BILL ANALYSIS Ó SB 36 Page 1 Date of Hearing: September 9, 2015 ASSEMBLY COMMITTEE ON HEALTH Rob Bonta, Chair SB 36 (Hernandez) - As Amended September 4, 2015 SENATE VOTE: Not relevant SUBJECT: Medi-Cal: demonstration project. SUMMARY: Authorizes the Department of Health Care Services (DHCS) to request one or more temporary waiver extensions to continue the operation of, and the authorities provided under, the current "California Bridge to Reform Demonstration," the state's Section 1115 Medicaid waiver which is set to expire on October 31, 2015. Contains an urgency clause to ensure that the provisions of this bill go into immediate effect upon enactment. Specifically, this bill: 1)Requires DHCS to extend and apply the existing hospital payment methodologies and allocations on a state fiscal year, annual, partial year, or other basis, to the extent permitted under any approved temporary waiver extension, an approved subsequent waiver, or as otherwise permitted under federal Medicaid law. SB 36 Page 2 2)Conditions the provisions of this bill on DHCS obtaining any necessary federal approvals and continuing eligibility to obtain federal matching funds. EXISTING LAW: 1)Establishes the Medi-Cal program to provide comprehensive health benefits to low-income persons. 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. FISCAL EFFECT: This bill, as amended, has not been analyzed by a fiscal committee. COMMENTS: 1)PURPOSE OF THIS BILL. According to the author, this bill bridges the gap between the current Medicaid Section 1115 waiver which expires October 31, 2015 and the new waiver by allowing DHCS to request one or more temporary waiver extensions, and by requiring DHCS to extend the current hospital payment methodologies. The author states a new waiver agreement has not been reached between the state and federal government and is unlikely to be reached before the Legislature adjourns on September 11, 2015. An extension of the current hospital financing methodologies would continue to provide essential funding for safety net hospitals in the event of a delay in completion of the next waiver and until state hospital financing law is amended to determine the new waiver-related hospital funding provisions resulting from the SB 36 Page 3 next federal Section 1115 Medicaid waiver. 2)BACKGROUND. a) Federal Section 1115 Waiver and Expenditure Authority. Medicaid (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 gives the Secretary of the Department of Health and Human Services (HHS) authority to waive provisions of major health and welfare programs. 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. This is referred to as expenditure authority for costs not otherwise matchable. Section 1115 waivers are approved at the discretion of the Secretary of HHS through negotiations between a state and the federal Centers for Medicare and Medicaid Services (CMS). 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 the waiver. b) Bridge to Reform Waiver. California's existing Section 1115 waiver, commonly called "the California Bridge to Reform Demonstration," is a five-year demonstration of health care reform initiatives that was projected to SB 36 Page 4 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. 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 (MCMC) delivery system under this federal waiver. The current Bridge to Reform waiver enabled California to: i) Implement an early expansion of Medicaid to low-income adults without minor children under the Patient Protection and Affordable Care Act through the Low Income Health Program, which enrolled 650,000 individuals; ii) Require the mandatory enrollment of SPDs into MCMC plans in specified counties; iii) Provide federal funding for delivery system reform and uncompensated care in designated public hospital systems (21 county and University of California hospitals) through Delivery System Reform Incentive Payments Program and Safety Net Care Pool Uncompensated Care (SNCP); iv) Provide federal funding for designated state health care programs and workforce development programs related to medically disadvantaged service areas; and, v) Operate its MCMC program, Community-Based Adult Services (CBAS) program, and seven county Coordinated Care Initiative (under the Coordinated Care Initiative), individuals dually eligible for Medicare and Medi-Cal receive their Medi-Cal and Medicare benefits through one SB 36 Page 5 health plan). 3)RELATED LEGISLATION. AB 72 (Bonta) requires DHCS to submit an application to CMS for a waiver of federal Medicaid requirements to implement a demonstration project. This bill was subsequently amended to a different subject. 4)SUPPORT. According to the California Association of Public Hospitals (CAPH), in the event of a delay in negotiating a new waiver, it is critical for the state to maintain existing expenditure authority, in order to ensure that funds can continue to flow to public safety net providers. CAPH argues this bill includes two important provisions to allow for continuity during these negotiations. The Association of California Healthcare Districts argues in support because the waiver extension will build on the priorities of the association, which include access to care, workforce development, expanding the use of telehealth and improving mental health and substance use disorder treatment. REGISTERED SUPPORT / OPPOSITION: Support Association of California Healthcare Districts California Association of Public Hospitals Opposition SB 36 Page 6 None on file. Analysis Prepared by:Roger Dunstan / HEALTH / (916) 319-2097