BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 586 (Hernandez) - Children's services ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 28, 2015 |Policy Vote: HEALTH 8 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 11, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 586 would eliminate the existing sunset of the "carve out" of the California Children's Services (CCS) program from Medi-Cal managed care. Instead, the bill would require the Department of Health Care Services to enter into contracts with one or more Kids Integrated Delivery Systems (KIDS) to provide integrated care that includes both existing CCS benefits and all other health care services provided under the Medi-Cal program. Fiscal Impact: One-time administrative costs, likely in the low millions, to design the program requirements, adopt regulations, and negotiate contracts with KIDS plans (General Fund and federal funds). SB 586 (Hernandez) Page 1 of ? Unknown impact on overall Medi-Cal expenditures for services provided to CCS-eligible Medi-Cal beneficiaries (General Fund and federal funds). There are several factors that will impact the overall costs or savings to the state under the bill. (See below.) 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. In addition, the Department operates the California Children's Services program which provides diagnosis, treatment, and case management to children under age 21 who have complex medical needs. (90% of CCS enrollees are Medi-Cal eligible. About 10% are eligible only for CCS services, paid for with county funds). Under current law, the CCS program is "carved out" of Medi-Cal managed care, meaning that the program is operated on a fee-for-service basis. (CCS eligible children receive services related to their CCS eligible condition through the program, but receive other health care services through Medi-Cal managed care.) Under current law, the carve out expires at the end of 2015, at which time the Department could transition the CCS population fully into managed care. Current law allows the Department to establish pilot projects for integrated care for CCS enrollees. Five demonstration projects have been approved, but only one has been implemented (operated by the San Mateo Health Plan). The Department has been conducting a stakeholder process to seek input on the future of the CCS program. The Department has indicated that it would like to move the CCS program away from the fee-for-service system to a more integrated care model. SB 586 (Hernandez) Page 2 of ? Proposed Law: SB 586 would eliminate the existing sunset of the "carve out" of the California Children's Services (CCS) program from Medi-Cal managed care. Instead, the bill would require the Department of Health Care Services to enter into contracts with one or more Kids Integrated Delivery Systems to provide integrated care that includes both existing CCS benefits and all other health care services provided under the Medi-Cal program. Specific provisions of the bill would: Define the eligible population, including individuals from age 21 to 26 who were formerly eligible for CCS; Require, by January 1, 2018, the Department to enter into contract with one or more KIDS networks to provide comprehensive medical care to eligible children; Specify the requirements for participation as a KIDS network, including a requirement that the KIDS network include a CCS tertiary hospital; Specify the services to be provided and excluded from the contract; Authorize the contracts to include opportunities for risk sharing between the state and the KIDS network, with a requirement that shared savings be reinvested in services; Allow an enrollee to continue to receive care from a KIDS network for 12 months following termination of eligibility for CCS (providing the individual is still eligible for Medi-Cal). Related Legislation: AB 187 (Bonta) would extend the CCS carve out until an evaluation of certain CCS pilot projects have been completed. Staff Comments: Under current law, the "carve out" of CCS benefits from Medi-Cal managed care is set to expire at the end of 2015. After that, the Department could transition CCS eligible beneficiaries from the current system into Medi-Cal managed care. Historically, the state has assumed that shifting Medi-Cal beneficiaries into managed care will reduce costs, relative to the fee-for-service system, due to better coordination of care and less utilization of high-cost services. Whether that would occur under current law is highly uncertain, however, given the serious health issues experienced by CCS-eligible children. SB 586 (Hernandez) Page 3 of ? This bill does not simply eliminate the carve out, but would replace it with a new system, under which the state would contract with KIDS networks to provide both CCS services and the non-CCS benefits that beneficiaries currently receive. The KIDS networks would not be fully capitated managed care plans, but would share some risk with the state for the costs to provide services. In theory, KIDS networks could reduce costs through better care coordination. However, since this is a new model of delivering care to a population with complex medical needs, it is difficult to predict whether savings would occur. Additionally, the bill states that any "shared savings" from such an arrangement shall be reinvested in services. It is not clear whether this requirement would apply to total cost savings or whether it would apply only to the share of savings accruing to the KIDS network under the contract. In addition, the bill would authorize a formerly CCS eligible child to remain within the KIDS network until age 26 (providing the individual was still eligible for Medi-Cal). The universe of such individuals is not likely to be large and it is not known yet whether the overall cost to provide care through a KIDS network would be greater or less than in a traditional Medi-Cal managed care plan. Total expenditures in the CCS program are over $2.2 billion per year. If the contracts with KIDS networks are structured to allow the state to retain a portion of savings due to better care coordination (and such savings actually occur), state savings could be substantial. -- END --