BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1432

                                                                    Page  1

          Date of Hearing:  April 7, 2015

                            ASSEMBLY COMMITTEE ON HEALTH

                                    Bonta, Chair

                        1432 (Bonta) - As Amended  March 26, 2015

          SUBJECT:  Drug and alcohol abuse programs.

          SUMMARY:  Requires the State Department of Health Care Services  
          (DHCS) to submit an application to the federal Centers for  
          Medicare and Medicaid Services (CMS) for a waiver to implement a  
          demonstration project to accomplish specified goals and requires  
          DHCS to submit an implementation plan to the Legislature prior  
          to implementing an approved waiver.  Specifically, this bill:

          1)Requires DHCS to submit an application to 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 communities and consumers with substance abuse  
               disorders and co-occurring disorders;

             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  


                                                                    AB 1432

                                                                    Page  2

            Legislature in developing the waiver application. 


          1)Establishes the Medi-Cal program, administered by DHCS, under  
            which qualified low-income persons receive health care  
            benefits.  Medi-Cal is California's version of the federal  
            Medicaid program and is jointly funded by the state and  
            federal government.

          2)Establishes the Drug Medi-Cal program (DMC), which provides  
            substance use disorder services to Medi-Cal recipients.

          3)Allows DHCS to enter into contracts with counties for the  
            provision of DMC services.  Requires DHCS to contract for  
            services in the county to ensure beneficiary access, if a  
            county declines to contract with DHCS.

          4)Requires DHCS to adopt emergency regulations governing the DMC  
            program by July 1, 2014.  

          FISCAL EFFECT:  This bill has not yet been analyzed by a fiscal  


          1)PURPOSE OF THIS BILL.  The author states that an important  
            goal of the new DMC Organized Delivery System demonstration  
            project authorized by the amendment to the Section 1115 Waiver  
            will be to maximize mental health and substance abuse disorder  
            services for Californians.  This bill is necessary to ensure  


                                                                    AB 1432

                                                                    Page  3

            that the provisions of the final DMC Organized Delivery System  
            demonstration project amendment have the legislative authority  
            necessary to be implemented.

          2)BACKGROUND.  DMC services are reimbursed on a fee-for-service  
            basis at rates set by the state, and are not provided through  
            Medi-Cal managed care plans.  These services are carved out  
            from the regular Medi-Cal program:  they are delivered by a  
            specialized system of providers certified by the state rather  
            than through participating physicians or health plans.  DMC  
            services include outpatient drug free services, which consist  
            mostly of group counseling and some limited individual  
            counseling for persons in crisis; narcotic treatment programs,  
            which provide methadone replacement therapy; intensive  
            outpatient services; and, residential services.  There are  
            about 800 active DMC providers in the state.

             a)   Federal Section 1115 Waivers.  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 HHS 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 government,  
               meaning that federal spending under a waiver must not be  
               more than projected federal spending in the state without  


                                                                    AB 1432

                                                                    Page  4

               the waiver.  The DMC Organized Delivery System Program  
               (ODS) waiver was submitted as an amendment to the  
               California Section 1115 Bridge to Reform Waiver.
              b)   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.  Under the current waiver, California is  
               required to submit an extension request no later than six  
               months prior to the expiration date of the current  
               demonstration.  California also operates its Medi-Cal  
               managed care delivery system under this federal waiver. 

               c)     DMC Waiver Amendment.  On November 21, 2014, DHCS  
                 submitted a proposal to amend the Special Terms and  
                 Conditions the California Section 1115 Bridge to Reform  
                 Waiver.  California's DMC Organized Delivery System  
                 (DMC-ODS) 1115 demonstration waiver provides a continuum  
                 of care modeled after the American Society of Addiction  
                 Medicine Criteria for substance use disorder treatment  

               The waiver amendment will make improvements to the DMC  
                 service delivery system, will create more local control  
                 and accountability in selection of high quality  
                 providers, will improve local coordination of case  
                 management services, will ensure implementation of  
                 evidence based practices in substance abuse treatment,  
                 and will increase coordination with other systems of care  
                 including physical health.  The DMC-ODS waiver amendment  
                 will demonstrate how organized substance use disorder  
                 care increases the success of DMC beneficiaries while  
                 decreasing other system health care costs.  Participation  
                 for providing services under this waiver is voluntary;  
                 eight to 12 counties are expected to initially opt-in to  


                                                                    AB 1432

                                                                    Page  5

                 waiver participation.

               This waiver amendment would allow the state to extend the  
                 DMC Residential Treatment Service, as an integral aspect  
                 of the continuum of care, to additional beneficiaries.   
                 Historically, the Residential Treatment Service was only  
                 available to pregnant/postpartum beneficiaries in  
                 facilities with a capacity of 16 or less beds.  This  
                 waiver will create a Residential Treatment Service  
                 operable in facilities with no bed capacity limit.

          3)SUPPORT.  The California College and University Police Chiefs  
            Association state that the public safety challenges that take  
            place disproportionately in their jurisdictions, primarily  
            institutions of higher education, could be improved by  
          enhanced substance abuse program access.

          4)RELATED LEGISLATION.  AB 72 (Bonta and Atkins) requires DHCS  
            to submit an application to CMS for a waiver to implement the  
            provisions of the state's Section 1115 Waiver Demonstration  
            entitled "Medi-Cal 2020: Key Concepts for Renewal."  AB 72 is  
            pending in the Assembly Health Committee.


             a)   AB 1967 (Pan), Chapter 461, Statutes of 2014, requires  
               DHCS, if it commences or concludes an investigation of a  
               DMC provider, to notify counties that contract with the  

             b)   SB 1529 (Alquist), Chapter 797, Statutes of 2012,  
               revises screening, enrollment, disenrollment, suspensions,  
               and other sanctions for fee-for service Medi-Cal providers  
               and suppliers to conform to the ACA.

             c)   SB 857 (Speier), Chapter 601, Statutes of 2003, makes  
               numerous changes to the Medi-Cal program intended to  
               address provider fraud, including establishing new Medi-Cal  
               application requirements for new providers, existing  
               providers at new locations, and providers applying for  
               continued enrollment.  


                                                                    AB 1432

                                                                    Page  6




          California College and University Police Chiefs


          None on file.

          Analysis Prepared  
          by:              Paula Villescaz / HEALTH / (916) 319-2097