BILL NUMBER: AB 2377 CHAPTERED 07/11/94 BILL TEXT CHAPTER 147 FILED WITH SECRETARY OF STATE JULY 11, 1994 APPROVED BY GOVERNOR JULY 9, 1994 PASSED THE ASSEMBLY JULY 5, 1994 PASSED THE SENATE JULY 4, 1994 AMENDED IN SENATE JULY 4, 1994 AMENDED IN SENATE JUNE 27, 1994 INTRODUCED BY Committee on Ways and Means (Vasconcellos (Chairman), Hannigan, Horcher, Alpert, Burton, Campbell, Costa, Epple, Barbara Friedman, Gotch, Johnson, Lee, Murray, Nolan, O' Connell, Polanco, and Seastrand) APRIL 1, 1993 An act to amend Section 3750 of the Family Code, to add Sections 22793.1 and 22825.14 to the Government Code, to amend Sections 1233.5, 1357.03, 1357.50, 1373, and 1374.57 of, and to add Section 1374.3 to, the Health and Safety Code, to amend Sections 10117, 10119, and 10700 of, and to add Sections 10702.1, 10719.1, and 10731.2 to, the Insurance Code, to add Sections 2803.4 and 2803.5 to the Labor Code, to amend Sections 14006.7, 14009.5, 14015, 14132.44, 14133.22, and 14163 of, and to add Sections 14005.20, 14087.46, 14105.336, 14124.93, 14132.47, 14132.48, and 14148.75 to, and to add and repeal Section 14105.335 of, the Welfare and Institutions Code, relating to human services, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 2377, Committee on Ways and Means. Human services. (1) Existing law requires, commencing January 1, 1995, a licensed clinic board of directors and its medical director to establish and adopt written policies and procedures to screen patients for purposes of detecting spousal or partner abuse. This bill would delay the date upon which these policies and procedures would be required to be established until June 30, 1995. (2) Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Services, and funded in part from federal medicaid program funds, pursuant to which Medi-Cal benefits are provided to public assistance recipients and certain other low-income persons. Existing law establishes requirements for various contracts between employers and carriers offering health benefit plans and contracts. This bill would specify that a plan or contract shall not provide an exception for other coverage where the other coverage is entitlement to Medi-Cal or medicaid benefits, and would make conforming changes. (3) Existing law authorizes the court to require health care coverage payments in child support proceedings. This bill would require the district attorney, the department, or a party with custody of a child, as defined to enforce an outstanding support order that requires that health care coverage be provided to the child, and requires employers and health care service plans to comply with these provisions in the case of a child eligible for federal medicaid services. The bill would require that children be included within the coverage of health care provided by employers or other providers except as otherwise provided. It also imposes various requirements on health care insurers. (4) Existing law requires the department to claim against the estate of a decedent if the decedent had received benefits under the Medi-Cal program. This bill would revise the circumstances in which the department is required to claim against the estate of a decedent who received Medi-Cal benefits. (5) Existing law prohibits any limitation or restriction on the right of a Medi-Cal beneficiary to dispose or encumber property, but provides that the disposal of resources for less than fair market value shall result in a period of ineligibility for aid. This bill would, instead, provide that the transfer or gift of assets, including income and resources, would result in a period of ineligibility for aid. (6) This bill would require the State Department of Health Services to exercise the option made available by the federal medicaid program to provide funds for medical assistance for eligible persons infected with tuberculosis. Because local government entities would be responsible for administering the eligibility requirements for medical assistance for persons infected with tuberculosis, this bill would impose a state-mandated local program. (7) Existing law permits the department to enter into contracts with manufacturers of single-source and multiple-source drugs for drugs from each major therapeutic category, and establish a Medi-Cal contract drug list. Contracts must, however, meet specified requirements. This bill would, until July 1, 1996, in addition to rebates required pursuant to other provisions of state or federal law, for each prescription drug reimbursed through the Medi-Cal program, except for specified drugs, require all pharmaceutical manufacturers to provide the department a supplemental 10% rebate. (8) The bill would also require the department to reduce reimbursements to pharmacists by 50 per prescription, effective January 1, 1995. n (9) Existing law, except under specified circumstances, limits prescribed drugs under the Medi-Cal program to not more than 10 per month, unless prior authorization is obtained. This bill would reduce this limit to 6 prescription drugs per month. This bill would also provide that, in carrying out the requirements for prior authorization, the department would be permitted to contract, either directly or through the fiscal intermediary, for pharmacy consultant staff necessary to accomplish the treatment authorization request reviews. (10) Existing law makes targeted case management, as defined, a covered benefit under the Medi-Cal program, for specified populations, and subject to federal requirements. Existing law specifies that counties are the entities permitted to provide these services. This bill would make various changes in targeted case management provisions, including a grant of authority for counties or charter cities to contract for the provision of targeted case management services with health care providers. It would, however, specify that certain targeted case management services would not need to be provided in accordance with these requirements. The bill would also establish a Medi-Cal Administrative Claiming process under which local governmental agencies could obtain federal matching funds for participation with the department in this process. The bill would require local governmental agencies participating in the Medi-Cal Administrative Claiming process to pay to the department a participation fee, to cover the state's costs of administering the program. Under existing law, moneys in the Health Care Deposit Fund are used for purposes of the Medi-Cal program. The bill would, in addition, require local governmental agencies participating in the Medi-Cal Administrative Claiming process to pay an amount from its nonfederal general fund revenues necessary to yield a combined total reimbursement of $200,000,000 to the state in the 1994-95 fiscal year and subsequent fiscal years, for deposit in the Health Care Deposit Fund, with these moneys to be continuously appropriated to the department for support of the Medi-Cal program. (11) Under existing law, the department is required to adopt the federal medicaid option to extend eligibility for Medi-Cal benefits to all pregnant women and infants with family incomes not in excess of 185% of the federal poverty level. Federal law authorizes states administering the medicaid program to waive the use of an asset test for determining eligibility of pregnant women and infants for Medi-Cal benefits. This bill would require the State Department of Health Services to adopt that federal option. Existing law requires the county in which a person resides to determine a person's eligibility for Medi-Cal benefits and continued eligibility. To the extent this bill would increase the counties' responsibilities for eligibility determination, it would impose a state-mandated local program. (12) Existing law provides for dental coverage under the Medi-Cal program. This bill would require the department to implement a dental managed care program. (13) Existing law establishes the Medi-Cal Inpatient Adjustment Fund, the moneys in which may be used only for payment adjustments to hospitals deemed as disproportionate share hospitals, and for other specified purposes. Existing law provides that, except as specified, commencing in the 1993-94 fiscal year, $154,757,690 of the moneys in this fund may be transferred to the Health Care Deposit Fund. This bill would increase the amount, beginning with the 1994-95 fiscal year to $239,757,690. (14) Existing law authorizes the adoption of emergency regulations to implement specified provisions relating to the provision of education and related services to children with disabilities. This bill would provide that the emergency regulations governing these provisions that are operative for the 1993-94 fiscal year shall be operative for the 1994-95 fiscal year. (15) This bill would authorize the State Department of Health Services to adopt emergency regulations, in accordance with certain procedures, and subject to specified limitations, to implement its provisions. (16) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement, including the creation of a State Mandates Claims Fund to pay the costs of mandates which do not exceed $1,000,000 statewide and other procedures for claims whose statewide costs exceed $1,000,000. This bill would provide that, if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to those statutory procedures and, if the statewide cost does not exceed $1,000,000, shall be made from the State Mandates Claims Fund. (17) This bill would declare that it is to take effect immediately as an urgency statute. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 3750 of the Family Code is amended to read: 3750. "Health insurance coverage" as used in this article includes all of the following: (a) Vision care and dental care coverage whether the vision care or dental care coverage is part of existing health insurance coverage or is issued as a separate policy or plan. (b) Provision for the delivery of health care services by a fee for service, health maintenance organization, preferred provider organization, or any other type of health care delivery system under which medical services could be provided to a dependent child of an absent parent. (c) Notwithstanding any other provision of this article or of a health care service plan contract, every health care service plan shall comply with the requirements of Section 14124.93 of the Welfare and Institutions Code in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 2. Section 22793.1 is added to the Government Code, to read: 22793.1. (a) A plan or contract shall not provide any of the following: (1) An exception for other coverage where the other coverage is entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. (2) An exception for Medi-Cal or medicaid benefits. (3) A provision that the benefits payable under the plan or contract are subject to reduction if the individual insured has entitlement to Medi-Cal or medicaid benefits. (4) An exception for enrollment for benefits because of an applicant's entitlement to Medi-Cal or medicaid benefits. (b) Each plan approved or contract made under this part shall be considered in determining the liability of any third party for medical expenses incurred by a Medi-Cal recipient under Section 14124.90 of the Welfare and Institutions Code or a medicaid recipient under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 3. Section 22825.14 is added to the Government Code, to read: 22825.14. Any person or entity subject to the requirements of this chapter shall comply with the standards set forth in Section 14124.93 of the Welfare and Institutions Code, in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 4. Section 1233.5 of the Health and Safety Code is amended to read: 1233.5. By June 30, 1995, a licensed clinic board of directors and its medical director shall establish and adopt written policies and procedures to screen patients for purposes of detecting spousal or partner abuse. The policies shall include procedures to accomplish all of the following: (a) Identifying, as part of its medical screening, spousal or partner abuse among patients. (b) Documenting in the medical record patient injuries or illnesses attributable to spousal or partner abuse. (c) Providing to patients who exhibit signs of spousal or partner abuse a current referral list of private and public community agencies that provide, or arrange for, the evaluation, counseling, and care of persons experiencing spousal or partner abuse, including, but not limited to, hot lines, local battered women's shelters, legal services, and information about temporary restraining orders. (d) Designating licensed clinical staff to be responsible for the implementation of these guidelines. It is the intent of the Legislature that clinics, for purposes of satisfying the requirements of this section, adopt guidelines similar to those developed by the American Medical Association regarding domestic violence detection and referral. The Legislature recognizes that while guidelines evolve and change, the American Medical Association's guidelines may serve, at this time, as a model for clinics to follow. SEC. 5. Section 1357.03 of the Health and Safety Code is amended to read: 1357.03. (a) Upon the effective date of this article, a plan shall fairly and affirmatively offer, market, and sell all of the plan's health care service plan contracts that are sold to small employers or to associations that include small employers to all small employers in each service area in which the plan provides or arranges for the provision of health care services. A plan contracting to participate in the voluntary purchasing pool for small employers provided for under Article 4 (commencing with Section 10730) of Chapter 14 of Part 2 of Division 2 of the Insurance Code shall be deemed in compliance with this requirement for a contract offered through the voluntary purchasing pool established under Article 4 (commencing with Section 10730) of Chapter 14 of Part 2 of Division 2 of the Insurance Code in those geographic regions in which plans participate in the pool, if the contract is offered exclusively through the pool. Each plan shall make available to each small employer all small employer health care service plan contracts which the plan offers and sells to small employers or to associations that include small employers in this state. No plan or solicitor shall induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employee's employment or membership in a guaranteed association. (b) Every plan shall file with the commissioner the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employee's premium. Employer contribution requirements shall not vary by employer size. Members of an association eligible for health coverage under subdivision (o) of Section 1357 but not electing any health coverage through the association shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plan's reasonable participation standards. (c) The plan may not reject an application from a small employer for a health care service plan contract if all of the following are met: (1) The small employer, as defined by paragraph (1) of subdivision (l) of Section 1357 offers health benefits to 100 percent of its eligible employees, as defined by paragraph (1) of subdivision (b) of Section 1357. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees. (2) The small employer agrees to make the required premium payments. (3) The small employer agrees to inform the small employers' employees of the availability of coverage and the provision that those not electing coverage must wait one year to obtain coverage through the group if they later decide they would like to have coverage. (4) The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services. (d) No plan or solicitor shall, directly or indirectly, engage in the following activities: (1) Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plan's approved service area. (2) Encourage or direct small employers to seek coverage from another plan or the voluntary purchasing pool established under Article 4 (commencing with Section 10730) of Chapter 14 of Part 2 of Division 2 of the Insurance Code because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plan's approved service area. (e) No plan shall, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer. (f) Each plan shall comply with the requirements of Section 1374.3. SEC. 6. Section 1357.50 of the Health and Safety Code is amended to read: 1357.50. For purposes of this article: (a) "Health benefit plan" means any individual or group, insurance policy or health care service plan contract, that provides medical, hospital, and surgical benefits. The term does not include accident only, credit, disability income, coverage of Medicare services pursuant to contracts with the United States government, Medicare supplement, long-term care insurance, dental, vision, coverage issued as a supplement to liability insurance, insurance arising out of a workers' compensation or similar law, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance. (b) "Late enrollee" means an eligible employee or dependent who has declined health coverage under a health benefit plan offered through employment or sponsored by an employer at the time of the initial enrollment period provided under the terms of the health benefit plan, and who subsequently requests enrollment in a health benefit plan of that employer; provided that the initial enrollment period shall be a period of at least 30 days. However, an eligible employee or dependent shall not be considered a late enrollee if any of the following is applicable: (1) The individual meets all of the following requirements: (A) The individual was covered under another employer health benefit plan at the time the individual was eligible to enroll. (B) The individual certified, at the time of the initial enrollment that coverage under another employer health benefit plan was the reason for declining enrollment provided that, if the individual was covered under another employer health plan, the individual was given the opportunity to make the certification required by this subdivision and was notified that failure to do so could result in later treatment as a late enrollee. (C) The individual has lost or will lose coverage under another employer health benefit plan as a result of termination of employment of the individual or of a person through whom the individual was covered as a dependent, change in employment status of the individual or of a person through whom the individual was covered as a dependent, termination of the other plan's coverage, cessation of an employer's contribution toward an employee or dependent's coverage, death of a person through whom the individual was covered as a dependent, or divorce. (D) The individual requests enrollment within 30 days after termination of coverage, or cessation of employer contribution toward coverage provided under another employer health benefit plan. (2) The individual is employed by an employer that offers multiple health benefit plans and the individual elects a different plan during an open enrollment period. (3) A court has ordered that coverage be provided for a spouse or minor child under a covered employee's health benefit plan. The health benefits plan shall enroll a dependent child within 30 days of presentation of a court order by the district attorney, or upon presentation of a court order or request by a custodial party, as described in subdivision (j) of Section 14124.93 of the Welfare and Institutions Code, or the Medi-Cal program. (4) The plan cannot produce a written statement from the employer stating that, prior to declining coverage, the individual or the person through whom the individual was eligible to be covered as a dependent was provided with, and signed acknowledgment of, explicit written notice in bold type specifying that failure to elect coverage during the initial enrollment period permits the plan to impose, at the time of the individual's later decision to elect coverage, an exclusion from coverage for a period of 12 months as well as a six-month preexisting condition exclusion, unless the individual meets the criteria specified in paragraph (1), (2), or (3). (c) "Preexisting condition provision" means a contract provision that excludes coverage for charges or expenses incurred during a specified period following the enrollee's effective date of coverage, as to a condition for which medical advice, diagnosis, care, or treatment was recommended or received during a specified period immediately preceding the effective date of coverage. (d) "Qualifying prior coverage" means: (1) Any individual or group policy, contract or program, that is written or administered by a disability insurance company, nonprofit hospital service plan, health care service plan, fraternal benefits society, self-insured employer plan, or any other entity, in this state or elsewhere, and that arranges or provides medical, hospital and surgical coverage not designed to supplement other private or governmental plans. The term includes continuation or conversion coverage but does not include accident only, credit, disability income, Medicare supplement, long-term care insurance, dental, vision, coverage issued as a supplement to liability insurance, insurance arising out of a workers' compensation or similar law, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance. (2) The federal Medicare program pursuant to Title XVIII of the Social Security Act. (3) The medicaid program pursuant to Title XIX of the Social Security Act. (4) Any other publicly sponsored program, provided in this state or elsewhere, of medical, hospital and surgical care. (e) "Waivered condition" means a contract provision that excludes coverage for charges or expenses incurred during a specified period of time for one or more specific, identified, medical conditions. SEC. 7. Section 1373 of the Health and Safety Code is amended to read: 1373. (a) A plan contract may not provide an exception for other coverage where the other coverage is entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. Each plan contract shall be interpreted not to provide an exception for the Medi-Cal or medicaid benefits. A plan contract shall not provide an exemption for enrollment because of an applicant's entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. A plan contract may not provide that the benefits payable thereunder are subject to reduction if the individual insured has entitlement to the Medi-Cal or medicaid benefits. (b) A plan contract that provides coverage, whether by specific benefit or by the effect of general wording, for sterilization operations or procedures shall not impose any disclaimer, restriction on, or limitation of, coverage relative to the covered individual's reason for sterilization. As used in this section, "sterilization operations or procedures" shall have the same meaning as that specified in Section 10120 of the Insurance Code. (c) Every plan contract that provides coverage to the spouse or dependents of the subscriber or spouse shall grant immediate accident and sickness coverage, from and after the moment of birth, to each newborn infant of any subscriber or spouse covered and to each minor child placed for adoption from and after the date on which the adoptive child's birth parent or other appropriate legal authority signs a written document, including, but not limited to, a health facility minor release report, a medical authorization form, or a relinquishment form, granting the subscriber or spouse the right to control health care for the adoptive child or, absent this written document, on the date there exists evidence of the subscriber's or spouse's right to control the health care of the child placed for adoption. No such plan may be entered into or amended if it contains any disclaimer, waiver, or other limitation of coverage relative to the coverage or insurability of newborn infants of, or children placed for adoption with, a subscriber or spouse covered as required by this subdivision. (d) Every plan contract that provides that coverage of a dependent child of a subscriber shall terminate upon attainment of the limiting age for dependent children specified in the plan, shall also provide in substance that attainment of the limiting age shall not operate to terminate the coverage of the child while the child is and continues to be both (1) incapable of self-sustaining employment by reason of mental retardation or physical handicap and (2) chiefly dependent upon the subscriber for support and maintenance, provided proof of the incapacity and dependency is furnished to the plan by the member within 31 days of the request for the information by the plan or group plan contractholder and subsequently as may be required by the plan or group plan contractholder, but not more frequently than annually after the two-year period following the child's attainment of the limiting age. (e) A plan contract which provides coverage, whether by specific benefit or by the effect of general wording, for both an employee and one or more covered persons dependent upon the employee and provides for an extension of the coverage for any period following a termination of employment of the employee shall also provide that this extension of coverage shall apply to dependents upon the same terms and conditions precedent as applied to the covered employee, for the same period of time, subject to payment of premiums, if any, as required by the terms of the policy and subject to any applicable collective bargaining agreement. (f) A group contract shall not discriminate against handicapped persons or against groups containing handicapped persons. Nothing in this subdivision shall preclude reasonable provisions in a plan contract against liability for services or reimbursement of the handicap condition or conditions relating thereto, as may be allowed by rules of the commissioner. (g) Every group contract shall set forth the terms and conditions under which subscribers and enrollees may remain in the plan in the event the group ceases to exist, the group contract is terminated or an individual subscriber leaves the group, or the enrollees' eligibility status changes. (h) (1) A health care service plan or specialized health care service plan may provide for coverage of, or for payment for, professional mental health services, or vision care services, or for the exclusion of these services. If the terms and conditions include coverage for services provided in a general acute care hospital or an acute psychiatric hospital as defined in Section 1250 and do not restrict or modify the choice of providers, the coverage shall extend to care provided by a psychiatric health facility as defined in Section 1250.2 operating pursuant to licensure by the State Department of Mental Health. A health care service plan that offers outpatient mental health services but does not cover these services in all of its group contracts shall communicate to prospective group contractholders as to the availability of outpatient coverage for the treatment of mental or nervous disorders. (2) No plan shall prohibit the member from selecting any psychologist who is licensed pursuant to the Psychology Licensing Law (Chapter 6.6 (commencing with Section 2900) of Division 2 of the Business and Professions Code), any optometrist who is the holder of a certificate issued pursuant to Chapter 7 (commencing with Section 3000) of Division 2 of the Business and Professions Code or, upon referral by a physician and surgeon licensed pursuant to the Medical Practice Act (Chapter 5 (commencing with Section 2000) of Division 2 of the Business and Professions Code), (i) any marriage, family, and child counselor who is the holder of a license under Section 4980.50 of the Business and Professions Code, (ii) any licensed clinical social worker who is the holder of a license under Section 4996 of the Business and Professions Code, or (iii) any registered nurse licensed pursuant to Chapter 6 (commencing with Section 2700) of Division 2 of the Business and Professions Code who possesses a master's degree in psychiatric-mental health nursing and two years of supervised experience in psychiatric-mental health nursing, at the time that the State Board of Registered Nurses produces and maintains a list of those psychiatric-mental health nurses who possess a master's degree in psychiatric-mental health nursing and two years of supervised experience in psychiatric-mental health nursing, to perform the particular services covered under the terms of the plan, and the certificate holder is expressly authorized by law to perform these services. (3) Nothing in this section shall be construed to allow any certificate holder or licensee enumerated in this section to perform professional mental health services beyond his or her field or fields of competence as established by his or her education, training and experience. (4) For the purposes of this section, "marriage, family, and child counselor" means a licensed marriage, family, and child counselor who has received specific instruction in assessment, diagnosis, prognosis, and counseling, and psychotherapeutic treatment of premarital, marriage, family, and child relationship dysfunctions which is equivalent to the instruction required for licensure on January 1, 1981. (5) Nothing in this section shall be construed to allow a member to select and obtain mental health or psychological or vision care services from a certificate or licenseholder who is not directly affiliated with or under contract to the health care service plan or specialized health care service plan to which the member belongs. All health care service plans and individual practice associations that offer mental health benefits shall make reasonable efforts to make available to their members the services of licensed psychologists. However, a failure of a plan or association to comply with the requirements of the preceding sentence shall not constitute a misdemeanor. (6) As used in this subdivision, "individual practice association" means an entity as defined in subsection (5) of Section 1307 of the federal Public Health Service Act (42 U.S.C. Sec. 300e-1, subsec. (5)). (7) Health care service plan coverage for professional mental health services may include community residential treatment services that are alternatives to inpatient care and which are directly affiliated with the plan or to which enrollees are referred by providers affiliated with the plan. (i) If the plan utilizes arbitration to settle disputes, the plan contracts shall set forth the type of disputes subject to arbitration, the process to be utilized, and how it is to be initiated. (j) A plan contract which provides benefits that accrue after a certain time of confinement in a health care facility shall specify what constitutes a day of confinement or the number of consecutive hours of confinement that are requisite to the commencement of benefits. SEC. 8. Section 1374.3 is added to the Health and Safety Code, to read: 1374.3. Notwithstanding any other provision of this article or of a health care service plan contract, every health care service plan shall comply with the requirements of Section 14124.93 of the Welfare and Institutions Code in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 9. Section 1374.57 of the Health and Safety Code is amended to read: 1374.57. (a) No group health care service plan that provides hospital, medical, or surgical expense benefits for employees or subscribers and their dependents shall exclude a dependent child from eligibility or benefits solely because the dependent child does not reside with the employee or subscriber. (b) A health care service plan that provides hospital, medical, or surgical expense benefits for employees or subscribers and their dependents shall enroll, upon application by the employer or group administrator, a dependent child of the noncustodial parent when the parent is the employee or subscriber, at any time the noncustodial or custodial parent makes an application for enrollment to the employer or group administrator when a court order for medical support exists. Except as provided in Section 1374.3, the application to the employer or group administrator shall be made within 90 days of the issuance of the court order. In the case of children who are eligible for medicaid, the State Department of Health Services or the district attorney in whose jurisdiction the child resides may make that application. (c) This section shall not be construed to require that a health care service plan enroll a dependent who resides outside the plan's geographic service area, except as provided in Section 1374.3. (d) Notwithstanding any other provision of this section, all health care service plans shall comply with the standards set forth in Section 1374.3. SEC. 10. Section 10117 of the Insurance Code is amended to read: 10117. (a) A policy of disability insurance, self-insured employee welfare benefit plan, or nonprofit hospital service plan may not provide an exception for other coverage where the other coverage is entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14500) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. Each policy of disability insurance shall be interpreted not to provide an exception for those Medi-Cal or medicaid benefits. (b) A policy of disability insurance may not provide that the benefits payable thereunder are subject to reduction if the individual insured has entitlement to such Medi-Cal benefits. (c) A policy of disability insurance, self-insured employee welfare benefit plan, or nonprofit hospital service plan shall not provide an exception for enrollment for benefits because of an applicant's entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14500) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 11. Section 10119 of the Insurance Code is amended to read: 10119. On and after the operative date of this section: (a) No policy of disability insurance which, in addition to covering the insured, also covers members of the insured's immediate family, may be issued or amended in this state if it contains any disclaimer, waiver, or other limitation of coverage relative to the accident and sickness coverage or insurability of newborn infants of an insured from and after the moment of birth or of any minor child placed with an insured for adoption from and after the moment the child is placed in the physical custody of the insured for adoption. (b) Each such policy of disability insurance shall contain a provision granting immediate accident and sickness coverage to each newborn infant of, and each minor child placed for adoption with, any insured as required by subdivision (a). (c) A policy of disability insurance, self-insured care coverage, employee welfare benefit plan, or nonprofit hospital service plan, shall comply with the standards set forth in Section 14124.93 of the Welfare and Institutions Code, in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 12. Section 10700 of the Insurance Code is amended to read: 10700. As used in this chapter: (a) "Agent or broker" means a person or entity licensed under Chapter 5 (commencing with Section 1621) of Part 2 of Division 1. (b) "Benefit plan design" means a specific health coverage product issued by a carrier to small employers, to trustees of associations that include small employers, or to individuals if the coverage is offered through employment or sponsored by an employer. It includes services covered and the levels of copayment and deductibles, and it may include the professional providers who are to provide those services and the sites where those services are to be provided. A benefit plan design may also be an integrated system for the financing and delivery of quality health care services which has significant incentives for the covered individuals to use the system. (c) "Board" means the Major Risk Medical Insurance Board. (d) "Carrier" means any disability insurance company, nonprofit hospital service plan, or any other entity that writes, issues, or administers health benefit plans that cover the employees of small employers, regardless of the situs of the contract or master policyholder. For the purposes of Articles 3 (commencing with Section 10719) and 4 (commencing with Section 10730), "carrier" also includes health care service plans. (e) "Dependent" means the spouse or child of an eligible employee, subject to applicable terms of the health benefit plan covering the employee, and includes dependents of guaranteed association members if the association elects to include dependents under its health coverage at the same time it determines its membership composition pursuant to subdivision (z). (f) "Eligible employee" means either of the following: (1) Any permanent employee who is actively engaged on a full-time basis in the conduct of the business of the small employer with a normal work week of at least 30 hours, in the small employer's regular place of business, who has met any statutorily authorized applicable waiting period requirements. The term includes sole proprietors or partners of a partnership, if they are actively engaged on a full-time basis in the small employer's business, and they are included as employees under a health benefit plan of a small employer, but does not include employees who work on a part-time, temporary, or substitute basis. It includes any eligible employee as defined in this paragraph who obtains coverage through a guaranteed association. Employees of employers purchasing through a guaranteed association shall be deemed to be eligible employees if they would otherwise meet the definition except for the number of persons employed by the employer. (2) Any member of a guaranteed association as defined in subdivision (z). (g) "Enrollee" means an eligible employee or dependent who receives health coverage through the program from a participating carrier. (h) "Financially impaired" means, for the purposes of this chapter, a carrier that, on or after the effective date of this chapter, is not insolvent and is either: (1) Deemed by the commissioner to be potentially unable to fulfill its contractual obligations. (2) Placed under an order of rehabilitation or conservation by a court of competent jurisdiction. (i) "Fund" means the California Small Group Reinsurance Fund. (j) "Health benefit plan" means a policy or contract written or administered by a carrier that arranges or provides health care benefits for the covered eligible employees of a small employer and their dependents. The term does not include accident only, credit, disability income, coverage of Medicare services pursuant to contracts with the United States government, Medicare supplement, long-term care insurance, dental, vision, coverage issued as a supplement to liability insurance, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance. (k) "In force business" means an existing health benefit plan issued by the carrier to a small employer. (l) "Late enrollee" means an eligible employee or dependent who has declined health coverage under a health benefit plan offered by a small employer at the time of the initial enrollment period provided under the terms of the health benefit plan, and who subsequently requests enrollment in a health benefit plan of that small employer; provided that the initial enrollment period shall be a period of at least 30 days. It also means any member of an association that is a guaranteed association as well as any other person eligible to purchase through the guaranteed association when that person has failed to purchase coverage during the initial enrollment period provided under the terms of the guaranteed association's health benefit plan and who subsequently requests enrollment in the plan, provided that the initial enrollment period shall be a period of at least 30 days. However, an eligible employee, another person eligible for coverage through a guaranteed association pursuant to subdivision (z), or dependent shall not be considered a late enrollee if: (1) the individual meets all of the following: (A) was covered under another employer health benefit plan at the time the individual was eligible to enroll; (B) certified at the time of the initial enrollment, that coverage under another employer health benefit plan was the reason for declining enrollment provided that, if the individual was covered under another employer health plan, the individual was given the opportunity to make the certification required by this subdivision and was notified that failure to do so could result in later treatment as a late enrollee; (C) has lost or will lose coverage under another employer health benefit plan as a result of termination of employment of the individual or of a person through whom the individual was covered as a dependent, change in employment status of the individual, or of a person through whom the individual was covered as a dependent, the termination of the other plan's coverage, cessation of an employer's contribution toward an employee or dependent's coverage, death of the person through whom the individual was covered as a dependent, or divorce; and (D) requests enrollment within 30 days after termination of coverage or employer contribution toward coverage provided under another employer health benefit plan; or (2) the individual is employed by an employer who offers multiple health benefit plans and the individual elects a different plan during an open enrollment period; or (3) a court has ordered that coverage be provided for a spouse or minor child under a covered employee's health benefit plan; or (4) (A) in the case of an eligible employee as defined in paragraph (1) of subdivision (b), the carrier cannot produce a written statement from the employer stating that the individual or the person through whom an individual was eligible to be covered as a dependent, prior to declining coverage, was provided with, and signed acknowledgment of, an explicit written notice in bold type specifying that failure to elect coverage during the initial enrollment period permits the carrier to impose, at the time of the individual's later decision to elect coverage, an exclusion from coverage for a period of 12 months as well as a six-month preexisting condition exclusion unless the individual meets the criteria specified in paragraph (1), (2), or (3); (B) in the case of an eligible employee who is a guaranteed association member, the plan cannot produce a written statement from the guaranteed association stating that the association sent a written notice in bold type to all association members at their last known address prior to the initial enrollment period informing members that failure to elect coverage during the initial enrollment period permits the plan to impose, at the time of the member's later decision to elect coverage, an exclusion from coverage for a period of 12 months as well as a six-month preexisting condition exclusion unless the member can demonstrate that he or she meets the requirements of subparagraphs (A), (C), and (D) of paragraph (1) or paragraph (2) or (3); or (C) in the case of an employer or person who is not a member of an association, was eligible to purchase coverage through a guaranteed association, and did not do so, and would not be eligible to purchase guaranteed coverage unless purchased through a guaranteed association, the employer or person can demonstrate that he or she meets the requirements of subparagraphs (A), (C), and (D) of paragraph (1), or paragraph (2) or (3), or that he or she recently had a change in status that would make him or her eligible and that application for coverage was made within 30 days of the change. (m) "New business" means a health benefit plan issued to a small employer that is not the carrier's in force business. (n) "Participating carrier" means a carrier that has entered into a contract with the program to provide health benefits coverage under this part. (o) "Plan of operation" means the plan of operation of the fund, including articles, bylaws and operating rules adopted by the fund pursuant to Article 3 (commencing with Section 10719). (p) "Program" means the Voluntary Alliance Uniting Employers Purchasing Program. (q) "Preexisting condition provision" means a policy provision that excludes coverage for charges or expenses incurred during a specified period following the insured's effective date of coverage, as to a condition for which medical advice, diagnosis, care, or treatment was recommended or received during a specified period immediately preceding the effective date of coverage. (r) "Qualifying prior coverage" means: (1) Any individual or group policy, contract, or program, that is written or administered by a disability insurer, nonprofit hospital service plan, health care service plan, fraternal benefits society, self-insured employer plan, or any other entity, in this state or elsewhere, and that arranges or provides medical, hospital, and surgical coverage not designed to supplement other private or governmental plans. The term includes continuation or conversion coverage but does not include accident only, credit, disability income, Medicare supplement, long-term care, dental, vision, coverage issued as a supplement to liability insurance, insurance arising out of a workers' compensation or similar law, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance. (2) The federal Medicare program pursuant to Title XVIII of the Social Security Act. (3) The medicaid program pursuant to Title XIX of the Social Security Act. (4) Any other publicly sponsored program, provided in this state or elsewhere, of medical, hospital, and surgical care. (s) "Rating period" means the period for which premium rates established by a carrier are in effect and shall be no less than six months. (t) "Risk adjusted employee risk rate" means the rate determined for an eligible employee of a small employer in a particular risk category after applying the risk adjustment factor. (u) "Risk adjustment factor" means the percent adjustment to be applied equally to each standard employee risk rate for a particular small employer, based upon any expected deviations from standard claims. This factor may not be more than 120 percent or less than 80 percent until July 1, 1996. Effective July 1, 1996, this factor may not be more than 110 percent or less than 90 percent. (v) "Risk category" means the following characteristics of an eligible employee: age, geographic region, and family size of the employee, plus the benefit plan design selected by the small employer. (1) No more than the following age categories may be used in determining premium rates: Under 30 30-39 40-49 50-54 55-59 60-64 65 and over However, for the 65 and over age category, separate premium rates may be specified depending upon whether coverage under the health benefit plan will be primary or secondary to benefits provided by the federal Medicare program pursuant to Title XVIII of the federal Social Security Act. (2) Small employer carriers shall base rates to small employers using no more than the following family size categories: (A) Single. (B) Married couple. (C) One adult and child or children. (D) Married couple and child or children. (3) (A) In determining rates for small employers, a carrier that operates statewide shall use no more than nine geographic regions in the state, have no region smaller than an area in which the first three digits of all its ZIP Codes are in common within a county and shall divide no county into more than two regions. Carriers shall be deemed to be operating statewide if their coverage area includes 90 percent or more of the state's population. Geographic regions established pursuant to this section shall, as a group, cover the entire state, and the area encompassed in a geographic region shall be separate and distinct from areas encompassed in other geographic regions. Geographic regions may be noncontiguous. (B) In determining rates for small employers, a carrier that does not operate statewide shall use no more than the number of geographic regions in the state than is determined by the following formula: the population, as determined in the last federal census, of all counties which are included in their entirety in a carrier's service area divided by the total population of the state, as determined in the last federal census, multiplied by nine. The resulting number shall be rounded to the nearest whole integer. No region may be smaller than an area in which the first three digits of all its ZIP Codes are in common within a county and no county may be divided into more than two regions. The area encompassed in a geographic region shall be separate and distinct from areas encompassed in other geographic regions. Geographic regions may be noncontiguous. No carrier shall have less than one geographic area. (w) "Small employer" means either of the following: (1) Any person, proprietary or nonprofit firm, corporation, partnership, public agency, or association that is actively engaged in business or service that, on at least 50 percent of its working days during the preceding calendar quarter, employed at least three, but not more than 50, eligible employees, the majority of whom were employed within this state, that was not formed primarily for purposes of buying health insurance and in which a bona fide employer-employee relationship exists. However, for purposes of subdivisions (b) and (h) of Section 10705, the definition shall include employers with at least five eligible employees until July 1, 1994, four eligible employees until July 1, 1995, and three eligible employees thereafter. In determining the number of eligible employees, companies that are affiliated companies, and that are eligible to file a combined income tax return for purposes of state taxation shall be considered one employer. Subsequent to the issuance of a health benefit plan to a small employer pursuant to this chapter, and for the purpose of determining eligibility, the size of a small employer shall be determined annually. Except as otherwise specifically provided, provisions of this chapter that apply to a small employer shall continue to apply until the health benefit plan anniversary following the date the employer no longer meets the requirements of this definition. It includes any small employer as defined in this paragraph who purchases coverage through a guaranteed association, and any employer purchasing coverage for employees through a guaranteed association. (2) Any guaranteed association, as defined in subdivision (y), that purchases health coverage for members of the association. (x) "Standard employee risk rate" means the rate applicable to an eligible employee in a particular risk category in a small employer group. (y) "Guaranteed association" means a nonprofit organization comprised of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or employer meeting its membership criteria which (1) includes one or more small employers as defined in paragraph (1) of subdivision (w), (2) does not condition membership directly or indirectly on the health or claims history of any person, (3) uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, (4) is organized and maintained in good faith for purposes unrelated to insurance, (5) has been in active existence on January 1, 1992, and for at least five years prior to that date, (6) has been offering health insurance to its members for at least five years prior to January 1, 1992, (7) has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, (8) offers any benefit plan design that is purchased to all individual members and employer members in this state, (9) includes any member choosing to enroll in the benefit plan design offered to the association provided that the member has agreed to make the required premium payments, and (10) covers at least 1,000 persons with the carrier with which it contracts. The requirement of 1,000 persons may be met if component chapters of a statewide association contracting separately with the same carrier cover at least 1,000 persons in the aggregate. This subdivision applies regardless of whether a master policy by an admitted insurer is delivered directly to the association or a trust formed for or sponsored by an association to administer benefits for association members. For purposes of this subdivision, an association formed by a merger of two or more associations after January 1, 1992, and otherwise meeting the criteria of this subdivision shall be deemed to have been in active existence on January 1, 1992, if its predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and otherwise met the criteria of this subdivision. (z) "Members of a guaranteed association" means any individual or employer meeting the association's membership criteria if that person is a member of the association and chooses to purchase health coverage through the association. At the association's discretion, it may also include employers and employees of association members, employees of employers of association members, association staff, retired members, retired employees of members, and surviving spouses and dependents of deceased members. However, if an association chooses to include such persons as members of the guaranteed association, the association must so elect in advance of purchasing coverage from a plan. Health plans may require an association to adhere to the membership composition it selects for up to 12 months. SEC. 13. Section 10702.1 is added to the Insurance Code, to read: 10702.1. Any person or entity subject to the requirements of this chapter shall comply with the standards set forth in Section 14124.93 of the Welfare and Institutions Code, in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 14. Section 10719.1 is added to the Insurance Code, to read: 10719.1. Any person or entity subject to the requirements of this chapter shall comply with the standards set forth in Section 14124.93 of the Welfare and Institutions Code, in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 15. Section 10731.2 is added to the Insurance Code, to read: 10731.2. Any person or entity subject to the requirements of this chapter shall comply with the standards set forth in Section 14124.93 of the Welfare and Institutions Code, in the case of children who are eligible for medicaid services under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 16. Section 2803.4 is added to the Labor Code, to read: 2803.4. (a) Any employer providing health benefits under the Employee Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1001, et seq.) shall not provide an exception for other coverage where the other coverage is entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. Any employer providing health benefits under the Employee Retirement Income Security Act of 1974 shall not provide an exception for the Medi-Cal or medicaid benefits. (b) Any employer providing health benefits under the Employee Retirement Income Security Act of 1974 shall not provide that the benefits payable are subject to reduction if the individual insured has entitlement to Medi-Cal or medicaid benefits. (c) Any employer providing health benefits under the Employee Retirement Income Security Act of 1974 shall not provide an exception for enrollment for benefits because of an applicant's entitlement to Medi-Cal benefits under Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, or medicaid benefits under Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. (d) The State Department of Health Services shall consider health benefits available under the Employee Retirement Income Security Act of 1974 in determining legal liability of any third party for medical expenses incurred by a Medi-Cal or medicaid recipient under Section 14124.90 of the Welfare and Institutions Code and Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code. SEC. 17. Section 2803.5 is added to the Labor Code, to read: 2803.5. Any employer who offers health care coverage, including employers and insurers, shall comply with the standards set forth in Section 14124.93 of the Welfare and Institutions Code. SEC. 18. Section 14005.20 is added to the Welfare and Institutions Code, to read: 14005.20. (a) The State Department of Health Services shall adopt the option made available under Section 13603 of the federal Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66) to pay allowable tuberculosis related services for persons infected with tuberculosis. (b) The income and resources of these persons may not exceed the maximum amount for a disabled person as described in Section 1902(a)(10)(A)(i) of Title XIX of the federal Social Security Act (42 U.S.C. Sec. 1396a(a)(10)(A)(i)). SEC. 19. Section 14006.7 of the Welfare and Institutions Code is amended to read: 14006.7. The department shall impose a lien upon the equity interest in the home or other property of an institutionalized beneficiary in order to secure the assets of the beneficiary for future recovery, provided all of the following conditions are met: (a) The beneficiary has been admitted to a nursing facility. (b) None of the following individuals are lawfully residing in the beneficiary's home: (1) The beneficiary's spouse. (2) The beneficiary's child who is under age 21 or blind or permanently and totally disabled. (3) The beneficiary's sibling, if he or she has an equity interest in the home and if the sibling is residing in the individual's home and has resided in the individual's home for at least one year before the beneficiary was admitted to the nursing facility. (4) Any individual who was continuously residing in the individual's home for a period of at least two years immediately before the date of the individual's admission to the nursing facility, and who establishes to the satisfaction of the department that he or she provided care to that individual that permitted the individual to reside in his or her home rather than in an institution. (c) The department determines that the beneficiary cannot reasonably be expected to return home. There shall be a rebuttable presumption that the beneficiary cannot reasonably be expected to return home if any of the following conditions are met: (1) The beneficiary or a responsible person declares there is no intent to return home. (2) The beneficiary has been continuously authorized to receive institutional care or has been institutionalized for six months or longer with no discharge plan. (d) (1) The beneficiary has been given 30 days' notice of the department's intent to impose a lien and has an opportunity for hearing under the state hearing procedures. The notice shall explain the proposed lien and its effect upon the beneficiary's ownership interest. (2) The lien shall be recorded in the office of the county recorder in which the real property is located and shall contain the name of the record owner of the real property and a legal description of the property. When recorded, the lien shall have the force, effect, and priority of a judgment lien. (3) If and when a beneficiary returns home, the lien shall dissolve. SEC. 20. Section 14009.5 of the Welfare and Institutions Code is amended to read: 14009.5. (a) Notwithstanding any other provision of this chapter, the department shall claim against the estate of the decedent, or against any recipient of the property of that decedent by distribution or survival an amount equal to the payments for the health care services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. (b) The department may not claim in any of the following circumstances: (1) The decedent was under 55 when services were received, except in the case of an individual who had been an inpatient in a nursing facility. (2) Where there is any of the following: (A) A surviving spouse during his or her lifetime. However, upon the death of a surviving spouse, the department shall make a claim against the estate of the surviving spouse, or against any recipient of property from the surviving spouse obtained by distribution or survival, for either the amount paid for the medical assistance given to the decedent or the value of any of the decedent's property received by the surviving spouse through distribution or survival, whichever is less. Any statute of limitations that purports to limit the ability to recover for medical assistance granted under this chapter shall not apply to any claim made for reimbursement. (B) A surviving child who is under age 21. (C) A surviving child who is blind or permanently and totally disabled, within the meaning of Section 1614 of the federal Social Security Act (42 U.S.C.A. Sec. 1382c). (3) Any exemption described in paragraph (2) that restricts the department from filing a claim against a decedent's property shall apply only to the proportionate share of the decedent's estate or property that passes to those recipients, by survival or distribution, who qualify for an exemption under paragraph (2). (c) The department shall place a lien against the decedent's interest in the real property of a surviving spouse in the amount of the department's entitlement pursuant to paragraph (2) of subdivision (b). The lien shall become due and payable upon the death of the surviving spouse or upon the sale, transfer, or exchange of the real property. (d) (1) The department shall waive its claim, in whole or in part, if it determines that enforcement of the claim would result in substantial hardship to other dependents, heirs, or survivors of the individual against whose estate the claim exists. (2) The department shall notify individuals of the waiver provision and the opportunity for a hearing to establish that a waiver should be granted. (e) The following definitions shall govern the construction of this section: (1) "Decedent" means a beneficiary who has received health care under this chapter or Chapter 8 (commencing with Section 14200) and who has died leaving property to others either through distribution or survival. (2) "Dependents" includes, but is not limited to, immediate family or blood relatives of the decedent. SEC. 21. Section 14015 of the Welfare and Institutions Code is amended to read: 14015. (a) The providing of health care under this chapter shall not impose any limitation or restriction upon the person's right to sell, exchange or change the form of property holdings nor shall the care provided constitute any encumbrance on the holdings. However, the transfer or gift of assets, including income and resources, for less than fair market value shall, to the extent and under the circumstances set forth in Title XIX of the federal Social Security Act (42 U.S.C. Sec. 1396 et seq.) result in a period of ineligibility for aid. (b) Any item of durable medical equipment which is purchased for a recipient pursuant to this chapter exclusively with Medi-Cal program funds shall be returned to the department when the department determines that the item is no longer medically necessary for the recipient. Items of durable medical equipment shall include, but are not limited to, wheelchairs and special hospital beds. SEC. 22. Section 14087.46 is added to the Welfare and Institutions Code, to read: 14087.46. (a) The department shall implement a dental managed care program for Medi-Cal beneficiaries to achieve major cost savings, while ensuring access and quality of care, pursuant to this section. (b) The department shall issue a request for proposals and award contracts on a competitive basis to one or more dental health care service contractors licensed pursuant to the Knox-Keene Health Care Service Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) in each county or region that the department determines to be feasible. The department may contract with county organized health systems. (c) To ensure access and continuity of care, the department shall award contracts only to plans that agree to negotiate in good faith and subcontract with any provider who agrees to provide dental services to Medi-Cal beneficiaries at a reimbursement rate comparable to that paid by the plan to other participating providers. Plans shall contract whenever feasible with traditional and safety net providers of dental services to Medi-Cal beneficiaries. In evaluating the plans, the department shall assign favorable weighting to contractors that include traditional and safety net providers. (d) The department shall implement a process to inform all Medi-Cal beneficiaries of their choices of participating dentists and to allow a beneficiary to chose or change his or her participating dentist. (e) The department shall make every effort to achieve operational contracts to place all Medi-Cal beneficiaries in dental managed care by October 1, 1995. The department may determine which counties or categories of Medi-Cal beneficiaries are to be included in the dental managed care program. If the department has achieved one or more operational managed care contracts in a county or region, fee-for-service dental services shall not be an option for selection by a beneficiary, except that the department may provide for fee-for-service dental care if needed to ensure adequate access in rural or underserved areas, or for unique populations. (f) The department shall require all participating plans to provide, at a minimum, the full scope of dental benefits pursuant to state and federal law. (g) In order to achieve maximum cost savings, the Legislature hereby determines that an expedited contract process for contracts under this section is necessary. Therefore, contracts under this section shall be exempt from the Public Contract Code. (h) Medi-Cal beneficiaries shall be able to receive their dental care from federally qualified health centers and rural health clinics certified pursuant to Public Law 95-210 that provide dental care in their service area. At the time of informing the Medi-Cal beneficiary of his or her choices of participating dentists, the beneficiary shall be informed of this option. Federally qualified health centers and rural health clinics shall continue to be reimbursed for dental services through the medical payment system in accordance with federal regulations. (i) The department shall monitor the implementation of dental managed care, and for each of the first three years of implementation, shall annually evaluate the program on a county-by-county basis in terms of access, quality of care, and cost savings. The evaluation shall be provided to the Legislature within 120 days of the close of each of the three fiscal years. (j) The department shall seek all federal waivers necessary to allow for federal financial participation in the program implemented pursuant to this section. This article shall not be implemented unless and until the director has executed a declaration, to be retained by the director, that approval of all necessary federal waivers have been obtained by the department. SEC. 23. Section 14105.335 is added to the Welfare and Institutions Code, to read: 14105.335. (a) Effective July 1, 1994, all pharmaceutical manufacturers shall provide the department a supplemental 10 percent rebate in addition to rebates pursuant to other provisions of state or federal law, less any state supplemental rebate currently provided under separate state agreements, for each prescription drug reimbursed through the Medi-Cal program. This supplemental rebate shall be calculated as 10 percent of the manufacturer's average manufacturer price, as that term is defined in the manufacturer's contract with the Health Care Financing Administration pursuant to Section 1927 of the Social Security Act (42 U.S.C. 1396r-8). Products that have been added to the Medi-Cal list of contract drugs pursuant to Section 14105.43 or 14133.2 do not require a supplemental rebate. (b) The drug products of any manufacturer that fails to execute a contract or contract amendment for the rebates required by subdivision (a), by September 30, 1994, shall be available to Medi-Cal beneficiaries only through prior authorization. (c) In carrying out this section, the department may contract either directly, or through the fiscal intermediary, for pharmacy consultant staff necessary to accomplish the treatment authorization request reviews. This authority shall extend until July 1, 1996. (d) For any drug placed on prior authorization pursuant to subdivision (b), the procedural and notification requirements described in subdivision (i) of Section 14105.33, Sections 14105.37 and 14105.38, subdivisions (a), (c), (e), and (f) of Section 14105.39, and Sections 14105.4 and 14105.405 are waived for the purposes of this section. (e) This section shall remain in effect only until July 1, 1996, and as of that date, is repealed, unless a later enacted statute that is enacted on or before July 1, 1996, deletes or extends that date. SEC. 23.5. Section 14105.336 is added to the Welfare and Institutions Code, to read: 14105.336. The department shall reduce reimbursements to pharmacists by fifty cents ($0.50) per prescription, effective January 1, 1995, for all prescription claims reimbursed through the Medi-Cal program. SEC. 24. Section 14124.93 is added to the Welfare and Institutions Code, to read: 14124.93. (a) The district attorney or party with custody of a child shall act to enforce an outstanding support order that requires that health care coverage be provided to the child. (b) To the extent required by federal law, any support obligor, and his or her employer and health care insurer, shall comply with the standards set forth in this section. (c) An employer or insurer shall not deny enrollment of a child under the health coverage of a child's parent on any of the following grounds: (1) The child was born out of wedlock. (2) The child is not claimed as a dependent on the parent's federal income tax return. (3) The child does not reside with the parent or in the insurer's service area. (d) In any case in which a parent is required by a court or administrative order to provide health coverage for a child and the parent is eligible for family health coverage through an insurer, the insurer shall do all of the following, as applicable: (1) Permit the parent to enroll under health coverage any child who is otherwise eligible to enroll for that coverage, without regard to any enrollment period restrictions. (2) If the parent is enrolled in health coverage but fails to apply to obtain coverage of the child, enroll that child under the health coverage upon presentation of the court order by the district attorney or upon presentation of the court order or request by the custodial party or the Medi-Cal program. (3) The insurer shall not disenroll, or eliminate coverage of, a child to which this subdivision applies, unless the insurer is provided with satisfactory evidence that either of the following apply: (A) The court order or administrative order is no longer in effect. (B) The child is or will be enrolled in comparable health coverage through another insurer that will take effect not later than the effective date of the child's disenrollment. (e) If a parent is required by a court or administrative order to provide health coverage and the parent is eligible for health coverage through an employer doing business in the state, the employer shall do all of the following: (1) Permit the parent to enroll under health coverage any child who is otherwise eligible for coverage, without regard to any enrollment period restrictions. (2) If the parent is enrolled in health coverage but fails to apply to obtain coverage of the child, enroll the child under the health coverage upon presentation of a court order by the district attorney or upon presentation of a court order or request by the custodial party or the Medi-Cal program. (3) The employer shall not disenroll or eliminate coverage of any child to which this section applies unless the employer is provided satisfactory written evidence, where applicable, that any of the following apply: (A) The court order or administrative order is no longer in effect. (B) The child will be enrolled in comparable health coverage through another insurer that will take effect not later than the effective date of the child's disenrollment. (C) The employer has eliminated family health coverage for all of the employer's employees. (4) Withhold from the employee's compensation the employee's share, if any, of the premiums for health coverage, not to exceed the maximum amount permitted to be withheld under Section 303(b) of the federal Consumer Credit Protection Act (15 U.S.C. Sec. 1673(b)), and pay that share of the premiums to the insurer, except as otherwise provided by federal statute or regulation for appropriate circumstances under which an employer may withhold less than the employee's share of the premiums. (f) The rights of a Medi-Cal beneficiary to health care benefits from an insurer have been assigned to the department, an insurer shall not impose any requirement on the department that is different from any requirement applicable to an agent or any other assignee of the covered beneficiary. (g) An insurer shall, in any case in which a child has health coverage through the insurer of a noncustodial parent, do all of the following: (1) Provide any information to the custodial party that may be necessary for the child to obtain benefits through the health coverage. (2) Permit the custodial party, or provider, with the custodial party's approval, to submit claims for covered services without the approval of the noncustodial parent. (3) Make payment on claims submitted in accordance with paragraph (2) directly to the custodial party, the provider, or the department. (h) The department, in the administration of the Medi-Cal program, may garnish the wages, salary, or other employment income of, and withhold amounts from state tax refunds from, any person to whom both of the following apply: (1) The person is required by a court or administrative order to provide coverage of the costs of health services to a child who is eligible for medical assistance under the Medi-Cal program. (2) The person has received payment from a third party for the costs of the health services for the child, but he or she has not used the payments to reimburse, as appropriate, either the custodial party or the provider of the health services, to the extent necessary to reimburse the department for expenditures for those costs under the Medi-Cal program. All claims for current or past-due child support shall take priority over claims made by the department for the costs of Medi-Cal services. (i) For purposes of this section, "insurer" includes every health care service plan, self-insured welfare benefit plan, including those regulated pursuant to the Employee Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1001, et seq.), self-funded employer plan, disability insurer, nonprofit hospital service plan, labor union trust fund, employer, and any other similar plan, insurer, or entity offering a health coverage plan. (j) For purposes of this section, "custodial party" or "party with custody of a child" includes, but is not limited to, a custodial parent, legal guardian, primary caretaker, or person with whom the child resides. SEC. 25. Section 14132.44 of the Welfare and Institutions Code is amended to read: 14132.44. (a) Targeted case management (TCM), pursuant to Section 1915(g) of the Social Security Act as amended by Public Law 99-272 (42 U.S.C. Sec. 1396n(g)), shall be covered as a benefit if the TCM provider providing the TCM services does so pursuant to a contract with a participating local governmental agency under the Medi-Cal Administrative Claiming process pursuant to Section 14132.47. TCM services shall be, subject to utilization controls for persons in programs determined appropriate by the director. Nothing in this section or in Section 14132.47 shall be construed to require any local governmental agency to implement TCM. (b) A TCM service provider under contract to a participating local governmental agency may provide TCM services to one or all of the following groups of Medi-Cal beneficiaries: (1) High-risk children, youth, and families. (2) Pregnant, postpartum, and parenting women. (3) Persons with human immunodeficiency virus infection. (4) Homeless persons. (5) Persons abusing alcohol or drugs, or both. (6) Persons known to use multiple service providers. (7) Persons with catastrophic or chronic illnesses. (8) Elderly persons at risk of institutionalization. (9) Adults at risk of abuse or neglect. (c) A participating local governmental agency that elects to contract with a TCM provider for the provision of TCM services to the groups specified in subdivision (b) shall, for each fiscal year, for the purpose of obtaining federal medicaid matching funds, certify to the department all of the following: (1) The availability and expenditure of 100 percent of the nonfederal share for the provision of TCM services. (2) The amount of funds expended on allowable TCM services. (3) Its expenditures represent costs that are eligible for federal financial participation. The department shall deny any claim if it determines that any certification required by this subdivision is not adequately supported for purposes of federal financial participation. (d) Only a participating local governmental agency may submit TCM service claims to the department for TCM services performed by a TCM provider pursuant to a contract with the participating local governmental agency. The department shall deny any claims for TCM services performed by a TCM provider unless the TCM provider only performs those services pursuant to its contract with that participating local governmental agency and the claims are submitted by that agency. (e) Upon federal approval for federal financial participation, the department, in consultation with counties, and consistent with federal regulations including the State Medicaid Manual of the Department of Health and Human Services, Health Care Financing Administration, shall define TCM services, shall establish the standards under which TCM services qualify as a Medi-Cal reimbursable service, shall develop an appropriate rate of reimbursement, and shall develop a claiming system to certify local matching expenditures. (f) (1) Notwithstanding any other provision of this section or of Section 14132.47, the state shall be held harmless, in accordance with paragraphs (2) and (3), from any final federal audit disallowance and interest resulting from payments made by the federal medicaid program to a participating local governmental agency for TCM services provided by a TCM provider pursuant to this section. (2) Each participating local governmental agency that has received payments under this section shall be liable for the same proportion of the disallowance and interest as the participating local governmental agency's paid claims pursuant to this section less its contribution pursuant to subdivision (m) of Section 14132.47, both in the fiscal year to which the disallowance pertains, bears to the particular participating local governmental agency's total claims pursuant to this section and Section 14132.47 in that same fiscal year. (3) Each participating local governmental agency that has received payments under this section shall be liable for any final federal audit disallowance and interest only with respect to the payments made to that participating local governmental agency. In the event that the department is required or obligated to reimburse the federal medicaid program for a final federal audit disallowance and interest resulting from payments made to a participating local governmental agency for TCM services provided by a TCM provider pursuant to this section, the department shall recoup from that particular participating local governmental agency the same proportion of the disallowance and interest as the participating local governmental agency's paid claims pursuant to this section less its contribution pursuant to subdivision (m) of Section 14132.47, both in the fiscal year to which the disallowance pertains, bears to the particular participating local governmental agency's total claims pursuant to this section and Section 14132.47 in that same fiscal year. (4) Notwithstanding paragraphs (2) and (3), to the extent that a final federal audit disallowance and interest results from a claim or claims for which the participating local governmental agency has received reimbursement for TCM services performed by a nongovernmental entity under contract with, and on behalf of, the participating local governmental agency, the department shall be held harmless by that particular participating local governmental agency for 100 percent of the amount of any such final federal audit disallowance and interest. (g) The use of local matching funds allowed by this section shall not create, lead to, or expand the health care funding obligations or service obligations for current or future years for each participating local governmental agency, except as required by this section or as may be required by federal law. (h) TCM services are services which assist clients to gain access to needed medical, social, educational, and other services. Activities conducted by TCM providers may include, but are not limited to, all of the following: (1) Assessment of client needs and personal support systems. (2) Development of comprehensive individualized service plans. (3) Coordination of services required to implement the individualized service plan. (4) Referral services. (5) Client monitoring to assess the efficacy of the plan. (6) Advocacy for clients with service providers. (7) Reevaluation and adaptation of the individualized service plan as necessary. (i) Each participating local governmental agency may only submit to the department TCM service claims performed by a TCM service provider if that provider is under contract with a participating local governmental agency that is claiming through the Medi-Cal Administrative Claiming process pursuant to Section 14132.47 and the TCM provider has an ongoing and continuous relationship with the Medi-Cal beneficiary receiving the TCM service in a manner consistent with continuity of care, pursuant to standards established by the Director of Health Services. (j) For the purposes of this section "participating local governmental agency" means a county or chartered city under contract with the department pursuant to Section 14132.47. (k) For the purposes of this section a "TCM provider" means an entity or person that is not affiliated with or employed by a participating local governmental agency, but provides TCM services on behalf of a local governmental agency in accordance with a contract. (l) The requirements of subdivision (m) of Section 14132.47 shall not apply to claims for TCM services provided by a local educational agency under a contract with a participating local governmental agency. (m) Amendments to this section enacted during the 1994 calendar year shall be applicable to services rendered, and to moneys paid to participating local governmental agencies for those services, in the 1994-95 fiscal year and thereafter. SEC. 26. Section 14132.47 is added to the Welfare and Institutions Code, to read: 14132.47. (a)(1) It is the intent of the Legislature that federal financial participation in both state and local programs be maximized. It is further the intent of the Legislature, in enacting this act, to provide for local governmental participation in the provision of targeted case management services pursuant to Section 1396n(g) of Title 42 of the United States Code and in Medi-Cal Administrative Claiming, with maximum possible federal financial participation. (2) It is further the intent of the Legislature to provide local governmental agencies the choice of participating in either or both of the Target Case Management (TCM) and Medi-Cal Administrative Claiming process programs at their option, subject to the requirements of this section and Section 14132.44. (b) The department is authorized to contract with each participating local governmental agency for the provision of administrative functions necessary for the proper and efficient administration of the Medi-Cal program, pursuant to Section 1396b(a) of Title 42 of the United States Code, Section 19303a of the federal Social Security Act, and this activity shall be known as the Medi-Cal Administrative Claiming process. (c) (1) As a condition for participation in the Medi-Cal Administrative Claiming process, each participating local governmental agency shall, for the purpose of obtaining federal medicaid matching funds, execute a contract with the department and shall certify to the department the amount of funds expended on allowable administrative functions. (2) The department shall deny the claim if it determines that the certification is not adequately supported for purposes of federal financial participation. (d) Each Medi-Cal Administrative Claiming process contract shall include a requirement that each participating local governmental agency submit a claiming plan in a manner prescribed by the department that does all of the following: (1) Describes the nature of each local program claiming administrative costs pursuant to the contract. (2) Describes each administrative function performed pursuant to the contract. (3) Identifies each employee job category and number of employees directly responsible for the performance of any administrative function. (4) Identifies the participating local governmental agency or political subdivision thereof that employs or controls the employee job category responsible for the performance of any administrative function. (5) Identifies, by local program, each nongovernmental entity and the choice of claiming method for that nongovernmental entity made pursuant to subdivision (i). (e) The department shall require that each participating local governmental agency certify to the department both of the following: (1) The availability and expenditure of 100 percent of the nonfederal share of the provision of Medi-Cal Administrative Claiming process functions. (2) In each fiscal year, that its expenditures represent costs that are eligible for federal financial participation for that fiscal year. The department shall deny the claim if it determines that the certification is not adequately supported for purposes of federal financial participation. (f) (1) Notwithstanding any other provision of this section, the state shall be held harmless, in accordance with paragraphs (2) and (3), from any final federal audit disallowance and interest resulting from payments made to a participating local governmental agency pursuant to this section. (2) Each participating local governmental agency that has received payments under this section shall be liable for the same proportion of the disallowance and interest as the participating local governmental agency's paid claims pursuant to this section and Section 14132.44 less its contribution pursuant to subdivision (m), both in the fiscal year to which the disallowance pertains, bears to the particular participating local governmental agency's total claims pursuant to this section and Section 14132.44 in that same fiscal year. (3) Each participating local governmental agency that has received payments under this section shall be liable for any final federal audit disallowance and interest only with respect to the payments made to that participating local governmental agency. In the event that the department is required or obligated to reimburse the federal medicaid program for a final federal audit disallowance and interest resulting from payments made to a participating local governmental agency for Medi-Cal Administrative Claiming process functions pursuant to this section, the department shall recoup from that particular participating local governmental agency the same proportion of the disallowance and interest as the participating local governmental agency's paid claims pursuant to this section and Section 14132.44 less its contribution pursuant to subdivision (m), both in the fiscal year to which the disallowance pertains, bears to the particular participating local governmental agency' s total claims pursuant to this section and Section 14132.44 in that same fiscal year. (4) Notwithstanding paragraphs (2) and (3), to the extent that a final federal audit disallowance and interest results from a claim or claims for which the participating local governmental agency has received reimbursement for Medi-Cal Administrative Claiming process functions performed by a nongovernmental entity under contract with, and on behalf of, the participating local governmental agency, the department shall be held harmless by that particular participating local governmental agency for 100 percent of the amount of any such final federal audit disallowance and interest. (g) The use of local matching funds required by this section shall not create, lead to, or expand the health care funding obligations or service obligations for current or future years for any participating local governmental agency, except as required by this section or as may be required by federal law. (h) The department shall deny any claim from a participating local governmental agency if the department determines that the claim is not adequately supported in accordance with criteria established pursuant to this subdivision before it forwards such a claim for reimbursement to the federal medicaid program. In consultation with local government agencies, the department shall establish criteria, on or before October 1, 1994, for the submission and payment of claims by each participating local governmental agency for administrative functions. The criteria shall include, but not be limited to, all of the following standards: (1) Methodology for determining and calculating personnel time studies submitted by each participating local governmental agency in support of its claims. (2) Identification of each local program for which Medi-Cal administrative costs are being claimed by that participating local governmental agency. This identification shall be consistent with the participating local governmental agency's claiming plan. (3) Identification of the local governmental agency or the political subdivision thereof submitting the claim. This identification shall be consistent with the participating local governmental agency's claiming plan. (4) Methodology for identifying the population served by the performance of the administrative functions and the percentage of that population which consists of Medi-Cal beneficiaries. (5) Methodology for identifying the costs of the administrative functions performed by each participating local governmental agency. (6) A specific identification of the administrative functions, approved by the department, that are performed and being claimed by each participating local governmental agency pursuant to an executed contract, as described in subdivision (a). (7) Methodology, applicable to any claim submitted by a participating local governmental agency based in whole or in part on health care services and administrative functions performed by the same employee of that agency, to demonstrate that no activity properly classified as a service or a part of a service is redesignated as an administrative function, and that the services and functions claimed are not duplicative. (i) Administrative functions shall be necessary for the proper and efficient administration of the state's medicaid plan, and the department may, after consultation with the participating local governmental agencies, include, without limitation, the following: (1) Functions or activities, under Medi-Cal, such as methods to inform or offer opportunity or assistance to recipients or potential recipients to enter into care through the Medi-Cal system. (2) Monitoring the delivery of TCM services by TCM providers under contract with that participating local governmental agency. (3) Administrative case management functions performed by the employees of a participating local governmental agency that may include, and are not limited to, the following: (A) Informing or assisting recipients or potential recipients in entering into care; including prescreening, facilitating a Medi-Cal application, and enrollment. (B) Case finding, assessment, case planning, and case coordination. (C) Anticipatory guidance for complex health needs and medical consultation. (D) Recipient assistance to access services. (E) Provider relations, resource development, and quality management. (F) Interagency coordination, program planning and development. (G) Staff training, incidental nonmedical activities, and general administration. (j) Claims submitted by participating local governmental agencies shall be reviewed by the department within 30 days of receipt. Any claim that cannot be approved shall promptly be returned to the participating local governmental agency, with a written explanation of the basis for denial if the claim is denied. All other claims shall be processed either for payment or for inclusion in the state's federal medicaid claim within 14 days of the claim review. (k) If the department denies any claim submitted under this section or Section 14132.44, the affected participating local governmental agency may, within 30 days after receipt of written notice of the denial, request that the department reconsider its action. The participating local governmental agency may request a meeting with the director or his or her designee within 30 days to present its concerns to the department after the request is filed. If the director or his or her designee cannot meet, the department shall respond in writing indicating the specific reasons for which the claim is out of compliance to the participating local governmental agency in response to its appeal. Thereafter, the decision of the director shall be final. (l) If a participating local governmental agency chooses to provide case management through an entity or person that is not administered by, affiliated with, or employed by, a participating local governmental agency, it may, subject to applicable requirements of federal law, pursuant to a contract with the nongovernmental entity, claim costs by designating the entity in advance either as a TCM provider under Section 14132.44, or as performing administrative case management activities under this section. After the election is made as to each nongovernmental entity, the choice shall be reflected in the contract between the participating local governmental agency and the nongovernmental entity and be included in the participating local governmental agency's claiming plan pursuant to subdivision (c). (m) (1) Each participating local governmental agency shall reimburse the department from its nonfederal, general fund revenues in an amount necessary to yield a combined total reimbursement of two hundred million dollars ($200,000,000) for the 1994-95 fiscal year and subsequent fiscal years for deposit in the Health Care Deposit Fund. (2) In accordance with subdivision (u), on or before August 1, 1994, and thereafter before July 1 of each year, the participating local governmental agencies shall determine the contribution of each participating local governmental agency to the total reimbursement amount set forth in paragraph (1). (3) If the department is not advised of the final determination of those contribution amounts by the date specified in paragraph (2), the department shall specify, by October 1, 1994, and by September 1 of each year thereafter, the contribution amount for each participating local governmental agency. Upon notification by the department, each participating local governmental agency shall remit to the department the amounts required by this subdivision on a quarterly basis beginning within 30 days after the participating local governmental agency's receipt of quarterly payments for Medi-Cal Administrative Claiming process services. (4) Moneys received by the department pursuant to this subdivision are hereby continuously appropriated to the department for support of the Medi-Cal program, and the funds shall be administered in accordance with procedures prescribed by the Department of Finance. If not paid as provided in this section, the department may offset payments due to each participating local governmental agency from the state, not related to payments required to be made pursuant to this section and Section 14132.44, in order to recoup these funds for the Health Care Deposit Fund. (n) As a condition of participation in the Medi-Cal Administrative Claiming process and in recognition of revenue generated to each participating local governmental agency in the Medi-Cal Administrative Claiming process, each participating local governmental agency shall pay an annual participation fee through a mechanism agreed to by the state and local governmental agencies, or, if no agreement is reached by August 1 of each year, directly to the state. The participation fee shall be used to cover the cost of administering the Medi-Cal Administrative Claiming process, including, but not limited to, claims processing, technical assistance, and monitoring. The amount of the participation fee shall be based upon the anticipated salaries, benefits, and operating expenses, to administer the Medi-Cal Administrative Claiming process and other costs related to that process. (o) For the purposes of this section "participating local governmental agency" means a county or chartered city under contract with the department pursuant to subdivision (a). (p) For the purposes of this section, a "TCM provider" means an entity or person that is not administered by, affiliated with, or employed by a participating local governmental agency, but provides TCM services on behalf of a local governmental agency in accordance with a contract as required under Section 14132.44. (q) The requirements of subdivision (m) shall not apply to claims for administrative functions, pursuant to the Medi-Cal Administrative Claiming process, performed by a local educational agency and by public health programs administered by the state. (r) A participating local governmental agency may charge an administrative fee to any entity claiming Medi-Cal Administrative Claiming through that agency. The fee for local education agencies shall not exceed the percentage established for that county pursuant to subdivision (m). (s) The department, subject to federal law, shall continue to administer the Medi-Cal Administrative Claiming process according to current practices and procedures established by the department, in consultation with participating local government agencies, until such time as the criteria established pursuant to subdivision (m) are in effect. (t) The department shall provide technical assistance to all local governmental agencies in order to maximize federal financial participation in the TCM and Medi-Cal Administrative Claiming process programs. (u) This section shall be applicable to Medi-Cal Administrative Claiming process activities performed, and to moneys paid to participating local governmental agencies for those activities, in the 1994-95 fiscal year and thereafter. SEC. 27. Section 14132.48 is added to the Welfare and Institutions Code, to read: 14132.48. Targeted case management services to which Sections 14132.44 and 14132.47 does not apply, and as specified in Section 1915(g) of the federal Social Security Act, as amended by Public Law 99-272 (42 U.S.C. Section 1396n(g)), shall be covered as a benefit under this chapter, subject to utilization controls, for the following populations: (a) Persons served by regional centers administered by the State Department of Developmental Services. (b) Persons served in other programs administered by the State Department of Developmental Services. (c) Persons receiving services pursuant to Section 14021.3. (d) Persons in programs determined appropriate by the director. SEC. 28. Section 14133.22 of the Welfare and Institutions Code is amended to read: 14133.22. (a) Prescribed drugs shall be limited to no more than six per month, unless prior authorization is obtained. (b) The limit in subdivision (a) shall not apply to patients receiving care in a nursing facility. (c) The limit in subdivision (a) shall not apply to drugs for family planning. (d) The department may issue Medi-Cal cards that contain labels for prescribed drugs to implement this section. (e) In carrying out this section, the department may contract either directly, or through the fiscal intermediary, for pharmacy consultant staff necessary to accomplish the treatment authorization request reviews. This authority shall extend for a maximum of 36 months from the date of the initial contract. SEC. 29. Section 14148.75 is added to the Welfare and Institutions Code, to read: 14148.75. Commencing with the first day of the second month following the effective date of this section, the department shall adopt the federal medicaid option to waive the use of an asset test for determining eligibility of pregnant women and infants for benefits under this chapter, as provided in Section 4101 of the federal Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203). SEC. 30. Section 14163 of the Welfare and Institutions Code is amended to read: 14163. (a) For purposes of this section, the following definitions shall apply: (1) "Public entity" means a county, a city, a city and county, the University of California, a local hospital district, a local health authority, or any other political subdivision of the state. (2) "Hospital" means a health facility that is licensed pursuant to Chapter 2 (commencing with Section 1250) of Division 2 of the Health and Safety Code to provide acute inpatient hospital services, and includes all components of the facility. (3) "Disproportionate share hospital" means a hospital providing acute inpatient services to Medi-Cal beneficiaries that meets the criteria for disproportionate share status relating to acute inpatient services set forth in Section 14105.98. (4) "Disproportionate share list" means the annual list of disproportionate share hospitals for acute inpatient services issued by the department pursuant to Section 14105.98. (5) "Fund" means the Medi-Cal Inpatient Payment Adjustment Fund. (6) "Eligible hospital" means, for a particular state fiscal year, a hospital on the disproportionate share list that is eligible to receive payment adjustment amounts under Section 14105.98 with respect to that state fiscal year. (7) "Transfer year" means the particular state fiscal year during which, or with respect to which, public entities are required by this section to make an intergovernmental transfer of funds to the Controller. (8) "Transferor entity" means a public entity that, with respect to a particular transfer year, is required by this section to make an intergovernmental transfer of funds to the Controller. (9) "Transfer amount" means an amount of intergovernmental transfer of funds that this section requires for a particular transferor entity with respect to a particular transfer year. (10) "Intergovernmental transfer" means a transfer of funds from a public entity to the state, that is local government financial participation in Medi-Cal pursuant to the terms of this section. (11) "Licensee" means an entity that has been issued a license to operate a hospital by the department. (12) "Annualized Medi-Cal inpatient paid days" means the total number of Medi-Cal acute inpatient hospital days, regardless of dates of service, for which payment was made by or on behalf of the department to a hospital, under present or previous ownership, during the most recent calendar year ending prior to the beginning of a particular transfer year, including all Medi-Cal acute inpatient covered days of care for hospitals that are paid on a different basis than per diem payments. (13) "Medi-Cal acute inpatient hospital day" means any acute inpatient day of service attributable to patients who, for those days, were eligible for medical assistance under the California state plan, including any day of service that is reimbursed on a basis other than per diem payments. (b) The Medi-Cal Inpatient Payment Adjustment Fund is hereby created in the State Treasury. Notwithstanding Section 13340 of the Government Code, the fund shall be continuously appropriated to, and under the administrative control of, the department for the purposes specified in subdivision (d). The fund shall consist of the following: (1) Transfer amounts collected by the Controller under this section, whether submitted by transferor entities pursuant to subdivision (i) or obtained by offset pursuant to subdivision (j). (2) Any other intergovernmental transfers deposited in the fund, as permitted by Section 14164. (3) Any interest that accrues with respect to amounts in the fund. (c) Moneys in the fund, which shall not consist of any state general funds, shall be used as the source for the nonfederal share of payments to hospitals pursuant to Section 14105.98. Moneys shall be allocated from the fund by the department and matched by federal funds in accordance with customary Medi-Cal accounting procedures, and used to make payments pursuant to Section 14105.98. (d) Except as otherwise provided in Section 14105.98 or in any provision of law appropriating a specified sum of money to the department for administering this section and Section 14105.98, moneys in the fund shall be used only for the following: (1) Payments to hospitals pursuant to Section 14105.98. (2) Except for the amount transferred pursuant to paragraph (3), transfers to the Health Care Deposit Fund in the amount of two hundred thirty-nine million seven hundred fifty-seven thousand six hundred ninety dollars ($239,757,690), for the 1994-95 fiscal year and for each fiscal year thereafter. Notwithstanding any other provision of law, the amount specified in this paragraph shall be in addition to any amounts transferred to the Health Care Deposit Fund arising from changes of any kind attributable to payment adjustment years prior to the 1993-94 payment adjustment year. These transfers from the fund shall be made in six equal monthly installments to the Medi-Cal local assistance appropriation item (Item 4260-101-001 of the annual Budget Act) in support of Medi-Cal expenditures. The first installment shall accrue in October of each transfer year, and all other installments shall accrue monthly thereafter from November through March. (3) In the 1993-94 fiscal year, in addition to the amount transferred as specified in paragraph (2), fifteen million dollars ($15,000,000) shall also be transferred to the Medi-Cal local assistance appropriation item (Item 4260-101-001) of the Budget Act of 1993. (e) For the 1991-92 state fiscal year, the department shall determine, no later than 70 days after the enactment of this section, the transferor entities for the 1991-92 transfer year. To make this determination, the department shall utilize the disproportionate share list for the 1991-92 fiscal year, which shall be issued by the department no later than 65 days after the enactment of this section, pursuant to paragraph (1) of subdivision (f) of Section 14105.98. The department shall identify each eligible hospital on the list for which a public entity is the licensee as of July 1, 1991. The public entity that is the licensee of each identified eligible hospital shall be a transferor entity for the 1991-92 transfer year. (f) The department shall determine, no later than 70 days after the enactment of this section, the transfer amounts for the 1991-92 transfer year. The transfer amounts shall be determined as follows: (1) The eligible hospitals for 1991-92 shall be identified. For each hospital, the applicable total per diem payment adjustment amount under Section 14105.98 for the 1991-92 transfer year shall be computed. This amount shall be multiplied by 80 percent of the eligible hospital's annualized Medi-Cal inpatient paid days as determined from all Medi-Cal paid claims records available through April 1, 1991. The products of these calculations for all eligible hospitals shall be added together to determine an aggregate sum for the 1991-92 transfer year. (2) The eligible hospitals for 1991-92 involving transferor entities as licensees shall be identified. For each hospital, the applicable total per diem payment adjustment amount under Section 14105.98 for the 1991-92 transfer year shall be computed. This amount shall be multiplied by 80 percent of the eligible hospital's annualized Medi-Cal inpatient paid days as determined from all Medi-Cal paid claims records available through April 1, 1991. The products of these calculations for all eligible hospitals with transferor entities as licensees shall be added together to determine an aggregate sum for the 1991-92 transfer year. (3) The aggregate sum determined under paragraph (1) shall be divided by the aggregate sum determined under paragraph (2), yielding a factor to be utilized in paragraph (4). (4) The factor determined in paragraph (3) shall be multiplied by the amount determined for each hospital under paragraph (2). The product of this calculation for each hospital in paragraph (2) shall be divided by 1.771, yielding a transfer amount for the particular transferor entity for the transfer year, except as provided by paragraph (5). (5) Only for the transfer year with respect to which the payment adjustment program set forth in Section 14105.98 first gains federal approval, a reduction in the transfer amount determined pursuant to paragraph (4) shall be applicable under the following circumstances: (A) To determine any such reduction, the transfer amount determined pursuant to paragraph (4) shall first be multiplied by a fraction, the numerator of which is the number of days of the transfer year for which federal approval is effective and the denominator of which is 365. (B) If the product of the calculation under subparagraph (A) is 80 percent or more of the transfer amount determined under paragraph (4), no reduction of the transfer amount determined under paragraph (4) shall apply. (C) If the product of the calculation under subparagraph (A) is less than 80 percent of the transfer amount determined under paragraph (4), a reduction shall apply to the transfer amount determined under paragraph (4). The reduction shall be that particular amount which is equal to the difference between (i) the transfer amount determined under paragraph (4) and (ii) the amount calculated under subparagraph (A) divided by 80 percent. (D) Any reduction of a transfer amount applicable under subparagraph (C) shall be spread equally among the installments referred to in subdivision (i). (g) For the 1991-92 transfer year, the department shall notify each transferor entity in writing of its applicable transfer amount or amounts no later than 70 days after the enactment of this section, which amount or amounts shall be subject to adjustment pursuant to subdivisions (f) and (i). (h) For the 1992-93 transfer year and subsequent transfer years, transfer amounts shall be determined in the same procedural manner as set forth in subdivision (f), except: (1) The department shall use all of the following: (A) The disproportionate share list applicable to the particular transfer year to determine the eligible hospitals. (B) The payment adjustment amounts calculated under Section 14105.98 for the particular transfer year. These amounts shall take into account any projected or actual increases or decreases in the size of the payment adjustment program as are required under Section 14105.98 for the particular year in question. Subject to the installment schedule in paragraph (5) of subdivision (i) regarding transfer amounts, the department may issue interim, revised, and supplemental transfer requests as necessary and appropriate to address changes in payment adjustment levels that occur under Section 14105.98. All transfer requests, or adjustments thereto, issued to transferor entities by the department shall meet the requirements set forth in subparagraph (E) of paragraph (5) of subdivision (i). (C) Data regarding annualized Medi-Cal inpatient paid days for the most recent calendar year ending prior to the beginning of the particular transfer year, as determined from all Medi-Cal paid claims records available through April 1 preceding the particular transfer year. (D) The status of public entities as licensees of eligible hospitals as of July 1 of the particular transfer year. (E) The transfer amounts calculated by the department may be increased or decreased by a percentage amount consistent with the Medi-Cal State Plan. (2) For the 1993-94 transfer year and subsequent transfer years, transfer amounts shall be increased on a pro rata basis for each transferor entity for the particular transfer year in the amounts necessary to fund the nonfederal share of the total supplemental lump-sum payment adjustment amounts that arise under Section 14105.98. For purposes of this paragraph, the supplemental lump-sum payment adjustment amounts shall be deemed to arise for the particular transfer year as of the date specified in Section 14105.98. Transfer amounts to fund the nonfederal share of the payments shall be paid by the transferor entities for the particular transfer year within 20 days after the department notifies the transferor entity in writing of the additional transfer amount to be paid. (3) The department shall prepare preliminary analyses and calculations regarding potential transfer amounts, and potential transferor entities shall be notified by the department of estimated transfer amounts as soon as reasonably feasible regarding any particular transfer year. Written notices of transfer amounts shall be issued by the department as soon as possible with respect to each transfer year. All state agencies shall take all necessary steps in order to supply applicable data to the department to accomplish these tasks. The Office of Statewide Health Planning and Development shall provide to the department quarterly access to the edited and unedited confidential patient discharge data files for all Medi-Cal eligible patients. The department shall maintain the confidentiality of that data to the same extent as is required of the Office of Statewide Health Planning and Development. In addition, OSHPD shall provide to the department, not later than March 1 of each year, the data specified by the department, as the data existed on the statewide data base file as of February 1 of each year, from all of the following: (A) Hospital annual disclosure reports, filed with the Office of Statewide Health Planning and Development pursuant to Section 443.31 of the Health and Safety Code, for hospital fiscal years that ended during the calendar year ending 13 months prior to the applicable February 1. (B) Annual reports of hospitals, filed with the Office of Statewide Health Planning and Development pursuant to Section 439.2 of the Health and Safety Code, for the calendar year ending 13 months prior to the applicable February 1. (C) Hospital patient discharge data reports, filed with the Office of Statewide Health Planning and Development pursuant to subdivision (g) of Section 443.31 of the Health and Safety Code, for the calendar year ending 13 months prior to the applicable February 1. (D) Any other materials on file with the Office of Statewide Health Planning and Development. (4) For the 1993-94 transfer year and subsequent transfer years, the divisor to be used for purposes of the calculation referred to in paragraph (4) of subdivision (f) shall be determined by the department. The divisor shall be calculated to ensure that the appropriate amount of transfers from transferor entities are received into the fund to satisfy the requirements of Section 14105.98 for the particular transfer year. For the 1993-94 transfer year, the divisor shall be 1.742. (5) For the 1993-94 fiscal year, the transfer amount that would otherwise be required from the University of California shall be increased by fifteen million dollars ($15,000,000). (6) Notwithstanding any other provision of law, the total amount of transfers required from the transferor entities for any particular transfer year shall not exceed the sum of the following: (A) The amount needed to fund the nonfederal share of all payment adjustment amounts applicable to the particular payment adjustment year as calculated under Section 14105.98. Included in the calculations for this purpose shall be any decreases in the program as a whole, and for individual hospitals, that arise due to the provisions of Section 1396r-4(f) of Title 42 of the United States Code. (B) The amount needed to fund the transfers to the Health Care Deposit Fund, as referred to in paragraphs (2) and (3) of subdivision (d). (7) Except as provided in subparagraph (A) of paragraph (2) of subdivision (j), any amounts in the fund that are not expended, or estimated to be required for expenditure, under Section 14105.98 with respect to a particular transfer year shall be returned on a pro rata basis to the transferor entities for the particular transfer year within 120 days after the department determines that the funds are not needed for an expenditure in connection with the particular transfer year. (i) (1) For the 1991-92 transfer year, each transferor entity shall pay its transfer amount or amounts to the Controller, for deposit in the fund, in eight equal installments. Except as provided below, the first installment shall accrue on July 25, 1991, and all other installments shall accrue on the 5th day of each month thereafter from August through February. (2) Notwithstanding paragraph (1), no installment shall be payable to the Controller until that date which is 20 days after the department notifies the transferor entity in writing that the payment adjustment program set forth in Section 14105.98 has first gained federal approval as part of the Medi-Cal program. For purposes of this paragraph, federal approval requires both (i) approval by appropriate federal agencies of an amendment to the Medi-Cal State Plan, as referred to in subdivision (o) of Section 14105.98, and (ii) confirmation by appropriate federal agencies regarding the availability of federal financial participation for the payment adjustment program set forth in Section 14105.98 at a level of at least 40 percent of the percentage of federal financial participation that is normally applicable for Medi-Cal expenditures for acute inpatient hospital services. (3) If any installment that would otherwise be payable under paragraph (1) is not paid because of the provisions of paragraph (2), then subparagraphs (A) and (B) shall be followed when federal approval is gained. (A) All installments that were deferred based on the provisions of paragraph (2) shall be paid no later than 20 days after the department notifies the transferor entity in writing that federal approval has been gained, in an amount consistent with subparagraph (B). (B) The installments paid pursuant to subparagraph (A) shall be paid in full, subject to an adjustment in amount pursuant to paragraph (5) of subdivision (f). (4) All installments for the 1991-92 transfer year that arise in months after federal approval is gained shall be paid by the 5th day of the month or 20 days after the department notifies the transferor entity in writing that federal approval has been gained, whichever is later. These installments shall be subject to an adjustment in amount pursuant to paragraph (5) of subdivision (f). (5) (A) Except as provided in subparagraphs (B) and (C), for the 1992-93 transfer year and subsequent transfer years, each transferor entity shall pay its transfer amount or amounts to the Controller, for deposit in the fund, in eight equal installments. The first installment shall be payable on July 10 of each transfer year. All other installments shall be payable on the 5th day of each month thereafter from August through February. (B) For the 1994-95 transfer year, each transferor entity shall pay its transfer amount or amounts to the Controller, for deposit in the fund, in five equal installments. The first installment shall be payable on October 5, 1994. The next four installments shall be payable on the fifth day of each month thereafter from November through February. (C) For the 1995-96 transfer year, each transferor entity shall pay its transfer amount or amounts to the Controller, for deposit in the fund, in five equal installments. The first installment shall be payable on October 5, 1995. The next four installments shall be payable on the fifth day of each month thereafter from November through February. (D) Except as otherwise specifically provided, subparagraphs (A) to (C), inclusive, shall not apply to increases in transfer amounts described in paragraph (2) of subdivision (h) or to additional transfer amounts described in subdivision (o). (E) All requests for transfer payments, or adjustments thereto, issued by the department shall be in writing and shall include (i) an explanation of the basis for the particular transfer request or transfer activity, (ii) a summary description of program funding status for the particular transfer year, and (iii) the general calculations used by the department in connection with the particular transfer request or transfer activity. (6) A transferor entity may use any of the following funds for purposes of meeting its transfer obligations under this section: (A) General funds of the transferor entity. (B) Any other funds permitted by law to be used for these purposes, except that a transferor entity shall not submit to the Controller any federal funds unless those federal funds are authorized by federal law to be used to match other federal funds. In addition, no private donated funds from any health care provider, or from any person or organization affiliated with such a health care provider, shall be channeled through a transferor entity or any other public entity to the fund. The transferor entity shall be responsible for determining that funds transferred meet the requirements of this subparagraph. (j) (1) If a transferor entity does not submit any transfer amount within the time period specified in this section, the Controller shall offset immediately the amount owed against any funds which otherwise would be payable by the state to the transferor entity. The Controller, however, shall not impose an offset against any particular funds payable to the transferor entity where the offset would violate state or federal law. (2) Where a withhold or a recoupment occurs pursuant to the provisions of paragraph (2) of subdivision (r) of Section 14105.98, the nonfederal portion of the amount in question shall remain in the fund, or shall be redeposited in the fund by the department, as applicable. The department shall then proceed as follows: (A) If the withhold or recoupment was imposed with respect to a hospital whose licensee was a transferor entity for the particular state fiscal year to which the withhold or recoupment related, the nonfederal portion of the amount withheld or recouped shall serve as a credit for the particular transferor entity against an equal amount of transfer obligations under this section, to be applied whenever the transfer obligations next arise. Should no such transfer obligation arise within 180 days, the department shall return the funds in question to the particular transferor entity within 30 days thereafter. (B) For other situations, the withheld or recouped nonfederal portion shall be subject to paragraph (7) of subdivision (h). (k) All amounts received by the Controller pursuant to subdivision (i), paragraph (2) of subdivision (h), or subdivision (o), or offset by the Controller pursuant to subdivision (j), shall immediately be deposited in the fund. (l) For purposes of this section, the disproportionate share list utilized by the department for a particular transfer year shall be identical to the disproportionate share list utilized by the department for the same state fiscal year for purposes of Section 14105.98. Nothing on a disproportionate share list, once issued by the department, shall be modified for any reason other than mathematical or typographical errors or omissions on the part of the department or the Office of Statewide Health Planning and Development in preparation of the list. (m) Neither the intergovernmental transfers required by this section, nor any elective transfer made pursuant to Section 14164, shall create, lead to, or expand the health care funding or service obligations for current or future years for any transferor entity, except as required of the state by this section or as may be required by federal law, in which case the state shall be held harmless by the transferor entities on a pro rata basis. (n) No amount submitted to the Controller pursuant to subdivision (i), paragraph (2) of subdivision (h), or subdivision (o), or offset by the Controller pursuant to subdivision (j), shall be claimed or recognized as an allowable element of cost in Medi-Cal cost reports submitted to the department. (o) Whenever additional transfer amounts are required to fund the nonfederal share of payment adjustment amounts under Section 14105.98 that are distributed after the close of the particular payment adjustment year to which the payment adjustment amounts apply, the additional transfer amounts shall be paid by the parties who were the transferor entities for the particular transfer year that was concurrent with the particular payment adjustment year. The additional transfer amounts shall be calculated under the formula that was in effect during the particular transfer year. For transfer years prior to the 1993-94 transfer year, the percentage of the additional transfer amounts available for transfer to the Health Care Deposit Fund under subdivision (d) shall be the percentage that was in effect during the particular transfer year. These additional transfer amounts shall be paid by transferor entities within 20 days after the department notifies the transferor entity in writing of the additional transfer amount to be paid. (p) (1) Ten million dollars ($10,000,000) of the amount transferred from the Medi-Cal Inpatient Payment Adjustment Fund to the Health Care Deposit Fund due to amounts transferred attributable to years prior to the 1993-94 fiscal year is hereby appropriated without regard to fiscal years to the State Department of Health Services to be used to support the development of managed care programs under the department's plan to expand Medi-Cal managed care. (2) These funds shall be used by the department for both of the following purposes: (A) distributions to counties or other local entities that contract with the department to receive those funds to offset a portion of the costs of forming the local initiative entity, and (B) distributions to local initiative entities that contract with the department to receive those funds to offset a portion of the costs of developing the local initiative health delivery system in accordance with the department's plan to expand Medi-Cal managed care. (3) Entities contracting with the department for any portion of the ten million dollars ($10,000,000) shall meet the objectives of the department's plan to expand Medi-Cal managed care with regard to traditional and safety net providers. (4) Entities contracting with the department for any portion of the ten million dollars ($10,000,000) may be authorized under those contracts to utilize their funds to provide for reimbursement of the costs of local organizations and entities incurred in participating in the development and operation of a local initiative. (5) To the full extent permitted by state and federal law, these funds shall be distributed by the department for expenditure at the local level in a manner that qualifies for federal financial participation under the medicaid program. SEC. 31. Notwithstanding any provision of law to the contrary, the emergency regulations governing Chapter 26.5 (commencing with Section 7570) of Division 7 of Title 1 of the Government Code adopted pursuant to Section 7587 of the Government Code, and operative for the 1993-94 fiscal year, shall be operative for the 1994-95 fiscal year. SEC. 32. The State Department of Health Services may adopt emergency regulations to implement the applicable provisions of this act in accordance with the Administrative Procedure Act, Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. The initial adoption of emergency regulations and one readoption of the initial regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Initial emergency regulations and the first readoption of those regulations shall be exempt from review by the Office of Administrative Law. The emergency regulations authorized by this section shall be submitted to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations and shall remain in effect for no more than 180 days. SEC. 33. Notwithstanding Section 17610 of the Government Code, if the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code. If the statewide cost of the claim for reimbursement does not exceed one million dollars ($1,000,000), reimbursement shall be made from the State Mandates Claims Fund. Notwithstanding Section 17580 of the Government Code, unless otherwise specified in this act, the provisions of this act shall become operative on the same date that the act takes effect pursuant to the California Constitution. SEC. 34. 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: In order that changes in the Medi-Cal program necessary for implementation of the Budget Act of 1994 will be in effect during the entire 1994-95 fiscal year, it is necessary that this act take effect immediately.