BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 361 (Mitchell) - Medi-Cal: Health Homes for Medi-Cal  
          Enrollees and Section 1115 Waiver Demonstration Populations with  
          Chronic and Complex Conditions.
          
          Amended: June 19, 2013          Policy Vote: 7-2
          Urgency: No                     Mandate: No
          Hearing Date: August 12, 2013                           
          Consultant: Brendan McCarthy    
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: AB 361 would authorize the Department of Health  
          Care Services to establish a program to provide specified health  
          home services for certain Medi-Cal enrollees, with the intent of  
          reducing avoidable hospitalization or use of emergency medical  
          services.

          Fiscal Impact: 
              One-time administrative costs likely in the hundreds of  
              thousands of dollars to develop program guidelines,  
              determine eligibility standards, adopt a Medicaid State Plan  
              Amendment, and select providers. The Department has about  
              $650,000 in available federal planning grant funding that  
              may be used some or all of these costs.

              Ongoing costs likely in the hundreds of thousands to  
              millions of dollars to oversee and administer the program.  
              The bill requires that all costs to implement the program be  
              funded with non-state public funds or private funds for the  
              first eight quarters of implementation. After the first  
              eight quarters, should the Department elect to continue  
              implementation of the program, administrative costs would be  
              funded at the standard federal financial participation rate  
              (50% General Fund, 50% federal funds).

              One-time costs in the low millions of dollars to perform an  
              evaluation of program outcomes during the first eight  
              quarters. The Department indicates that prior program  
              evaluations similar in scope have cost between $1 million  
              and $5 million. The sponsors indicate that the most likely  
              source of funding for the evaluation and any other  








          AB 361 (Mitchell)
          Page 1


              administrative costs is foundation funding. Based on the  
              requirement in the bill that the program only be implemented  
              if no additional General Fund money is used, this is a  
              reasonable assumption.

              The long-term program costs are unknown, but likely to be  
              cost-neutral to the state. Under the health home option in  
              federal law, enhanced federal financial participation at 90%  
              is available for the first eight quarters of program  
              implementation - increasing state funding that can be used  
              for the program. On the other hand, federal law and guidance  
              requires health home programs to provide more intensive  
              services than are typically provided by Medi-Cal. The intent  
              of the bill is to both improve health outcomes for  
              participants and to reduce overall costs, by providing more  
              intensive primary care and support services while reducing  
              costly hospitalization and emergency medical services. Based  
              on other programs similar in nature, including the Frequent  
              Users of Health Services Initiative, this is a reasonable  
              assumption. In addition, the bill requires the Department to  
              continue implementation of the program after the initial  
              eight quarters only if it finds that the avoided costs are  
              sufficient to fully fund the ongoing costs of  
              implementation.

          Background: Under the federal Patient Protection and Affordable  
          Care Act (Affordable Care Act), states are authorized to  
          implement health home programs. Under federal law, health home  
          programs are required to provide specified services to target  
          populations that have serious chronic conditions (including  
          mental health conditions). The services provided under health  
          homes are more intensive than typical for state Medicaid  
          programs, and include intensive case management, transitional  
          care, patient and family support, and referral to social  
          services. In return for providing more intensive services,  
          states are eligible for enhanced federal financial participation  
          at 90% of costs for the first eight quarters of program  
          implementation.

          The Department has been exploring the potential to implement a  
          health home program in the state. Work done by a consultant to  
          the Department identified several options for providing health  
          home services - for example through California Children's  
          Services Special Care Centers, county mental health plans,  








          AB 361 (Mitchell)
          Page 2


          managed care systems, and others.

          Proposed Law: AB 361 would authorize the Department of Health  
          Care Services to implement a health home program for specific  
          Medi-Cal enrollees.

          Specific provision of the bill would:
              Authorize the Department to design a health home program  
              and designate eligible providers;
              Authorize the Department to submit a state plan amendment  
              to the federal government;
              Define the population eligible for health homes, based on  
              specified diagnoses (including mental health disorders,  
              substance abuse, chronic or life-threatening conditions, and  
              cognitive impairments) and indications of severity  
              (including frequent hospitalization, excessing use of  
              emergency services, chronic homelessness, and others);
              Authorize the Department to limit the program to certain  
              geographic areas and to use both managed care and  
              fee-for-service models;
              List the types of services that must be provided;
              Authorize the Department to require that the lead provider  
              be a community clinic, a provider of mental health services,  
              or a hospital;
              Require that if the Department creates a Health Home  
              Program under the bill, the Department shall determine  
              whether such a program that targets adults is operationally  
              viable;
              Require the Department to prepare a program evaluation;
              Require that the bill only be implemented to the extent  
              federal matching funds are available;
              Require that the program only be implemented if no  
              additional General Fund monies are used to fund  
              administrative costs or services, unless the Department  
              determines that the ongoing operation of the program will  
              not result in additional General Fund spending. (In other  
              words, if the Department determines that ongoing operation  
              of the program will reduce overall General Fund spending on  
              the participating population, General Fund monies may be  
              used for the program.);
              Authorize the Department to terminate implementation of the  
              program after the initial eight quarters if it finds that  
              the program does not result in avoided costs to Medi-Cal  
              sufficient to offset program costs;








          AB 361 (Mitchell)
          Page 3


              Authorize the Department to implement the bill through  
              emergency regulations.

          Related Legislation: AB 2266 (Mitchell, 2012) would have  
          required the Department of Health Care Services to establish a  
          program to provide specified health home services, with the  
          intent of reducing avoidable hospitalization or use of emergency  
          medical services. That bill died on the Senate Inactive File.

          Staff Comments: As noted above, the bill generally requires  
          implementation to occur without the expenditure of additional  
          General Fund monies. There are indications that existing federal  
          grant funds and potential foundation funding will be available  
          to pay for the additional administrative costs of setting up the  
          program.