BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                         AB 72|
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                                   THIRD READING 

          Bill No:  AB 72
          Author:   Bonta (D) and Atkins(D)
          Vote:     27  - Urgency

           SENATE HEALTH COMMITTEE:  9-0, 7/15/15
           AYES:  Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen,  
            Pan, Roth, Wolk

           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza
           NO VOTE RECORDED:  Nielsen

           ASSEMBLY FLOOR:  78-0, 4/23/15 (Consent) - See last page for  

           SUBJECT:   Medi-Cal: demonstration project

          SOURCE:    Author

          DIGEST:  This bill requires the Department of Health Care  
          Services to submit an application to the federal Centers for  
          Medicare and Medicaid Services for a waiver to implement a  
          demonstration project that furthers the delivery of high-quality  
          and cost-efficient care for Medi-Cal beneficiaries, ensures the  
          long-term viability of the delivery system following the  
          expansion of Medi-Cal eligibility under the federal Patient  
          Protection and Affordable Care Act, and continues California's  
          momentum and successes in innovation achieved under the 2010  
          "Bridge to Reform" Waiver.


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          Existing law:

          1)Establishes the Medi-Cal program, which is administered by the  
            Department of Health Care Services (DHCS) and under which  
            qualified low-income persons receive health care benefits. 

          2)Establishes a demonstration project under the Medi-Cal program  
            until October 31, 2015, to implement specified objectives,  
            including better care coordination for Seniors and Persons  
            with Disabilities (SPDs) and maximization of opportunities to  
            reduce the number of uninsured individuals.

          This bill:

          1)Requires DHCS to submit an application to the federal Centers  
            for Medicare and Medicaid Services (CMS) for a waiver to  
            implement a demonstration project that does all of the  

             a)   Furthers the delivery of high-quality and cost-efficient  
               care for Medi-Cal beneficiaries;

             b)   Ensures the long-term viability of the delivery system  
               following the expansion of Medi-Cal eligibility under the  
               federal Patient Protection and Affordable Care Act (ACA);  

             c)   Continues California's momentum and successes in  
               innovation achieved under the 2010 "Bridge to Reform"  

          2)Requires DHCS to consult with interested stakeholders and the  
            Legislature in developing the waiver application.

          3)Contains an urgency clause that will make this bill effective  
            upon enactment.



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          1)Author's statement. According to the author, this bill is one  
            of two legislative vehicles to make the necessary statutory  
            changes to implement a new Section 1115 Medicaid waiver as the  
            2010 California Bridge to Reform Waiver (Waiver) expires on  
            October 31, 2015. The Waiver renewal is critical to the  
            long-term fiscal sustainability of the Medi-Cal program and to  
            California's ability to continue to provide high quality  
            health care to Medi-Cal beneficiaries. The goals of the Waiver  
            are to continue to support ACA implementation, improve the  
            health care quality and outcomes of the over 12 million  
            individuals enrolled in Medi-Cal, and provide for the  
            long-term fiscal stability of the Medi-Cal program through  
            delivery system transformation. Specific strategies  
            anticipated to be included in the waiver renewal include a  
            federal-state shared savings initiative; housing and  
            supportive services for vulnerable populations; various health  
            plan and provider delivery system transformation and alignment  
            incentive programs, including a new Delivery System Reform  
            Incentive Program (DSRIP) at designated public hospitals and  
            non-designated public hospitals; workforce development  
            strategies to expand provider access and capacity; and safety  
            net payment and delivery system transformation.

          2)Federal Section 1115 Waiver and Expenditure Authority.  
            Medicaid, known as Medi-Cal in California, is a joint  
            federal-state program to provide health coverage to low-income  
            individuals. Section 1115 of the federal Social Security Act  
            (Act) gives the Secretary of the Department of Health and  
            Human Services (HHS) authority to waive provisions of major  
            health and welfare programs authorized under the Act. This  
            includes certain federal Medicaid requirements in any  
            experimental pilot or demonstration project which, in the  
            judgment of the Secretary, is likely to assist in promoting  
            the objectives of Medicaid. In addition, Section 1115 also  
            allows states to use federal Medicaid funds to reimburse for  
            costs in ways that are not otherwise allowed under federal  
            Medicaid law. Section 1115 waivers are approved at the  
            discretion of the Secretary of HHS through negotiations  
            between a state and CMS for projects that the Secretary  
            determines promote Medicaid program objectives. Section 1115  
            waivers are generally approved for a five-year period and then  
            must be renewed. Although not required by statute or  
            regulation, longstanding federal administrative policy has  
            required waivers to be "budget neutral" for the federal  


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            government, meaning that federal spending under a waiver must  
            not be more than projected federal spending in the state  
            without the waiver. 
           3)Bridge to Reform Waiver. California's existing Section 1115  
            "California Bridge to Reform Demonstration" Waiver is a  
            five-year demonstration of health care reform initiatives that  
            was projected to provide an additional $10 billion in federal  
            funds over the lifetime of the waiver. The waiver prepared the  
            state for successful implementation of health care reform  
            through an early expansion of Medicaid, and tested innovations  
            in health care support for safety net providers. California is  
            currently in the fourth year of this waiver, which began  
            November 1, 2010, and expires October 31, 2015. California  
            also operates its Medi-Cal managed care delivery system under  
            this federal waiver. The Bridge to Reform Waiver enabled  
            California to:
              a)   Implement an early expansion of Medicaid to low-income  
               adults without minor children under the ACA through the Low  
               Income Health Program, which enrolled 650,000 individuals;

             b)   Require the mandatory enrollment of SPDs into Medi-Cal  
               managed care plans in specified counties;

             c)   Provide federal funding for delivery system reform and  
               uncompensated care in designated public hospital systems  
               (21 county and University of California hospitals) through  
               the DSRIP and Safety Net Care Pool Uncompensated Care  

             d)   Provided federal funding for designated state health  
               care programs and workforce development programs related to  
               medically disadvantaged service areas; and,

             e)   Operate its Medi-Cal managed care program,  
               Community-Based Adult Services (CBAS) program, and seven  
               county Coordinated Care Initiative (under the CCI,  
               individuals dually eligible for Medicare and Medi-Cal  
               receive their Medi-Cal and Medicare benefits through one  
               health plan).

          1)DHCS Waiver Submission. On March 27, 2014, following several  
            months of waiver-related stakeholder meetings, DHCS submitted  


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            an application to renew the state's Section 1115 Waiver  
            Demonstration entitled "Medi-Cal 2020: Key Concepts for  
            Renewal" (Medi-Cal 2020). DHCS indicates the focus of the  
            Waiver Renewal will be on continuing to drive the  
            transformation of its Medi-Cal program, ensuring ongoing  
            support for the safety net in California, and ensuring the  
            long-term viability of the program and the Medicaid expansion.  
             Existing 1115 Waiver authorities and programs that would  
            continue under the next Waiver include the CCI, the CBAS  
            waiver, managed care program, Indian Health Services  
            uncompensated care, Designated State Health Programs, the  
            pending Drug Medi-Cal Organized Delivery System program, and  
            the provision of full scope benefits for pregnant women with  
            incomes between 109 percent to 138 percent of the federal  
            poverty level.

            In addition to the continuation of existing waiver programs,  
            DHCS will pursue a set of six, cross-cutting approaches that  
            together will advance delivery system transformation in  
            California as part of Medi-Cal waiver renewal: 

             a)   Managed Care Systems Transformation & Improvement  
               Program - Joint incentive pools for Medi-Cal plans,  
               behavioral health systems and providers to align  
               incentives, improve health outcomes and reduce overall  

             b)   Fee-for-Service (FFS) Transformation & Improvement  
               Program - FFS incentives in dental and maternity care to  
               expand access to dental services through targeted  
               incentives to increase provider participation and incenting  
               delivery of preventative services in lieu of more invasive  
               and costly procedures;

             c)   Public Safety Net System Transformation & Improvement  
               Program - Funding for quality improvement for public  
               hospitals, and expanding eligibility for this funding to  
               the 40+ non-designated public hospitals;

             d)   Workforce Development Program - Waiver funding to  
               provide financial incentives to (1) health professionals  
               who have not previously cared for Medi-Cal members, and to  
               existing Medi-Cal providers who treat additional Medi-Cal  
               beneficiaries, targeted to health professionals in  


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               geographic areas with the greatest need for Medi-Cal  
               participating providers and to professions and specialties  
               where recruiting is most challenging; (2) voluntary  
               training opportunities to improve quality for non-clinical  
               members of the care team to help those new to coverage  
               navigate the health system through health education and  
               other outreach efforts; and (3) incentives and programs to  
               expand cross-training of providers in primary care, mental  
               health, substance use disorder services, and long-term  
               services and supports, and to support integration of  
               multi-disciplinary teams across care settings;

             e)   Increased Access to Housing and Supportive Services  
               Program - The Waiver will provide tools to better  
               coordinate care for the most vulnerable Medi-Cal members  
               through policies, data analysis and measurement that  
               facilitate access to supportive services that are also  
               proven to reduce costs, including improved access to  
               affordable housing;

             f)   Whole Person Care Pilots - An option for enhanced model  
               of regional partnerships requiring proposals for a  
               geographic region, such as a county or group of counties,  
               jointly pursued by the county and applicable Medi-Cal plans  
               for that region whereby managed care plans, counties, and  
               local partners would provide Whole-Person Care for target  
               high need patients through collaborative leadership and  
               systematic coordination with other public and private  
               entities identified by the county. The pilot design would  
               encourage innovation in delivery and financing strategies  
               to improve health outcomes of target populations; and,

             g)   Public Safety Net System Global Payment for the  
               Remaining Uninsured - Moving disproportionate share  
               hospital and SNCP funding into a global budget structure  
               where care for the remaining uninsured would be provided  
               within a global budget for all uninsured services, thus  
               giving public hospital systems the incentive to provide  
               more coordinated upstream care for the uninsured and reduce  
               inappropriate utilization.

          In support of California's efforts to achieve the goals outlined  
          above, DHCS seeks to test a new investment strategy in  
          partnership with the federal government by initiating a  


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          federal-state shared savings model. California's shared savings  
          initiative would involve a reinvestment of federal funding in  
          recognition of the savings that California's Section 1115  
          demonstration initiatives generate to the benefit of both the  
          state and the federal government. This reinvestment would  
          provide the state with a portion of the federal savings that are  
          generated through the demonstration to facilitate and augment  
          continued Medi-Cal delivery system transformation. Under this  
          initiative, California would be required to demonstrate that the  
          federal savings generated under the waiver are substantial  
          enough to permit California to retain a portion or percentage of  
          that savings. The state would need to demonstrate that, even  
          after reinvestment in the waiver strategies, the federal  
          government will continue to realize savings. If the waiver  
          strategies implemented through Medi-Cal 2020 do not result in  
          the level of federal savings that is projected, California would  
          be required to limit the spending on waiver reinvestment  
          initiatives to ensure overall savings and budget neutrality.

          The state's waiver request in Medi-Cal 2020 is for $17.1 billion  
          in federal funds over the five years of the waiver. The state's  
          waiver request is pending with the federal government.

          Related Legislation
          SB 36 (Hernandez and De Leon) is identical to this bill. SB 36  
          is scheduled to be heard in the Assembly Appropriations  
          Committee on August 19, 2015.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee, no new  
          administrative costs to DHCS are anticipated due to this bill.  
          DHCS is currently in the process of developing a waiver  
          application and has been engaged in planning and stakeholder  
          discussions which will continue in 2015-16. Because DHCS is  
          already undertaking these efforts, this bill will not impose new  
          administrative duties on DHCS.

          SUPPORT:   (Verified8/18/15)


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          American Federation of State, County and Municipal Employees
          Association of California Health Care Districts
          California Association of Physician Groups
          California Association of Public Hospitals and Health Systems
          California State Association of Counties
          California State Council of the Service Employees International  
          Community Clinic Association of Los Angeles County
          District Hospital Leadership Forum
          Planned Parenthood Affiliates of California
          University of California                    

          OPPOSITION:   (Verified8/18/15)

          None received

          ARGUMENTS IN SUPPORT:     The California Association of  
          Physician Groups (CAPG) writes that it supports policy measures  
          that encourage the implementation of the Triple Aim which  
          include decreased cost, improved patient experience and  
          development of population health management. CAPG writes the new  
          "Medi-Cal 2020" waiver seeks approximately $17 billion in  
          federal investment to further the achievements California has  
          made in health care reform that a set of payment and delivery  
          system transformation strategies. CAPG states it continues to  
          support and participate in the waiver renewal stakeholder  

          The California State Association of Counties (CSAC) writes in  
          support that DHCS' Medi-Cal 2020 waiver renewal addresses the  
          counties' priorities, and introduces a new concept transforming  
          California's public safety net for the remaining uninsured by  
          creating a global payment system. CSAC states the global  
          payments offer a unique opportunity for California to serve as  
          an incubator in testing new payment methods for delivering care  
          to the uninsured and in transforming care away from high-cost  
          settings (such as emergency rooms) towards primary care. CSAC  
          argues these individual payments would allow each hospital  
          system more certainty about its budget and how much in federal  
          funds will be available.


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          ASSEMBLY FLOOR:  78-0, 4/23/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,  
            Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,  
            Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,  
            Waldron, Weber, Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Campos, Salas

          Prepared by:Scott Bain / HEALTH / 
          8/19/15 20:23:19

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