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  








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          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  








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          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.