BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 815 (Hernandez) - Medi-Cal: demonstration project
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|Version: May 3, 2016 |Policy Vote: HEALTH 8 - 0 |
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|Urgency: Yes |Mandate: No |
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|Hearing Date: May 23, 2016 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 815 would authorize in statute the state's new
Medi-Cal Section 1115 waiver, known as "Medi-Cal 2020".
Fiscal
Impact: Over the course of the five-year waiver period, the
state will be able to access at least $6.2 billion in additional
federal funding that the state would not be eligible for without
the waiver. The state is eligible for the additional funding
under the waiver for two primary reasons. First, the state's
continuing use of Medi-Cal managed care reduces costs relative
to the alternative fee-for-service system. The federal
government will allow the state to use a portion of those
projected savings for waiver programs. Second, the federal
government will allow the state draw down federal matching funds
for certain "state only" health care programs that are not
currently eligible for federal funding. The General Fund savings
from receiving those additional federal funds will be redirected
to a specific waiver program.
The following are the major elements of Medi-Cal 2020. Note that
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the funding amounts are for the five-year waiver period, unless
otherwise noted.
PRIME - $3.7 billion (federal funds). The Public Hospital
Redesign and Incentives in Medi-Cal (PRIME) program authorizes
federal matching funds to make incentive payments to
Designated Public Hospitals and District/Municipal Public
Hospitals in order to improve care delivery and strengthen
their ability to take on risk-based payments.
Global Payment Program - at least $236 million (federal
funds). The Global Payment Program restructures the
distribution of federal funding for uncompensated care. This
includes disproportionate share hospital funding (DSH), to
designated public hospitals (excluding University of
California hospitals) in order to incentivize improvements in
care delivery and provision of care in appropriate settings.
Medi-Cal 2020 maintains the DSH funding methodology for other
hospitals, with DSH funding for UC hospitals capped by fiscal
year. The $236 million in federal funding is only for the
first year of the waiver. Additional funding in subsequent
years will be determined based on future uncompensated care.
Also, the figures above do not include existing DSH funding of
about $5.9 billion in federal funds over the waiver period.
Dental Transformation Initiative - $375 million (federal
funds). The Dental Transformation Initiative permits incentive
payments to qualified dental providers to improve dental care
and utilization among children enrolled in Medi-Cal. The state
share of funding for this program is provided through the
redirection of existing General Fund support for specific
state only health care programs which will be eligible for
federal matching funds under the waiver.
Designated State Health Programs - $375 million (federal
funds). The waiver authorizes the state to access federal
matching funds for several existing health care programs that
are currently funded only with state and local funds. By
making these programs eligible for federal matching funds, the
waiver frees up state funding to support the Dental
Transformation Initiative and to draw down federal matching
funds.
Whole Person Care - $1.5 billion (federal funds). This program
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allows participating lead entities (primarily counties) to
claim federal matching funds for efforts to coordinate health,
behavioral health, and social services for high-risk Medi-Cal
beneficiaries who are high utilizers of health care services.
Federal matching funds will be available for a variety of
social services and supports that are not eligible for federal
matching funds absent the waiver.
The Department of Health Care Services has requested additional
administrative funding to oversee Medi-Cal 2020 of $34 million
over the five-year waiver period, including $11 million in the
Budget Year (General Fund and federal funds).
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.
The federal government provides matching funds that vary from
50% to 90% of expenditures depending on the category of
beneficiary.
Current federal law allows states to apply for "Section 1115
waivers" of requirements of the federal Social Security Act.
This process allows states, on a case by case basis, to make
changes to their Medicaid program with the approval of the
federal Centers for Medicare and Medicaid Services. In general,
for the federal government to approve a waiver, the state must
demonstrate that the waiver will assist in promoting the
objectives of Medicaid and that total federal costs will not
exceed fee-for-service equivalent costs to the federal
government over the period of the waiver, typically five years.
In general, Section 1115 waivers allow states to draw down
federal matching funds for activities that would not normally be
eligible for federal funds, for example non-health care services
or services to the uninsured.
California's prior Section 1115 wavier, referred to as the
"Bridge to Reform Waiver" was set to expire in October 2015 but
was extended until the end of 2015. The prior wavier was
designed to provide about $10 billion in addition federal
funding to the state to fund an early implementation of the
coverage expansion under the Affordable Care Act and to invest
in safety net health care programs. The additional federal funds
were available due to cost savings created through the use of
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Medi-Cal managed care to reduce per beneficiary expenditures
below what they would have been through fee-for-service health
care.
Proposed Law:
SB 815 would authorize in statute the state's new Medi-Cal
Section 1115 waiver, known as "Medi-Cal 2020".
Major provisions of the bill would:
Establish the four new waiver programs - the Global
Payment Program, PRIME, Whole Person Care, and Dental
Transformation Initiative;
Require a comprehensive assessment of access to care in
Medi-Cal;
Contain numerous administrative provisions relating to
implementation of the Waiver by the Department of Health
Care Services;
Condition implementation of the bill and the waiver upon
federal approval and the availability of federal funding;
Authorize the fund-swap, under which new federal
matching funds for designated state-only health care
programs would free up existing General Fund monies that
would be redirected to provide the state share of cost for
the Dental Transformation Initiative;
Authorize the continuation of numerous programs and
authorities authorized in prior waivers, including the
state's current methodology for paying certain hospitals;
Continuously appropriate certain funds received under
the waiver.
This bill is an urgency measure.
Related
Legislation: AB 1568 (Bonta and Atkins) is identical to this
measure. That bill is pending in the Assembly Appropriations
Committee.
Staff
Comments: Determining available federal funding under the
waiver. Both the prior and the new Section 1115 waivers were
financed with additional federal funding that is available to
the state, due to the cost-savings associated with using managed
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care to deliver Medi-Cal benefits versus the alternative
fee-for-service system. The Department of Health Care Services,
with oversight from the federal government, calculates the
projected costs of providing care under Medi-Cal managed care
versus the projected costs of doing so under fee-for-service.
Under the prior waiver, the state was able to use all of the
"budget neutrality room" under the projected fee-for-service
cost to justify the additional federal funding available. The
financing for the new Medi-Cal 2020 waiver has changed. Under
Medi-Cal 2020, the federal government has reduced the savings
projections that the state can use to justify additional federal
funding. Under Medi-Cal 2020, the amount of savings will vary by
type Medi-Cal eligibility group. Doing so reflects the fact that
certain Medi-Cal populations have been in managed care for
longer and therefore managed care reflects the status quo for
those groups. For example, the state can claim a much lower
level of savings for families in urban counties (which were the
first group to be mandatorily enrolled in managed care) than for
rural families or seniors and persons with disabilities.
Additional federal funding under the waiver. As noted above,
the fiscal projections for Medi-Cal 2020 only reflect the
additional federal funding for the Global Payment Program that
will be available in the first year of the waiver. In subsequent
years, the amount of additional federal funding that will be
available will be based on a study of the amount of
uncompensated care that is provided by designated public
hospitals.
Use of non-state funds to draw down federal funding. Much of the
non-federal share of funding programs under Medi-Cal 2020 will
be provided by hospitals. For example, both the PRIME and Global
Payment Program will be funded by public hospitals transferring
funding to the state (referred to as intergovernmental transfers
of IGTs). The state will use those local funds to draw down
federal matching funds and then provide the combined funding
back to hospitals through Medi-Cal payments. Similarly,
non-federal funding for Whole Person Care pilots is likely to be
provided by counties using intergovernmental transfers. In
addition, public hospitals will continue to draw down federal
funding for hospital services through certified public
expenditures, under which local governments certify that they
have made expenditures for patient care and the federal
government recognizes those payments as being eligible for
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federal matching funds.
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