BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 640
AUTHOR: Lara
AMENDED: April 15, 2013
HEARING DATE: April 24, 2013
CONSULTANT: Bain
SUBJECT : Medi-Cal: reimbursement: provider payments. (URGENCY)
SUMMARY : Requires Medi-Cal payments for fee-for-service
benefits, including pharmacy, to be determined without
application of the 10 percent payment reduction in existing law
for dates of service on or after June 1, 2011, and requires
Medi-Cal payments to managed care health plans to be determined
without application of the 10 percent payment reduction required
in existing law for dates of service on and after the effective
date of this bill. Requires Medi-Cal payments for nursing
facilities that are a distinct part of a general acute care
hospital (DP-SNFs) and subacute care units that are parts of
general acute care hospitals for dates of service on or after
June 1, 2011, to be determined without application of the
Medi-Cal reductions and roll back in existing law. Takes effect
immediately as an urgency statute.
Existing law:
1.Existing law establishes the Medi-Cal program, administered by
the Department of Health Care Services (DHCS), under which
qualified low-income individuals receive health care services.
Establishes a schedule of benefits for Medi-Cal beneficiaries,
which includes hospital services and nursing facility
services. Defines, in the Medi-Cal state plan, a DP-SNF as any
nursing facility which is licensed together with an acute care
hospital.
2.Requires Medi-Cal fee-for-service (FFS) provider payments to
DP-SNFs to be reduced by 5 percent for dates of service on and
after March 1, 2009. Requires payments to Medi-Cal managed
care plans to be reduced by the actuarially equivalent amount
of the 5 percent payment reduction.
3.Requires Medi-Cal FFS provider payments to DP-SNFs to not
exceed the reimbursement rates to DP-SNFs in the 2008-09 rate
year, reduced by 10 percent for dates of service on and after
June 1, 2011. Requires payments to be reduced by 10 percent
Continued---
SB 640 | Page 2
for Medi-Cal FFS benefits for dates of service on and after
June 1, 2011. Requires payments to Medi-Cal managed care plans
to be reduced by the actuarial equivalent amount of the 10
percent payment reduction.
4.Requires the payment reductions in 2) above to cease to be
implemented for the same services provided by the same class
of providers when federal approval is obtained for the payment
reductions in 3) above. Requires the payment reductions in 3)
to be implemented retroactively to June 1, 2011, or on any
other date or dates as may be applicable when federal approval
is obtained.
This bill:
1. Requires Medi-Cal payments for fee-for-service benefits
to be determined without application of the 10 percent
payment reduction in existing law for dates of service on
or after June 1, 2011.
2. Requires Medi-Cal payments for DP-SNFs and subacute care
units that are parts of general acute care hospitals and
fee-for-service payments to pharmacies for dates of service
on or after June 1, 2011, to be determined without
application of the Medi-Cal reductions and roll back in
existing law.
3. Prohibits, for dates of service prior to the effective
date of this bill, Medi-Cal payments from exceeding the
reimbursement rate at which payment has been made by DHCS
prior to the effective date of this bill.
4. Requires Medi-Cal payments to managed care health plans
to be determined without application of the 10 percent
payment reduction required in existing law for dates of
service on and after the effective date of this bill.
5. Requires the director to implement this bill to the
maximum extent permitted by law and for the maximum time
period for which the director obtains federal approval for
federal financial participation for the increase provided
for in this bill.
SB 640 | Page
3
6. Requires the DHCS director to promptly seek all
necessary federal approvals to implement this bill.
7. Permits DHCS to implement this bill by means of provider
bulletins or notices, policy letters, or other similar
instructions, without taking regulatory action under the
Administrative Procedure Act.
8. Takes effect immediately as an urgency statute.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. SB 640 (Lara) is a measure to provide
critical stability to health care provider networks within the
Medi-Cal program on the eve of full federal health reform
implementation and Medi-Cal expansion. The bill stops the
implementation of the rate cuts contained in AB 97, the health
services trailer bill to the 2011-12 state budget.
It makes no sense to further slash Medi-Cal provider rates.
California already pays its Medi-Cal providers some of the
lowest in the entire country (47th of the 50 states for
physician rates). Expanding Medi-Cal with reduced rates is
making an empty promise to California's poor, who will find it
nearly impossible to find providers to treat them when they
are sick or injured. Doing so will force them into crowded
emergency rooms as a last resort.
SB 640 would do two things. First, it would eliminate the
state's ability to implement the 10 percent Medi-Cal provider
rate cuts that were enacted through AB 97 for all Medi-Cal
providers. Second, the bill would eliminate the state's
ability to 'claw back' rate cuts from various Medi-Cal
providers who have not yet been cut, for the period of time
from June 1, 2011 to the present day.
In order to meet the full promise of the federal Patient
Protection and Affordable Care Act (ACA), California is
looking to expand its Medi-Cal program to hundreds of
thousands-potentially millions-of individuals who aren't
currently eligible. California cannot continue to cut provider
SB 640 | Page 4
rates to the bone and also anticipate those same providers to
take on more Medi-Cal patients than they do today.
California's health care providers are ready to embrace health
reform, but our state needs to repair its broken safety net.
2.Federal Medicaid law, the Medi-Cal budget and Medi-Cal rate
litigation. To achieve budget savings in Medi-Cal during the
state's recent fiscal crisis, the state has three principle
policy and fiscal choices: (a) to reduce or restrict who is
eligible for Medi-Cal benefits; (b) to reduce the scope of
benefits provided in the program; (c) to reduce the payments
to health care providers and managed care plans for Medi-Cal
services. Federal law has prevented or limited the state's
ability to reduce eligibility, but the state has eliminated
benefits in Medi-Cal, most notably adult dental services. In
addition, the state has attempted several times to reduce
Medi-Cal payments to health plans, health facilities and
health care providers.
However, some of these rate reductions did not, and have not
taken effect because of court injunctions, while other
reductions have expired by their own terms and been replaced
by different rate reductions. For example, DP-SNFs were
subject to some of these reductions for certain periods of
time before court injunctions were issued. The multiple cases
challenging the Medi-Cal 5 percent and 10 percent rate
reductions enacted by the state in 2008 and 2009 were heard by
the United States Supreme Court, and in February 2012, the
Supreme Court vacated the prior Ninth Circuit decisions
preventing the reductions from being implemented and sent the
case back to the Ninth Circuit Court of Appeals to reassess in
light of the federal government's approval of DHCS' State Plan
Amendment.
In December 2012, the Ninth Circuit issued a decision that
reversed the injunction concerning the 10 percent Medi-Cal
rate reductions enacted in 2011 in AB 97 (Committee on
Budget), Chapter 3, Statutes of 2011. In January 2012, the
plaintiffs in those cases asked the entire Ninth Circuit to
re-hear the three judge Ninth Circuit court decision in the
case. That petition is currently before the Ninth Circuit.
DHCS has not imposed the AB 97 rate reduction until the
petition for re-hearing has been resolved by the Ninth
Circuit. DHCS has indicated that, once it has authority to
implement the payment reductions, it will do so retroactive to
June 1, 2011.
SB 640 | Page
5
3.Legislative Analyst's Office (LAO) fiscal. At the request of
committee staff, the LAO obtained data from DHCS as to the
fiscal effect of a prospective bill and a bill that would
reverse the retroactive rate reduction and the prospective
rate reduction.
----------------------------------------------------
| AB 97 Payment Reductions |
|----------------------------------------------------|
| (General Fund) |
----------------------------------------------------
-----------------------------------------------------
| | | | |
-----------------------------------------------------
----------------------------------------------------
| November 2012 Estimated Savings from AB 97 |
| Reduction |
----------------------------------------------------
-----------------------------------------------------
| FY 2012-13 | FY 2013-14 |
-----------------------------------------------------
-----------------------------------------------------
| Prospective |Retroactive |Prospective |Retroactive |
| Only | & | Only | & |
| |Prospective | |Prospective |
-----------------------------------------------------
| $93,346,121 |$142,561,563|$427,699,546|$573,100,129|
| | | | |
|--------------+------------+------------+------------|
| | | | |
-----------------------------------------------------
-----------------------------------------------------
| FY 2014-15 | FY 2015-16 |
-----------------------------------------------------
-----------------------------------------------------
| Prospective |Retroactive |Prospective |Retroactive |
| Only | & | Only | & |
SB 640 | Page 6
| |Prospective | |Prospective |
|--------------+------------+------------+------------|
|$427,719,464 |$689,116,956|$427,719,464|$471,016,384|
| | | | |
-----------------------------------------------------
4.Related legislation. SB 646 (Neilsen) requires Medi-Cal
reimbursement for nursing facilities that are a distinct part
of a general acute care hospital (DP-SNFs) to be determined
without the Medi-Cal rate reductions and rate roll-back
required under existing law. Limits the provisions of this
bill to rural or sole community provider DP-SNFs that meet
specified criteria. Takes effect immediately as an urgency
statute. SB 646 is scheduled to be heard in the Senate Health
Committee on April 24, 2013.
AB 900 (Alejo), an urgency bill, would exempt all DP-SNFs from
the Medi-Cal rate reduction. AB 800 is scheduled to be heard
in the Assembly Health Committee on April 30, 2013.
5.Prior legislation.
a. AB X3 5 (Committee on Budget), Chapter 3, Statutes
of 2008 reduced Medi-Cal provider payments by 10 percent
for fee-for-service benefits for dates of service on and
after July 1, 2008 and for specified non-Medi-Cal
programs. AB X3 5 reduced payments to Medi-Cal managed
care plans by the actuarial equivalent amount of 10
percent, effective July 1, 2008. Exempts specified
providers from the payment reductions. Reduced
non-contract hospital payments in Medi-Cal, as specified.
b. AB 1183 (Committee on Budget), Chapter 758, Statutes
of 2008 sunset the AB X3 5 rate reduction February 28,
2009 and applied the payment reductions to small and
rural hospitals only from July 1, 2008 through October
31, 2008. Instead, AB 1183 reduced Medi-Cal provider
payments for most classes of services by 1 percent for
Medi-Cal FFS benefits for dates of service on and after
March 1, 2009, and reduced Medi-Cal provider payments by
5 percent for dates of service on and after March 1, 2009
for the following types of providers: DP-SNFs,
intermediate care facilities (except for ICF-DD), rural
swing-bed facilities and subacute care units that are a
distinct part of a general acute care hospital, pediatric
subacute care units that are a distinct part of a general
SB 640 | Page
7
acute care hospital, adult day health care centers, and
pharmacies. AB 1183 reduced payments to Medi-Cal managed
care plans and PACE plans by the actuarial equivalent
amount of 5 percent, effective July 1, 2008 or
thereafter.
c. AB X4 5 (Evans), Chapter 5, Statutes of 2009 froze
Medi-Cal rates for services beginning in the 2009-10 rate
year and each rate year thereafter, by prohibiting the
reimbursement rates from exceeding the rates that were
applicable in the 2008-09 rate year for the following
providers after the 5 percent reduction made by AB 1183:
DP-SNFs, ICF-DD or facilities providing continuous SNF
care to DD individuals under a pilot program (previously
exempt from the AB 1183 reduction), freestanding
pediatric subacute care units.
d. AB 97 (Committee on Budget), Chapter 3, Statutes of
2011 makes the rate reductions enacted by AB 1183 and AB
X4 5 inoperative for dates of service on and after June
1, 2011, with specified exceptions. Reduces Medi-Cal
provider payments by 10 percent for fee-for-service
benefits for dates of service and after June 1, 2011.
Requires, for DP-SNFs and certain other providers, the 10
percent rate reduction to apply to the rates in effect
for those providers during the 2008-09 Medi-Cal rate
year. Requires Medi-Cal managed care plan rates by the
actuarial equivalent amount, effective July 1, 2011.
Reduces payments for non-Medi-Cal programs for services
on and after June 1, 2011, with exceptions. Implement the
payment reductions only if the reductions comply with
federal Medicaid requirements, and prohibits
implementation until federal approval is obtained.
Applies the payment reduction retroactively to June 1,
2011 or on such other date as may be applicable when
federal approval is obtained. Federal approval of the AB
97 rate reductions were obtained in October 2011 and
thereby made the Medi-Cal reductions called for in AB
1183 and AB X4 5 inoperative.
e. AB 102 (Committee on Budget), Chapter 29, Statutes
of 2011 continues the 1 percent and 5 percent Medi-Cal
reductions that were due to expire for dates of service
on and after June 1, 2011 until a Medi-Cal rate reduction
of up to 10 percent and the AB 97 reduction and
SB 640 | Page 8
adjustment receive federal approval. Requires, when
federal approval is obtained, the payments to be
implemented retroactively to June 1, 2011 or on any other
date or dates as may be applicable. Exempts pharmacy drug
product payments from the rate reduction when DHCS
determines the average acquisition cost methodology has
been fully implemented and DHCS budget reduction targets
have been met.
6.Support. This bill is jointly sponsored by the California
Medical Association (CMA) the California Academy of Family
Practice Physicians, the California Chapter of the American
College of Emergency Physicians, the California Hospital
Association and SEIU-UHW. The sponsors and supporters argue
this measure will help stabilize the state's safety net by
stopping the 10 percent Medi-Cal rate reduction. Supporters
explain that AB 97, the health services trailer bill to the
2011-12 state budget included an across-the-board 10 percent
reduction in Medi-Cal provider payments, and this rate cut
impacts many provider types, including physicians, dentists,
ambulance providers, pharmacists, nursing homes and others.
Medi-Cal is the largest Medicaid program of any state in the
country, with total enrollment of over 10 million in 2009, and
yet the program pays some of the lowest reimbursement rates of
any Medicaid program in the nation. Supporters argue that if
the AB 97 rate cuts are implemented, California will likely
hold the dubious distinction of ranking first in total
Medicaid program enrollment and 50th in provider payments.
California's patient, provider and payor communities want to
be a partner with the state in the effort to fully implement
federal health reform. Expanding Medi-Cal to meet the
Affordable Care Act's (ACA) requirements could mean millions
of new Medi-Cal enrollees will be added to the state's already
tattered safety net. Further reducing provider payments at
the precise time the system is proposed to be expanded to
those currently uninsured is the wrong solution for
California, and makes the Medi-Cal program an empty promise to
California's poor and needy.
7.Support with amendments. Developmental Services Network (DSN),
a private nonprofit association of intermediate care facility
service providers to the developmentally disabled, seeks
amendments to reverse the Medi-Cal cuts to intermediate care
providers. DSN states there are more than 1,100 such
facilities in the state that care f8.or people with
developmental disabilities in health licensed small home like
SB 640 | Page
9
facilities, and MediCal rate freezes and cuts are forcing
facilities to close which results in placement of people into
higher cost institutional care and takes away the homes many
of them have lived in for as long as 20 years.
9.Should Medi-Cal rate reductions be prevented from taking
effect?
This bill addresses an important issue in that provider payment
rates in Medi-Cal are a key factor in beneficiaries' ability
to access program services and the ability of providers to
continue to provide services. However, has the state's fiscal
condition improved enough to prevent previously enacted
Medi-Cal rate reductions from taking effect?
SUPPORT AND OPPOSITION :
Support: California Medical Association (cosponsor)
California Academy of Family Physicians (cosponsor)
California Chapter of the American College of
Emergency Physicians (cosponsor)
California Hospital Association (cosponsor)
SEIU - UHW (cosponsor)
Access Dental Plan
California Association of Health Facilities
California Association of Medical Product Suppliers
California Coverage and Health Initiatives
California Medical Transportation Association
California Pharmacists Association
California Pharmacists Association
California Primary Care Association
California Radiological Society
California Retailers Association
California Society of Anesthesiologists
California Society of Pathologists
California Society of Pediatric Dentistry
Children Now
Children's Defense Fund
Conifer Health Solutions
DaVita
District Hospital Leadership Forum
MedPoint Management
National Association of Chain Drug Stores
PICO California
Planned Parenthood Affiliates of California
Rural County Representatives of California
SB 640 | Page 10
Rural County Representatives of California
SynerMed
The Children's Partnership
United Ways of California
100% Campaign
Oppose: None received
--END--