BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 36     
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          |AUTHOR:        |Hernandez                                      |
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          |VERSION:       |September 4, 2015                              |
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          |HEARING DATE:  |September 11,  |               |               |
          |               |2015           |               |               |
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          |CONSULTANT:    |Scott Bain                                     |
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          PURSUANT TO SENATE RULE 29.10

           SUBJECT  :  Medi-Cal: demonstration project.

           SUMMARY  :  This bill 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. 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.
          
          Existing law:
          1)Establishes the Medi-Cal program, which is administered by  
            DHCS and under which qualified low-income persons receive  
            health care benefits. 

          2)Establishes a Medicaid Section 1115 demonstration project  
            under the Medi-Cal program until October 31, 2015 known as  
            California's Bridge to Reform, 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.

          3)Provides for payments under the Bridge to Reform under the  
            "Medi-Cal Hospital/Uninsured Care Demonstration Project Act"  
            to designated public hospitals (DPHs are the approximately 20  
            UC and county hospitals), and for federal disproportionate  
            share (DSH), payments to private hospitals (referred to as  







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            "DSH replacement payments") and non-designated public  
            hospitals (NDPHs are district hospitals) through October 1,  
            2015. These provisions:

                  a)        Make DPHs eligible for cost-based  
                    fee-for-service Medicaid funding using certified  
                    public expenditures (CPEs) as the federal match,  
                    instead of state General Fund. DPHs put up the  
                    nonfederal share of Medi-Cal fee-for-service payments  
                    used to draw down federal Medicaid matching funds, and  
                    receive cost-based reimbursement, using CPEs to draw  
                    down federal Medicaid matching funds;
                  b)        Provide DSH payments to DPHs, using CPEs and  
                    intergovernmental transfers (IGTs) to draw down  
                    federal DHS funds;
                  c)        Provide DSH payments to eligible  
                    non-designated public hospitals (NDPH are primarily  
                    district hospitals) meeting DSH eligibility criteria,  
                    using state General Fund to draw down federal DSH  
                    funds;
                  d)        Provide for "DSH replacement payments" to  
                    private hospitals meeting DSH eligibility criteria,  
                    using non-DSH Medicaid funds and state General Fund as  
                    the fund source;
                  e)        Make DPHs eligible for payments from the  
                    federally funded Safety Net Care Pool (SNCP) for  
                    uncompensated care; and,
                  f)        Make DPHs eligible for payments from the  
                    federally funded delivery system reform incentive pool  
                    (DSRIP), based on the DPH's progress toward and  
                    achievement of milestones and metrics established in  
                    its DSRIP proposal, funded by federal funds and IGTs.

          
          This bill:
          1)Permits the director of DHCS to request one or more temporary  
            waiver extensions, as necessary to continue the operation of,  
            and the authorities provided under, the current "California  
            Bridge to Reform Demonstration" waiver until the approved  
            effective date of the next waiver, if DHCS has not received  
            adequate assurances from the federal Centers for Medicare and  
            Medicaid Services (CMS) before November 1, 2015, that DHCS's  
            application for a subsequent waiver is likely to be approved  
            with an effective date of November 1, 2015.









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          2)Requires DHCS, after consulting with the affected DPHs, to  
            extend and apply the payment methodologies and allocations in  
            the existing "Medi-Cal Hospital/Uninsured Care Demonstration  
            Project Act" that are in effect under the current waiver, on a  
            state fiscal year, annual, partial year, or other basis.

          3)Requires the extension and application of the current payment  
            methodologies and allocations to be consistent with any  
            applicable implementing provisions of the Medi-Cal state plan  
            and requirements imposed by CMS. 

          4)Implements the provisions in 2) and 3) above to the extent  
            permitted under the terms of any approved temporary waiver  
            extension obtained by DHCS, an approved subsequent waiver, or  
            as otherwise permitted under federal Medicaid law.

          5)Permits DHCS to make payments on an interim basis, subject to  
            reconciliation to amounts payable under the payment and  
            allocation methodologies in any approved temporary extension  
            obtained by DHCS under this bill, or under an approved  
            subsequent waiver.

          6)Implements this bill only to the extent that any necessary  
            federal approvals are obtained and federal financial  
            participation is available and is not jeopardized.

          7)Requires, until July 1, 2016, in the event of a conflict  
            between the terms of any federally approved waiver extension  
            obtained by DHCS and the provisions of the "Medi-Cal  
            Hospital/Uninsured Care Demonstration Project Act," the terms  
            of the federally approved temporary extension to control.  
            Requires DHCS to provide notice of the conflict to the  
            appropriate policy and fiscal committees of the Legislature.

          8)Permits DHCS to implement, interpret, or make specific this  
            bill by means of all-county letters, plan letters, plan or  
            provider bulletins, or similar instructions without taking  
            regulatory action until July 1, 2016.

          9)Would take effect immediately as an urgency statute.


           FISCAL  
          EFFECT  :  This current version of the bill has not been analyzed  
          by a fiscal committee.








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          COMMENTS  :
          1)Author's statement.  According to the author, According to the  
            author, this bill is needed because the current Section 1115  
            Medicaid waiver known as California Bridge to Reform Waiver  
            (Waiver) expires on October 31, 2015, but an agreement on a  
            subsequent waiver have not been agreed to by the state and the  
            federal government, and an agreement appears unlikely to be  
            reached before the Legislature adjourns on September 11, 2015  
            so that state law could be amended to incorporate the new  
            waiver-related funding provisions. This two-part bill would  
            bridge the gap between the current waiver and the new waiver  
            by allowing DHCS to request one or more temporary waiver  
            extensions, and by requiring DHCS to extend and apply the  
            current hospital payment methodologies and allocations in  
            effect under the current waiver on a state fiscal year,  
            annual, partial year, or other basis, to the extent allowed by  
            the federal government. The extension of the current hospital  
            financing methodologies would continue to provide essential  
            funding for safety net providers in the event of a delay in  
            completion of the next waiver and until state hospital  
            financing law is amended to determine the new DSH and  
            waiver-related funding provisions for private hospitals, NDPHs  
            and DPHs resulting from the next federal Section 1115 Medicaid  
            waiver.

          2)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. The Bridge to Reform Waiver enabled California to:

               a)     Implement an early expansion of Medicaid to  
                 low-income adults without minor children under ACA  








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                 through the Low Income Health Program, which enrolled  
                 650,000 individuals;

               b)     Require the mandatory enrollment of SPDs into  
                 Medi-Cal managed care plans in specified counties;

               c)     Provide federal funding for delivery system reform  
                 and uncompensated care in designated public hospital  
                 systems (21 county and University of California  
                 hospitals) through the DSRIP and SNCP; 

               d)     Provided federal funding for designated state health  
                 care programs and workforce development programs related  
                 to medically disadvantaged service areas;

               e)     Operate its Medi-Cal managed care program,  
                 Community-Based Adult Services program, and seven county  
                 Coordinated Care Initiative (under the Initiative,  
                 individuals dually eligible for Medicare and Medi-Cal  
                 receive their Medi-Cal and Medicare benefits through one  
                 health plan)..
            
          3)Support.  The California Association of Public Hospitals and  
            Health Systems (CAPH) writes in support that there is a chance  
            wavier negotiations could extend beyond October 31, 2015 when  
            the "Bridge to Reform" waiver expires. CAPH argues, in the  
            event of a delay, 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  
            states this bill includes two important provisions to allow  
            for continuity during these negotiations. These provisions  
            grant DHCS the authority to extend the existing waiver and  
            make waiver expenditures in the case of a delay, as many other  
            states have experienced delays in renewing their waivers due  
            to the time it can take the federal government to complete a  
            Section 1115 waiver negotiation.  In addition, this bill  
            requires the continuation of existing hospital funding  
            distribution methodologies in the event of a delay. While  
            waivers make certain payment streams available, state law  
            specifies how those funds must be distributed amongst  
            providers.  As such, if there are any delays in renewing the  
            waiver, there would be no new guidance for how to distribute  
            DSH and SNCP payments to public and private hospitals, and  
            SNCP payments to public hospitals. This bill requires the  
            continued distribution of DSH and SNCP payments according to  








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            current methodologies in the event of a delay, which is  
            important to hospitals as the total federal funding for these  
            programs in the current waiver year is $1.2 billion in federal  
            DSH funds and $236 million in federal SNCP funds.
          
           SUPPORT AND OPPOSITION  :
          Support:  Association of California Health Care Districts
                    California Association of Public Hospitals and Health  
                    Systems
                    California Hospital Association
                    California State Association of Counties
                    District Hospital Leadership Forum
          
          Oppose:   None received.

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