BILL ANALYSIS Ó
SENATE COMMITTEE ON HUMAN SERVICES
Senator McGuire, Chair
2015 - 2016 Regular
Bill No: SB 638
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|Author: |Stone |
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|Version: |April 21, 2015 |Hearing |April 28, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Mareva Brown |
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Subject: Developmental services: funding
SUMMARY
This bill requires the Department of Developmental Services
(DDS) to submit a plan to the Legislature by August 1, 2016, to
ensure the sustainability, quality, and transparency of
community-based services for individuals with developmental
disabilities. It requires DDS to regularly consult with
stakeholders in developing the plan, and to address specified
topics including recommendations for a comprehensive approach to
funding regional center operations in a sustainable and
transparent manner that enables regional centers to deliver
high-quality services to consumers. The bill also relaxes the
percentage of funds that vendors may spend on administrative
costs, based on various factors, and increases rates for
services that are established in statute. Additionally, the bill
requires an increase to the rates set by the department through
various methodologies and requires that DDS ensure that the
rates permit the viability of certain residential facilities by
establishing different rates for each facility size, as
specified. Additionally, this bill requires DDS to increase
funding for regional center operating budgets, by 10% by July 1,
2015, and, beginning July 1, 2016, to increase operations
funding based on a calculation using the California Consumer
Price Index. The bill also requires DDS to increase regional
center vendor funding to cover costs related to minimum wage
requirements.
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ABSTRACT
Existing law:
1) Defines "developmental disability" as a disability that
originates before the age of 18, continues, or can be
expected to continue, indefinitely, and constitutes a
substantial disability. This term also includes autism.
(WIC 4512)
2) Establishes the California Department of Developmental
Services (DDS) as the agency that oversees the state's
developmental centers, and specifies the duties of the
department and developmental center employees. (WIC 4400 et
seq.)
3) Establishes that DDS contracts with private non-profit
regional centers to provide fixed points of contact in the
community for persons with developmental disabilities and
their families, so that these persons may have access to
the services and supports best suited to them throughout
their lifetime. (WIC 4620)
4) Prohibits any contract or agreement with a service
provider in which rates are determined through negotiations
between the regional center and the service provider from
spending more than 15 percent of regional center funds on
administrative costs. (WIC 4629.7)
5) Requires DDS to adopt regulations that specify rates for
community care facilities serving persons with
developmental disabilities and specifies elements of the
cost model, including facility size, geographic cost of
living variables, and common direct-care services specific
to an identifiable group of persons, among many factors.
(WIC 4681.1. (a))
6) Prohibits a regional center from paying an existing
residential provider, supported living provider or service
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provider a negotiated rate any rate higher than the rate
that was in effect on June 30, 2008, with limited
exceptions. (WIC 4681.6 (a)(1)) (WIC 4689.8(a)(1)) (WIC
4691.9 (a)(1))
7) Additionally, prohibits a regional center from
negotiating a rate with a new residential provider,
supported living provider, or service provider that is
higher than the regional center's median rate for the same
service, as defined, or the statewide median rate -
whichever is lower. (WIC 4681.6 (a)(2)) (WIC 4689.8
(a)(2)) (WIC 4691.9 (a)(2))
8) Defines habilitation services as activities purchased
for regional center consumers, including services provided
under the Work Activity and Supported Employment programs
to prepare and maintain consumers at their highest level of
vocation functioning or to prepare them for referral to
vocational rehabilitation services. (WIC 4851)
9) Establishes the hourly rate for supported employment
services at $30.82. (WIC 4860)
10)Establishes a series of fees to be paid to supported
employment providers upon completion of a consumer's
progress in the program, as follows:
A $360 fee to be paid to a program
provider upon intake of a consumer into a supported
employment program, as specified.
A $720 fee to be paid upon placement of a
consumer in an integrated job, as specified.
A $720 fee to be paid after a 90-day
retention of a consumer in a job, as specified.
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This bill:
1) Makes a variety of uncodified findings and declarations
about the effects of cuts, rate freezes and outdated
funding formulas.
2) Adds section 4519.8 to the Welfare and Institutions code
requiring DDS submit a plan to the Legislature by August 1,
2016, to ensure the sustainability, quality, and
transparency of community-based services for individuals
with developmental disabilities.
3) Requires the department to regularly consult with
stakeholders in developing the plan.
4) Requires the plan to include, but not be limited to, all
of the following:
a. An assessment of the effectiveness of the
methods used to pay each category of community service
provider, including consideration of the following
factors for each category of service provider:
i. Whether the current method of
ratesetting for a service category is ensuring an
adequate supply of providers in that category,
including, but not limited to, whether there is a
sufficient supply of providers to enable a
consumer to have a choice of providers.
ii. A comparison of the likely fiscal
effects of using the following methodologies for
each service provider category:
Negotiated rates, which may be
limited to regional medians or other limits.
Rates established through
regulations on either a statewide or regionally
adjusted basis.
Alternate rate methodologies that
may use combinations of negotiated or regulatory
rates on either a statewide or regionally
adjusted basis.
a. An evaluation of the appropriateness of the
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number and type of service codes for regional center
services, including, but not limited to,
recommendations for making service codes more
reflective of the level and type of services provided
and for reducing the number and type of services that
are billed with a service code of "Miscellaneous."
b. Recommendations for a comprehensive
purchase-of-services rate structure that would ensure
a sustainable, high-quality, and transparent community
services system.
c. An assessment of the adequacy of the number
and locations of regional centers for providing timely
service to consumers. This assessment shall consider,
at a minimum, all of the following factors:
The waiting time for consumers to obtain
appointments with regional center personnel.
The distance consumers must travel for
in-person meetings with regional center personnel.
The type and frequency of interactions
between consumers and regional center staff that can
be accommodated remotely through electronic means,
including, but not limited to, electronic mail,
video conferencing, or telehealth.
Whether the number of consumers and the
geographic size of the catchment area served by each
regional center are reasonable for delivering
high-quality service to consumers and their
families.
Whether additional regional centers or
regional center locations are necessary to address
any identified deficiencies in access to regional
center personnel, or whether technology-enabled
means of access or other solutions are warranted.
a. Recommendations for a comprehensive approach
to funding regional center operations in a sustainable
and transparent manner that enables regional centers
to deliver high-quality services to their consumers,
including, but not limited to, recommendations and
estimated costs for increasing the number of regional
centers or altering catchment areas.
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1) Amends existing law which mandated a 15 percent cap on
administrative costs for all service providers receiving
negotiator rates from a regional center. Instead, it
requires:
a. For service providers who receive payments
from one or more regional centers totaling $2 million
or more annually, 15 percent of regional center funds
may be spent on administrative costs.
b. For service providers who receive payments
from one or more regional centers totaling less than
$2 million but more than $500,000 annually, 20 percent
of regional center funds may be spent on
administrative costs.
c. For service providers who receive payments
from one or more regional centers totaling $500,000 or
less annually, 25 percent of regional center funds may
be spent on administrative costs.
2) Requires DDS to ensure that rates established for
community care facilities serving persons with
developmental disabilities permit the viability of those
facilities, including, but not limited to, four-bed
facilities, by establishing different rates for each
facility size, as determined by the number of beds
available, that reflect reasonable differences in the cost
structure of facilities with differing numbers of beds.
3) Requires DDS to adopt emergency regulations by July 1,
2016, to implement the establishment of different rates for
each facility size and deems any adoption, amendment,
repeal, or re-adoption of a regulation to be necessary for
the immediate preservation of the public peace, health and
safety, or general welfare, and therefore DDS is exempted
from the requirement that it describe specific facts
showing the need for immediate action, as required for
regulations under Gov Codes 11346.1 and 11349.6.
4) Requires DDS to increase by 10 percent rates for various
regional center services, effective July 1, 2015. It
further requires that, commencing July 1, 2016, DDS shall
increase those rates in accordance with the California
Consumer Price Index, unless the Budget Act of 2016
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includes alternative rate increases or rate reforms, as
specified, or the increase would not imperil the amount of
federal matching funds available for these services. The
rate categories include:
a. Community care facilities
b. Residential service providers with negotiated
rates
c. Supported Living Services providers with
negotiated rates
d. Non-residential service providers
e. Service providers with negotiated rates
f. The regional centers' core staffing formula.
5) Requires DDS to increase the funding to enable a
regional center to fund all of the following costs
associated with minimum wage requirements for the centers
and purchase-of service vendors:
a. Costs necessary to comply with a statewide
minimum wage requirement.
b. Costs necessary to comply with minimum wage
requirements enacted by local governments that exceed
the statewide minimum wage.
c. Costs necessary to increase compensation for
exempt, salaried employees to comply with wage orders
issued by the Industrial Welfare Commission or any
other state regulatory agency.
d. Any other wage adjustments that vendors are
required to make in response to minimum wage increases
mandated by state or federal statutes, regulations, or
other authorities.
6) Requires that funding increases related to minimum wage
mandates be in addition to the 10 percent and Consumer
Price Index funding increases mandated in other sections of
this bill, and the increases to Supported Employment Rates
set in statute.
7) Increases the hourly rate paid to providers of
individualized and group-supported employment services from
$30.82 to $34.24, and increases the fees paid to program
providers from $360 to $400 and from $720 to $800,
respectively, for achieving various client milestones in
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employment.
8) Effective July 1, 2016, increases the hourly rate paid
to providers of individualized and group-supported
employment services to $37.66, providing the Budget Act of
2016 does not implement alternative rate increases or
regional center funding reforms.
9) States codified Legislative intent that the changes made
by this act are not intended to result in the substantial
impairment of any contract, and that if any contract is
substantially impaired as a result of the application of
any change made by this act, it is the intent of the
Legislature that the change apply only to contracts renewed
or entered into on or after January 1, 2016.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
Purpose of the bill:
According to the author, neglect of the community service system
in the past decade has shut down some small businesses and
non-profits that serve developmentally disabled individuals.
State budget actions in recent years reduced or froze
reimbursement levels for service providers, and imposed mandates
and administrative hurdles that added little or no value, the
author states. Additionally, the author states, archaic methods
for funding and overseeing services through the non-profit
regional centers have resulted in understaffing at those
centers, which has created challenges for persons with
developmental disabilities and their families to identify and
obtain the services they need.
According to the author, these obstacles continue to threaten
the viability of the community system. SB 638 takes both
short-term and long-term steps to sustain the promise that
individuals with developmental disabilities can thrive in their
own communities, the author states.
The Lanterman Act
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The Lanterman Developmental Disabilities Services Act
establishes an entitlement to services and supports for
Californians with developmental disabilities who are living in
their communities. A developmental disability is one that
originates before the age of 18, continues, or can be expected
to continue, indefinitely, and constitutes a substantial
disability. Approximately 280,000 children and adults with
developmental disabilities are served in community-based
programs and supported by state- and federally funded services
that are coordinated by local, nonprofit regional centers. An
additional 1,100 individuals are served in four state-run
institutions, including three Developmental Centers. About 74
percent of consumers live in the home of a parent or guardian,
according to 2014 DDS data.
The state's 21 nonprofit regional centers vary considerably in
size and organization, from Redwood Coast Regional Center, which
serves approximately 3,300 consumers, to Inland Regional Center,
with a caseload of nearly 29,000. The average is around 12,000
consumers. Services are developed locally and regional centers
"vendorize" providers to deliver services in local catchment
areas. Approximately 45,000 agencies provide services in more
than 150 service category types including residential care, day
programs, behavioral therapies, independent and supported
living, supported employment, respite, transportation and many
others. The Governor's January budget includes funding for DDS
of $5.7 billion.
Determination of service needs
Determining and coordinating the services for an individual
consumer is done through the process of developing an
Individualized Program Plan (IPP), or an Individual Family
Service Plan (IFSP), if the consumer is an infant or toddler
three years of age or younger. The IPP or IFSP is prepared
jointly by an interdisciplinary team consisting of the consumer,
a parent or guardian, persons who have important roles in
evaluating or assisting the consumer, and representatives from
the Regional Center. The IPP or IFSP includes a description of
the consumer's needs and of the services to be provided to meet
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those needs.
Cost-saving measures
Although consumers have an entitlement to services that meet
their needs, a variety of restrictions on service provision have
been implemented over the past 10 years. Since 2009, the state
has reduced costs to developmental services programs by more
than $1 billion (GF) including restrictions on payments for
specific services, caps on costs or provided for other services,
across-the-board reductions, mandated holidays and other cuts.
Prior to the 2009 cost-containment measures, the state had
frozen rates to providers in order to contain costs.
A Senate Human Services Committee oversight hearing in Los
Angeles on October 9, 2014, focused on the sustainability of the
Regional Center system in the wake of significant cuts and
freezes.<1> Panelists and members of the public testified that
years of rate freezes and payment cuts have left the system
fragile and unable to withstand even minor fiscal challenges.
The Association of Regional Center Agencies reports that 435
licensed residential homes and 57 day and work programs have
closed since July 2011, and while the exact cause of these
closures is unclear and may be related to other factors, some of
these are a result of unsustainable reimbursement rates.
Widespread rate freezes began in 2003-04 for community-based and
similar day programs, in-home respite care, supported living
services and transportation. In 2008-09, as a part of
Recession-prompted rate controls, new regional center vendors
statewide were no longer permitted to negotiate a rate higher
than the statewide median rate or regional center median rate
for the same service - whichever was lower. In 2011-12, a new
rate survey was conducted resulting in lower median rates for
new providers. This practice continues today.
Provider payment reductions also were imposed as cost savings
mechanisms. In 2009-10, providers were required to take a 3
percent across the board reduction to save an estimated $51
million annually. In the following two fiscal years, provider
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<1> The Lanterman Act: Promises and Challenges, Senate Human
Services Committee, Edward R. Roybal Board of Public Works
Session Room, October 9, 2014
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payments were reduced by 4.25 percent, to save an estimated $75
million and $94 million respectively, and in 2012-13, providers
phased out the payment reductions with a 1.25 percent decrease.
Rates returned to their 2008-09 levels in 2013-14.
In 2009-10, at the height of the recessionary cutbacks, a DDS
budget workgroup discussed the importance of using generic
resources before tapping into regional center funds to serve
consumers. The state imposed the requirement that year.
Increased use of private insurance, for example, was estimated
to save $51 million annually, increased use of public
transportation saved $37 million, and the increased use of
public education for consumers between ages 18 and 22 saved $14
million, among other examples.
The 2011 developmental service budget trailer bill (SB 74,
Chapter 9, Statutes of 2011) additionally capped administration
costs for all negotiated rate providers and contractors at 15
percent and defined what must be included in administrative
costs.
Regional Center caseloads
Regional centers struggled with heavy caseloads and low salary
reimbursements during this time period. Caseloads are
statutorily mandated to be no higher than 1:62 for most
consumers, or 1:45 for consumers who have moved out of a
developmental center in the previous 12 months, and 1:66 for
consumers not receiving federally reimbursed waiver services and
who had not recently moved from a developmental center.
Some regional center caseworkers have testified of caseloads
substantially higher than 62 and ARCA reports one regional
center in 2014 reported a ratio of 1:136 for consumers without
waiver services. In 2007, before the recession began, 11
regional centers were reportedly out of compliance with the
caseload ratio requirements. In 2014, all 21 regional centers
reported being out of compliance in at least one category. As
part of the cost cutting solutions, the mandated ratio of 1:66
for some consumers was statutorily lifted between February 2009
and June 2013. As a comparison, the National Association of
State Directors of Developmental Disabilities Services (NASDDDS)
surveyed states about their caseloads and found that 32 out of
37 states had caseload ratios below 1:59, and more than half of
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the 37 had caseloads below 1:39.<2>
The persistent inability of regional centers to adhere to
caseload mandates has caused some concern. A similar lack of
oversight in 1997 drew a federal rebuke and significant
restrictions on the use of the federal Home and Community Based
Services (HCBS) waiver, which provides matched funding to many
services for consumers who qualify for subsidized benefits.
After extensive state compliance efforts, in which regional
centers had to certify compliance one by one, the federal waiver
enrollment freeze was gradually lifted. The six-year freeze cost
California $933 million in lost reimbursements.
Central to the caseload conversation is the regional centers'
"core staffing formula" which defines the way regional centers
are funded. The core staffing formula has not been updated since
1991, meaning that regional centers are funded for positions at
significantly lower rates than the actual salaries they are
paying. One consequence of this is that regional centers will
hire fewer staffers in order to pay the staffers they have a
competitive wage. Additionally, the core staffing formula does
not fully reflect current demands on mid-level managers and
other staff.
Rate Restructuring
In 2001, DDS and its stakeholders completed a four-year review
of the community based service delivery system and released a
67-page document with that year's May budget revision. The
report, prompted by SB 1038 (Chapter 1043, Statutes of 1998),
underscored the need to shift the current system to one of
quality-based outcomes. Inherent in this process was the need
restructure rates to reflect the actual cost of providing
services. A recession in late 2001, forced the state to postpone
implementation, although DDS committed to continue focusing on
the effort with workgroups.
In 2014, the Legislature again tried to establish a rate reform
process in its budget bill, however the Governor rejected the
language, noting that the issue would be taken up by a task
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<2> "On the Brink of Collapse: The Consequences of Underfunding
California's Developmental Services System," Association of
Regional Center Agencies, February 2015, pg 31.
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force convened by the Health and Human Services Agency.
Agency task force
In July 2014, Health and Human Services Secretary Diana Dooley
convened a task force to study the community service delivery
system and to recommend reforms. The Developmental Services task
force and its subcommittees have met several times since fall,
including last week. The task force will be considering whether
to revise the existing rate structure and rate-setting
methodology, how to streamline billing codes, how to allow more
flexible rates, establish standards of quality and outcome
measurements and consider other new state, local and federal
mandates. It also is looking into staffing levels and the core
staffing formula at the 21 regional centers. The task force has
no specific end date for its work.
The task force was convened as a follow up to the work of a
similar task force that looked into the state's developmental
centers and produced a report on "The Plan for the Future of
Developmental Centers in California." That task force's report
included a request to "develop recommendations to strengthen the
community system in the context of a growing and aging
population, resource constraints and availability of community
resources to meet the specialized needs of clients and past
reductions to the community system."7
New federal HCBS requirements
In March 2014, the federal Centers for Medicaid and Medicare
Services (CMS) released new regulations for federal
reimbursement of home and community based services. Among the
changes are requirements for consumers to live in and receive
services in the most integrated setting possible, leaving open,
for now, exact definitions of what changes could be required in
California to comply. The new regulations affect federal HCBS
waivers used by DDS to pay for consumer services. California and
other states are required to submit state transition plans and
DDS has begun a stakeholder process to identify service types
that may be out of compliance. The state is required to have its
plan in place and to shift consumers to the more-integrated
models of care in 2019.
Related legislation:
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SB 490 (Beall, 2015) revises the threshold for vendor financial
audit requirements imposed as budget cost savings measures.
AB 1400 (Santiago, 2015) requires that all regional center
contracts with in-home respite providers expressly require that
at least 85 percent of regional center funds be spent on direct
service expenditures, as defined.
AB 1626 (Maienschein, 2014) would have made identical increases
to the supported employment rates and fees. It died in the
Senate Appropriations Committee. An Appropriations committee
analysis estimated the cost of these rate and fee increases to
be at least $10.1 million (GF) per year.
AB 954 (Maienschein, 2013) would have made identical increases
to the supported employment rates and fees. It died in the
Assembly Appropriations Committee. A committee analysis
estimated the cost of these rate and fee increases to be
approximately $12.5 million (GF) per year.
SB 468 (Emmerson, Chapter 683, Statutes of 2013) established the
self-determination program which gives consumers the option of
having an individual budget with which to purchase services as
they choose, with defined approval processes, rather than having
services coordinated by the regional center.
AB 1041 (Chesbro, Chapter 677, Statures of 2013) established the
Employment First policy, requiring the state to prioritize
integrated, competitive employment when planning activities for
working age adults with developmental disabilities.
COMMENTS
A series of reports issued by the Association of Regional Center
Agencies (ARCA) in the past several years have described
systemic underfunding of the system. In its February 2015
report, "On the Brink of Collapse: The Consequences of
Underfunding California's Developmental Services System," ARCA
concludes that erosion of funding coupled with additional
unfunded mandates have left it struggling to maintain many
consumers, rather than providing them with the robust supports
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and services they need to thrive.<3>
To the degree that this bill overlaps efforts already in place
by the Health and Human Services Agency's task force, the
language in SB 638 imposes a time line on completion of the
evaluation of service rates and regional center staffing
formulas. This bill also reflects advocacy efforts for a 10
percent increase to provider rates, satisfies the regional
center's request for a 10 percent increase to its core staffing
formula and includes a statutory rate increase to supported
employment providers that was attempted last year in SB 1626
(Maienschein).
Should the author need to trim costs in this bill, he may want
to consider prioritizing language that remedies identified needs
in the system that are not being addressed by the task force or
in the budget committee, such as restructuring rates for
four-bed facilities to comply with new federal integrated
setting requirements, or to identify the most critical rate
stabilization efforts. The Autism Society of Los Angeles, which
did not take a position on this bill, submitted a letter
encouraged the author to consider prioriting funding for
purchase of services for consumers to improve individual
outcomes.
POSITIONS
Support:
California Association of State Hospital Parent Councils
for the Retarded
California Disability Services Association
Futures Explored, Inc.
ResCoalition
Opposition:
None received
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<3> Ibid P 55
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