BILL ANALYSIS
AB 367
Page 1
Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 367 (Galgiani and Audra Strickland) - As Amended: April 13,
2009
SUBJECT : Medi-Cal: HIV drug treatment: developmental
services: provider reimbursement.
SUMMARY : Requires the Controller to transfer from the General
Fund (GF) and the Federal Trust Fund to the Medical Providers
Interim Payment (MPIP) Fund a loan amount sufficient to, in the
event of a state budget delay, make continued payments to
Medi-Cal providers, providers of drug treatment services for
persons infected with Human Immunodeficiency Virus (HIV), and
providers of services to the developmentally disabled, rather
than requiring up to $2 billion to be transferred in existing
law. Repeals the authority of the Department of Health Care
Services (DHCS) to have a one month payment hold in Medi-Cal.
Specifically, this bill :
1)Deletes the $1 billion cap on the loan amount transferred from
the GF and the $1 billion cap on the amount transferred from
the Federal Trust Fund to the MPIP Fund, and instead
appropriates, in a year in which the annual State Budget is
not enacted by June 30th an amount of money that is sufficient
to make additional continued payments to Medi-Cal providers,
HIV drug treatment service providers, and providers of
services to the developmentally disabled, on or after July 1st
of the fiscal year in which no budget has been enacted, and
until the date upon which a budget is enacted for that year.
2)Permits payments to be made from the MPIP Fund until the date
upon which a budget is enacted, rather than until September
1st under existing law.
3)Repeals the authority of DHCS to hold for a period of one
month, payments to Medi-Cal providers or their designated
agents for health care services that are provided under
Medi-Cal and payments to entities that contract with DHCS for
the delivery of health care services. Under existing law,
this authority exists until June 30, 2009.
EXISTING LAW :
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1)Establishes the Medi-Cal Program, administered by DHCS, 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 who meet specified eligibility criteria.
2)Creates the MPIP Fund to pay Medi-Cal providers, HIV drug
treatment service providers, and providers of services for the
developmentally disabled, during any portion of a fiscal year,
prior to September 1st of that year, in which no budget has
been enacted, or when Medi-Cal incurs a deficiency.
3)Requires the State Controller to annually transfer $1 billion
from the GF and $1 billion in federal funds to the MPIP.
4)Permits DHCS, notwithstanding any other provision of law, and
to the extent not otherwise conflicting with federal law, to
hold for a period of one month, payments to providers or their
designated agents for health care services that are provided
under Medi-Cal, and payments to entities that contract with
DHCS for the delivery of health care services.
5)Limits the authority in 4) above to payments for one month
only, and only for a month ending prior to June 30, 2009.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . This bill is sponsored by the
California Association of Health Facilities (CAHF), which
states there are more than 200,000 patients and clients and
150,000 workers who rely on nursing facilities and homes for
the developmentally disabled in California. CAHF states the
elderly and disabled served in an institutional setting are
far more reliant on Medi-Cal services than most beneficiaries.
The providers who care for this population are equally
dependant on Medi-Cal and are unable to shift costs to other
payers or to generate revenue from alternative sources to cope
with a loss of Medi-Cal revenue. CAHF states, due to very
prescriptive state and federal requirements, they are also not
able to reduce services, decrease costs, furlough staff, or
discharge residents when Medi-Cal does not pay its bills on
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time. While budget-driven payment delays have become
commonplace, most facilities are still recovering from the
lack of Medi-Cal payments during last fall's unprecedented
impasse and are in no position to cope with another cash flow
interruption this soon. CAHF states many facilities are very
short on reserves and will be unable to secure short-term
loans in today's challenging credit market, and there is no
statutory assurance that future facility payments will be made
on schedule, especially in this economic downturn.
CAHF states this bill seeks to guarantee that facilities serving
the elderly and persons with developmental disabilities
receive uninterrupted Medi-Cal payments necessary to make
certain there are continuous services for those who rely on
their care. CAHF concludes this bill is necessary to allow
the State Controller to transfer an amount to the MPIP Fund
that is sufficient to ensure that these providers continue to
receive timely payments during a budget delay, a cash flow
crisis, or a scheduled Medi-Cal payment deferral. Compounding
this issue, according to CAHF, is the state authority to defer
an additional four weeks of Medi-Cal payments prior to July 1,
2009. The original statutory authority gave the state the
ability to delay these payments for up to four weeks, but only
until January 1, 2009. This authority was recently extended
to allow deferral of Medi-Cal payments until July 1, 2009.
CAHF states this bill would delete this authority in statute
so that it could not be extended into another fiscal year.
2)MPIP FUND AND BUDGET ENACTMENT . SB 561 (Scott), Chapter 993,
Statutes of 1998 creates the MPIP Fund to ensure payments to
medical providers in the event of a delay in passage of the
annual state budget. Providers who serve a large proportion
of Medi-Cal and public patients, such as public hospitals,
clinics, and nursing homes, frequently experience cash flow
shortages when Medi-Cal payments are delayed. The MPIP Fund
receives a temporary loan of general and federal funds to pay
Medi-Cal providers, HIV drug treatment providers, and
providers of services to the developmentally disabled when
there is a late budget. When the budget is passed, the loan
is repaid. According to DHCS, MPIP Fund payments are made to
both managed care plans and fee-for-service providers,
including adult day health care, specialty mental health
services, regional centers, and institutional providers. For
some providers, public payments account for more than 75% of
their total revenues.
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In the eighteen years from the beginning of the Wilson
Administration (1991-92) through 2008-09, the state budget was
signed into law before the start of the state fiscal year
(July 1st) four times. The constitutional deadline for the
Legislature to pass the budget is June 15th. The 2009-10
budget was adopted by the Legislature in February of this
year.
3)SHIFT FROM ACCRUAL TO CASH ACCOUNTING . To achieve one-time
budget savings of $930 million GF in 2003-04, the 2003 budget
converted Medi-Cal from an accrual to a cash-based accounting
system. This means that funding would no longer be
appropriated to pay for services based upon the date when a
medical service was rendered, but according to when the bill
for a medical service was paid. In effect, the state shifted
expenditures for some services that would otherwise have been
paid for out of the 2003-04 budget appropriation into the
budget for the following year. However, this accounting
change also made it so the state is using the existing $1
billion GF in the MPIP Fund to pay the claims from the prior
year, which reduces the time period for which the MPIP Funds
provides a "cushion" in the event of a late budget.
4)EXPERIENCE WITH THE MPIP FUND . Since the shift to cash
accounting in 2003, passage of the state budget has been
delayed beyond July 1st in four out of five budget years.
DHCS indicates during last year's lengthy budget delay (the
budget was signed on September 23, 2008), the last payment
from the MPIP Fund was on August 29, 2008, when the MPIP Fund
was exhausted. For the four years prior to last year's
lengthy budget delay, the MPIP Fund had balances (all funds)
of $886 million, $1.2 billion, $1.4 billion and $2 billion by
the time the budget has passed.
5)MEDI-CAL PAYMENT HOLD . To address the state's cash flow
shortage, AB 5 X3, Chapter 3, Statutes of 2007-08 Third
Extraordinary Session and SB 8 X3 (Ducheny), Chapter 4,
Statutes of 2009-10 Third Extraordinary Session, authorize
DHCS to hold for one month payments to Medi-Cal providers for
Medi-Cal services, for a month ending prior to January 1, 2009
(in AB 5 X3) and for a month prior to June 30, 2009 (in SB 8
X3). For the second payment hold authorized by SB 8 X3
(enacted in February 2009), DHCS indicates reimbursement to 33
types of Medi-Cal institutional providers, except for small
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and rural hospitals, designated public hospitals, and local
education agencies, were held effective March 26, 2009 (the
fourth check release date of March), and these claims will be
released four weeks later, beginning April 23, 2009. However,
DHCS indicates based upon recent positive cash developments,
the state no longer needs to implement the previously planned
second, third, or fourth week Medi-Cal fee-for-service
deferrals, and the first weekly payment previously planned to
be held for four weeks may be released sooner depending upon
the state's cash reserves. DHCS indicates payments to
Medi-Cal non-institutional providers will not be held.
6)WHO GETS PAID BY MEDI-CAL IN THE EVENT OF A LATE STATE BUDGET ?
Federal mandates require certain providers to be paid in the
event of a late state budget, including most non-institutional
providers such as physicians, optometrists, physician groups,
occupational therapists, physical therapists, podiatrists,
pharmacies, and psychologists. Providers who are not paid if
the MPIP Fund is exhausted include adult day health centers,
blood banks, clinical labs, optical labs, home health
agencies, inpatient and outpatient community hospitals,
managed care plans, long-term care facilities, clinics, and
federally qualified health centers.
The federal American Recovery and Reinvestment Act of 2009
(ARRA) requires states, as a condition of receipt of the
increased Federal Medicaid Matching Assistance Percentage
(FMAP) increase (ARRA increased the percentage of each
Medi-Cal dollar spent that is paid for by federal funds),
states are required to pay claims in accordance with federal
prompt payment standards. The enhanced FMAP is available from
October 1, 2008 through December 31, 2010. ARRA also extended
the prompt payment requirements to nursing facilities and
hospitals as condition of a state receiving the enhanced FMAP,
so these providers would be reimbursed in the event of a late
state budget during the time period in which the enhanced FMAP
made available by ARRA is available.
7)SUPPORT . The California Association for Health Services at
Home (CAHSAH) writes that while budget-driven payment delays
have become commonplace, most facilities are still recovering
from the lack of Medi-Cal payments during last year's
unprecedented impasse and are in no position to cope with
another cash flow interruption. CAHSAH states many providers
are very short on reserves and will be unable to secure
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short-term loans in today's challenging credit market. CAHSAH
states that, over the years, the loan authority for the MPIP
Fund has lost its effectiveness due to inflation, the shift to
cash accounting in Medi-Cal, frequent Medi-Cal budget
deficiencies and intentional rollover of two weeks of June
payments into the next fiscal year. To be useful during an
extended budget delay, CAHSAH argues the MPIP Fund should be
amended to restore its original purchasing power, and language
should be enacted to eliminate the state's authority to
intentionally schedule payment deferrals. CAHSAH argues this
bill is necessary to avoid a financial crisis for Medi-Cal
providers, uncertainty for workers, and unnecessary suffering
for patients.
8)PREVIOUS LEGISLATION .
a) AB 308 (Galgiani) would have deleted the $1 billion cap
on the loan amount transferred from the GF and the $1
billion cap on the amount transferred from the Federal
Trust Fund to the MPIP Fund, and would have instead
appropriated, in a year in which the annual state budget is
not enacted by June 30th, an amount of money that is
sufficient to make additional continued payments to
Medi-Cal providers, providers of drug treatment services
for persons with HIV, and providers of services to the
developmentally disabled on or after July 1st of the fiscal
year in which no budget has been enacted and until the date
upon which a budget is enacted for that year. AB 308 was
never heard in policy committee.
b) AB 237 (Strickland) in 2007 would have increased the
amount appropriated from the GF to MPIP Fund from $1
billion to $2 billion and the amount appropriated from the
Federal Trust Fund from $1 billion to $2 billion. AB 237
died on the Assembly Appropriations Suspense File.
c) AB 119 (Strickland) in 2005 would have increased the
amount appropriated from the GF to MPIP Fund from $1
billion to $2 billion and the amount appropriated from the
Federal Trust Fund from $1 billion to $2 billion. AB 119
died on the Senate Appropriations Suspense File.
d) AB 1707 (Chan), Chapter 57, Statutes of 2005, allows the
MPIP Fund to be used to pay Medi-Cal claims received after
the beginning of a fiscal year in which there is no enacted
state budget, even if the services were provided in the
prior fiscal year, consistent with a cash-based accounting
system.
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e) AB 1762 (Committee on Budget), Chapter 230, Statutes of
2003, permits the MPIP Fund to pay the specified providers
when Medi-Cal incurs a deficiency.
f) AB 561 (Scott), Chapter 993, Statutes of 1998,
establishes the MPIP Fund for the purpose of reimbursing
Medi-Cal providers and providers for developmentally
disabled patients for care provided between July 1st and
September 1st of any year when a budget has not been passed
on time.
9)URGENCY CLAUSE . The author has requested an urgency clause be
added to this bill so that the provisions of this bill can
take effect immediately upon enactment.
10)POLICY ISSUES .
a) This bill addresses an important issue in that prolonged
budget delays impact providers' ability to maintain viable
businesses and serve Medi-Cal beneficiaries. Because
California is one of a few states with a supermajority vote
requirement to pass a state budget, health care providers
who are not reimbursed by the state (and their employees
and the individuals they serve) bear the brunt of this
state constitutional requirement when a prolonged budget
impasse such as last year's budget delay exhausts the
current MPIP Fund amount.
b) During last year's prolonged budget delay, the last
payment from MPIP was made on August 29, 2008. For the
four fiscal years prior to last year's prolonged budget
delay, the MPIP Fund has had remaining balances (all funds)
of $886 million, $1.2 billion, $1.4 billion and $2 billion
by the time the budget has passed. This bill would
transfer to MPIP Fund whatever amount is required to pay
providers reimbursed by the MPIP Fund, and would allow for
reimbursement beyond September 1. Should the amount in the
MPIP Fund be increased from $1 billion GF/$1 billion
federal funds to a higher amount to adjust for inflation
and the accounting shift from accrual to cash, rather than
appropriating the amount needed to make additional
continued payments until the budget is enacted?
REGISTERED SUPPORT / OPPOSITION :
Support
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California Association of Health Facilities (sponsor)
Aging Services of California
Ahwahnee Care Homes, Inc.
AIDS Healthcare Foundation
Alliance Nursing and Rehabilitation Center
American Federation of State, County and Municipal Employees,
AFL-CIO
Angel View Crippled Children's Foundation, Inc.
Arrowhead Home Convalescent Hospital
California Association for Adult Day Services
California Association for Health Services at Home
California Children's Hospital Association
California Hospital Association
California Medical Association
Canyon Homes
Clearview Alzheimers' Care Facilities
Congress of California Seniors
Crestwood Behavioral Health Fairmont Rehabilitation Hospital
Del Rosa Villa
Developmental Client Care Industries, Inc.
Developmental Services Network
Drier's Nursing Care Center
Evergreen Rehabilitation Care Center
Highland Park Skilled Nursing and Wellness Centre
Hillside House
Home of Guiding Hands
Horizon Health and Subacute Center
Hy-Lond Home
Jan & Gail's Care Homes, Inc.
Knott Avenue Senior Campus
Life Care Centers of America
Mt. Rubidoux Convalescent Hospital
Nineteenth Avenue Healthcare Center
Orangetree Convalescent Hospital
Parkview Julian Convalescent Hospital
Plott Nursing Home
Riverside Health Care
Shields Nursing Centers, Inc.
SnF Management
St. Francis Extended Care
Tyler & Wilson
Valley Village
Valley West Care Center
Vineyard Hills Health Center
Vista Cove Care Center at San Gabriel
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Vista Healthcare Center
Volunteers of America
Windsor Gardens
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097