BILL ANALYSIS Ó SB 815 Page 1 Date of Hearing: June 15, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 815 (Hernandez) - As Amended June 9, 2016 ----------------------------------------------------------------- |Policy |Health |Vote:|16 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: NoReimbursable: No SUMMARY: This urgency bill implements portions of a new, major Medi-Cal waiver; it is a companion bill to AB 1568 (Bonta), upon which it is contingent. Specifically, this bill: 1)Authorizes the Department of Health Care Services (DHCS) to implement provisions of the Medi-Cal 2020 Demonstration Project, implementing the Special Terms and Conditions (STCs) negotiated with and approved by the federal Centers for Medicare and Medicaid Services (CMS). SB 815 Page 2 2)Specifies two major components of Medi-Cal 2020, as follows: a) Global Payment Program (GPP), which restructures the distribution of federal funding for uncompensated care, including disproportionate share hospitals (DSH) funding, to designated public hospitals (DPHs), excluding University of California (UC) hospitals, in order to incentivize improvements in care delivery and provision of care in appropriate settings. The bill maintains the DSH funding methodology for other hospitals, with DSH funding for UC hospitals capped by fiscal year. b) Public Hospital Redesign and Incentives in Medi-Cal (PRIME), which authorizes federal matching funds to make incentive payments to DPHs and District/Municipal Public Hospitals (DMPHs), in order to improve care delivery and strengthen their ability to take on risk-based payments. 3)Codifies a federally required assessment of access to care in Medi-Cal, as specified, and states legislative intent to encourage contracting between DPHs and multiple Medi-Cal managed care plans in order to ensure access. 4)Contains a number of administrative provisions, including an exemption for DHCS from the regulatory process, exemption of contracts from the Public Contract Code and approval by Department of General Services, and authorization for the director of DHCS to modify any process or methodology if necessary to comply with federal law or the STCs, among other provisions. 5)Conditions implementation on federal approval and availability of federal financial participation (FFP). SB 815 Page 3 6)Authorizes the nonfederal share of matching funds for a portion of waiver implementation through a fund swap, whereby DHCS may claim FFP for state expenditures on Designated State Health Programs (DSHPs), as specified, and appropriates an amount of GF equal to such FFP to the Health Care Deposit Fund, as specified. 7)Contains numerous other provisions and details related to waiver implementation. 8)Provides that this bill becomes operative only if AB 1568 (Bonta) is enacted and takes effect before January 1, 2017. FISCAL EFFECT: 1)DHCS has requested administrative resources through an April 2016 Spring Finance Letter totaling $33.6 million for waiver implementation over its five-year lifetime, $14 million of the total is for contract costs, and $10.8 million of which is requested for 2016-17. Funding will pay for implementation, monitoring, oversight, evaluation and assessment, technical assistance, program development, and related activities (GF/federal). The funding request is the cost to implement the entire waiver, but only certain elements of the waiver are included in this bill. Other provisions are implemented in AB 1568 (Bonta), a companion bill. 2)Federal matching funds available by waiver program component are as follows: SB 815 Page 4 PRIME $3.73 billion Global Payment Program(GPP)$236 million* Dental Transformation Initiative (DTI)$375 million** Designated State Health Programs$375 million Whole Person Care (WPC) $1.5 billion** --------------------------------------------------------------- --------------- Total $6.2 billion * The $236 million for GPP only represents additional waiver funding; it does not include the existing federal Disproportionate Share Hospitals (DSH) component of GPP funding. Federal DSH funding over the five-year life of the waiver is projected to be about $5.8 billion. In addition, only the first year of federal funding for GPP is shown here. Funding in subsequent years is based on a study of uncompensated care. **DTI and WPC are implemented in AB 1568 (Bonta). SB 815 Page 5 COMMENTS: 1)Purpose. According to the author, while the STCs outline the programmatic and financing elements of Medi-Cal 2020, this bill is needed to provide the statutory framework. In addition, this bill would grant flexibility to DHCS to implement Medi-Cal 2020 without using the regular contracting and regulatory processes due to waiver timelines, and would require notification to the Legislature regarding waiver-related activities. Numerous health care provider and advocacy groups support this bill, and it has no opposition. 2)Federal Medicaid Waivers. Section 1115 of the federal Social Security Act authorizes the federal government to waive certain Medicaid rules. This authority has been used in order to allow states to test innovative program improvements and to facilitate coverage expansions. To obtain a waiver, a state negotiates with CMS about which Medicaid provisions might be waived, what innovations the state is proposing, and how the state plans to achieve budget neutrality (a requirement that waivers cannot cost the federal government more with the waiver than without the waiver). The negotiations are memorialized in the STCs, which constitute a contract between CMS and the state. In addition, the state adopts authorizing legislation, such as this bill, to implement the waiver. Recent waivers have included the 2005 waiver, which established Medi-Cal's public hospital funding mechanisms and provided for coverage expansions in certain counties, and the 2010 "Bridge to Reform" waiver, which included, among other provisions, a phased implementation of health care reform through early expansion of Medi-Cal at local option, expansions of managed care, and a precursor to the PRIME SB 815 Page 6 program for public hospitals called the delivery system reform incentive pool (DSRIP). 1)California's new 1115 Waiver: Medi-Cal 2020. On December 30, 2015, DHCS received CMS approval of the five-year Medi-Cal 2020 waiver, which began January 1, 2016. Medi-Cal 2020 is anticipated to provide $6.2 billion in federal matching funds over the five years of the waiver, as specified above. The details of Medi-Cal 2020 are in the 300+ page STCs and related attachments agreed to by the state and CMS. This bill implements a portion of the overall waiver, while other major waiver programs are included in AB 1568 (Bonta), a companion bill. Specifically, AB 1568 implements the Whole Person Care (WPC) program, which 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. AB 1568 also implements the Dental Transformation Initiative (DTI), which permits incentive payments to qualified dental providers to improve dental care and utilization among children enrolled in Medi-Cal. The WPC program, the DTI, and the GPP program for uncompensated care are new components of Medi-Cal 2020. 2)Available Federal Funding. As noted, waivers are approved by CMS pursuant to projections they will not increase federal costs overall. In the case of Medi-Cal 2020, the level of federal resources is calculated based on two primary factors. First, the state's continuing use of Medi-Cal managed care reduces costs relative to the alternative fee-for-service system. CMS will allow the state to use a portion of those projected savings for waiver programs. Second, CMS will allow the state draw down federal matching funds for certain "state-only" health care programs that are not currently eligible for federal funding. SB 815 Page 7 Under the prior waiver, the state was able to use all of the "budget neutrality room," the difference between projected fee-for-service cost and managed care cost, to justify the federal funding available. Under Medi-Cal 2020, however, CMS has reduced the savings projections that the state can use to justify this funding. Under Medi-Cal 2020, the amount of savings will vary by Medi-Cal eligibility group, whereby a lower level of savings is allowed for Medi-Cal eligibility groups who have been enrolled in managed care for a longer period of time. This new methodology reflects the fact for these Medi-Cal populations, managed care costs are more reflective of the status quo. 3)Non-federal share of Costs. The waiver does not "provide" federal funds, but allows states to claim federal matching funds for designated programs and services that would otherwise not qualify. The nonfederal share of costs for Medi-Cal 2020 waiver programs are provided through various means, as indicated below. a) Intergovernmental transfers (IGTs). IGTs are transfers of public funds between governmental entities, such as from a county to the state. The nonfederal share of PRIME and GPP will be funded by transfers of funds from public hospitals to the state, whereby the state will match the transfer with federal funds and remit the local funds, with matching federal funds, back to the hospital. Similarly, the nonfederal share for the WPC pilots is likely to be funded by counties through transfers of local revenues. b) Certified Public Expenditures (CPEs). Under a CPE SB 815 Page 8 arrangement, government providers certify their Medicaid expenditures to the state, and the state then obtains federal reimbursement on the basis of the CPEs. Under the state's prior two waivers as well as this one, DPHs use CPEs to claim federal matching funds for services provided to Medi-Cal beneficiaries on a fee-for-service basis. c) General Fund (GF). GF provides the nonfederal share for programs being continued under this waiver, including Medi-Cal managed care and the Coordinated Care Initiative. In addition, the waiver allows the state to claim federal matching funds for spending on State Designated Health Programs, which are various state-funded health programs specified in the STCs. This essentially frees up an equal amount of GF, which is used to fund the nonfederal share for the DTI. 4)Related Legislation. AB 1568 (Bonta) is a companion measure to this bill, and is pending in the Senate Appropriations Committee. AB 1568 and this bill, which were identical measures that contained the entire authorizing statute for the Medi-Cal 2020 waiver, were both amended on June 2, 2016. The amendments divided the authorizing statute between the two bills, which are intended for joint enactment. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081 SB 815 Page 9