BILL NUMBER: SB 2046 CHAPTERED 09/29/00 CHAPTER 852 FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2000 APPROVED BY GOVERNOR SEPTEMBER 28, 2000 PASSED THE SENATE AUGUST 31, 2000 PASSED THE ASSEMBLY AUGUST 28, 2000 AMENDED IN ASSEMBLY AUGUST 18, 2000 AMENDED IN ASSEMBLY JULY 6, 2000 AMENDED IN ASSEMBLY JUNE 20, 2000 AMENDED IN SENATE MAY 2, 2000 AMENDED IN SENATE APRIL 24, 2000 AMENDED IN SENATE APRIL 13, 2000 INTRODUCED BY Senator Speier FEBRUARY 25, 2000 An act to amend Section 1367.21 of the Health and Safety Code, to amend Section 10123.195 of the Insurance Code, and to amend Section 14105.26 of the Welfare and Institutions Code, relating to health care. LEGISLATIVE COUNSEL'S DIGEST SB 2046, Speier. Health care: prescription drug coverage. (1) Existing law provides for the regulation and licensing of health care service plans by the Department of Managed Care. A willful violation of the provisions governing health care service plans is a crime. Existing law provides for the regulation of policies of disability insurance by the Insurance Commissioner. Existing law prohibits a health care service plan contract, and specified disability insurance policies, from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different than the use for which the drug has been approved for marketing by the federal Food and Drug Administration (off-label use) if specified conditions are met, including that the drug prescribed is for the treatment of a life-threatening condition. This bill would modify that specific condition by also including a drug that is prescribed for a chronic and seriously debilitating condition. This bill would define "chronic and seriously debilitating." The bill would require the drug be medically necessary for the chronic and seriously debilitating condition. The bill would require, for health care service plans, that if the drug for a life-threatening or chronic and seriously debilitating condition is not on the plan's formulary, that the procedures relating to the use of nonformulary prescription drugs instead be followed. The bill would specify that the requirement for coverage for off-label drug use not be construed to prohibit the use of specified mechanisms as a means of appropriately controlling the utilization of the off-label use of prescription drugs for life-threatening and chronic and seriously debilitating conditions. The bill would permit a plan subscriber or insured to use the Independent Medical Review System to review a denial of coverage by either a health care service plan or a disability insurer of a request for the off-label use of a prescription drug for treating a life-threatening or chronic and seriously debilitating condition when the basis for the denial is that the use of the drug is experimental or investigational. Because a violation of this bill's requirements with respect to coverage under a health care service plan contract would be a crime, this bill would impose a state-mandated local program by creating a new crime. (2) Existing law provides for the Medi-Cal program, administered by the State Department of Health Services, under which qualified low-income persons are provided with health care services. The Medi-Cal program provides for a special methodology of reimbursement of disproportionate share hospitals for the provision of inpatient hospital services, and provides for the supplemental reimbursement of eligible disproportionate share providers for funding capital projects. Existing law further authorizes a distinct part of an acute care hospital providing specified services and meeting certain requirements to receive, in addition to the rate of payment that the facility would otherwise receive for skilled nursing services, supplemental reimbursement for capital projects under specified conditions. One of those conditions is that for a new capital project to be eligible for the supplemental reimbursement, the final plans for the project must have been submitted to the appropriate review agency before July 1, 2001. This bill would extend the time for submission of the final plans to the appropriate review agency until January 1, 2003. (3) 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. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1367.21 of the Health and Safety Code is amended to read: 1367.21. (a) No health care service plan contract which covers prescription drug benefits shall be issued, amended, delivered, or renewed in this state if the plan limits or excludes coverage for a drug on the basis that the drug is prescribed for a use that is different from the use for which that drug has been approved for marketing by the federal Food and Drug Administration (FDA), provided that all of the following conditions have been met: (1) The drug is approved by the FDA. (2) (A) The drug is prescribed by a participating licensed health care professional for the treatment of a life-threatening condition; or (B) The drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary. If the drug is not on the plan formulary, the participating subscriber's request shall be considered pursuant to the process required by Section 1367.24. (3) The drug has been recognized for treatment of that condition by one of the following: (A) The American Medical Association Drug Evaluations. (B) The American Hospital Formulary Service Drug Information. (C) The United States Pharmacopoeia Dispensing Information, Volume 1, "Drug Information for the Health Care Professional." (D) Two articles from major peer reviewed medical journals that present data supporting the proposed off-label use or uses as generally safe and effective unless there is clear and convincing contradictory evidence presented in a major peer reviewed medical journal. (b) It shall be the responsibility of the participating prescriber to submit to the plan documentation supporting compliance with the requirements of subdivision (a), if requested by the plan. (c) Any coverage required by this section shall also include medically necessary services associated with the administration of a drug, subject to the conditions of the contract. (d) For purposes of this section, "life-threatening" means either or both of the following: (1) Diseases or conditions where the likelihood of death is high unless the course of the disease is interrupted. (2) Diseases or conditions with potentially fatal outcomes, where the end point of clinical intervention is survival. (e) For purposes of this section, "chronic and seriously debilitating" means diseases or conditions that require ongoing treatment to maintain remission or prevent deterioration and cause significant long-term morbidity. (f) The provision of drugs and services when required by this section shall not, in itself, give rise to liability on the part of the plan. (g) Nothing in this section shall be construed to prohibit the use of a formulary, copayment, technology assessment panel, or similar mechanism as a means for appropriately controlling the utilization of a drug that is prescribed for a use that is different from the use for which that drug has been approved for marketing by the FDA. (h) If a plan denies coverage pursuant to this section on the basis that its use is experimental or investigational, that decision is subject to review under Section 1370.4. (i) Health care service plan contracts for the delivery of Medi-Cal services under the Waxman-Duffy Prepaid Health Plan Act (Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code) are exempt from the requirements of this section. SEC. 2. Section 10123.195 of the Insurance Code is amended to read: 10123.195. (a) No group or individual disability insurance policy issued, delivered, or renewed in this state or certificate of group disability insurance issued, delivered, or renewed in this state pursuant to a master group policy issued, delivered, or renewed in another state that, as a provision of hospital, medical, or surgical services, directly or indirectly covers prescription drugs shall limit or exclude coverage for a drug on the basis that the drug is prescribed for a use that is different from the use for which that drug has been approved for marketing by the federal Food and Drug Administration (FDA), provided that all of the following conditions have been met: (1) The drug is approved by the FDA. (2) (A) The drug is prescribed by a contracting licensed health care professional for the treatment of a life-threatening condition; or (B) The drug is prescribed by a contracting licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the insurer's formulary, if any. (3) The drug has been recognized for treatment of that condition by one of the following: (A) The American Medical Association Drug Evaluations. (B) The American Hospital Formulary Service Drug Information. (C) The United States Pharmacopoeia Dispensing Information, Volume 1, "Drug Information for the Health Care Professional." (D) Two articles from major peer reviewed medical journals that present data supporting the proposed off-label use or uses as generally safe and effective unless there is clear and convincing contradictory evidence presented in a major peer reviewed medical journal. (b) It shall be the responsibility of the contracting prescriber to submit to the insurer documentation supporting compliance with the requirements of subdivision (a), if requested by the insurer. (c) Any coverage required by this section shall also include medically necessary services associated with the administration of a drug subject to the conditions of the contract. (d) For purposes of this section, "life-threatening" means either or both of the following: (1) Diseases or conditions where the likelihood of death is high unless the course of the disease is interrupted. (2) Diseases or conditions with potentially fatal outcomes, where the end point of clinical intervention is survival. (e) For purposes of this section, "chronic and seriously debilitating" means diseases or conditions that require ongoing treatment to maintain remission or prevent deterioration and cause significant long-term morbidity. (f) The provision of drugs and services when required by this section shall not, in itself, give rise to liability on the part of the insurer. (g) This section shall not apply to a policy of disability insurance that covers hospital, medical, or surgical expenses which is issued outside of California to an employer whose principal place of business is located outside of California. (h) Nothing in this section shall be construed to prohibit the use of a formulary, copayment, technology assessment panel, or similar mechanism as a means for appropriately controlling the utilization of a drug that is prescribed for a use that is different from the use for which that drug has been approved for marketing by the FDA. (i) If an insurer denies coverage pursuant to this section on the basis that its use is experimental or investigational, that decision is subject to review under the Independent Medical Review System of Article 3.5 (commencing with Section 10169). (j) This section is not applicable to vision-only, dental-only, Medicare or Champus supplement, disability income, long-term care, accident-only, specified disease or hospital confinement indemnity insurance. SEC. 3. Section 14105.26 of the Welfare and Institutions Code is amended to read: 14105.26. (a) Each eligible facility, as described in paragraph 2 of subdivision (b), may, in addition to the rate of payment that the facility would otherwise receive for skilled nursing services, receive supplemental Medi-Cal reimbursement to the extent provided in this section. (b) (1) Projects eligible for supplemental reimbursement shall include any new capital projects for which final plans have been submitted to the appropriate review agency after January 1, 2000, and before January 1, 2003. For purposes of this section, "capital project" means the construction, expansion, replacement, remodeling, or renovation of an eligible facility, including buildings and fixed equipment. A "capital project" does not include the provision of furnishings or of equipment that is not fixed equipment. (2) A facility shall be eligible only if the submitting entity had all of the following additional characteristics during the 1998 calendar year: (A) Provided services to Medi-Cal beneficiaries. (B) Was a distinct part of an acute care hospital providing skilled nursing care and supportive care to patients whose primary need is for the availability of skilled nursing care on an extended basis. For the purposes of this section, "acute care hospital" means the facilities defined in subdivisions (a) or (b), or both, of Section 1250 of the Health and Safety Code. (C) Had not less than 300 licensed skilled nursing beds. (D) Had an average skilled nursing Medi-Cal patient census of not less than 80 percent of the total skilled nursing patient days. (E) Was owned by a county or city and county. (c) (1) An eligible facility seeking to qualify for supplemental reimbursement shall submit documentation to the department regarding debt service on revenue bonds or other financing instruments used for financing the capital project. (2) The department shall confirm in writing project eligibility under this section. (d) (1) Capital projects receiving funding shall include only the upgrading or construction of buildings and equipment to a level required by currently accepted medical practice standards, including projects designed to correct Joint Commission on Accreditation of Hospitals and Health Systems, fire and life safety, seismic, or other related regulatory standards. (2) Capital projects receiving funding may expand service capacity as needed to maintain current or reasonably foreseeable necessary bed capacity to meet the needs of Medi-Cal beneficiaries after giving consideration to bed capacity needed for other patients, including unsponsored patients. (3) Supplemental reimbursement shall only be made for capital projects, or for that portion of capital projects that provide skilled nursing services, and that are available and accessible to patients eligible for services under this chapter. (e) An eligible facility's supplemental reimbursement for a capital project qualifying pursuant to this section shall be calculated and paid as follows: (1) For any fiscal year for which the facility is eligible to receive supplemental reimbursement, the facility shall report to the department the amount of debt service on the revenue bonds or other financing instruments issued to finance the capital project. (2) For each fiscal year in which an eligible facility requests reimbursement, the department shall establish the ratio of skilled nursing Medi-Cal days of care provided by the eligible facility to total skilled nursing patient days of care provided by the eligible facility. The ratio shall be established using data obtained from audits performed by the department, and shall be applied to the corresponding fiscal year of debt service on the revenue bonds or other financing instruments issued to finance the capital project. (3) The amount of debt service that will be submitted to the federal Health Care Financing Administration for the purpose of claiming reimbursement for each fiscal year shall equal the amount determined annually in paragraph (1) multiplied by the percentage figure determined in paragraph (2). (4) The supplemental reimbursement to an eligible facility shall be equal to the amount of federal financial participation received as a result of the claims submitted pursuant to paragraph (2) of subdivision (j). (5) In no instance shall the total amount of supplemental reimbursement received under this section combined with that received from all other sources dedicated exclusively to debt service exceed 100 percent of the debt service for the capital project over the life of the loan, revenue bond, or other financing mechanism. (6) A facility qualifying for and receiving supplemental reimbursement pursuant to this section shall continue to receive reimbursement until the qualifying loan, revenue bond, or other financing mechanism is paid off, and as long as the facility meets the requirements of paragraph (3) of subdivision (d). (7) The supplemental Medi-Cal reimbursement provided by this section shall be distributed under a payment methodology based on skilled nursing services provided to Medi-Cal patients at the eligible facility, either on a per diem basis, a per discharge basis, or any other federally permissible basis. The department shall seek approval from the federal Health Care Financing Administration for the payment methodology to be utilized, and shall not make any payment pursuant to this section prior to obtaining that approval. (8) The supplemental reimbursement provided by this section shall not commence prior to the date upon which the hospital submits to the department a copy of the certificate of occupancy for the capital project. (f) (1) It is the Legislature's intent in enacting this section to provide a funding source for a portion of the construction costs of eligible facilities without any expenditure from the state General Fund. (2) The state share of the amount of the debt service submitted to the federal Health Care Financing Administration for purposes of supplemental reimbursement shall be paid with county-only funds and certified to the state as provided in subdivision (g). Any amount of the costs of the capital project that are not reimbursed by federal funds shall be borne solely by the eligible facility. (3) Prior to receiving any funding through this section, an eligible facility shall demonstrate its ability to cover all of the anticipated costs of construction, including those not reimbursed through federal funding. (g) The county or city and county, on behalf of any eligible facility, shall do all of the following: (1) Certify, in conformity with the requirements of Section 433.51 of Title 42 of the Code of Federal Regulations, that the claimed expenditures for the capital project are eligible for federal financial participation. (2) Provide evidence supporting the certification as specified by the department. (3) Submit data, as specified by the department, to determine the appropriate amounts to claim as expenditures qualifying for financial participation. (4) Keep, maintain, and have readily retrievable, such records as specified by the department in order to fully disclose reimbursement amounts to which the eligible facility is entitled, and any other records required by the federal Health Care Financing Administration. (h) The department may require that any county or city and county seeking supplemental reimbursement under this section enter into an interagency agreement with the department for the purpose of implementing this section. (i) All payments received by an eligible facility pursuant to this section shall be placed in a special account, the funds of which shall be used exclusively for the payment of expenses related to the eligible capital project. (j) (1) The department shall promptly seek any necessary federal approvals for the implementation of this section. If necessary to obtain federal approval, the department may, for federal purposes, limit the program to those costs that are allowable expenditures under Title XIX of the federal Social Security Act (Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code). If federal approval is not obtained for implementation of this section, this section shall become inoperative. (2) The department shall submit claims for federal financial participation for the expenditures for debt service that are allowable expenditures under federal law. (3) The department shall, on an annual basis, submit any necessary materials to the federal government to provide assurances that claims for federal financial participation will include only those expenditures that are allowable under federal law. (k) Supplemental reimbursement paid under this section shall not duplicate any reimbursement received by an eligible facility pursuant to this chapter for construction costs that would otherwise be eligible for reimbursement under this section. In no event shall the total Medi-Cal reimbursement pursuant to this chapter to a facility eligible under this section be less than what would have been paid had this section not existed. (l) In the event there is a final judicial determination by any court of appellate jurisdiction or a final determination by the administrator of the federal Health Care Financing Administration that the supplemental reimbursement provided in this section must be made to any facility not described therein, this section shall become immediately inoperative. (m) Any and all funds expended pursuant to this section shall be subject to review and audit by the department. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.