BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair AB 498 (Chavez) - Medi-Cal. Amended: June 20, 2013 Policy Vote: Health 9-0 Urgency: No Mandate: No Hearing Date: August 19, 2013 Consultant: Brendan McCarthy This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 498 would allow the Department of Health Care Services to seek federal approval to make payments to Non-Designated Public Hospitals from the federally-funded Safety Net Care Pool in 2013-14 and 2014-15. The bill requires the state to retain one-half of any federal funds received for this purpose. Fiscal Impact: One-time cost of about $300,000 to seek federal approvals by the Department of Health Care Services (50% General Fund, 50% federal funds). Payments to Non-Designated Public Hospitals of about $25 million in 2013-14 and $27.5 million in 2014-15 (federal funds). State expenditures for the Medi-Cal program of about $25 million in 2013-14 and $27.5 million in 2014-15 (federal funds). These federal funds will allow the state to reduce General Fund expenditures by a similar amount. Background: The state's Medi-Cal program provides health care coverage for low income children, their families, and certain disabled residents of the state. Of the roughly 8.2 million people enrolled in Medi-Cal, about 30% are served through the fee-for-service program. In fee-for-service Medi-Cal, the Department of Health Care Services pays providers, such as hospitals, for the costs of providing treatment to program participants. Non-Designated Public Hospitals are hospitals that are owned by hospital districts or municipal entities. There are 46 AB 498 (Chavez) Page 1 Non-Designated Public Hospitals in the state. Under current practice, Non-Designated Public Hospitals are paid for services provided to Medi-Cal beneficiaries either based on a contracted rate or by cost-based reimbursements. AB 1467 (Committee on Budget, Statutes of 2012), the health budget trailer bill, proposed to change the method for paying Non-Designated Public Hospitals for providing services to Medi-Cal enrollees. Under that bill, subject to federal approval, the Non-Designated Public Hospitals would use their certified public expenditures (their own funds expended to provide care) to draw down federal matching funds. This would have eliminated the state's obligation to provide funds to match federal funds. In addition, the Non-Designated Public Hospitals would have been allowed to draw down federal funding from the federally-financed Safety Net Care Pool and the Delivery System Reform Incentive Pool, both of which are authorized under the state's federal Medicaid hospital financing waiver. Based on feedback from the federal government, the Department of Health Care Services has withdrawn the state's application to implement this new funding mechanism for Non-Designated Public Hospitals. Proposed Law: AB 498 would allow the Department of Health Care Services to seek federal approval to make payments to Non-Designated Public Hospitals from the federally-funded Safety Net Care Pool in 2013-14 and 2014-15, if federal approval is not granted for the new funding mechanism for Non-Designated Public Hospitals authorized in AB 1467. The bill requires the state to retain one-half of any federal funds received for this purpose for Medi-Cal related expenditures. Related Legislation: SB 239 (Hernandez) would impose a quality assurance fee on certain hospitals from January 1, 2014 to December 30, 2015. The bill would require the Department of Health Care Services to use the resulting revenues (and federal matching funds) to make supplemental payments to private hospitals and Medi-Cal managed care plans. That bill is in the Assembly Health Committee. Staff Comments: According to the Department of Health Care Services, allowing Non-Designated Public Hospitals to access Safety Net Care Pool funds would not reduce the level of federal AB 498 (Chavez) Page 2 funding available for other hospitals in the state. California hospitals currently are not currently drawing down the maximum allowed amount of federal funding under California's current hospital financing waiver.