BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 243 (Hernandez) - Medi-Cal: reimbursement: provider rates
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|Version: May 12, 2015 |Policy Vote: HEALTH 8 - 0 |
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|Urgency: Yes |Mandate: No |
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|Hearing Date: May 18, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 243 would require the Department of Health Care
Services to raise a variety of rates paid to Medi-Cal providers
and require the Department to rescind existing rate reductions
to specified providers.
Fiscal
Impact:
Annual costs of $11.1 billion per year in total funds ($6.6
billion General Fund) due to increased payments to Medi-Cal
providers in 2016-17, and growing as specified on an annual
basis thereafter. These costs include:
o $1.7 billion ($841 million General Fund) per year
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for increased hospital payments. In future years,
hospital payments would automatically increase annually
by hundreds of millions of dollars per year, depending on
the medical CPI.
o $1.2 billion (special fund) decreased hospital
quality assurance fee (QAF) revenues. This reduction is
associated with the effect that increased state payments
to hospitals has on the ability to raise funds through
the hospital QAF. This estimate assumes the QAF is
extended past its current expiration in December 2016.
o $195 million per year (General Fund) relating to the
reduction in revenues for children's' health care
coverage associated with the hospital QAF and potentially
growing in future years.
o $538 million ($269 million General Fund) associated
with restoring the 10% payment reductions to certain
fee-for-service providers and actuarially equivalent
reductions in managed care.
o $10.9 billion ($5.3 billion General Fund) to
increase specified payments in fee-for-service, managed
care, and dental rates to the equivalent of Medicare
rates.
o $616 million ($308 million General Fund) over
2015-16 and 2016-17 in lost savings and repayment related
to the bill's repeal of 2011 provider cuts. This
includes cuts that have been implemented and some that
have not yet been implemented.
Background: Under state and federal law, the Department of Health Care
Services operates the Medi-Cal program, which provides health
care coverage to low income individuals, families, and children.
Medi-Cal provides coverage to childless adults and parents with
household incomes up to 138 percent of the federal poverty level
and to children with household incomes up to 266 percent of the
federal poverty level. The federal government provides matching
funds that vary from 50 percent to 90 percent of expenditures
depending on the category of beneficiary.
Over the last several years, there have been a variety of
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attempts by the state to reduce payment rates to Medi-Cal
providers, in an effort to reduce state spending on the program.
Many of those rate reductions have been enjoined by the courts
or repealed and replaced by different budget actions.
As part of the 2011-12 budget (AB 97, Committee on Budget,
Statutes of 2011), the state imposed a 10% reduction in the
rates paid to many fee-for-service Medi-Cal providers and
required the capitated rates paid to managed care plans to be
reduced by an actuarially equivalent amount. In addition,
payment rates for distinct part skilled nursing facilities
(located on a hospital campus) were "rolled back" to the payment
rates in place in 2008-09 and then reduced by 10%. Rate
reductions were made retroactive to June 1, 2011 for all
fee-for-service providers.
Many of those rate reductions were enjoined by the courts until
June 2013. At that point, the state had legal authority to both
reduce provider rates going forward and to "claw back" rate
reductions for services provided between June 2011 and June
2013. (Providers subject to claw backs include pharmacies,
durable medical equipment providers, clinical laboratories,
distinct part nursing facilities, and radiology services.) Rate
reductions for Medi-Cal managed care providers will be made
going forward but the state will not recoup unrealized savings.
Since the enactment of the 2013-14 Budget Act, several
categories of providers have been exempted from Medi-Cal rate
reductions by statute or administrative action of the
Department.
Proposed Law:
SB 243 would require the Department of Health Care Services to
raise a variety of rates paid to Medi-Cal providers and require
the Department to rescind existing rate reductions to specified
providers.
Specific provisions of the bill would:
Require payments to providers for services after June 1, 2011
to be determined without the current provider rate reductions.
(The Department of Health Care Services indicates that this
provision would require both the elimination of rate
reductions for services provided after enactment of this bill
and eliminate the ability to require claw back payments for
services provided between June 2011 and June 2013.);
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Require payments to Medi-Cal fee-for-service providers to be
equal to the Medicare payment rate for those services;
Require payments for dental services to be increased in
proportion to the increase in other fee-for-service payments
rates to the Medicare rate level;
Require payments to hospitals under the diagnosis related
group payment system to be increased by 16% for the 2015-16
year and subsequently increased each year by the medical
component of the Consumer Price Index;
Require capitated payments to Medi-Cal managed care plans to
be increased by the actuarially equivalent amount necessary to
equal all of the increases in fee-for-service rates included
in the bill;
Include an urgency clause.
Related
Legislation:
AB 366 (Bonta) is identical to this bill. That bill is in the
Assembly Appropriations Committee.
AB 1805 (Skinner and Pan, 2014) would have eliminated the 10%
provider rate reduction. That bill was never heard in the
Assembly Appropriations Committee.
AB 900 (Alejo, 2013) would have eliminated the rate reductions
for distinct part skilled nursing facilities. That bill was
held on this committee's Suspense File.
SB 646 (Nielsen, 2013) was similar to AB 900 (Alejo, 2013).
That bill was held on this committee's Suspense File.
SB 640 (Lara, 2013) would have eliminated the 10% provider
rate reduction. That bill was held on this committee's
Suspense File.
Staff
Comments: Concerns have been raised by providers and advocates
that low reimbursement rates in the Medi-Cal program result in
providers limiting their participation in the program. Providers
may accept no Medi-Cal patients, refuse new Medi-Cal patients,
or limit the number of Medi-Cal patients in their practice.
Surveys of providers performed by the Medical Board of
California and the National Centers for Health Statistics Data
Brief have found that providers accept new Medi-Cal patients at
lower rates than new patients with other sources of health care
coverage and at lower rates than providers in other states.
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Currently, about 80% of Medi-Cal beneficiaries are enrolled in
Medi-Cal managed care plans. Commercial Medi-Cal managed care
plans are subject to network adequacy and timely access to care
requirements under the Knox-Keene Act and regulations adopted by
the Department of Managed Health Care. Non-commercial Medi-Cal
managed care plans (such as county organized health systems) are
not directly regulated by those requirements. However, the
Department of Health Care Services includes substantively
similar requirements in its contracts with managed care plans.
According to the Legislative Analyst's Office, there is little
evidence that fee-for-service rates strongly influence the
capitated payment rates that the state negotiates with Medi-Cal
managed care plans. Given the overwhelming enrollment of
Medi-Cal beneficiaries in managed care, the Legislative
Analyst's Office has recommended that the Legislature focus it
oversight with regard to Medi-Cal access issues on the process
for setting managed care rates and the network adequacy
requirements that those plans are required to meet. The
Legislative Analyst's Office has recommended that the
Legislature's oversight of the fee-for-service system should
focus on services that are only provided through
fee-for-service, such as long-term care and dental services.
The intended purpose of this bill is to ensure that Medi-Cal
beneficiaries have access to the necessary medical services they
are entitled to, by ensuring that providers are paid at rates
sufficient to allow them to continue to accept Medi-Cal
patients. It is important to note that this bill would increase
provider rates across the board (in effect paying providers more
to see the Medi-Cal patients they are going to see anyway), in
the hope that doing so will encourage those providers and other
providers to see more Medi-Cal patients. The costs for actually
increasing access to Medi-Cal services are not included in the
cost estimates above and would depend on how providers respond,
if at all, to higher reimbursement rates.
It would be more cost effective for the state to develop
targeted incentive programs to encourage providers to either
increase the share of Medi-Cal patients they are currently
accepting or encourage other providers to begin accepting
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Medi-Cal patients, rather than implementing across-the-board
rate increases for services already being provided.
The only costs that may be incurred by a local agency relate to
crimes and infractions. Under the California Constitution, such
costs are not reimbursable by the state.
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