BILL ANALYSIS Ó
SB 815
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Date of Hearing: June 15, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 815
(Hernandez) - As Amended June 9, 2016
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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).
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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).
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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:
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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**
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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).
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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
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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.
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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
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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
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