BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 208
AUTHOR: Lara
AMENDED: September 6, 2013
HEARING DATE: September 12, 2013
CONSULTANT: Scott Bain
PURSUANT TO SENATE RULE 29.10
SUBJECT : Developmental services: request for proposals.
SUMMARY : Deletes a prohibition on Medi-Cal prepaid health plans
entering into any sub-contract in which consideration is
determined by a percentage of the primary contractor's payment
from the Department of Health Care Services (DHCS), unless DHCS
objects. Establishes requirements related to cultural and
linguistic competency for requests for proposals submitted by
regional centers. (This provision is the jurisdiction of the
Senate Human Services Committee and therefore not covered in
this analysis).
Existing law:
1.Establishes the Medi-Cal program, administered by (DHCS), 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.Prohibits Medi-Cal prepaid health plans from entering into any
sub-contract in which consideration is determined by a
percentage of the primary contractor's payment from DHCS.
4.Requires most persons eligible for Medi-Cal to enroll in a
Medi-Cal MCP.
5.Establishes Medicare as a federal health insurance program to
provide coverage to eligible individuals who are disabled or
over age 65.
Continued---
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6.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.
7.Licenses and regulates health plans through the Department of
Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene).
This bill:
1.Deletes a prohibition on Medi-Cal Prepaid Health Plans (PHPs)
entering into any sub-contract in which consideration is
determined by a percentage of the primary contractor's payment
from DHCS, unless DHCS objects, thereby authorizing these
payment arrangements.
2.Prohibits a request for proposals (RFP) that is prepared by a
regional center for consumer services and supports to include
a section on issues of equity and diversity. Requires the
section on equity and diversity to request, but not be limited
to, all of the following information:
a. A statement outlining the applicant's plan to
serve diverse populations, including, but not limited
to, culturally and linguistically diverse populations;
b. Examples of the applicant's commitment to
addressing the needs of those diverse populations;
and,
c. Any additional information that the applicant
deems relevant to issues of equity and diversity.
3.Requires that an RFP, which applies only to specifically
identified consumers, is required only to request information
on how the applicant plans to provide culturally and
linguistically competent services and supports to those
specific consumers.
4.Prohibits these RFP provisions from altering contracts entered
into before January 1, 2014.
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FISCAL EFFECT : Unknown.
COMMENTS :
1.Author's statement. According to the author, SB 208 is a
public social services bill that does two things:
a. Allows health plans, with approval of DHCS, to enter into a
sub-contract whereas payment consideration is determined by a
percentage of the primary contractor's payment (also known as
"percent of premium"). This will provide health plans with
payment flexibility and create a consistent payment
methodology for both Medicare and Medi-Cal.
b. Ensures that developmental supports and services are
person-centered and provided in a culturally and
linguistically competent manner. Specifically, this bill
requires that RFPs created by regional centers include a
section to evaluate the applicant's ability to provide
services that are culturally and linguistically appropriate.
2.Background. DHCS will shortly have almost its entire
population in MCMC. Currently Medi-Cal managed care (MCMC) in
California serves about 5.2 million enrollees in 30 counties,
or about 69 percent of the total Medi-Cal population through
three separate models of care: County Operated Health System,
the two-plan model and through geographic managed care. 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 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.
The Medi-Cal PHP percentage of premium prohibition in existing
law was enacted in the 1970s as part of legislation stemming
from a scandal in the mid-1970s, involving California PHPs
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which received national attention. These programs had been
launched in an attempt to control costs of Medi-Cal, several
years before the advent of Knox-Keene. The U.S. General
Accounting Office (12Government 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 sub-contracts and then spent
the money in questionable ways." Since that time, the
Legislature has increased oversight of health plans.
Legislation has created a stand-alone department for health
plan regulation (DMHC), transferred DMHC from the Business,
Transportation and Housing Agency to the Health and Human
Services Agency, enacted a regulatory framework for health
plans (under the Knox-Keene Act) and established financial
solvency standards for Risk Bearing Organizations (RBOs), such
as capitated medical groups.
3.Support. This bill is jointly sponsored by L.A. Care,
HealthNet and the California Association of Physician Groups.
According to the sponsors of the Medi-Cal provisions of this
measure, the provision authorizing payment through a
percentage of premium is necessary to allow health plans to
contract in a consistent fashion for both Medi-Cal and
Medicare services. The sponsors 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. The sponsors argue permitting payment based on
percentage of premium creates transparency for providers and
health plans while incentivizing health care organizations to
work together in order to meet performance standards. This
contracting method accommodates the risk adjustment of
Medicare capitation payment methodology which is
enrollee-specific. In addition, 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 MCMC
system of today.
L.A. Care indicates it currently pays capitated provider groups
in Medi-Cal a negotiated rate. For SPDs, sub-contractors are
paid a rate that is developed based on a number of factors,
including expected utilization for the overall population
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within the aid category, what services are delegated to the
capitated provider and the amount paid by DHCS. 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. L.A. Care argues that, if
percent of premium were allowed, it would be transparent to
the sub-contractor, and the sub-contractor would receive their
rate adjustment much quicker than having to go through a
contract amendment execution process.
SUPPORT AND OPPOSITION :
Support: California Association of Physician Groups
(co-sponsor)
Health Net (co-sponsor)
L.A. Care Health Plan (co-sponsor)
California Academy of Physician Assistants
Molina Healthcare of California
Oppose: None received.
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