BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1161 (Beall) - Drug Medi-Cal.
          
          Amended: April 29, 2014         Policy Vote: Health 7-0
          Urgency: No                     Mandate: No
          Hearing Date: May 12, 2014      Consultant: Brendan McCarthy
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: SB 1161 would require the Department of Health  
          Care Services to seek a waiver of federal Medicaid law to  
          authorize federal matching funds for short term residential  
          (drug and alcohol) treatment and short-term inpatient medical  
          detoxification provided within institutes of mental disease.

          Fiscal Impact: 
              One-time costs up to $150,000 to develop a waiver  
              application by the Department of Health Care Services  
              (General Funds and federal funds).

              Unknown increased federal funding for services provided in  
              the Drug Medi-Cal program by local governments (federal  
              funds).  Under current law, counties provide and pay for  
              residential drug treatment services for pregnant and  
              post-partum women. Under current federal law, federal  
              matching funds are not available for services provided in an  
              institute of mental disease (IMD) with more than 16 beds. In  
              effect, this "IMD exclusion" means that counties are  
              providing some services through Drug Medi-Cal without  
              receiving federal matching funds. To the extent that the  
              bill results in the federal government waiving the IMD  
              exclusion, counties would receive additional federal  
              funding.

              Annual costs of about $50 million per year to the state  
              (and about $70 million in additional federal matching funds)  
              to provide additional services in the Drug Medi-Cal program  
              that were newly authorized as of January 1, 2014 (General  
              Fund and federal funds). 

              Under the terms of the state's 2011 realignment, the state  
              is responsible for any new services authorized in law for  








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              realigned programs, including Drug Medi-Cal. As part of the  
              state's expansion of Medi-Cal, the state expanded both the  
              population eligible for Medi-Cal and the benefit package  
              available in Medi-Cal. As of January 1, 2014, all Medi-Cal  
              beneficiaries are eligible for residential treatment and  
              inpatient detoxification services (previously those benefits  
              were only authorized for pregnant or post-partum women).  
              However, because those services cannot be provided in an IMD  
              under federal law and there are very few non-IMD providers  
              of those services, the federal government did not accept the  
              state plan amendment proposal to add those services to the  
              Medi-Cal benefit package. Thus, the state will not provide  
              those services any Medi-Cal beneficiaries other than the  
              previously eligible pregnant and post-partum population,  
              despite the authority in current law.

              If the federal government were to waive the IMD exclusion  
              under this bill, it is likely that the federal government  
              would also allow the state to add those benefits to the  
              Medi-Cal benefit package. In that case, the state would be  
              responsible for paying for the non-federal share of the cost  
              to provide those benefits to Medi-Cal beneficiaries. 

              Increased federal funding of about $20 million per year for  
              benefits provided to the newly eligible Medi-Cal population  
              (i.e. childless adults). Over time, the state will assume a  
              share of this cost, rising to 10 percent of total costs by  
              2020.

          Background: Under state and federal law, the Department of  
          Health Care Services operates the Medi-Cal program, which  
          provides health care coverage to pregnant women, children and  
          their parents with low incomes, as well as blind, disabled, and  
          certain other populations. Generally, the federal government  
          provides a 50 percent federal match for state expenditures. 

          Pursuant to the federal Affordable Care Act, California has  
          opted to expand eligibility for Medi-Cal up to 138 percent of  
          the federal poverty level and to include childless adults.  The  
          Affordable Care Act provides a significantly enhanced federal  
          match for the Medicaid expansion. Under the law, the federal  
          government will pay for 100 percent of the cost of the Medicaid  
          expansion in 2013-14 declining to a 90 percent federal match in  
          the 2020 federal fiscal year and thereafter.








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          With the exception of certain populations (for example,  
          individuals eligible for limited scope Medi-Cal benefits or  
          individuals dually eligible for Medi-Cal and Medicare in most  
          counties), managed care is the primary system for providing  
          Medi-Cal benefits. The Department estimates that in 2014-15, 7.5  
          million Medi-Cal beneficiaries (73 percent of total enrollment)  
          will receive care through the managed care system. 

          Drug Medi-Cal, which is the package of benefits related to  
          substance use disorders has been "carved out" of managed care  
          and is provided by the counties using realignment funds.  
          According to the 2011 realignment, counties are only responsible  
          for the costs to provide benefits that were authorized prior to  
          September 30, 2012. 

          Pursuant to Government Code Section 30026.5, legislation enacted  
          after September 30, 2012, that has an overall effect of  
          increasing the costs already borne by a local agency for  
          programs or levels of service under the 2011 Realignment shall  
          apply to local agencies only to the extent that the state  
          provides annual funding for the cost increase. Local agencies  
          shall not be obligated to provide programs or levels of service  
          required by legislation above the level for which funding has  
          been provided. 

          Under federal law, federal financial participation is not  
          available for any services provided to Medicaid (Medi-Cal)  
          beneficiaries under age 65 in an institute of mental disease  
          (which by definition is an inpatient facility with more than 16  
          bends providing primarily psychiatric services). Under this  
          federal law, when Drug Medi-Cal beneficiaries receive services  
          within an institute of mental disease (for example, residential  
          substance use treatment), no federal matching funds are  
          available and the state or counties are responsible for all  
          costs. As noted above, because of the federal IMD exclusion and  
          its impact on the availability of providers, the federal  
          government has not authorized the state to include additional  
          residential inpatient treatment and detoxification services in  
          the Medi-Cal program.

          Proposed Law: SB 1161 would require the Department of Health  
          Care Services to seek a waiver of federal Medicaid law to  
          authorize federal matching funds for certain Drug Medi-Cal  








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          benefits provided within institutes of mental disease.

          The bill would require the Department to seek a federal waiver  
          to allow federal financial participation for short term  
          residential treatment in facilities with more than 16 beds and  
          short-term inpatient medical detoxification in a hospital  
          setting.

          The bill would only be implemented to the extent that federal  
          financial participation is available.

          Related Legislation: SB 973 (Hernandez) would make several  
          changes to the statutes governing narcotic treatment programs.  
          That bill will be heard in this committee.

          Staff Comments: Current federal law allows states to apply for  
          "waivers" of requirements of the federal Social Security Act.  
          This process allows states, on a case by case basis, to make  
          changes to their Medicaid program with the approval of the  
          federal Centers for Medicare and Medicaid Services. In general,  
          for the federal government to approve a waiver, the state must  
          demonstrate that total federal costs will not exceed  
          fee-for-service equivalent costs to the federal government over  
          the period of the waiver. In order for the federal government to  
          approve a waiver under this bill, the Department will need to  
          demonstrate that overall federal costs will not increase, even  
          though the waiver would explicitly seek to increase federal  
          funding for specified services. The Department would likely need  
          to demonstrate that additional federal funding for select  
          inpatient services would reduce the need for other Medi-Cal  
          services over the period of the waiver. It is important to note,  
          however, that the Department is currently developing a waiver  
          application to administer the Drug Medi-Cal program as an  
          organized delivery system (in other words, to shift Drug  
          Medi-Cal from a fee-for-service model to a managed care model,  
          separate from the overall Medi-Cal managed care program).