BILL ANALYSIS Ó SB 1300 Page 1 Date of Hearing: August 3, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 1300 (Hernandez) - As Amended June 30, 2016 ----------------------------------------------------------------- |Policy |Health |Vote:|16 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: YesReimbursable: No SUMMARY: This bill establishes a quality assurance fee (QAF) on providers of emergency medical transportation (EMT, or ambulance) beginning on July 1, 2017, and uses the revenue to raise reimbursement rates for ambulance providers. Specifically, this bill: 1)Assesses a fee on EMT providers of 5.5% of total revenue, with some adjustments for future years, and contains numerous details about fee payment, recourse for nonpayment, federal approval, administrative flexibility, and conditions required SB 1300 Page 2 for implementation. 2)Allocates revenues to a newly created Medi-Cal Emergency Medical Transport Fund and continually appropriates funding for designated purposes. 3)Specifies revenue must be used for the following, in priority order: a) Up to $350,000 for Department of Health Care Services (DHCS) staffing and administrative costs associated with implementation (such revenue can be matched with federal funds). b) To pay for health care coverage in each fiscal year in the amount of 10 percent of the projected QAF revenue for that fiscal year. c) To make increased payments to EMT providers. Specifically, it requires the fee-for-service payment schedule governing reimbursement to EMT providers be increased by an amount calculated as specified, for both fee-for-service and managed care. 1)Requires the department to adopt implementing regulations, and allows non-regulatory guidance to be issued and active until July 1, 2018. 2)Includes an urgency clause, in order to implement the QAF as soon as federal approval is obtained. SB 1300 Page 3 FISCAL EFFECT: 1)One-time costs of $1.2 million and ongoing administrative costs of $750,000 annually (Medi-Cal Emergency Medical Transport Fund/GF/federal) for DHCS to develop regulations, gain federal approval, make any necessary system changes, oversee collection of the quality assurance fee, and make increased payments. This bill provides that $350,000 per year must be available to DHCS for administrative costs (the state would be able to draw down additional federal funding to help cover the administrative costs). To the extent that actual administrative costs are higher, those costs would be GF/federal. 2)DHCS states it has been unable to independently verify data provided by EMT providers. However, based on such data, staff assumes costs associated with fee collection and payment as follows: a) Ongoing GF benefit of about $3 million per year through reduced health care spending. This bill provides that 10% of revenue collected (after setting aside administrative funding) is available to the state for health care coverage. Thus, this bill reduces the need for GF support of the Medi-Cal program by an equal amount. b) Additional payments of about $73 million per year for Medi-Cal EMT services (Medi-Cal Emergency Medical Transport Fund/ federal). The quality assurance fee is projected to generate about $30 million per year in revenues (after accounting for administration and state benefits). With federal matching funds, about $73 million per year would be paid in increased reimbursements to providers. SB 1300 Page 4 3)Unknown GF cost pressure, potentially in the millions annually, to maintain higher ambulance transport rates if QAF revenues are eliminated or changed. See comment 7 (a), below. COMMENTS: 1)Purpose. According to the author, this bill increases Medi-Cal EMT rates by levying a fee on three specific EMT reimbursement codes. The resulting revenue would then be used to draw down additional federal Medicaid funds to increase Medi-Cal emergency transportation rates, without imposing a cost to the state GF. In addition, 10% of revenue raised by the QAF would offset GF costs for state-funded health care coverage. The author argues inadequate Medi-Cal reimbursement for ambulance transport is a longstanding issue and places a strain on the state's emergency medical services (EMS) system. Unlike other Medi-Cal providers, ambulance providers cannot "opt out" or otherwise limit their participation in the Medi-Cal program based on low Medi-Cal reimbursement levels. 2)Background. Federal law authorizes states to fund a portion of Medicaid (Medi-Cal in California) through provider fees that meet federal requirements. The fee revenue collected by states is matched through federal financial participation (FFP) and used to increase provider payments, either through supplemental payments or through increased rates. With certain exceptions, state QAF must be broad-based, uniform, and cannot hold a group of providers harmless with respect to fees paid and payments received. In California, QAF mechanisms have been used to fund Medi-Cal managed care, skilled nursing facilities (SNF, nursing homes), intermediate care facilities for the developmentally disabled (ICF-DDs), and hospitals. 3)EMT Costs Versus Medi-Cal Payments. Ambulance payment rates in SB 1300 Page 5 Medi-Cal are poor even compared to Medi-Cal's generally low fee-for-service payment rates, which are generally about 50% of Medicare levels across all types of services. A 2012 GAO study found the median cost per ambulance transport was $429 nationally, whereas the average Medi-Cal payment is $106 before minor add-ons that slightly increase reimbursement. 4)Recent Payment Reduction. Pursuant to AB 97 (Committee on Budget), Chapter 3, Statutes of 2011, Medi-Cal provider rates were reduced by 10% for dates of services on and after June 1, 2011, subject to federal approval, and federal financial participation. This rate reduction was blocked by court action for some providers. It took effect for ambulance providers in September 2013, but without retroactive recoupment. 5)Prior Legislation. a) AB 2577 (Cooley and Pan) of 2014 authorized governmental entities to make intergovernmental transfers as the non-federal share of expenditures for ground EMT services for purposes of drawing down federal Medicaid matching funds. AB 2577 was vetoed by the Governor, who cited administrative capacity issues and committed to continue work on a funding mechanism. b) SB 1374 (Hernandez) of 2013 and AB 1257 (Gray) of 2015 increased payment rates for ground EMT services. Both were held on the suspense files of their respective house's Appropriations Committees. c) AB 678 (Pan), Chapter 397, Statutes of 2011, establishes a supplemental payment program for governmental entity SB 1300 Page 6 providers of Medi-Cal EMT services, based on certified public expenditures using state or local governmental entities' funds as the required federal match. 6)Support and Opposition. Ambulance providers support this bill. DHCS has expressed opposition, noting the mechanism to increase payments is a rate increase, which puts the GF at risk of maintaining augmented rates, notwithstanding any subsequent changed circumstances affecting the amount of QAF revenues DHCS may collect. 7)Staff Comments. a) Increased Rates versus Supplemental Payments. As noted, there are two main ways to increase reimbursement: providing higher reimbursement rates or providing supplemental payments without adjusting the base rate. DHCS notes that once higher reimbursement rates are approved by the federal government, they may prove difficult to modify or eliminate based on changing circumstances. For instance, if the QAF mechanism were eliminated, or a situation emerged in which the QAF revenue no longer covered the increased costs of the higher rates, the GF would likely shoulder the burden of paying for the rate increase. Supplemental payments appear easier to modify or eliminate. b) Administrative Costs. DHCS notes the $350,000 limit on revenue for administrative costs may not cover the necessary staffing, contract, and other costs the department may incur to implement the bill. To ensure GF neutrality, this bill should be amended to allow for complete administrative cost recovery from the collected revenues. SB 1300 Page 7 Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081