BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 586 (Hernandez) - Children's services
          
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          |Version: April 28, 2015         |Policy Vote: HEALTH 8 - 0       |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 11, 2015      |Consultant: Brendan McCarthy    |
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          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  
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           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  
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          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  
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          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.




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