BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 366 --------------------------------------------------------------- |AUTHOR: |Bonta | |---------------+-----------------------------------------------| |VERSION: |July 7, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |July 15, 2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Scott Bain | --------------------------------------------------------------- SUBJECT : Medi-Cal: annual access monitoring report. SUMMARY : Requires the Department of Health Care Services (DHCS) to submit to the Legislature, and post on the DHCS' Internet Web site, a Medi-Cal access monitoring report. Requires the report to present results of DHCS' ongoing access monitoring efforts in fee-for-service and managed care and to compare the level of access to care and services available through Medi-Cal, to the level of access to care and services available to the general population in different geographic areas of California. Existing law: 1)Establishes the Medi-Cal program, administered by DHCS, under which qualified low-income individuals receive health care services. 2)Requires payments to be reduced by 10% for Medi-Cal fee-for-service (FFS) benefits for dates of service on and after June 1, 2011. Requires payments to Medi-Cal managed care plans to be reduced by the actuarial equivalent amount of the 10% payment reduction. This is referred to as the "AB 97 reductions." 3)Requires the Director of the Department of Health Services (DHS was the predecessor to DHCS) to annually review the reimbursement levels for physician and dental services under Medi-Cal, taking into account the following factors: a) Annual cost increases for physicians as reflected by the Consumer Price Index; b) Physician reimbursement levels of Medicare, Blue Shield, and other third-party payers; AB 366 (Bonta) Page 2 of ? c) Prevailing customary physician charges within the state and in various geographical areas; d) Procedures reflected by the current Relative Value Studies (RVS); and, e) Characteristics of the current population of Medi-Cal beneficiaries and the medical services needed. This bill: 1)Requires DHCS to submit to the Legislature, and post on the DHCS Internet Web site, a Medi-Cal access monitoring report. Requires the annual report to be completed by March 15, 2016, and annually thereafter by February 1st, and to include the following: a) Present results of DHCS' ongoing access monitoring efforts in FFS and managed care. Requires, for managed care, the report to include results from the Department of Managed Health Care's oversight of provider networks and timely access in Medi-Cal managed care. b) Compare the level of access to care and services available through Medi-Cal, to the level of access to care and services available to the general population in different geographic areas of California; c) Include access measurements of sufficient granularity to reflect patient experience of access to particular services or provider types, or in particular geographic areas; d) Identify particular services, provider types, or geographic areas for which the level of access is less than the level of access to care and services available to the general population in the geographic area. Requires, for those services, provider types, or geographic areas, the annual report to assess and report on the adequacy of provider payment rates and identify any other factors that impede access; Use language clearly understandable to the public; and, e) Use more than one valid, generally accepted method to assess access to care. 2)Requires DHCS, at least once annually, to hold a public meeting to present and discuss the access monitoring report, and to accept public comment from stakeholders at the public meeting. AB 366 (Bonta) Page 3 of ? 3)Permits DHCS to enter into a contract with an independent entity to perform an ongoing assessment of access to care and the adequacy of provider payment rates in Medi-Cal. 4)Requires, for services, provider types, or geographic areas for which rates are identified in the annual report as inadequate, rate increases to be implemented to the extent funding is provided in the annual Budget Act and federal financial participation is available. 5)Makes legislative findings and declarations that it is important to ensure adequate access to care in the Medi-Cal program as new enrollees seek appropriate care, that the state needs to assess the gaps in access to care and act swiftly to address those gaps, that one area of anticipated need is the availability of more Medi-Cal providers, that Medi-Cal provider reimbursement rates have historically been among the lowest in the nation, that during recent years, the state has reduced reimbursement rates to Medi-Cal providers due to budget constraints, and that an assessment of gaps in access should include a determination of whether current provider rates are sufficient to ensure access to care. 6)States legislative intent that an annual access monitoring report provide a valid, clear, and public assessment of access to care in Medi-Cal, and provide a basis to evaluate the adequacy of Medi-Cal rates and the existence of other barriers to access to care. FISCAL EFFECT : According to the Assembly Appropriations Committee, costs in the range of $1 million (General Fund/federal funds) for enhanced monitoring and reporting of access and adequacy of provider rates. PRIOR VOTES : ----------------------------------------------------------------- |Assembly Floor: |77 - 0 | |------------------------------------+----------------------------| |Assembly Appropriations Committee: |17 - 0 | |------------------------------------+----------------------------| |Assembly Health Committee: |16 - 0 | AB 366 (Bonta) Page 4 of ? | | | ----------------------------------------------------------------- COMMENTS : 1)Author's statement. 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, there is increased concern about access to care. That concern stems from the low rates in the program. 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 Patient Protection and Affordable Care Act (ACA), California needs to ensure that Medi-Cal beneficiaries have sufficient access to care. 2)Medi-Cal budget. The 2015-16 DHCS budget assumes average monthly enrollment in Medi-Cal of 12.4 million individuals, and total expenditures of $91.3 billion ($18.1 billion General Fund). Each monthly, DHCS assumes 9.5 million individuals, or 76.6% of program enrollment, to be in Medi-Cal managed care plans, and 23.3%, or 2.9 million, to be in FFS. 3)Medi-Cal rates. To achieve budget savings in Medi-Cal during the state's fiscal crisis, the state has three principle policy and fiscal choices: (a) to reduce or restrict who is eligible for Medi-Cal benefits; (b) to reduce the scope of benefits provided in the program; and, (c) to reduce the payments to health care providers and managed care plans for Medi-Cal services. Federal law has prevented or limited the state's ability to reduce eligibility, but the state previously eliminated benefits in Medi-Cal, most notably adult dental services (which were partially restored in May 2014). In addition, the state has attempted several times to reduce Medi-Cal payments to health plans, health facilities and health care providers. However, some of these rate reductions did not, and have not taken effect because of court injunctions, while other reductions have expired by their own AB 366 (Bonta) Page 5 of ? terms and been replaced by different rate reductions. 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 were reduced to help address state budget deficits. In 2011, the Legislature passed and Governor Brown signed AB 97 into law, which largely replaced prior Medi-Cal rate reductions and which remains in effect today. Major provisions of AB 97 include the following: a. Reduced Medi-Cal provider payments, with specified exceptions, by 10% for FFS benefits for dates of service on and after June 1, 2011; b. Required Medi-Cal managed care plan rates to be reduced by the actuarial equivalent amount of the FFS reduction, effective July 1, 2011; c. Froze rates at the 2008-09 rate year and then applied the 10% rate reduction for certain types of facility providers; d. 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; e. Conditioned the implementation of the payment reductions on the reductions complying with federal Medicaid requirements; f. 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, g. Prohibited implementation 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 providers on an ongoing basis; and, (2) retroactively recoup the reductions from past payments that were made to providers AB 366 (Bonta) Page 6 of ? during the period in which the injunctions were in effect (this is commonly referred to as a "claw back"). The AB 97 reductions did not apply to certain provider categories, including hospital inpatient and outpatient services, critical access hospitals, federally qualified health centers and hospices, services provided under Family PACT and payments funded by intergovernmental transfers or certified public expenditures. Entities subject to the AB 97 rate reduction include physician services to adults, other health care providers (such as nurse practitioners, psychologists, podiatrists, optometrists, physical therapists), blood banks, adult day care centers, MSSP providers, medical transportation providers, durable medical equipment/supply providers, dental service providers, clinics and pharmacy providers. 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 Medi-Cal managed care plans from the AB 97 retroactive reduction, and the following providers/services were exempted prospectively: a) Pediatric health care; b) Audiology rates by a particular type of provider; c) Residential care facilities for the elderly and care coordinator agencies; d) Genetic disease screening program; e) Community-based adult services providers located in San Francisco; f) 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; g) For-profit dental pediatric surgery centers that provide services to at least 95 % of their Medi-Cal beneficiaries under age 21; and, h) 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. AB 366 (Bonta) Page 7 of ? Providers subject to the retroactive payment recoveries include pharmacies, durable medical equipment/supply providers, clinical laboratories/laboratory services, distinct part skilled nursing facilities, 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. The provisions of AB 97 were not changed in the most recently enacted 2015-16 budget, except for Denti-Cal services. The AB 97 10% rate reduction was repealed for dental services for by the health budget trailer bill, SB 75 (Committee on Budget and Fiscal Review) Chapter 18, Statutes of 2015. Specifically, the 10% rate reduction was repealed for dental services and applicable ancillary services for dates of service on or after July 1, 2015, or the effective date of any necessary federal approvals, whichever is later, and for Denti-Cal managed care plans for contract amendments or change orders effective on or after July 1, 2015, or the effective date of any necessary federal approvals, whichever is later. 1)Physician and dentist participation in Medi-Cal. 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 March 2015 National Centers for Health Statistics Data Brief found 76.6% of California physicians were accepting new privately insured patients, 77.2 were accepting new Medicare patients, as compared to 54.2 % of California physicians who were accepting new Medi-Cal patients. The national average for accepting new Medicaid patients was 68.9%. AB 366 (Bonta) Page 8 of ? 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. 2)Access to care 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 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 AB 366 (Bonta) Page 9 of ? 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 of seeking an appointment compared to individuals with ESI (46% v. 20.6%). 3)Primary care rate bump under ACA. 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. For this reason, the ACA included a "primary care bump," which required states, for 2013 and 2014, to increase their Medicaid primary care rates to those rates provided by Medicare, and provided states 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 California submitted to implement the federal requirement was only approved October 24, 2013, nearly 11 months after the effective date. The increased payments covered the two years the primary care bump was in effect, but the increased payments ended December 31, 2014. 4)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 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 AB 366 (Bonta) Page 10 of ? 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 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. 5)Medi-Cal managed care. Medi-Cal managed care rates are 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 health plan-specific encounter and claims data, supplemental utilization and cost data submitted by the health plans, FFS data for the underlying county of operation or other appropriate counties as deemed necessary by DHCS. Federal regulations for Medicaid managed care plans require all AB 366 (Bonta) Page 11 of ? payments under risk contracts (such as to Medi-Cal managed care plans) and all risk-sharing mechanisms in contracts to be actuarially sound. 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. 6)Recent Supreme Court decision on Medicaid rates. In March 2014, the United States Supreme Court issued a decision in Armstrong et al. v. Exceptional Child Center, Inc., et al. In that case, providers of "habilitation services" under Idaho's Medicaid plan are reimbursed by the Idaho's Department of Health and Welfare. Section 1902(a)(30)(A) of the federal Medicaid Act requires Idaho's plan to "assure that payments are consistent with efficiency, economy, and quality of care" while "safeguard[ing] against unnecessary utilization of . . .care and services. The providers of habilitation services sued the Idaho Health and Welfare Department officials, claiming that petitioner Idaho reimbursed them at rates lower than §30(A) permits, and sought to enjoin Idaho to increase these rates. The District Court entered summary judgment for the providers. The Ninth Circuit affirmed, concluding that the Supremacy Clause gave the providers an implied right of action, and that they could sue under this implied right of action to seek an injunction requiring Idaho to comply with AB 366 (Bonta) Page 12 of ? §30(a). The Supreme Court reversed this decision in a 5-4 opinion. The Supreme Court concluded that the Supremacy Clause of the Constitution does not confer a private right of action, and that Medicaid providers cannot sue for an injunction requiring compliance with §30(a). The Supreme Court also stated that the providers of habilitation services suit cannot proceed in equity as the power of federal courts of equity to enjoin unlawful executive action is subject to express and implied statutory limitations. In this case, the express provision of a single remedy for a State's failure to comply with Medicaid's requirements-the withholding of Medicaid funds by the federal Secretary of Health and Human Services, and the sheer complexity associated with enforcing §30(A) combine to establish Congress's "intent to foreclose" equitable relief. 7)Related legislation. Last session, SB 870 (Senate Budget and Fiscal Review Committee), was signed by Governor Brown on June 20, 2014. Among its provisions is uncodified legislative intent language that requires DHCS to continue to monitor access to and utilization of Medi-Cal services in the FFS and managed care settings during the 2014-15 fiscal year, in conjunction with DHCS' federally approved plan to monitor health care access for Medi-Cal beneficiaries and any other methods deemed appropriate by the director. The language would further require DHCS to use this information to evaluate current reimbursement levels for Medi-Cal providers and to make recommendations for targeted changes to the reductions in reimbursement levels made pursuant to AB 97 (Committee on Budget, Chapter 3, Statutes of 2011), to the extent DHCS finds those changes appropriate. SB 243 (Hernandez), would have repealed prior year Medi-Cal provider and managed care rate reductions, including the AB 97 reductions. SB 243 would have increased specified FFS Medi-Cal provider rates to Medicare levels, required rates paid to Medi-Cal managed care plans to be actuarially equivalent to the payment rates established under the Medicare program, required Medi-Cal hospital inpatient claims for diagnosis-related groups to be increased by 16% for the 2015-16 fiscal year, and to be increased annually thereafter, and required Medi-Cal managed care plan rates to be increased by a proportionately equal amount for increased payments for AB 366 (Bonta) Page 13 of ? hospital services. SB 243 was held on the Senate Appropriations Committee suspense file. 8)Support. This bill is supported by rural county representatives, some health care providers, and labor groups, which argue this bill is important to document the shortcomings in the Medi-Cal delivery system and the need to increase reimbursement rates in order to improve access to care. Supporters argue that as the state expands Medi-Cal cover increasing numbers of Californians, it is critical to perform a regular assessment of access to care the adequacy of provider payments in the program. Supporters conclude that requiring a regular assessment of access issues and provider rates is an important part in ensuring the quality and long-term sustainability of the Medi-Cal program. SUPPORT AND OPPOSITION : Support: California Academy of Family Physicians (co-sponsor) ALS Association Golden West Chapter Association of California Healthcare Districts California Association for Health Services at Home California Hospital Association California Immigrant Policy Center California Labor Federation California Medical Association California School Employees Association Community Clinic Association of Los Angeles County Health Access California LIUNA Local 777 LIUNA Local 792 Planned Parenthood Affiliates of California Rural County Representatives of California Silicon Valley Leadership Group Western Center on Law and Poverty Oppose: None received -- END -- AB 366 (Bonta) Page 14 of ?