BILL ANALYSIS Ó
AB 366
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Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
366 (Bonta) - As Amended April 7, 2015
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
SUMMARY: This bill increases provider payment rates in the
Medi-Cal program. Specifically, this bill:
AB 366
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1)Repeals implementation of prior year Medi-Cal rate reductions,
including the 10% reduction for affected Medi-Cal providers.
2)Increases fee-for service (FFS) Medi-Cal reimbursement rates
for specified medical services to the amounts reimbursed by
the federal Medicare program, and by a similar amount for
dental services. Requires actuarially equivalent increases for
managed care.
3)Increases Medi-Cal hospital reimbursement rates for inpatient
hospital services by 16% on a one-time basis and requires
annual increases linked to the medical component of the
California consumer price index (CPI). Requires actuarially
equivalent increases for managed care.
4)Conditions granting rate increases on compliance with
applicable federal law and regulations, availability of
federal financial participation, and obtaining necessary
federal approvals.
5)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.
FISCAL EFFECT:
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1)Approximately $11.1 billion total funds ($6.6 billion GF) in
increased costs to Medi-Cal in 2016-17, and growing as
specified on an annual basis thereafter. This consists of:
a) Increased hospital payments of $1.7 billion ($841
million GF). In future years, hospital payments would
automatically increase annually by hundreds of millions of
dollars per year, depending on the medical CPI.
b) Decreased hospital quality assurance fee (QAF) revenues
of $1.2 billion. This reduction is associated with the
effect increased state payments to hospitals have on the
ability to raise funds through the hospital QAF. This
estimate assumes the QAF is extended past its current
expiration in December 2016.
c) Increased GF costs related to the reduction of revenues
for children's' health care coverage associated with the
hospital QAF, of $195 million, and potentially growing in
future years.
d) $538 million ($269 million GF) associated with restoring
the 10% payment reductions to certain FFS providers, and
actuarially equivalent reductions in managed care.
e) $10.9 billion ($5.3 billion GF) to increase specified
payments in FFS, managed care, and dental rates to the
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equivalent of Medicare rates.
1)$616 million ($308 million GF) over 2015-16 and 2016-17 in
lost savings and repayment related to the bill's repeal of
2011 provider cuts. This includes cuts that have been
implemented, and some that have not yet been implemented.
COMMENTS:
1)Purpose. The purpose of this bill is to increase payment rates
in the Medi-Cal program to reverse cuts made in the recent
recession and increase rates up to Medicare levels, which the
author believes will result in increased access to care for
Medi-Cal patients.
2)Background. California pays its Medi-Cal FFS providers some of
the lowest rates in the country. Medi-Cal has paid poorly by
national standards for quite some time; a 2001 LAO report
notes that 1998 FFS rates were 47 percent of Medicare rates,
as compared to 51% today. With the Medi-Cal program projected
to cover one-third of the state, or 12.2 million people in
2015-16, there is a state interest in ensuring enrollees can
access care.
3)Access in Medi-Cal. Surveys of Californians conducted before
coverage expansions enacted under the ACA consistently showed
a wide gap between Medi-Cal enrollees and other insured
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populations with respect to access to care. For example, a
2011 survey funded by the California HealthCare Foundation of
over 1,500 Medi-Cal beneficiaries identified difficulties in
finding health care providers who accepted their coverage, as
34% of Medi-Cal beneficiaries said it was difficult to find
health care providers who accepted their insurance, compared
to 13% for people with other coverage. The transition of most
Medi-Cal enrollees to managed care has been touted as ensuring
better access, as plans must meet network adequacy and other
access standards in order to remain licensed. Oversight of
managed care compliance with timely access and provider
network adequacy standards is currently being improved through
the passage of SB 964 (Ed Hernández), Chapter 573, Statutes of
2014, and related budget proposals. By federal law, FFS
payments must be sufficient to enlist enough providers so that
care and services are available to Medicaid beneficiaries to
at least the same extent that they are available to the
general population in a geographic area.
4)Legislative Analyst's Office (LAO) Recommendations. A review
of access issues in Medi-Cal, relevant to the 10% provider
cuts made pursuant to Chapter 3, Statutes of 2011 (AB 97,
Committee on Budget), is highlighted in the LAO Analysis of
the 2014-15 Health Budget. Key points include that the debate
over provider rates has largely focuses on FFS reductions,
while most enrollees are now in managed care. In addition,
LAO states they are unaware of any compelling evidence to
support the widely held notion that FFS rate-setting strongly
and persistently influences capitated rate-setting for
Medi-Cal managed care. The LAO recommends refocusing
oversight priorities on monitoring the managed care system
instead of on FFS rate levels, given the state has delegated
much de facto control over provider payment policy to Medi-Cal
managed care plans.
5)Related Legislation. SB 243 (Ed Hernandez), pending in Senate
Appropriations Committee, is virtually identical to this bill.
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6)Prior Legislation. Numerous bills have addressed Medi-Cal
payments; most recently:
a) AB 1805 (Skinner and Pan) required DHCS to disregard the
10% payment reductions for Medi-Cal providers. AB 1805 was
set for hearing in this committee, but the hearing was
cancelled at the request of the author.
b) AB 900 (Alejo) of 2013 eliminated scheduled Medi-Cal
payment reductions for distinct part skilled nursing
facilities. AB 900 was held on the Suspense File of this
committee.
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 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) AB 97 (Committee on Budget), Chapter 3, Statutes of
2011, reduced Medi-Cal provider FFS and managed care
payments by 10% effective June 1, 2011.
1)Staff Comments. This bill raises provider payments in Medi-Cal
significantly, ostensibly to increase access, with no
corresponding evaluation of whether the over $11 billion
annual costs is paying off in terms of increased access or
health outcomes for Medi-Cal enrollees. Access monitoring and
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evaluation would seem to be a critical missing piece of this
proposal. The author may also wish to consider whether there
are more cost-effectiveness ways of increasing access, such as
more targeted rate increases in areas with known access
problems, or complimentary approaches that could increase
providers' willingness to see Medicaid patients that are not
strictly monetary. Staff also notes automatic price increases
linked to medical inflation even beyond Medicare levels, such
as those proposed for hospital payments, would not incentivize
cost-efficient provision of services.
Finally, taking a very broad view, even access to care is
likely an intermediate metric; many observers would agree the
state is not interested in health care access simply for
access's sake, but for its role in improving health outcomes.
While access to health care has a significant effect on health
outcomes and is certainly worthy of attention, research shows
environmental and social determinants play a much bigger role
in health status. If improving health is the ultimate
outcome, the author may also wish to consider how this
proposal measures up against the costs and benefits of other
approaches to improving health. In addition, given the sheer
magnitude of the state fiscal impact, there are obvious
opportunity costs for other state priorities.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081