BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 147 (Hernandez) - Federally qualified health centers ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 21, 2015 |Policy Vote: HEALTH 9 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 4, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 147 would require the Department of Health Care Services to authorize a three-year pilot project, under which federally qualified health centers would receive capitated monthly payments from Medi-Cal managed care plans in lieu of wrap-around payments from Medi-Cal for individual visits. Fiscal Impact: Likely costs of $450,000 per year for one to two years to develop the pilot project and apply for federal approval of the pilot project (General Fund and federal funds). One-time costs of $150,000 to $300,000 to prepare an evaluation of the pilot project (private funds). SB 147 (Hernandez) Page 1 of ? Unknown potential additional tax revenues to the state (General Fund). The state imposes a tax on Medi-Cal managed care organizations. To the extent that payments for services provided in federally qualified health centers shift from direct payments from the Department of Health Care Services to capitated payments made to managed care plans (who would then provide capitated payments to centers), the bill will increase managed care plan revenues and subsequent tax revenues. The size of this impact will depend on the scale of the pilot project. Background: Under current law, the Medi-Cal program provides health care coverage for certain low income and disabled individuals. In the Medi-Cal fee-for-service system, federally qualified health centers are paid a per-visit payment known as the prospective payment system (PPS). The PPS rate is based on a baseline rate that reflects a federally qualified health center's costs to provide services in 1999-2000, adjusted for inflation. When a Medi-Cal beneficiary in the managed care system receives care from a federally qualified health center, the managed care plan makes a per-visit payment to the center. Because the rates paid by managed care plans are significantly below the PPS rate, the state makes a supplemental "wrap-around" payment to the federally qualified health center to bring the total payment up to the PPS rate. In the 2012-13 Governor's Budget Proposal, the administration proposed a new method to make payments to federally qualified health centers, based on a capitated payment structure. The proposal would have also given greater flexibility to federally qualified health centers to provide services in new ways. The Legislature rejected that proposal. Proposed Law: SB 147 would require the Department of Health Care Services to authorize a three-year pilot project, under which federally qualified health centers would receive capitated monthly payments from Medi-Cal managed care plans in lieu of wrap-around payments from Medi-Cal for individual visits. Specific provisions of the bill would: SB 147 (Hernandez) Page 2 of ? Require the Department of Health Care Services to develop an alternate payment methodology pilot project for federally qualified health centers, beginning no sooner than July 1, 2016; Require the pilot to be implemented in any county and any federally qualified health center willing to participate; Require any participating federally qualified health center to receive capitated monthly payments from Medi-Cal managed care plans for Medi-Cal enrollees whose care is covered by the pilot program, in lieu of wrap-around payments from the Department; Require the pilot to include financial protections for both the participating federally qualified health centers and managed care plans; Require an evaluation of the pilot, to be funded with non-state funds; Require the Department to seek all necessary federal approvals. Related Legislation: AB 690 (Wood) would add marriage and family therapists to the list of providers for which FQHCs and RHCs can bill Medi-Cal. That bill will be heard in the Assembly Appropriations Committee. AB 858 (Wood) would require Medi-Cal reimbursement to FQHCs and RHCs for two visits taking place on the same day, under certain circumstances. That bill will be heard in the Assembly Appropriations Committee. SB 1081 (Hernandez, 2014) was substantially similar to this bill. That bill was held on this committee's Suspense File. Staff Comments: Under current law, the state imposes a 3.9% tax on Medi-Cal managed care plans, which is used to draw down federal funding and support the Medi-Cal program. Recent federal guidance indicates that the state's existing tax on Medi-Cal managed care plans is not allowed under federal rules, because it does not apply to managed care plans in general. The Governor has proposed to replace the existing tax with a tax on all managed care plans. By spreading the tax burden across all managed care plans, which the federal guidance would require to SB 147 (Hernandez) Page 3 of ? some degree, any revised managed care tax would likely generate less tax revenue from Medi-Cal managed care plans than is currently the case. -- END --