BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 640 (Lara) - Medi-Cal: reimbursement: provider payments.
Amended: May 1, 2013 Policy Vote: Health 8-0
Urgency: Yes Mandate: No
Hearing Date: May 13, 2013 Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 640, an urgency measure, would eliminate
reductions in payments to Medi-Cal providers adopted as part of
the 2011-12 budget.
Fiscal Impact:
Annual increased costs for payments to Medi-Cal providers
of $428 million per year (General Fund), based on estimates
made by the Department of Health Care Services. This
increase in state costs reflects a reversal of the 10%
provider payment reduction going forward from the enactment
of the bill.
Potential increased costs for payments to Medi-Cal
providers up to $500 million over the next three years
(General Fund), based on estimates made by the Department of
Health Care Services. This increase in state costs reflects
a reversal of the 10% provider payment reduction
retrospective to the initial enactment of the reduction.
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
private hospitals, for the costs of providing treatment to
program participants. The remaining 70% of Medi-Cal
beneficiaries receive coverage through manage care plans. The
Department negotiates capitated payments with those manage care
plans.
Over the last several years, there have been a variety of
attempts by the state to reduce payment rates to Medi-Cal
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providers, in an effort to reduce state spending on the program.
Many of those rate reductions have been enjoined by the courts
or repealed and replaced by different budgetary actions.
As part of the 2011-12 budget (AB 97, Committee on Budget,
Statutes of 2011), the state imposed a 10% reduction in the
rates to be paid to all fee-for-service Medi-Cal providers and
required the capitated rates paid to managed care plans to be
reduced by an actuarially equivalent amount. In addition,
payment rates for distinct part skilled nursing facilities
(located on a hospital campus) were "rolled back" to the payment
rates in place in 2008-09 and then reduced by 10%. Rate
reductions were made retroactive to June 1, 2011 for all
fee-for-service providers.
The federal government has approved the proposed rate
reductions. However, implementation has been enjoined while
legal challenges to the reductions proceed. Currently, the issue
is under review by the federal 9th Circuit Court Of Appeals.
Pending federal approval and settlement of the outstanding
lawsuits, the Department has been paying both fee-for-service
and managed care providers without applying the reductions. The
Department of Health Care Services indicates that once legal
challenges to the rate reductions have been settled, it is
required under federal law to make the rate reductions
retrospective to June 1, 2011 (for fee-for-service providers).
Therefore the Department indicates that at the conclusion of the
legal challenges, it will reduce payment rates by 10% and
further reduce payments over several years in an amount that
will allow the state to recoup the savings that did not occur
while the rate reductions were under legal challenge. Rate
reductions for Medi-Cal managed care providers will be made
going forward, but the state will not recoup unrealized savings.
Proposed Law: SB 640 would eliminate reductions in payments to
Medi-Cal providers adopted as part of the 2011-12 budget.
Specifically, the bill would require payments for
fee-for-service Medi-Cal benefits and Medi-Cal managed care
payments to be determined without the 10% rate reduction. In
addition, the bill would also require that payments for Medi-Cal
fee-for-service benefits provided in distinct part skilled
nursing facilities to be determined without the roll back to
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2008-09 rates.
The bill prohibits the Department from reducing future payments
to providers to recover foregone savings.
The bill requires the Department to seek federal approval and
implement the bill to the maximum extent allowed under federal
law.
This bill is an urgency measure.
Related Legislation:
SB 646 (Nielsen) would eliminate the Medi-Cal
fee-for-service rate rollback and reductions for distinct
part skilled nursing facilities. That bill will be heard in
this committee.
SB 900 (Alejo) would eliminate the Medi-Cal fee-for-service
rate rollback and reductions for distinct part skilled
nursing facilities. That bill is in the Assembly
Appropriations Committee.
Staff Comments: According to the Department of Health Care
Services, federal regulations would not allow the state to undo
a previously approved rate reduction. Under this interpretation
of federal law, the state is required to reduce payment rates
from June 1, 2011 until a new state plan amendment has been
approved by the federal government. The state would only be able
to eliminate the previously adopted rate reductions going
forward after enactment of this bill.