective January 1, 2014, the ACA envisions a streamlined,  
          simplified, and seamless enrollment system that employs minimal  
          use of paper documentation and relies on modern technology to  
          the greatest extent possible for all the state subsidy programs.  
          To promote coordination and avoid gaps or overlaps in coverage,  
          the new MAGI methodology is aligned with the one that will be  
          used to determine eligibility for the premium tax credits and  
          cost sharing reductions available to certain individuals  
          purchasing coverage on the Affordable Insurance Exchanges  
          starting in 2014 (Covered California).  States must use a single  
          streamlined application that is either the application developed  


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          by the federal Secretary of HHS or an alternative that she  
          approves.  States are required to have the application available  
          so that individuals and families may apply online, in-person, by  
          telephone, by mail, or by fax and it must be accessible to  
          persons with limited English proficiency and people with  
          disabilities.  The Medicaid eligibility determination process  
          will start with a MAGI screen and state Medicaid agencies may  
          enter into agreements with the Exchange to coordinate  
          eligibility.  The federal Centers for Medicare and Medicaid  
          Services (CMS) states in the Preamble to the March 23, 2012,  
          Rules and Regulations, as follows:  whether conducted by a  
          public or private entity, it is anticipated that eligibility  
          determinations using MAGI-based standards will be highly  
          automated, utilizing business rules developed by the State  
          Medicaid agency.  In the most simplified cases, which can be  
          determined without human intervention or discretion, we are  
          clarifying that automated systems can generate Medicaid  
          eligibility determinations, without suspending the case and  
          waiting for an eligibility worker to finalize the  

          In an Informational Bulletin issued on February 21, 2013, CMS  
          further stated that individuals must not be required to provide  
          additional information or documentation unless information  
          cannot be obtained electronically or the information obtained  
          electronically is not reasonably compatible with self-attested  
          information.  Documentation from individuals is permitted only  
          to the extent that establishing a data match would not be  
          effective, considering such factors as:  

          1)Administrative costs related to establishing and using the  
            data match compared to administrative costs related to relying  
            on paper documentation; and,

          2)Impact on program integrity in terms of the potential for  
            ineligible individuals to be approved as well as for eligible  
            individuals to be denied coverage. 

          For example, if the state does not accept self-attestation of  
          residency, before requiring the individual to provide  
          documentation, the state would need to consider the  
          effectiveness of conducting a match with a state database such  
          as the Department of Motor Vehicles, Temporary Assistance for  
          Needy Families, or Supplemental Nutrition Assistance Program.   


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          States have the option to first request and accept an  
          explanation from the individual as to why the information might  
          not be reasonably compatible, such as a reduction in the number  
          of hours worked, before requesting paper documentation.  

           Analysis Prepared by  :    Marjorie Swartz / HEALTH / (916)  

                                                                FN: 0000017