BILL ANALYSIS Ó
AB 366
Page 1
Date of Hearing: April 14, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
AB 366
(Bonta) - As Amended April 7, 2015
SUBJECT: Medi-Cal: reimbursement: provider rates.
SUMMARY: Increases rates paid to providers in the Medi-Cal
program to the comparable rate paid in the Medicare program.
Specifically, this bill:
1)Repeals implementation of prior year Medi-Cal rate reductions,
including the 10 % reduction for affected Medi-Cal providers.
2)Increases rates paid to Medi-Cal primary care providers upon
expiration of the temporary increases required by state and
federal law.
3)Increases reimbursement rates for other Medi-Cal providers to
the amounts reimbursed by the federal Medi-care program for
the purpose of ensuring access to health care services and to
comply with federal Medicaid requirements regarding access to
care and services.
4)Increases reimbursement rates for Denti-Cal providers by
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equivalent rate of increase for other Medi-Cal providers for
the purpose of ensuring access to medically necessary dental
services and to comply with federal Medicaid requirements
regarding access to care and services.
5)Increases payment rates to Medi-Cal fee-for-service (FFS)
providers to not less than the payment rate in the Medicare
program for the same services.
6)Increases rates paid to Medi-Cal managed care plans and
requires the rates to be actuarially equivalent to the payment
rate established in Medicare.
7)Increases hospital Medi-Cal rates for inpatient hospital
services on a one-time basis and then requires annual
increases linked to the medical component of the California
consumer price.
8)Increases Medi-Cal managed care health plans by a
proportionately equal amount for increased payments for
hospital services.
9)Conditions granting rate increases on compliance with
applicable federal law and regulations, availability of
federal financial participation, and obtaining necessary
federal approvals.
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10)Authorizes the Department of Health Care Services (DHCS) to
implement through provider bulletins or other similar
instructions until July 1, 2018 at which time DHCS is required
to adopt regulations.
11)Contains an urgency clause and will go immediately into
effect.
EXISTING LAW:
1)Establishes the Medi-Cal program, administered by DHCS, under
which qualified low-income patients receive health care
benefits. Medi-Cal is California's version of the federal
Medicaid program in which funding is provide by both the state
and federal government.
2)Requires Medi-Cal provider payments and payments to Medi-Cal
managed care plans to be reduced by 10% for dates of service
on and after June 1, 2011.
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FISCAL EFFECT: This bill has not been analyzed by a fiscal
committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, this bill
would provide critical stability to health care provider
networks and ensure access to health care services for people
receiving services in the Medi-Cal program. The author notes
that with the dramatic expansion of enrollment in California's
Medi-Cal program, it makes no sense to continue Medi-Cal
provider rate reductions that limit access to care that were
enacted during California's economic downturn. California
already pays its Medi-Cal FFS providers some of the lowest
rates in the entire country (for primary care and obstetric
care, California ranked 48th among all states in 2012, and
overall, Medi-Cal compensated physicians at only 51 % of
Medicare levels). Having expanded Medi-Cal under the
Affordable Care Act (ACA), California needs to ensure that
Medi-Cal provider rates provide sufficient access to Medi-Cal
beneficiaries. In order for the expansion of Medi-Cal program
to result in access to care, an adequate number of health care
providers must be available to provide care to Medi-Cal
patients.
2)BACKGROUND.
a) Medi-Cal. Medicaid (known as Medi-Cal in California) is
a joint federal-state program to provide health coverage to
low-income individuals. With the enactment of the ACA and
California's implementation of the Medi-Cal expansion,
California has taken a major step toward filling gaps in
health coverage and removing financial barriers that limit
access to health care. Millions of low- to moderate-income
individuals have gained health benefits as states expand
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their Medicaid programs and develop their marketplaces for
private health plans. In 2010, 7.4 million people were
covered by Medi-Cal. Today, 11.9 million people - nearly
one in three Californians - are enrolled in the program.
With the Medi-Cal program projected to cover 12.2 million
people in 2015-16, access to care can be a problem for
those who have coverage, particularly if Medi-Cal plan and
provider rates are below those paid by other payors.
b) Access. Surveys of Californians conducted before
coverage expansions enacted under the ACA consistently
showed a wide gap between Medi-Cal enrollees and other
insured populations with respect to access to care. A 2011
survey funded by the California HealthCare Foundation
(CHCF) of over 1,500 Medi-Cal beneficiaries identified
difficulties in finding health care providers who accept
their coverage, as 34% of Medi-Cal beneficiaries said it
was difficult to find health care providers who accept
their insurance, compared to 13% for people with other
coverage. The survey found a higher percentage of adults
with Medi-Cal say they have more difficulty getting
appointments with specialists and primary care providers
than adults with other health coverage (42% v. 24% for
specialists and 26% v. 15% for primary care providers).
Similarly, the 2012 California Health Interview Survey asked
how access to care in Medi-Cal compares to access to care
in employer-sponsored insurance (ESI) for adults with
similar health care needs. Medi-Cal had bigger gaps in
access to care, including Medi-Cal beneficiaries being less
likely to have a usual source of care other than the
emergency room as compared to individuals with ESI (21.5%
v. 8.1%, Medi-Cal beneficiaries were more likely to have
used the emergency room than individuals with ESI (3.7% v.
0.5%), and Medi-Cal beneficiaries were either sometimes or
never able to get a physician appointment within two days
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of seeking an appointment compared to individuals with ESI
(46% v. 20.6%).
In addition to surveys of beneficiaries, surveys of
physicians and dentists have found lower participation in
Medi-Cal and lower reimbursement rates as compared to
Medicare and private insurance. A survey of physicians
through the Medical Board of California found the
percentage of California physicians accepting new patients
in 2013 was 62% for Medi-Cal, compared to 79% for private
insurance and 75% for Medicare. The percentage of
physicians with any Medi-Cal patients in their practice
(69%) was significantly lower than the percentage with any
Medicare patients (77%) and much lower than the percentage
with any privately insured patients (92%).
A December 2012 publication by the Kaiser Commission on
Medicaid and the Uninsured (KCMU) showed how states compare
in their 2012 Medicaid fee levels, and how Medicaid fees
compared to Medicare fees. In California, Medi-Cal fees
for all services were 51% of Medicare, primary care
physician fees were 43% of Medicare, obstetrical care
services were 54% of Medicare, and other services were 67%
of Medicare. A December 2014 Bureau of State Audits (BSA)
review of California's Denti-Cal Program found that
California had similar access to care problems for children
needing dental services, as five counties may lack active
providers, an additional 11 counties had no providers
willing to accept new Medi-Cal patients, and 16 other
counties appear to have an insufficient number of
providers. The BSA stated a primary reason for low dental
provider participation rates is low reimbursement rates
compared to national and regional averages and to the
reimbursement rates of other states BSA examined.
c) Primary Care Access. The expansion of Medicaid under
the ACA has exacerbated concerns about whether the supply
of primary care providers would be sufficient to ensure
access to care for this new population, particularly given
low reimbursement rates offered by many Medicaid programs.
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For this reason, the ACA included a so-called "primary care
bump," which required states, for 2013 and 2014, to
increase their Medicaid primary rates to those rates
provided by Medicare, and provided states 100% federal
funds to make up the difference between state rates and
Medicare rates. Final federal regulations were released in
November 2012, but a state plan amendment implementing the
federal requirement was only approved October 24, 2013,
nearly 11 months after the effective date.
The impact on physician acceptance of Medi-Cal is unclear at
this point, given that the Medi-Cal expansion just started
in January 2014, the dollars actually started flowing out
to providers on a retroactive basis in November 2013, the
payment bump is expected to expire in 2015, and there are
other, massive changes happening throughout the health care
system. Observers have noted that states and the federal
government will need to make decisions about whether to
extend these increased rates or let them expire before it
is clear how they affect provider behavior.
d) Recent Actions on Medi-Cal Rates. While the number of
people receiving health care through Medi-Cal has grown
dramatically, beginning in 2008, Medi-Cal payment rates to
health plans and providers in the program have been reduced
to help address the state budget deficits. In 2011, the
Legislature passed and Governor Brown signed AB 97
(Committee on Budget), Chapter 3, Statutes of 2011, into
law, which largely replaced prior Medi-Cal rate reductions
and which remains in effect. Major provisions of AB 97
include the following:
i) Reduced Medi-Cal provider payments by 10% for
FFS benefits for dates of service on and after June 1,
2011;
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ii) Required Medi-Cal managed care plan rates to be
reduced by the actuarial equivalent amount of the FFS
reduction, effective July 1, 2011;
iii) Froze rates at the 2008-09 rate year and then
applied the 10% rate reduction for certain types of
facility providers;
iv) Required the payment reductions to be applied
retroactively to June 1, 2011 or on such other date as
may be applicable when federal approval is obtained;
v) Conditioned the implementation of the payment
reductions on the reductions complying with federal
Medicaid requirements;
vi) Granted the Director of DHCS the discretion to
not implement a particular payment reduction or
adjustment, or to adjust the payment as necessary to
comply with federal Medicaid requirements, to the
extent that the director determines that the payments
do not comply with the federal Medicaid requirements or
that federal financial participation is not available
with respect to any payment that is reduced; and,
vii) Prohibited implementation of AB 97 until federal
approval was obtained.
Federal approval of the AB 97 rate reductions was obtained
in October 2011, but a court injunction prevented DHCS from
implementing many of these reductions. In June 2013, the
injunctions were lifted, giving the state authority to (1)
apply the reductions to current and future payments to
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providers on an ongoing basis; and, (2) retroactively
recoup the reductions from past payments that were made to
providers during the period in which the injunctions were
in effect (this is commonly referred to as a "claw back").
Since the 2013-14 budget was enacted, several types of
providers and services have been exempted from the ongoing
payment reductions through either administrative decisions
by DHCS or through subsequently enacted legislation. DHCS
administratively exempted from the AB 97 rate reduction the
following providers/services:
i) Pediatric health care;
ii) Audiology rates by a particular type of
provider;
iii) Residential care facilities for the elderly and
care coordinator agencies;
iv) Genetic disease screening program;
v) Community-based adult services providers located
in San Francisco;
vi) Non-profit dental pediatric surgery centers that
provide at least 99% of their services under general
anesthesia to children with severe dental disease under
age 21;
vii) For-profit dental pediatric surgery centers that
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provide services to at least 95% of their Medi-Cal
beneficiaries under age 21; and,
viii) Certain prescription drugs (or categories of
drugs) that are generally high-cost drugs used to treat
extremely serious conditions, such as hemophilia,
multiple sclerosis, hepatitis.
Medi-Cal managed care plans were also exempt from the
retroactive recoupment.
Providers subject to the retroactive payment recoveries
include pharmacies, durable medical equipment/supply
providers, clinical laboratories/laboratory services, and
radiology service providers. DHCS has indicated these
retroactive payment recoveries will not occur until after
the prospective 10% provider payment reductions are
implemented, and DHCS has indicated it will provide at
least 60 days advanced notification of scheduled
recoveries.
DHCS assumes total fund savings from the AB 97 reductions
of $550 million ($275 million General Fund) in 2015-16.
e) Medi-Cal FFS. Medi-Cal rates and access to care
requirements vary by FFS versus managed care, and are
governed by a complex mix of state and federal laws and
regulations, administrative decisions by DHCS and the
federal Centers for Medicare and Medicaid Services (CMS),
and court interpretation of federal Medicaid requirements.
Medicaid is a cooperative federal-state program, and in order
to qualify for federal funds, states must submit their
Medicaid plan and any amendments to CMS. Before approving a
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Medicaid State Plan Amendments (SPA), CMS conducts a review
to determine whether they comply with federal requirements.
For the AB 97 FFS rate reductions, the state submitted
several SPAs for federal approval. Relevant federal law
(Section 1902(a)(30)(A) of the Social Security Act) for the
AB 97 SPAs is as follows (emphasis added):
"provide such methods and procedures relating to the
utilization of, and the payment for, care and services
available under the plan . . . as may be necessary to
safeguard against unnecessary utilization of such care
and services and to assure that payments are consistent
with efficiency, economy, and quality of care and are
sufficient to enlist enough providers so that care and
services are available under the plan at least to the
extent that such care and services are available to the
general population in the geographic area;"
As a condition of approval of the AB 97 FFS rate reductions
in California's SPA, CMS required DHCS to monitor health
care access. DHCS was required to provide metrics which
adequately demonstrated beneficiary access to CMS, and a
monitoring plan that would apply to the services where
rates were being reduced. DHCS developed a health care
access monitoring system to better detect if Medi-Cal
beneficiaries are experiencing difficulties accessing
health care services in FFS Medi-Cal. CMS indicated DHCS
would monitor predetermined metrics on a quarterly or
annual basis in order to ensure the beneficiary access is
comparable to services available to the general population
in the geographic area. DHCS indicates it will report on
23 access measures annually and a subset of four access
measures quarterly. The four areas reported quarterly are
changes in physician supply, Medi-Cal beneficiary
participation, service utilization rates per 1,000 member
months, and beneficiary feedback.
f) Medi-Cal Managed Care. Medi-Cal managed care rates are
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also set under state and federal requirements. State law
requires DHCS to pay capitation rates to health plans
participating in the Medi-Cal managed care program using
actuarial methods under what is commonly referred to as the
"Mercer methodology" (Mercer is DHCS' actuarial consulting
firm). Medi-Cal managed care plans must provide DHCS with
financial and utilization data to establish rates. DHCS is
required to utilize a county- and model-specific rate
methodology to develop Medi-Cal managed care capitation
rates that includes, but is not limited to, all of the
following:
i) Health plan-specific encounter and claims data;
ii) Supplemental utilization and cost data submitted by
the health plans;
iii) FFS data for the underlying county of operation or
other appropriate counties as deemed necessary by DHCS;
iv) DMHC financial statement data specific to Medi-Cal
operations; and,
v) Other demographic factors, such as age, gender, or
diagnostic-based risk adjustments, as DHCS deems
appropriate.
Federal regulations for Medicaid managed care plans require
all payments under risk contracts (such as to Medi-Cal
managed care plans) and all risk-sharing mechanisms in
contracts to be actuarially sound. The requirement for
actuarially sound capitation rates means capitation rates
that:
i) Have been developed in accordance with generally
accepted actuarial principles and practices;
ii) Are appropriate for the populations to be covered,
and the services to be furnished under the contract; and,
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iii) Have been certified by actuaries who meet the
qualification standards established by the American
Academy of Actuaries and follow the practice standards
established by the Actuarial Standards Board.
For enrollees of Medi-Cal managed care plans, DHCS has
requirements for network adequacy in existing law,
regulation, contracts with health plans, and through All
Plan Letters issued by DHCS. For example, DHCS
contractually requires Medi-Cal managed care plans to abide
by the time and distance standards in the Knox-Keene Health
Care Service Plan Act of 1974 (Knox Keene Act). The
Knox-Keene Act is the body of law regulating health plans,
and it requires a primary care physician to be no more than
15 miles or 30 minutes from the place of residence or work
of the member unless the member chooses a different
provider; the Medi-Cal standard is 10 miles from a member's
residence unless the plan has a DHCS-approved alternative.
In addition, the Knox-Keene Act requires Medi-Cal managed
care plans (except for County Organized Health Systems,
which are exempt from the Knox-Keene Act) to make all
services be readily available at reasonable times to each
enrollee consistent with good professional practice.
Regulations implementing the Knox-Keene Act require timely
access to care by requiring urgent and non-urgent
appointments to be provided within specified timeframes.
Health plan members have the right to appointments within
the following time frames:
f) The Legislative Analyst's Office (LAO) review. The LAO
in their 2014-15 analysis of health reviewed DHCS' baseline
analysis and quarterly monitoring reports. The LAO came
away with numerous concerns about the quality of the DHCS
data, the soundness of the methodologies, and the
assumptions underlying the administration's findings on FFS
access. In the LAO's view, these concerns are sufficient
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to render the administration's public reporting of very
limited value for the purpose of understanding beneficiary
access in the FFS system. The LAO specifically cited
inflated estimates of available FFS physicians and a flawed
construction and interpretation of enrollee-to-physician
ratios that failed to take into account physicians
accepting new patients. Regarding Denti-Cal coverage (which
is primarily provided through FFS Medi-Cal), the LAO stated
that, because dental care will remain primarily a FFS
benefit for the foreseeable future, it recommended the
Legislature enact legislation that would create meaningful
standards for monitoring Denti-Cal access.
2)SUPPORT. The We Care for California Coalition, who represents
the largest statewide organizations of physicians, dentists,
hospitals, health care workers, community health clinics,
health plans, first responders, caregivers, and other health
providers, is the sponsor of the bill, arguing this bill is
necessary to ensure Medi-Cal recipients have real access to
health care. They note that as California's Medi-Cal program
as grown to serve over 12 million people, patients throughout
the state are experiencing significant hurdles receiving care
due to California's low reimbursement rates paid to Medi-Cal
provider, one of the lowest reimbursement rates in the
country. As a result of the low rates, patients on Medi-Cal
frequently express frustration about limited provider
availability and delays in accessing care. The supporters
note that Californians who rely on Medi-Cal for health
insurance are often unable to get medical services and often
must turn to hospital emergency rooms for access to healcare,
demonstrating that the low rates have negatively impacted the
health of all Californians. Supporters conclude that although
California law promises Medi-Cal beneficiaries access to
needed medical care in timely manner, patients and providers
know that promise is not being met.
3)RELATED LEGISLATION. SB 243 (Ed Hernandez) is virtually
identical to this bill. SB 243 is currently pending in Senate
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Health Committee.
4)PREVIOUS LEGISLATION.
a) AB 1805 (Skinner and Pan) would have required DHCS to
disregard the 10% payment reductions for Medi-Cal
providers, to the maximum extent permitted by federal law
and for the maximum time period for which federal financial
participation is obtained. AB 1805 was set for hearing in
the Assembly Appropriations Committee, but the hearing was
cancelled at the request of the author.
b) AB 900 (Alejo) of 2013 would have eliminated scheduled
Medi-Cal payment reductions for distinct part skilled
nursing facilities. AB 900 was held on the Appropriations
Committee suspense file.
c) SB 646 (Nielsen) of 2013 was similar to AB 900 and was
held in the Senate Appropriations Committee.
d) SB 640 (Lara) of 2013 would have required scheduled
Medi-Cal payment reductions not apply to Medi-Cal provider
and managed care health plans for services delivered after
June 1, 2011. SB 640 was held on the suspense file of the
Senate Appropriations Committee.
e) SB 640 (Lara) would have required scheduled Medi-Cal
payment reductions not apply to Medi-Cal provider and
managed care health plans for services delivered after June
1, 2011. SB 640 was held on the suspense file of the
Senate Appropriations Committee.
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f) AB 5 X3 (Committee on Budget), Chapter 3, Statutes of
2007-08 Third Extraordinary Session, reduced Medi-Cal
provider fee-for-service payments and payments to Medi-Cal
managed care plans by 10% effective July 1, 2008, and also
reduced payments for specified non-Medi-Cal programs in a
similar manner and reduced non-contract Medi-Cal hospital
payments as specified. AB 5 X3 exempted specified
providers from payment reductions.
g) AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008, rendered inoperative the AB 5 X3 rate reduction
provisions on February 28, 2009, and applied various
payment reductions to other providers.
h) AB 5 X4, for specified providers, froze Medi-Cal payment
rates for services provided in the 2009-10 rate year and
beyond, by prohibiting reimbursement rates from exceeding
rates applicable in the 2008-09 rate year after the 5%
reduction mandated by AB 1183.
i) AB 97 requires the rate reductions required by AB 1183
and AB 5 X4 not be instituted for services delivered on or
after June 1, 2011 (with specified exceptions). Reduces
Medi-Cal provider FFS and managed care payments by 10%
effective June 1, 2011. Reduces payments for non-Medi-Cal
programs for services on and after June 1, 2011, with
exceptions. AB 97 was dependent upon federal approval and
specified that payment reductions would be collected
retroactively to June 1, 2011. Federal approval was
obtained October, 2011 and effectively voided the payment
reductions mandated in AB 1183 and AB 5 X4.
j) AB 102 (Committee on Budget), Chapter 29, Statutes of
2011, continued the 1% and 5% Medi-Cal reductions set to
expire effective June 1, 2011, until the reimbursement
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reductions specified in AB 97 received federal approval, at
which time payments were to be collected retroactively back
to June 1, 2011.
REGISTERED SUPPORT / OPPOSITION:
Support
We Care for California (sponsor)
Adventist Health
Alliance of Catholic Health Care
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO
AMR
Anthem Blue Cross
The Arc and United Cerebral Palsy California Collaboration
Association of California Healthcare Districts
Association of Northern California Oncologists
Blue Shield of California
California Academy of Audiology
California Academy of Family Physicians
California Ambulance Association
California Association of Medical Products Suppliers
California Association of Physician Groups
California Chapter of the American College of Emergency
Physicians
California Children's Hospital Association
California Clinical Laboratory Association
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California Commission on Aging
California Coverage & Health Initiatives
California Dental Association
California Dialysis Council
California Hospital Association
California Labor Federation
California Medical Association
California Medical Transportation Association
California PACE Association
California Pharmacists Association
California Primary Care Association
California Radiological Society
California School Employees Association
California Society of Anesthesiologists
California Society of Plastic Surgeons
California. Society of Pathologists
Children's Defense Fund-California
Children Now
Children's Partnership
DaVita HealthCare Partners
Dignity Health
Health Access California
Health Net
Kaiser Permanente
LIUNA Locals 777&792
Maxim Healthcare Services
Medical Oncology Association of Southern California, Inc.
Molina Healthcare of California
National Association of Chain Drug Stores
National Coalition of Assistive and Rehab Technology
Occupational Therapy Association of California
Osteopathic Physicians and Surgeons of California
Paramedics Plus
PICO California
Planned Parenthood Action Fund of Santa Barbara, Ventura and San
Luis Obispo Counties, Inc.
Planned Parenthood Action Fund of the Pacific Southwest
Planned Parenthood Advocacy Project Los Angeles County
Planned Parenthood Affiliates of California
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Planned Parenthood Mar Monte
Planned Parenthood Northern California Action Fund
Planned Parenthood of Orange and San Bernardino Counties
Private Essential Access Community Hospitals
Providence Health & Services
Rural County Representatives of California
SEIU-UHW
United Ways of California
Several individuals
Opposition
None on file.
Analysis Prepared by:Roger Dunstan / HEALTH / (916) 319-2097