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.