BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 208
Author: Lara (D)
Amended: 9/6/13
Vote: 21
SENATE HUMAN SERVICES COMMITTEE : 6-0, 4/9/13
AYES: Yee, Berryhill, Emmerson, Evans, Liu, Wright
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/13
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SENATE HEALTH COMMITTEE : 8-0, 9/12/13
(Pursuant to Senate Rule 29.10)
AYE: Hernandez, Anderson, Beall, DeSaulnier, Monning, Nielsen,
Pavley, Wolk
NO VOTE RECORDED: De Le�n
SENATE FLOOR : 39-0, 5/29/13
AYES: Anderson, Beall, Berryhill, Block, Calderon, Cannella,
Corbett, Correa, De Le�n, DeSaulnier, Emmerson, Evans, Fuller,
Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff,
Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen,
Padilla, Pavley, Price, Roth, Steinberg, Torres, Walters,
Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Vacancy
ASSEMBLY FLOOR : Not available
SUBJECT : Public social services: contracting
SOURCE : California Association of Physician Groups
CONTINUED
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Health Net
L.A. Care Health Plan
DIGEST : This bill deletes a prohibition on Medi-Cal prepaid
health plans (PHPs) entering into any subcontract in which
consideration is determined by a percentage of the primary
contractor's payment from the Department of Health Care Services
(DHCS), subject to objection from DHCS and instead authorizes
these arrangements. This bill establishes requirements related
to cultural and linguistic competency for requests for proposals
(RFP) submitted by regional centers.
Assembly Amendments 1) delete an existing prohibition that
prevents Medi-Cal PHPs from entering into a sub-contract in
which consideration is a percentage of the capitation rate paid
by DHCS to the prepaid health plan and 2) allow Medi-Cal prepaid
health plans to enter into sub-contracts based on a percentage
of the capitation rate, unless DHCS objects.
ANALYSIS :
Existing law:
1.Establishes the Medi-Cal program, to provide various health
and long-term services to low-income women, parent and
caretaker adults, children, elderly, and people with
disabilities. Effective January 1, 2014, provides services to
childless adults, who are not pregnant, between the ages of 19
and 65.
2.Authorizes DHCS to enter into contracts with managed care plan
(MCP) organizations to provide services to Medi-Cal enrollees.
3.Requires most persons eligible for Medi-Cal to enroll in a
Medi-Cal MCP.
4.Defines subcontract in the Medi-Cal program as an agreement
entered into by the PHP with any of the following:
A. A provider of health care services who agrees to furnish
such services to Medi-Cal beneficiaries enrolled in the
PHP;
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B. A marketing organization; and
C. Any other person or organization who agrees to perform
any administrative function or service for the operation of
the PHP specifically related to securing or fulfilling its
contractual obligations with DHCS.
1.Establishes Medicare as a federal health insurance program to
provide coverage to eligible individuals who are disabled or
over age 65.
2.Establishes the Coordinated Care Initiative (CCI) that
requires DHCS to seek federal approval to establish
demonstration sites in up to eight counties to provide
coordinated Medi-Cal and Medicare benefits to persons who are
dually eligible and authorizes DHCS to require seniors and
persons with disabilities (SPDs) who are eligible for Medi-Cal
only (not Medicare) to mandatorily enroll in Medi-Cal managed
care (MCMC) MCPs.
3.Provides for regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene).
This bill:
1.Makes a number of legislative findings related to the needs of
RC consumers, as specified, and declares that services
provided to RC consumers should be provided in a
linguistically and culturally competent manner that promotes
equity and diversity for all Californians.
2.Requires an RFP prepared by an RC for consumer services and
supports to include a section on issues of equity and
diversity that requests, at least, all of the following
information:
A. A statement outlining the applicant's plan to serve
diverse populations, including those that are culturally
and linguistically diverse;
B. Examples of the applicant's commitment to addressing the
needs of those diverse populations; and
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C. Additional information that the applicant deems relevant
to issues of equity and diversity.
1.Provides, if the RFP applies to specifically identified
consumers, the cultural and linguistic requirements would only
apply to those specific consumers.
2.Provides that this statute shall not alter any contracts
entered into prior to January 1, 2014.
Background
DHCS will shortly have almost its entire population in MCMC.
Currently MCMC in California serves about 5.2 million enrollees
in 30 counties, or about 69% of the total Medi-Cal population.
There are three models. The oldest model is the County Operated
Health System (COHS). COHS plans serve about one million
enrollees through six health plans in 14 counties: Marin,
Mendocino, Merced, Monterey, Napa, Orange, San Mateo, San Luis
Obispo, Santa Barbara, Santa Cruz, Solano, Sonoma, Ventura, and
Yolo. Eight more counties are in the process of transitioning
approximately 80,000 children and fee-for-service (FFS)
enrollees into a COHS (Del Norte, Humboldt, Lake, Lassen, Modoc,
Shasta, Siskiyou, and Trinity). In the COHS model, DHCS
contracts with a health plan created by the County Board of
Supervisors and all Medi-Cal enrollees are in the same health
plan. The second model is the two-Plan model in which there is
a "Local Initiative" and a "commercial plan." DHCS contracts
with both plans. The two-plan model serves about 3.6 million
beneficiaries in Alameda, Contra Costa, Fresno, Kern, Kings, Los
Angeles, Madera, Riverside, San Bernardino, San Francisco, San
Joaquin, Santa Clara, Stanislaus, and Tulare. In November 2013,
18 more counties will transition approximately 200,000 children,
families, seniors and people with disabilities into a regional
Two-Plan model. Thirdly, two-counties employ the Geographic
Managed Care (GMC) model: Sacramento and San Diego. DHCS
contracts with several commercial plans in those counties and
there are about 600,000 enrollees.
DHCS is also participating in a demonstration project authorized
by the 2010 federal Patient Protection and Affordable Care Act
to improve coordination of services for persons who are dually
eligible for state Medicaid programs and Medicare. The CCI, now
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entitled Cal MediConnect was authorized by the Legislature as a
three-year, eight county demonstration project. The eight
counties are Alameda, Los Angeles, Orange, Riverside, San
Bernardino, San Diego, San Mateo, and Santa Clara covering
456,000 dual eligible enrollees. Cal MediConnect will combine
the continuum of health care, acute care, behavioral health, and
Long Term Supports and Services through Medi-Cal MCPs using a
capitated payment model to provide Medicare and Medi-Cal
benefits through existing plans. The phase in of enrollment is
scheduled to begin no sooner than April 1, 2014.
Knox-Keene is the regulatory framework that most MCPs operate
under in California. It is a comprehensive set of rules that
cover mandatory basic services, financial stability,
availability and accessibility of providers, review of provider
contracts, the administrative organization, consumer disclosure,
and the grievance requirements. It is administered and enforced
by DMHC. Among the factors that led to its passage, including
the selection at the time of the Department of Corporations
(DOC) as the regulatory entity, were a number the scandals
associated with Medi-Cal PHPs and lax oversight by the
Department of Health Services (DHS) (now DHCS) in the early 70's
when Governor Reagan expanded use of PHPs in the Medi-Cal
program as a means of reducing costs. In 1999, comprehensive
health plan reform legislation, moved regulation from the DOC
and led to the creation of DMHC. Responsibility for Knox-Keene
regulation was transferred to the new department in July 2000.
However, it continued to be under the Business, Transportation
and Housing Agency, rather than the Health and Human Services
Agency until it was transferred in 2012 by AB 922 (Monning),
Chapter 552, Statutes of 2011.
As a result of the increase in sub-contracting to independent
practice associations (IPAs) and medical groups, DMHC has also
been tasked with assessing the adequacy of financial reserves
and the administrative capacity of all RBOs to fulfill delegated
responsibilities and to timely process and pay all medical
claims for the medical services that are delegated by a health
plan to the RBO. The DMHC's assessment activities include
review of all financial information submitted by the RBOs,
including certified public accountant-audited and
company-prepared financial statements. If an RBO becomes
noncompliant with Knox-Keene financial solvency requirements,
the RBO is required to develop a corrective action plan which
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the DMHC reviews to ensure the RBO's proposed corrective action
plan and financial assumptions are viable and will correct the
RBO's financial problems.
California has adopted the national trend to use various models
of managed care in place of FFS in its public programs such as
Medi-Cal. Similar to commercial HMOs, the enrollee receives a
subset of the Medi-Cal benefits through an MCP. The plan is
paid a per member capitated rate for each enrollee which is set
by an actuarial methodology. The plan in turn sub-contracts
with providers, medical groups, or in some cases another plan,
to provide Medi-Cal covered services to enrollees. As in
commercial managed care, the enrollee's choice of providers may
be limited to those in the plan's network, but the plan is
required to ensure timely access to care. MCMC developed along
two separate paths in California. In 1985 federal law
specifically authorized the Health Plan of San Mateo and the
Santa Barbara Regional Health Authority as Health Insuring
Organizations (known under state law as COHS). There is no
choice in these counties as all enrollees are in the same plan,
although some services may be provided outside the plan or are
"carved-out." Because of the specific federal authority, these
entities are not required to be licensed by the state. Even
prior to mandatory enrollment of SPDs in the two-plan and GMC
counties, in a COHS county everyone, regardless of disability
category is in the same health plan. Although COHS are not
required to obtain a Knox-Keene license for Medi-Cal, DHCS
requires them to meet Knox-Keene standards by contract.
When expanded use of PHPs was again proposed as a means of
reducing costs in Medi-Cal in 1993, a basic tenet was that the
plans in the two-plan and GMC counties would be required to
obtain Knox-Keene licensure. COHS continued to be exempted from
this requirement. However many of the COHS obtained a
Knox-Keene license in order to participate in the Healthy
Families program. In the most recent contracts, DHCS required
each COHS to meet Knox-Keene requirements. Currently DHCS
audits the plans regularly for contract compliance and audits
the Knox-Keene plans jointly with DMHC. The general practice of
DHCS is to require the plan to submit a corrective action plan
if there are deficiencies. Financial and fraud investigation
reviews are performed by the Controller's office. DHCS is also
in the process of entering into an inter-agency agreement to
train the Controller's staff to be able to perform medical
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audits.
Prior Legislation
AB 1693 (Keene), Chapter 1036, Statutes of 1977, establishes a
pilot program, revises the authorization of DHCS (then DHS) to
contract with PHPs to provide services to Medi-Cal enrollees, at
the enrollees option. Provides for regulation of the PHPs,
including sub-contracts and enacted consumer protections.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
This bill, as amended, has not been analyzed by a fiscal
committee.
SUPPORT : (Verified 9/12/13)
California Association of Physician Groups (co-source)
Health Net (co-source)
L.A. Care Health Plan (co-source)
California Academy of Physician Assistants
Congress of California Seniors
ARGUMENTS IN SUPPORT : According to the sponsors, these
provisions are necessary to allow health plans to contract in a
consistent fashion for both Medi-Cal and Medicare services. The
sponsors, California Association of Physician Groups, Health
Net, and L.A. Care Health Plan (LA Care) acknowledge that this
prohibition stems from a scandal in the mid-1970s, involving
California PHPs which received national attention. These
programs had been launched by the Governor Reagan Administration
in an attempt to control costs of Medi-Cal, several years before
the advent of Knox-Keene. According to background supplied by
these sponsors, in November 1976, the U.S. General Accounting
Office (now Government Accountability Office) determined that
five supposed nonprofit PHPs were, in fact, "fronts for
profit-making companies" that "obtained most of the state health
funds through subcontracts and then spent the money in
questionable ways." The sponsors point out however, that since
then, not only are these plans and contracts governed by
Knox-Keene, but additionally in 1999, DMHC implemented a
comprehensive financial solvency program for Risk Bearing
Organizations (RBOs), pursuant to enacted legislation at the
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time. The sponsors argue that improved oversight by DMHC
eliminated the need for artificial constraints on payment
mechanisms that were imposed back in 1977, before the Medi-Cal
PHPs developed into the modern Medi-Cal MCP system of today.
The sponsors also argue that health plans have paid capitated
providers in the Medicare Advantage (MA) program using a percent
of premium, with significant success. In addition, the sponsors
state that the need for a consistent payment methodology between
Medicare and MCMC will ensure a streamlined payment process in
the Duals Demonstration program, known as the CCI, scheduled to
begin no earlier than April 2014.
According to LA Care, currently it pays capitated provider
groups in Medi-Cal a negotiated rate. For SPDs, subcontractors
are paid a rate that is developed based on a number of factors
including expected utilization for the overall population within
the aid category, what services are delegated to the capitated
provider and the amount paid by DHCS. For the family aid
category, LA Care further defines the capitation by age and
gender within the aid category to better align payment with
risk. LA Care stated that DHCS often gives preliminary rates
and does not finalize them until well into the rate year.
Additionally, mid-year benefit changes have occurred and the
impact on rates is not known until many months or possibly years
after the services have been provided and paid for by the plan.
As a result, it is inefficient and administratively burdensome
and time consuming to have to do a contract amendment each time
there is a rate change or adjustment. If percent of premium
were allowed, it would be transparent to the subcontractor and
they would receive their rate adjustment much quicker than
having to go through a contract amendment execution process.
According to the supporters, currently, Medicare and Medi-Cal
capitated reimbursement rates are treated differently. For over
a decade, health plans have paid capitated providers in the MA
program using a percent of premium, with significant success.
The MA program serves over a million seniors in California,
including several hundred thousand voluntarily-enrolled
dual-eligible beneficiaries. The supporters further argue that
it has an excellent track record of patient satisfaction and
provider financial solvency. According to this support,
Medi-Cal is prevented from following the same payment method as
Medicare; which is a problem given the forthcoming convergence
of the two programs in the Cal MediConnect program (Duals
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Demonstration Pilot). They support this bill because it creates
transparency for providers and health plans; while incentivizing
health care organizations to work together in order to meet
performance standards. Furthermore, they argue, allowing
consideration to be based off the premium contract ensures that
the patient receives quality coverage because the reimbursement
and/or payment are based on the beneficiary getting the
appropriate level of care for his/her diagnoses. The need for a
consistent payment methodology for Medicare and Medi-Cal
services is genuine, and this bill is the best means to ensure a
streamlined payment process in the Cal MediConnect Program;
which is crucial for beneficiaries requiring adequate continuity
of care during the transition According to the sponsors, the
prohibition of paying a percent of premium is inconsistent with
how health plans currently pay capitated providers such as IPAs,
medical groups, and hospitals in the MA program. This
contracting method accommodates the risk adjustment of Medicare
capitation payment methodology which is enrollee-specific.
JL:nl 9/12/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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