BILL ANALYSIS
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THIRD READING
Bill No: AB 342
Author: John A. Perez (D)
Amended: 8/2/10 in Senate
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 7-1, 6/30/10
AYES: Alquist, Strickland, Cedillo, Leno, Negrete McLeod,
Pavley, Romero
NOES: Aanestad
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : 10-0, 8/12/10
AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,
Price, Wolk, Wyland, Yee
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 78-0, 5/28/09 - See last page for vote
SUBJECT : Medi-Cal: demonstration project waivers
SOURCE : Author
DIGEST : This bill authorizes the Department of Health
Care Services (DHCS) to require that seniors and persons
with disabilities in Medi-Cal be assigned as mandatory
enrollees to new or existing managed care plans, as
specified, requires DHCS to establish organized health care
delivery models for children eligible for California
Children's Services, establishes pilot projects for
managing the care of those with dual eligibility in
CONTINUED
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Medi-Cal and Medicare, and creates coverage expansion and
enrollment demonstration projects for coverage of
low-income individuals who are not otherwise eligible for
Medi-Cal.
ANALYSIS :
Existing federal law:
1. Establishes the Medicaid program to provide
comprehensive health benefits to low-income persons.
2. Establishes the federal Medicaid Disproportionate Share
Hospital (DSH) program to provide financial assistance
to hospitals that serve large numbers of Medicaid and
uninsured patients.
3. Provides that states may be granted waivers of federal
law to implement demonstration projects in their
Medicaid programs.
4. Authorizes states to use benchmark plans in Medicaid,
which allow the state more flexibility in determining
benefits and cost sharing.
5. Establishes the federal Medicare program, which provides
health care benefits to persons 65 years of age and
older and to disabled persons.
6. Provides that the Medicare program can grant waivers of
federal law for demonstration projects.
7. Establishes that the federal government will provide a
match for the Medicaid program, termed the federal
medical assistance percentage (FMAP), which varies by
state and territory according to a specified formula.
Pursuant to the federal Patient Protection and
Affordable Care Act (Public Law 111-148), establishes
Medicaid eligibility for childless low-income adults and
provides enhanced FMAP for this expansion population,
beginning January 1, 2014.
Existing state law:
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1. Establishes the Medi-Cal program, the state's Medicaid
program, which is administered by DHCS, and which
provides comprehensive health benefits to low-income
children; their parents or caretaker relatives; pregnant
women; elderly, blind or disabled persons; nursing home
residents and refugees.
2. Creates a demonstration project on hospital financing to
implement a five-year federal Medicaid waiver for
support of public hospitals that serve uninsured
patients and patients whose health care services are
covered by Medi-Cal.
3. Defines a designated public hospital to be one of 22
hospitals specifically named in the statute implementing
the federal waiver.
4. Creates the Safety Net Care Pool (SNCP) containing the
federal funds available under the demonstration project
to ensure continued government support for the provision
of health care services to uninsured populations.
5. Establishes methods for administering the federal (DSH)
program payments, and a mechanism that DHCS must use to
allocate the payments to designated public hospitals.
6. Requires that matching funds for SNCP and DSH payments
come from the certified public expenditures and/or
intergovernmental transfers from designated public
hospitals or the governmental entities with which they
are affiliated.
7. Establishes the Health Care Coverage Initiative and
provides that it shall operate pursuant to the special
terms and conditions of California's Section 1115
demonstration project on hospital financing in the
Medi-Cal program.
8. Provides that coverage initiatives shall expand health
care coverage to low-income, uninsured residents of 10
selected counties for federal fiscal years 2007-08
through 2009-10.
9. Authorizes DHCS to contract, on a bid or nonbid basis,
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with any qualified individual, organization, or entity
to provide services to, arrange for, or case manage, the
care of Medi-Cal beneficiaries.
10.Permits the contract to be exclusive or nonexclusive,
statewide or on a more limited geographic basis and
requires that the contracts include specified
provisions.
11.Defines a Medi-Cal managed care plan as any entity that
enters into one of several types of contracts with DHCS
including county organized health systems (COHS),
geographic managed care plans and local initiatives.
12.Requires DHCS to evaluate and determine the readiness of
managed care plans prior to geographic expansion of
Medi-Cal managed care.
13.Requires enrollment of seniors and persons with
disabilities into Medi-Cal managed care plans to be
voluntary, except in COHS counties where the enrollment
of seniors and persons with disabilities (SPDs) is
mandatory.
14.Requires counties to provide medical services for the
medically indigent.
15.Requires DHCS to submit a Medi-Cal Waiver or
Demonstration Project to the federal government in order
to strengthen California's health care safety net,
including disproportionate share hospitals; reduce the
number of uninsured Californians; increase federal
financial participation; improve health care quality and
outcomes; and, promote home and community based care.
16.Requires the waiver to include Medi-Cal restructuring
proposals in order for the program to better serve the
most vulnerable beneficiaries, including SPDs, children
with significant medical needs, and people with
behavioral health conditions.
17.Establishes that the goals of restructuring care for
these populations include increased access to better
coordinated and integrated care for these populations,
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improved health outcomes, and reduction in the long-term
growth of the Medi-Cal program.
18.Requires DHCS to submit a waiver proposal to the federal
Centers for Medicare and Medicaid Services (CMS) by a
date that allows sufficient time for the waiver to be
approved by no later than the later of either
September 1, 2010, or the conclusion of the current
Medi-Cal Hospital (1115) waiver.
19.Authorizes this waiver to seek authority to enroll
beneficiaries into specified organized delivery systems,
such as managed care, enhanced primary care case
management or a medical home model.
20.Requires the waiver to include processes, and criteria,
by which DHCS will evaluate and grant exemptions, on an
individual basis, from any mandatory enrollment of
beneficiaries into managed care.
21.Requires the Department of Managed Health Care (DMHC) to
enforce the Knox-Keene Act by overseeing the licensing
of plans and ensuring managed care plans compliance with
state law and regulations.
22.Provides that services provided by California Children's
Services (CCS) are not incorporated into Medi-Cal
managed care contracts.
In June 2010, DHCS released its 1115 waiver application and
submitted it to CMS. It outlines six 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
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individuals enrolled in Medi-Cal who are seniors and
persons with disabilities (SPDs). In years two and three
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.
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 addresses 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.
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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 four 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
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.
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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
five-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 three
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
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Delayed checkwrite ($357,496) Spend
similar amount General/*
savings due to SPD commencing FY
2011-12; Federal
managed care enrollment could be cost
neutral
DHCS waiver $9,498 $9,201 unknown
General/*
implementation staff
Federal/
and contracts Special
* 50 percent General Fund, 50 percent federal funds
* Roughly 50 percent General Fund and Mental Health
Services Fund, and 50 percent federal funds
SUPPORT : (Unable to verify at time of writing)
Aging Services of California (support in concept)
AIDS Healthcare Foundation
Association of California Healthcare Districts (earlier
version of bill)
California Association of Public Hospitals (in concept)
Children's Specialty Care Coalition
OPPOSITION : (Unable to verify at time of writing)
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Alzheimer's Association
AARP
California Primary Care Association
Corporation for Supportive Housing
Congress of California Seniors
Disability Rights California
Western Center on Law & Poverty
ARGUMENTS IN SUPPORT : The California Association of
Public Hospitals and Health Systems (CAPH) supports this
bill, in concept. They argue that approval of the next
waiver is critical to California's public hospitals and
encompasses their core funding for essential outpatient and
inpatient services provided to Medi-Cal beneficiaries and
the uninsured. CAPH also supports the inclusion of a
county alternative option in an organized system of care
for SPDs but states that key issues remain to be fully
worked out such as the definition of medical home and
ensuring adequate rates. CAPH further states that the
sections relating to CEED should be considered placeholder
language and that further changes will be needed
particularly with regard to network structure, scope of
benefits and definition of medical home.
Aging Services of California supports the bill, in concept,
but expresses concerns that the time frame for the
implementation process for SPDs into a managed care model
is very aggressive and details about integrating medical
care, long-term care and home and community-based services
is unclear. Aging Services also states that it is troubled
by the lack of mention of adult day health care, which is a
vital, cost effective, community-based program for frail
persons and their caregivers and is crucial for a cost
effective system.
ARGUMENTS IN OPPOSITION : Western Center on Law and
Poverty (WCLP) has a position of opposition because of
concern that this bill does not go far enough to protect
the most vulnerable Californians during the transitions
that this waiver will bring for SPDs, in particular that
there are inadequate protections for this significant
change of moving SPDS into mandatory Medi-Cal managed care.
WCLP has suggested that additional consumer protections
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are needed. These include more specific requirements for
primary and specialty care providers as part of network
adequacy, providing beneficiaries 90 days to make a choice,
a requirement of in-person assessment of new SPDs within 30
days, a standard of care for higher risk individuals where
both the potential for increased outcomes and for cost
savings is greatest and a requirement to arrange
transportation.
WCLP is also concerned with provisions related to the
mandatory enrollment of dual eligibles, arguing that
requiring dual eligibles to enroll in a managed care plan
is a serious policy decision with potential disastrous
effects for dual eligibles and allowing an opt-out on the
Medicare side will not necessarily address the coordination
problems. WCLP further states that the Department should
not be granted broad mandatory enrollment authority and
that DHCS should be required to return for more specific
enrollment authority once more details about the pilots
have been developed. With regard to the coverage
expansion, WCLP requests amendments to the enrollment and
renewal language requiring development of a simple, working
enrollment process and a screen for other health coverage
programs, more specific definitions and standards for
"health care homes," "enhanced health care homes" and "care
coordination" and at least min minimal standards both on
network adequacy and timely access to care.
Disability Rights California writes in opposition stating
that they are not opposed to managed care, but do oppose
the mandatory managed care requirement in the bill. They
also expressed concern that the timing of this significant
policy change is left to DHCS and is being planned too
quickly. They note that the readiness standards are
imprecise and that the standards in the California
Healthcare Foundation study be adopted. Another concerns
is that the assessment to identify high risk individuals,
are not being done in a timely enough fashion they argue.
The Corporation for Supportive Housing (CSH) writes that by
receiving health care home services, the frequent user
initiative participants who were Medi-Cal beneficiaries
experienced a 60 percent decrease in emergency room visits
and a 69 percent decrease in inpatient days. CSH argues
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that based on evaluations of this initiative, very
intensive face-to-face care coordination was a cornerstone
of success in improving health outcomes and decreasing
costs among this population. CSH requests amendments to
require health plans to deliver higher levels of services
to individuals considered high risk, in person assessments,
requirements to link high risk beneficiaries with community
resources and a definition of medical home using nationally
recognized standards. CSH further requests amendments to
promote medical homes in counties without managed care
plans.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Hayashi, Hernandez, Hill, Huber,
Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue,
Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava,
Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Price, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: Duvall, Harkey
CTW:mw 8/17/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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