BILL ANALYSIS Ó
AB 900
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 900 (Alejo) - As Amended: April 19, 2013
Policy Committee: HealthVote:19-0
Urgency: Yes State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires Medi-Cal payments to fee for service (FFS)
providers that would otherwise have been reduced by 10% on June
1, 2011, and Medi-Cal payments to skilled nursing facilities
that are a distinct part of a general acute care hospital
(DP-SNFs), and sub-acute care units that are a distinct part of
a general acute care hospital, to be determined without the
Medi-Cal rate reductions and rate roll-back required under
existing law.
FISCAL EFFECT
1)Estimated GF costs as follows:
FY 2012-13: greater than $140 million
FY 2013-14: greater than $573 million
FY 2014-15: greater than $680 million
FY 2015-16: greater than $450 million.
2)Assumptions are based on data provided by the Department of
Health Care Services and the Legislative Analyst from November
2012. It is further assumed this bill will be amended to
apply to intermediate care facilities for the developmentally
disabled (ICF-DD).
COMMENTS
1)Rationale . According to the sponsors, the California Hospital
Association (CHA) and the California Medical Association
(CMA), this bill is needed to stop the implementation of rate
cuts contained in AB 97, Chapter 29, Statutes of 2011, the
health services trailer bill to the 2011-12 state budget. This
AB 900
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bill eliminates the state's ability to both implement the 10%
Medi-Cal provider rate cuts and "claw-back" rate cuts from
various Medi-Cal providers who have not yet been cut for the
period from June 1, 2011 to the present day. This ensures
access to medically necessary care for California's most
vulnerable by providing critical stability to health care
provider networks within the Medi-Cal program.
AB 97 sought to help balance the state's significant budget
deficit by scoring state savings through a 10% reduction to
Medi-Cal provider payment rates. Current law contains no
sunset date for the rate cuts. In order to meet the full
promise of the federal Affordable Care Act (ACA), California
is looking to expand its Medi-Cal program to hundreds of
thousands-potentially millions-of individuals not currently
eligible. California cannot continue to cut provider rates to
the bone and also expect those same providers to take on more
Medi-Cal patients. California's health care providers are
ready to embrace health reform, but argue the state needs to
repair its broken safety net.
2)Background . Due to the economic downturn in 2008, and in the
face of significant state budget deficits, the Legislature
adopted a number of Medi-Cal rate freezes and/or rate
reductions. In earlier economic downturns, based on federal
Medicaid law that requires care and services to be available
to Medicaid beneficiaries at least to the extent care and
services are available to the general population in the
geographic area, providers had successfully sued to prevent
rate reductions from being implemented. Orthopaedic Hospital
v. Belshé 103. F.3d 1491 (1997). At the time of the
Orthopaedic Hospital decision, the state had not received
federal approval for the cuts. With later enacted cuts, DHCS
began to seek federal approval first and also began to collect
data to defend against arguments that had been successful for
providers in the litigation.
After much back and forth between the state and the federal
Centers for Medicare and Medicaid Services (CMS) and between
the parties in litigation, four cases gave rise to 11
consolidated appeals and an opinion was issued by the United
States Court of Appeals for the Ninth Circuit on December 13,
2012. The court distinguished the holding in Orthopaedic
Hospital based on CMS approval of subsequent cuts. The Court
gave great deference to CMS and DHCS. Not all rate reductions
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have been implemented and there is still an injunction
preventing the state from cutting payments to physicians,
dentists, pharmacists, pharmacies, home medical equipment,
durable medical equipment, orthotics and prosthetics, HIV/AIDS
care, nursing homes, ambulances, and air ambulances. Even
though litigation continues, DHCS anticipates a decision by
the end of the fiscal year. Assuming the state prevails, DHCS
has indicated once it has authority to implement the payment
reductions, it will do so retroactive to June 1, 2011.
3)Support . Numerous organizations are sponsoring and supporting
this bill, including the California Medical Association (CMA)
and California Hospital Association (CHA). Supporters mostly
include provider organizations but also include consumer
advocates, labor organizations, and health plans.
4)Related legislation . SB 640 (Lara), pending in Senate
Appropriations Committee, is substantially similar to this
measure except for SB 640's inclusion of ICF-DDs, which will
be amended into this bill.
Analysis Prepared by : Debra Roth / APPR. / (916) 319-2081