Amended in Assembly June 10, 2016

Amended in Assembly May 25, 2016

Senate Bill No. 835

Introduced by Committee on Budget and Fiscal Review

January 7, 2016

begin delete An act relating to the Budget Act of 2016. end delete begin insert An act to amend Sections 14169.53 and 14169.75 of the Welfare and Institutions Code, relating to Medi-Cal, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately, bill related to the budget. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 835, as amended, Committee on Budget and Fiscal Review. begin delete Budget Act of 2016. end delete begin insert Medi-Cal: hospitals: quality assurance fee. end insert

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Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Existing law, subject to federal approval, imposes a hospital quality assurance fee, as specified, on certain general acute care hospitals to be deposited into the Hospital Quality Assurance Revenue Fund. Existing law provides that moneys in the Hospital Quality Assurance Revenue Fund are continuously appropriated during the first program period of January 1, 2014, to December 31, 2016, inclusive, and available only for certain purposes, including paying for health care coverage for children, as specified, and making supplemental payments for certain services to private hospitals and increased capitation payments to Medi-Cal managed care plans. For subsequent program periods, existing law requires that the moneys in the Hospital Quality Assurance Revenue Fund be used for the above-described purposes upon appropriation by the Legislature in the annual Budget Act. Existing law provides that these provisions are inoperative on January 1, 2017, and that a hospital is not required to pay the hospital quality assurance fee after that date, as specified.

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This bill would extend the operation of these provisions to January 1, 2018. The bill would instead, for the second program period and subsequent program periods, require moneys in the Hospital Quality Assurance Revenue Fund to be continuously appropriated, thereby making an appropriation, for the above-described purposes.

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This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

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This bill would declare that it is to take effect immediately as an urgency statute.

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This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2016.

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Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation:  begin delete no end delete begin insert yes end insert . Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert Section 14169.53 of the end insert begin insert Welfare and Institutions
Code end insert begin insert is amended to read: end insert

14169.53.  

(a) (1) All fees required to be paid to the state
pursuant to this article shall be paid in the form of remittances
payable to the department.

(2) The department shall directly transmit the fee payments to
the Treasurer to be deposited in the fund. Notwithstanding Section
16305.7 of the Government Code, any interest and dividends
earned on deposits in the fund from the proceeds of the fee assessed
pursuant to this article shall be retained in the fund for purposes
specified in subdivision (b).

(b) (1) Notwithstanding subdivision (c) of Section 14167.35,
subdivision (b) of Section 14168.33, and subdivision (b) of Section
14169.33, all funds from the proceeds of the fee assessed pursuant
to this article in the fund, together with any interest and dividends
earned on money in the fund, shall continue to be used exclusively
to enhance federal financial participation for hospital services
under the Medi-Cal program, to provide additional reimbursement
to, and to support quality improvement efforts of, hospitals, and
to minimize uncompensated care provided by hospitals to uninsured
patients, as well as to pay for the state’s administrative costs and
to provide funding for children’s health coverage, in the following
order of priority:

(A) To pay for the department’s staffing and administrative
costs directly attributable to implementing this article, not to exceed
two hundred fifty thousand dollars ($250,000) for each subject
fiscal quarter, exclusive of any federal matching funds.

(B) To pay for the health care coverage, as described in
subdivision (g), except that for the two subject fiscal quarters in
the 2013-14 fiscal year, the amount for children’s health care
coverage shall be one hundred fifty-five million dollars
($155,000,000) for each subject fiscal quarter, exclusive of any
federal matching funds.

(C) To make increased capitation payments to managed health
care plans pursuant to this article and Section 14169.82, including
the nonfederal share of capitation payments to managed health
care plans pursuant to this article and Section 14169.82 for services
provided to individuals who meet the eligibility requirements in
Section 1902(a)(10)(A)(i)(VIII) of Title XIX of the federal Social
Security Act (42 U.S.C. Sec. 1396a(a)(10)(A)(i)(VIII)), and who
meet the conditions described in Section 1905(y) of the federal
Social Security Act (42 U.S.C. Sec. 1396d(y)).

(D) To make increased payments and direct grants to hospitals
pursuant to this article and Section 14169.83, including the
nonfederal share of payments to hospitals under this article and
Section 14169.83 for services provided to individuals who meet
the eligibility requirements in Section 1902(a)(10)(A)(i)(VIII) of
Title XIX of the federal Social Security Act (42 U.S.C. Sec.
1396a(a)(10)(A)(i)(VIII)), and who meet the conditions described
in Section 1905(y) of the federal Social Security Act (42 U.S.C.
Sec. 1396d(y)).

(2) Notwithstanding subdivision (c) of Section 14167.35,
subdivision (b) of Section 14168.33, and subdivision (b) of Section
14169.33, and notwithstanding Section 13340 of the Government
Code, the moneys in the fund shall be continuously appropriated
during the first program period only, without regard to fiscal year,
for the purposes of this article, Article 5.229 (commencing with
Section 14169.31), Article 5.228 (commencing with Section
14169.1), Article 5.227 (commencing with Section 14168.31),
former Article 5.226 (commencing with Section 14168.1), former
Article 5.22 (commencing with Section 14167.31), and former
Article 5.21 (commencing with Section 14167.1).

(3)  begin delete For end delete begin insert Notwithstanding any other law, for the second program
period and end insert subsequent program periods, the moneys in the fund
shall be begin delete used, upon appropriation by the Legislature in the annual
Budget Act, end delete begin insert continuously appropriated, without regard to fiscal
year, end insert for the purposes of this article and Sections 14169.82 and
14169.83.

(c) Any amounts of the quality assurance fee collected in excess
of the funds required to implement subdivision (b), including any
funds recovered under subdivision (d) of Section 14169.61, shall
be refunded to general acute care hospitals, pro rata with the
amount of quality assurance fee paid by the hospital, subject to
the limitations of federal law. If federal rules prohibit the refund
described in this subdivision, the excess funds shall be used as
quality assurance fees for the next program period for general acute
care hospitals, pro rata with the amount of quality assurance fees
paid by the hospital for the program period.

(d) Any methodology or other provision specified in this article
may be modified by the department, in consultation with the
hospital community, to the extent necessary to meet the
requirements of federal law or regulations to obtain federal
approval or to enhance the probability that federal approval can
be obtained, provided the modifications do not violate the spirit,
purposes, and intent of this article and are not inconsistent with
the conditions of implementation set forth in Section 14169.72.
The department shall notify the Joint Legislative Budget Committee
and the fiscal and appropriate policy committees of the Legislature
30 days prior to implementation of a modification pursuant to this
subdivision.

(e) The department, in consultation with the hospital community,
shall make adjustments, as necessary, to the amounts calculated
pursuant to Section 14169.52 in order to ensure compliance with
the federal requirements set forth in Section 433.68 of Title 42 of
the Code of Federal Regulations or elsewhere in federal law.

(f) The department shall request approval from the federal
Centers for Medicare and Medicaid Services for the implementation
of this article. In making this request, the department shall seek
specific approval from the federal Centers for Medicare and
Medicaid Services to exempt providers identified in this article as
exempt from the fees specified, including the submission, as may
be necessary, of a request for waiver of the broad-based
requirement, waiver of the uniform fee requirement, or both,
pursuant to paragraphs (1) and (2) of subdivision (e) of Section
433.68 of Title 42 of the Code of Federal Regulations.

(g) (1) For purposes of this subdivision, the following
definitions shall apply:

(A) “Actual net benefit” means the net benefit determined by
the department for a net benefit period after the conclusion of the
net benefit period using payments and grants actually made, and
fees actually collected, for the net benefit period.

(B) “Aggregate fees” means the aggregate fees collected from
hospitals under this article.

(C) “Aggregate payments” means the aggregate payments and
grants made directly or indirectly to hospitals under this article,
including payments and grants described in Sections 14169.54,
14169.55, 14169.57, and 14169.58, and subdivision (b) of Section
14169.82.

(D) “Net benefit” means the aggregate payments for a net benefit
period minus the aggregate fees for the net benefit period.

(E) “Net benefit period” means a subject fiscal year or portion
thereof that is in a program period and begins on or after July 1,
2014.

(F) “Preliminary net benefit” means the net benefit determined
by the department for a net benefit period prior to the beginning
of that net benefit period using estimated or projected data.

(2) The amount of funding provided for children’s health care
coverage under subdivision (b) for a net benefit period shall be
equal to 24 percent of the net benefit for that net benefit period.

(3) The department shall determine the preliminary net benefit
for all net benefit periods in the first program period before July
1, 2014. The department shall determine the preliminary net benefit
for all net benefit periods in a subsequent program period before
the beginning of the program period.

(4) The department shall determine the actual net benefit and
make the reconciliation described in paragraph (5) for each net
benefit period within six months after the date determined by the
department pursuant to subdivision (h).

(5) For each net benefit period, the department shall reconcile
the amount of moneys in the fund used for children’s health
coverage based on the preliminary net benefit with the amount of
the fund that may be used for children’s health coverage under
this subdivision based on the actual net benefit. For each net benefit
period, any amounts that were in the fund and used for children’s
health coverage in excess of the 24 percent of the actual net benefit
shall be returned to the fund, and the amount, if any, by which 24
percent of the actual net benefit exceeds 24 percent of the
preliminary net benefit shall be available from the fund to the
department for children’s health coverage. The department shall
notify the Joint Legislative Budget Committee and the fiscal and
appropriate policy committees of the Legislature of the results of
the reconciliation for each net benefit period pursuant to this
paragraph within five working days of performing the
reconciliation.

(6) The department shall make all calculations and
reconciliations required by this subdivision in consultation with
the hospital community using data that the department determines
is the best data reasonably available.

(h) After consultation with the hospital community, the
department shall determine a date upon which substantially all
fees have been paid and substantially all supplemental payments,
grants, and rate range increases have been made for a program
period, which date shall be no later than two years after the end
of a program period. After the date determined by the department
pursuant to this subdivision, no further supplemental payments
shall be made under the program period, and any fees collected
with respect to the program period shall be used for a subsequent
program period consistent with this section. Nothing in this
subdivision shall affect the department’s authority to collect quality
assurance fees for a program period after the end of the program
period or after the date determined by the department pursuant to
this subdivision. The department shall notify the Joint Legislative
Budget Committee and fiscal and appropriate policy committees
of that date within five working days of the determination.

(i) Use of the fee proceeds to enhance federal financial
participation pursuant to subdivision (b) shall include use of the
proceeds to supply the nonfederal share, if any, of payments to
hospitals under this article for services provided to individuals
who meet the eligibility requirements in Section
1902(a)(10)(A)(i)(VIII) of Title XIX of the federal Social Security
Act (42 U.S.C. Sec. 1396a(a)(10)(A)(i)(VIII)), and who meet the
conditions described in Section 1905(y) of the federal Social
Security Act (42 U.S.C. Sec. 1396d(y)) such that expenditures for
services provided to the individual are eligible for the enhanced
federal medical assistance percentage described in that section.

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begin insert SEC. 2. end insert   

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begin insert Section 14169.75 of the end insert begin insert Welfare and Institutions Code end insert

begin insert is amended to read: end insert

14169.75.  

Notwithstanding Section 14169.72, this article shall
become inoperative on January 1, begin delete 2017. No end delete begin insert 2018. A end insert hospital shall
begin insert not end insert be required to pay the fee after that date unless the fee was
owed during the period in which the article was operative, and begin delete no end delete
payments authorized under Section 14169.53 shall begin insert not end insert be made
unless the payments were owed during the period in which the
article was operative.

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begin insert SEC. 3. end insert   

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This act is a bill providing for appropriations related
to the Budget Bill within the meaning of subdivision (e) of Section
12 of Article IV of the California Constitution, has been identified
as related to the budget in the Budget Bill, and shall take effect
immediately.

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begin insert

begin insert SEC. 4. end insert   

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This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

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In order to provide continued health care coverage for
Californians at the earliest possible time, it is necessary that this
bill take effect immediately.

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begin delete

SECTION 1.  

It is the intent of the Legislature to enact statutory
changes, relating to the Budget Act of 2016.

end delete