BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
342 (J. Perez)
Hearing Date: 8/2/2010 Amended: 8/2/2010
Consultant: Katie Johnson Policy Vote: Health 7-1
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BILL SUMMARY: AB 342, an urgency measure, would enact the
California Section 1115 Comprehensive Demonstration Project
Waiver to replace the Section 1115 Hospital Financing Waiver
that expires August 31, 2010.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Delayed checkwrite ($357,496) Spend similar General/*
savings due to SPD amount commencing Federal
managed care enrollment FY 2011-2012; could be
cost neutral-see staff
comments
DHCS waiver implementation $9,498
$9,201unknown General/*
staff and contracts Federal/
Special
*50 percent General Fund, 50 percent federal funds
*Roughly 50 percent General Fund and Mental Health Services
Fund, and 50 percent federal funds
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
In June 2010, the Department of Health Care Services (DHCS)
released its 1115 waiver application and submitted it to the
Centers for Medicare and Medicaid Services (CMS). It outlines 6
goals that the state would like to accomplish through the
waiver.
1) Immediately begin phasing in coverage for adults aged 19
- 64 with incomes up to 133 percent of the federal poverty
line (FPL) in order to maximize California's opportunity to
access enhanced federal funding effective January 1, 2014;
2) Immediately begin phasing in coverage for adults with
incomes between 133 and 200 percent FPL by building upon
its existing county coverage initiatives;
3) Create more accountable, coordinated systems of care for
individuals enrolled in Medi-Cal who are seniors and
persons with disabilities (SPDs). In years 2 and 3 of the
waiver, DHCS would incorporate a new delivery system
approach for people with mental health and/or substance
abuse challenges and children with special health care
needs;
4) Continue and expand the Safety Net Care Pool (SNCP)
which provides funds for health care coverage;
5) Implement a series of improvements to the existing
delivery system; and,
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AB 342 (J. Perez)
6) Explore payment reforms within the public hospitals
system that better align payment and care delivery
incentives.
This bill is the vehicle for the waiver mentioned above, along
with SB 208 (Steinberg/Alquist), its identical companion
measure. This bill does not yet incorporate DHCS's entire vision
or the proposed hospital financing pieces for public and private
hospitals, including the continuation and expansion of the SNCP,
since many provisions continue to be subject to negotiation with
the federal government; however, this bill would address several
aspects of the waiver plan:
1) Authorize DHCS to require the mandatory enrollment of
about 380,000 SPDs in Medi-Cal managed care, commencing
upon federal approval or February 1, whichever is later,
and phasing in over the next calendar year. Funding for
this proposal would be shared 50 percent General Fund, 50
percent federal funds. There would be savings in FY
2010-2011 of $357 million due to a delayed checkwrite. In
FY 2011-2012 and throughout the life of the waiver, it is
estimated that treating SPDs through a managed care plan
versus in fee-for-service would make the following years at
least cost neutral; however, due to the uncertainty of
actual implementation, it would depend on how quickly SPDs
would be enrolled compared to the planned timeframe and
whether DHCS expenditures to treat SPDs in managed care
would be equal or less the cost of treating them in
fee-for-service.
2) Require DHCS to establish organized health care delivery
models for children eligible for the California Children's
Services (CCS) program, commencing January 1, 2012. This
bill does not describe how the funds would flow to the
various models. There could be General Fund cost pressure
in the millions of dollars to the extent that these models
are required to perform duties above and beyond those that
are currently part of CCS services.
3) Establish up to 4 pilot projects to test methods for how
to best manage the care of approximately 1.1 million
Californians who are dually eligible for Medi-Cal and
Medicare (dual eligibles) to create quality, cost effective
health outcomes, and to work to integrate funding and
services. These provisions would prohibit the use of
General Fund moneys and would provide that the nonfederal
share of funding would consist of local certified public
expenditures (CPEs) or intergovernmental transfers (IGTs).
There would be an unknown expenditure of likely millions of
federal funds for this program commencing April 1, 2011.
4) Create coverage expansion and enrollment demonstration
(CEED) projects, commencing January 1, 2011, or 180 days
after the successor waiver is approved by CMS, whichever is
later, for coverage of low-income individuals who are not
otherwise eligible for Medi-Cal in order to enable
California to expand Medi-Cal to childless adults pursuant
to the federal Patient Protection and Affordable Care Act
(ACA) on January 1, 2014. These provisions would extend the
current health care coverage initiatives (HCCIs) and would
expand the HCCIs to be statewide rather than in 10
counties, as they are currently. DHCS expects 56 of the 58
counties would participate and a total of 512,000
individuals to enroll. Enrollment within a county would be
limited to the availability of local funds. Currently,
localities provide the non-federal share through CPEs and
are
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AB 342 (J. Perez)
reimbursed at a matching rate of 50 percent. The HCCI
expansion would work to shift the reimbursement mechanism
from a direct CPE structure to one of three
financing approaches: IGT/CPE Combination; IGT-Based; or
Actuarial Payment to Plan Basis for CPE.
In order to administer the four programs above, in addition to
planning to implement the other aspects of the waiver included
in DHCS's proposal to CMS, DHCS would need approximately 50
staff at a total cost of $9.5 million in FY 2010-2011 and $9.2
million in FY 2011-2012, as proposed in a department budget
change proposal. Staffing costs beyond the first two years are
unknown, but would probably be of similar magnitude.
Existing law, SB 1100 (Perata and Ducheny), Chapter 560,
Statutes of 2005, creates a hospital funding demonstration
project to implement a five-year Section 1115 Medicaid waiver to
support public hospitals, including the five University of
California medical centers and county clinics that serve
Medicaid and uninsured patients. Section 1115 waivers are
approved for an initial five years and may be subsequently
renewed for three years. Federal law requires Section 1115
waivers to be budget neutral over their 5 year lifetimes.
Under the current waiver, public hospitals have access to over
$1 billion in federal DSH funds for uncompensated care provided
to Medi-Cal and uninsured patients. Public hospitals are able to
access SNCP funding through a CPE process. The SNCP is capped at
$766 million annually. The SNCP allotment includes $180 million
in the last 3 years of the waiver to implement the health care
coverage initiatives. Since one of the stated goals is to
continue and expand the SNCP, the waiver funding could be
expected to be of similar magnitude.
The waiver provides federal matching funds to CPEs for health
care services provided by public hospitals. For example, if a
hospital performs a procedure for $1, the federal government
would pay $0.50. While there are no state General Fund monies
involved in the public hospitals' CPE reimbursement process,
there is limited use of IGTs, or a combination of local and
state General Fund moneys, to draw down federal matching funds
for the disproportionate share hospital (DSH) Fund. Each
safety-net hospital receives a baseline amount of funding
annually and may receive an additional amount of stabilization
funding from the SNCP. Private hospitals negotiate individual
rates of reimbursement with the California Medical Assistance
Commission (CMAC) and receive supplemental DSH-like
payments-funds meant to defray uncompensated costs of treating
Medicaid and uninsured patients-from the General Fund and
federal funds. As noted above in the health care coverage
initiative expansion, CPEs and IGTs will continue to be funding
mechanisms in the proposed waiver.