BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1383
A
AUTHOR: Jones
B
AMENDED: July 1, 2009
HEARING DATE: July 8, 2009
1
CONSULTANT:
3
Dunstan/cjt/sh
8
3
SUBJECT
Medi-Cal: hospitals: supplemental payments: coverage
dividend fee
SUMMARY
Imposes a coverage dividend fee on hospitals, except for
designated public hospitals, for a period that would end on
December 31, 2010. Requires the Department of Health Care
Services (DHCS) to submit state plan amendments to the
federal government and seek any necessary approvals to
implement a system of supplemental payments for hospitals,
as specified. Requires revenue from the fee to be used
only to make specified increased Medi-Cal payments to
hospitals, the administrative costs of DHCS and to pay for
health care coverage for children.
CHANGES TO EXISTING LAW
Existing federal law:
Establishes the Medicaid program to provide comprehensive
health benefits to low-income persons. Establishes the
federal Medicaid Disproportionate Share Hospital (DSH)
program to provide financial assistance to hospitals that
serve large numbers of Medicaid and uninsured patients.
Allows states to request waivers of federal law under
Section 1115 of the Social Security Act for research and
Continued---
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demonstration projects. Requires that provider fees levied
by states must conform to specified standards and criteria.
Existing state law:
Establishes the Medi-Cal program as California's Medicaid
program, administered by the Department of Health Care
Services (DHCS), which provides comprehensive health care
coverage for low-income individuals and their families;
pregnant women; elderly, blind, or disabled persons;
nursing home residents; and refugees who meet specified
eligibility criteria.
Creates a hospital demonstration project to implement a
five-year federal Medicaid Section 1115 waiver for support
of public hospitals that serve uninsured patients and
patients whose health care services are covered by Medi-Cal
(California's Medicaid program).
Establishes the Safety Net Care Pool (SNCP) as the federal
funds available under the hospital demonstration project,
to ensure continued government support for the provision of
health care services to uninsured populations.
Defines a designated public hospital to be one of the
county or University of California hospitals specifically
named in the statute implementing the federal waiver.
Defines a nondesignated public hospital as any other public
hospital.
Imposes provider fees for the state's Medi-Cal program,
specifically a quality improvement fee on Medi-Cal managed
care plans and a quality assurance fee on both skilled
nursing facilities (SNFs) and intermediate care facilities
for the developmentally disabled (ICF-DD).
Establishes a selective provider contract program (SPCP)
for hospitals in the Medi-Cal program. Requires the
governor to designate a person in his or her office to act
as a special negotiator to negotiate rates, terms, and
conditions for contracts with hospitals for inpatient
services to be rendered to Medi-Cal program beneficiaries.
Requires the California Medical Assistance Commission
(CMAC) to assume the duties and powers of the special
negotiator.
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This bill:
Hospital payments
Requires hospitals to be paid a new supplemental payment
which, when combined with their other Medi-Cal payments,
equals the upper payment limit for hospital outpatient and
inpatient services, as specified. (The federal UPL is a
reasonable estimate of the amount that would be paid for
Medicaid services under Medicare payment principles.)
Requires private hospitals to be paid a new supplemental
payment for their Medi-Cal hospital outpatient and
inpatient services. Requires nondesignated public
hospitals, which are public hospitals that are not
designated in the hospital waiver and are typically owned
and operated by a hospital special district, to be paid the
new supplemental payment for their Medi-Cal hospital
inpatient services.
Requires designated public hospitals to be paid in support
of their expenditures incurred under the Medi-Cal program,
and specifies a formula for calculating the amount of their
payments.
Requires Medi-Cal managed care plans to receive
supplemental payments for the provision of Medi-Cal
hospital services to the extent that there are funds
generated by the coverage dividend fee. Requires each
Medi-Cal managed care plan to pay all of the supplemental
payments for hospital services.
States legislative intent to enact additional legislation
that will specify more precisely the calculation of the
supplemental payment to individual hospitals. Prohibits
any supplemental payments from being made until the
subsequent legislation has been enacted.
States that the provisions of the bill related to
supplemental payments shall become inoperative if the
federal government denies approval or does not approve the
implementation of the applicable provisions of the bill
before January 1, 2012.
Administration
Requires DHCS to submit a Medicaid state plan amendment to
implement the supplemental payment program. Requires DHCS
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to seek federal approval or waivers to obtain federal
financial participation (FFP) to the maximum extent
possible for payments made under this bill.
Requires the director of DHCS to submit a declaration to
the Legislature containing these elements.
a) Assurances from the Secretary of the United States
Department of Health and Human Services that there
will not be funding reductions to hospitals under the
current Section 1115 waiver.
b) Taking into account all relevant information
available from the federal government, there is no
reasonable basis on which to conclude that
implementation of the provisions related to the
supplemental payments will adversely impact funding
that otherwise would be available under a Medi-Cal
waiver or state plan amendment that replaces the
current waiver.
Prohibits implementation unless the director of DHCS
executes such a declaration.
Requires DHCS to negotiate the federal approvals required
concurrently with the negotiation of a federal waiver.
Provides that the program shall not be implemented unless,
and until, the federal government approves a federal
Section 1115 waiver for a hospital demonstration project to
replace the current Section 1115 waiver.
Coverage dividend fee
Imposes a provider fee, termed a "coverage dividend fee" on
hospitals, except for the 20 county and University of
California hospitals, which are defined in law as
designated public hospitals. Requires the coverage
dividend fee to be consistent with the principle of shared
benefit and shared responsibility. Requires the coverage
dividend fee to be assessed on hospitals until December 31,
2010. However, states legislative intent to enact
additional legislation that will specify more precisely the
coverage dividend fee and prohibits any coverage dividend
fee to be due or payable until the subsequent legislation
has been enacted.
Requires DHCS to seek in a timely manner any and all
federal approvals that may be necessary for the
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implementation of each element of the coverage dividend fee
provisions.
Provides that no hospital shall be required to pay the
coverage dividend fee to the department until the state
receives and maintains federal approval of the coverage
dividend fee from the federal government.
Limits use of the coverage dividend revenues to making
increased payments to hospitals, pursuant to this bill,
paying supplemental payments to managed care plans, paying
for health care coverage for children and the
administrative costs of DHCS. Provides that $80 million
will be available quarterly to provide for health care
coverage for children.
States that the provisions of the bill related to the
coverage dividend shall become inoperative if the federal
government denies approval or does not approve the
implementation of the applicable provisions of the bill
before January 1, 2012.
FISCAL IMPACT
According to the Assembly Appropriations Committee
analysis, this bill would lead to a one-time increase of
approximately $4 to $5 billion in the amount paid to
hospitals. This increased amount is composed of 38 percent
hospital provider fee and 62 percent federal funds or FFP.
The American Recovery and Reinvestment Act increased FFP
from what is generally a 50 percent federal share to 62
percent for 9 quarters, ending December 31, 2010, at which
point it reverts to 50 percent for most expenditures.
BACKGROUND AND DISCUSSION
According to the author, this bill would levy a provider
fee on specified hospitals that would be used to draw down
additional federal funds to increase Medi-Cal payments to
hospitals, and to pay for an expansion of children's health
care coverage. The author notes that federal law
authorizes states to levy fees on health care providers if
the fees meet federal requirements. According to the
author, 45 states, including California, have Medicaid
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provider fees, including 22 states with hospital provider
fees. The author argues that this bill would enable the
state to use the fee paid by hospitals to match federal
funds, which would then be used to boost Medi-Cal payments
to hospitals and to fund a children's health coverage
expansion. The author argues that providing a rate
increase and a coverage expansion using the state's general
fund is not possible given the state's dire fiscal
situation. This bill is an urgency measure, and the author
states this is important because immediate enactment would
allow California to take advantage of the increase in the
Federal Medicaid Assistance Percentage made available to
California through the federal stimulus legislation, which
will enable the state to drawn down additional federal
funds with a lower provider fee.
Hospital payments
Hospitals are reimbursed by Medi-Cal in a variety of ways,
depending upon whether they contract with the state through
the California Medical Assistance Commission (CMAC),
whether they qualify as a disproportionate share hospital
(DSH) based on their patient census, and whether they are a
designated public hospital, a private hospital, or a
non-designated public hospital (district hospital).
Designated public hospitals certify their own expenditures,
which becomes the state match for drawing down federal
funds.
Another factor affecting reimbursement is whether the
Medi-Cal patient they are serving is covered through
managed care or fee-for-service Medi-Cal. Fee-for-service
Medi-Cal outpatient hospital rates are established by DHCS
through a fee schedule.
For Medi-Cal inpatient services, CMAC negotiates contracts
with hospitals on behalf of the state under the Medi-Cal
program through the SPCP. Through CMAC, the state
selectively contracts on a competitive basis with hospitals
for inpatient services provided to Medi-Cal beneficiaries
in the fee-for-service Medi-Cal Program. According to
CMAC, the competitive contracting model has resulted in
savings to the state General Fund of over $600 million this
fiscal year. CMAC has negotiated a rate on behalf of the
state with 179 hospitals as of December 1, 2008. Hospitals
that do not contract with the state in the fee-for-service
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Medi-Cal Program are known as non-contract hospitals. When
non-contract hospitals bill Medi-Cal for services, they are
initially paid an interim rate. Hospitals are then
required to submit a cost report within five months of the
close of their fiscal period, and DHCS reviews each
hospital's cost report and prepares a tentative settlement,
which is a determination of the allowable reimbursable
reported costs for a hospital's fiscal period.
The role of CMAC would be diminished while this bill is in
effect. Because the supplemental amounts paid to hospitals
under this bill are in addition to any other amounts
payable to the hospital for inpatient services, and because
this bill requires Medi-Cal rates for inpatient services to
result in aggregate payments to the federal UPL, the role
of CMAC would be diminished while this bill is in effect.
Last session, two budget measures affected non-contract
hospital reimbursement: the mid-year reduction bill in
February 2008 (AB 5, (Committee on Budget) Chapter 3,
Statutes of the 2008, Third Extraordinary Session) and the
health budget trailer bill of 2008 (AB 1183, (Committee on
Budget), Chapter 758, Statutes of 2008) passed in September
2008. ABX3 5 reduced, for services provided on and after
July 1, 2008, Medi-Cal interim payments and cost report
settlements by 10 percent for amounts paid for inpatient
hospital services provided by hospitals that are not under
contract with the state, for services provided on and after
July 1, 2008. AB 1183, effective October 1, 2008 reduced
non-contract rates to the lesser of the 10 percent
reduction enacted by ABX3 5 or the regional average CMAC
per diem contract rate, reduced by five percent and
multiplied by the number of Medi-Cal covered inpatient
days.
On April 6, 2009, the U.S. Court of Appeals for the Ninth
Circuit granted a motion made by hospital plaintiffs (which
included the California Hospital Association and some
individual hospitals) and ordered a stay of the rate cuts
enacted in AB 1183 with respect to the specified hospital
services, including inpatient services for non-contract
hospitals, pending their appeal to the U.S. Court of
Appeals for the Ninth Circuit of the district court's order
denying the motion for a preliminary injunction.
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Provider fees
Federal law authorizes states to levy fees on health care
providers if the fees meet federal requirements. Many
states (including California) fund a portion of their share
of Medicaid Program costs through a fee on health care
providers. Under these funding methods, states collect
funds (through fees, taxes, or other means) from providers,
which can then be matched with federal funds. The
resulting combination of state and federal funds is then
used to increase Medicaid reimbursement to providers.
Federal law has specific requirements governing provider
fees. To prevent states from only levying an assessment on
certain providers, federal law requires provider fees to be
"broad based" and uniformly imposed throughout a
jurisdiction, meaning that they cannot be levied on a
subgroup of providers, such as only those who are enrolled
in Medicaid programs. States are prohibited from having a
provision that would ensure providers are "held harmless"
from the impact of the fee, meaning that all of the funds
that an individual provider is paid are returned to that
provider. As a practical matter, the federal requirements
result in provider fee programs where some providers
receive a net benefit and others do not.
California currently has the following provider fees on
intermediate care facilities for the developmentally
disabled, Medi-Cal managed care plans and SNFs:
a) A quality improvement fee (QIF) is assessed on
Medi-Cal managed care plans at a rate of 5.5 percent
of revenues. The net increase in revenue is deposited
into the state general fund, and is estimated to be
$238.8 million (total funds) in 2008-09. Half of the
fee is used to draw down federal funds and is returned
to the Medi-Cal managed care plans through increased
rates. The fee sunsets on October 1, 2009 and is
projected to raise $89.9 million in 2009-10. The QIF
is currently assessed on Medi-Cal managed care
revenue, but changes in federal law will likely result
in this fee sunsetting under state law;
b) A quality assurance fee (QAF) on skilled nursing
facilities at a rate of six percent of net revenues
(which excludes Medicare revenue). The QAF is
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projected to generate $293 million in 2009-10 and
sunsets on July 31, 2011. The legislation that
established the QAF also restructured the payment
system for SNFs from a flat rate system to one that
reimburses based on costs, and that provides an
incentive for facilities to spend more in certain
areas, such as labor. The QAF has been covering the
additional costs generated by AB 1629, but beginning
in 2010-11, the GF is expected to have to fund the
growth in AB 1629 costs; and,
c) As a condition of participation in Medi-Cal, a QAF
is assessed on the gross receipts of intermediate care
facilities for the developmentally disabled at a rate
of 5.5 percent with the amount paid in licensing fees
reduced from the total amount of revenue generated.
The QAF revenues are projected to rise, on a net
basis, to $19.2 million in the 2009-10 fiscal year.
DHCS indicates these facilities receive $13.1 million
above the amount facilities paid in fees.
The health reform proposal from last session by Governor
Schwarzenegger and authored by Assembly Speaker Fabian
Nunez would have levied a provider fee on hospitals through
a separate ballot initiative to be submitted to the voters.
That proposal would have increased Medi-Cal reimbursements
to hospitals as a way of reducing the subsidy where
below-market Medi-Cal reimbursement rates results in those
costs being shifted to insured individuals, families, and
employers.
Hospital waiver
In 2010, California will be negotiating a new waiver to
replace the current five-year waiver with the federal
government with respect to how Medi-Cal hospital payments
are made. In 2005, a California waiver agreement with the
federal government restructured the way Medi-Cal funding is
used to fund in-patient hospital services.
California's hospital waiver is a Section 1115 waiver,
which is authorized under the Social Security Act. Under
law, the Secretary of Health and Human Services is granted
broad authority to waive provisions of the Medicaid statute
to allow states to institute demonstration projects and
provide federal funding that would not normally be eligible
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under federal law. To avoid Congressional approval, these
waivers must be budget neutral over the life of the waiver,
meaning that they cannot cost the federal government more
than it would normally pay through Medicaid in the absence
of the waiver. Waivers allow states some measure of
flexibility to, for example, institute new systems of care
delivery, eligibility for non-Medicaid eligible
populations, or provide services that may not be a covered
benefit under Medicaid. All waivers are subject to
approval by the Centers for Medicare and Medicaid Services,
the Office of Management and Budget, and the Department of
Health and Human Services.
The state's hospital waiver was implemented through SB
1100, authored by Senators Ducheny and Perata, (Chapter
560, Statutes of 2005), which provides the statutory
framework for implementing the current hospital waiver. SB
1100 also established a new mechanism for funding all
safety-net hospitals. Under the waiver, federal funds
match "certified public expenditures" (CPEs) for health
care services provided in public hospitals and county
clinics. CPEs are expenditures for providing healthcare to
Medi-Cal recipients and the uninsured. Twenty selected
public hospitals, including the five UC hospitals,
currently use CPEs to claim federal funds under Medi-Cal,
including DSH payments.
Under the current waiver, for uncompensated care provided
to Medi-Cal and uninsured patients, public hospitals have
access to over $1 billion in federal DSH funds. DSH
funding is a capped allocation of federal funds and is
accessible to public hospitals as a reimbursement of CPEs
and intergovernmental transfers. Public hospitals are also
able to access SNCP funding, which is a federal allotment
of over $700 million. The waiver establishes the SNCP.
As part of the terms and conditions of the existing
Medi-Cal Hospital/Uninsured Care Waiver, the state is
prohibited during the term of the demonstration project
from imposing a provider tax, fee or assessment on
inpatient hospitals, outpatient or physician services that
will be used as the non-federal portion of any Medicaid
payment. The waiver is a five-year waiver that began
September 1, 2005 and extends until August 31, 2010. In
order for this bill to take effect prior to August 31,
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2010, the federal government would need to indicate the
provision in the current waiver prohibiting a hospital
provider fee won't be enforced or the waiver would need to
be renegotiated. According to the sponsors, California is
the only state that has a waiver condition prohibiting a
provider fee.
For safety-net hospitals, the waiver is critical for their
financing, and the subject of much interest and
negotiation. There are two identical vehicles, SB 208
(Steinberg) and AB 342 (Bass) that will likely constitute
the statutory provisions necessary to enact the waiver.
Timelines for completing a waiver vary, but generally, it
takes a year to negotiate and gain approval for a
substantial waiver with the Secretary of HHS and CMS.
States, such as Indiana, Massachusetts and Vermont have
reformed their health care systems using federal Medicaid
waivers. A common element in these state programs has been
expansion of each state's Medicaid program. However,
states have gone beyond this and have combined expansions
with additional programs such as investments in prevention,
care coordination and management and quality improvements.
Another option that states have pursued is to include costs
of health care programs that go beyond just hospital costs.
Related bills
SB 208 (Steinberg and Alquist) directs DHCS to develop a
new Medicaid hospital financing waiver, under Section 1115
of the federal Social Security Act to replace hospital
financing provisions established by SB 1100 (Perata),
Chapter 560, Statutes of 2005. SB 208 is in Assembly
Health Committee.
AB 511 (De La Torre), establishes a quality assurance fee
on ambulance transportation services providers to increase
transportation rates paid on behalf of Medi-Cal patients.
AB 511 is in Senate Health Committee.
AB 342 (Bass), has identical provisions to SB 208. This
bill is in Senate Health Committee.
Prior legislation
AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008, among its other provisions, extends the AB 1629 QAF
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by an additional two years, to July 31, 2011.
SB 1100 (Perata and Ducheny), Chapter 560 statutes of 2005,
provides the framework for implementing the new federal
hospital finance waiver, including establishing a new
mechanism for funding of safety-net hospitals.
AB 1629 (Frommer) Chapter 875, Statutes of 2004 establishes
the SNF QAF and the Medi-Cal Long-Term Care Reimbursement
Act.
Arguments in support
(All based on prior versions of the bill)
The Daughters of Charity Health System (Daughters) writes
that this bill is critical to its six hospitals and is
essential to the viability of the Medi-Cal program over the
next two years. Daughters states California now ranks 50th
among all states in Medi-Cal reimbursement levels, and the
fee in this bill will be used to provide the desperately
needed funding increases for services to Medi-Cal patients
that California cannot provide because of the state's
fiscal situation. Daughters argues this bill will allow
the state to obtain needed federal dollars over the next 18
months, and these funds are vitally necessary to California
hospitals' ability to continue providing access to Medi-Cal
patients. They point out that it will also allow the state
to expand or maintain coverage to children. Daughters
argues that, given current economic conditions, it would be
fiscally and morally irresponsible to forgo this
opportunity to strengthen California's safety net, and
Daughters looks forward to working with the Legislature,
the Administration and other stakeholders in refining and
enacting this bill.
The California Children's Hospital Association (CCHA)
writes this bill will result in essential improvements in
Medi-Cal reimbursement for all hospitals and is critically
important to the state's children's hospitals, which treat
a high volume of Medi-Cal beneficiaries and provide
resource-intensive services to the state's sickest and most
vulnerable patients. CCHA states its eight private,
not-for-profit, children's hospitals lose more than $200
million each year providing services to Medi-Cal
beneficiaries. Despite the fact that hospital costs are
escalating and utilization in children's hospitals is
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increasing, increases in Medi-Cal payments have been
minimal. Inadequate Medi-Cal reimbursement affects all
hospitals, but has a disproportionate impact on children's
hospitals. CCHA states, due to the volume of Medi-Cal
patients in children's hospitals, there is little
opportunity for cost shifting and children's hospitals are
falling further behind in reimbursement of costs. CCHA
states that inadequate Medi-Cal reimbursement currently is
compromising access to non-urgent care for Medi-Cal
beneficiaries.
The California Association of Public Hospitals (CAPH) is in
support of the concept of using a hospital fee to provide
increased Medi-Cal reimbursement to hospitals. They point
out that public hospitals provide one-third of the hospital
care to Medi-Cal beneficiaries and nearly half of all
hospital care to the state's uninsured. They see a
critical need for increased reimbursement to hospitals in
the Medi-Cal program. CAPH voices a concern that this
effort could adversely impact the next waiver which will
provide the core funding for public hospital systems. They
support the principles contained in AB 1383 which will help
ensure that this and any future actions related to the
hospital fee will not negatively impact the current and
next waiver.
The California Hospital Association (CHA) indicates it
supports allowing this bill to move forward in order to be
used as a vehicle to eventually increase Medi-Cal payments
to hospitals. CHA states it realizes this bill is a work
in progress and is continuing to work on evaluating options
to meet the needs of the state and federal government as
well as hospitals. CHA feels the final product should be
carried out in the context of the federal 1115 waiver for
this year and next, that timing is critical and there is a
very short period in which work must be completed.
The Private Essential Access Community Hospitals (PEACH)
supports this bill because it provides a method for taking
advantage of a short term increase in federal financial
participation and will result in increased Medi-Cal
payments to hospitals and coverage for children in
California. Adventists Health and Loma Linda University
Medical Center states that California's low Medi-Cal rates
are having negative effects on private safety-net
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hospitals. In addition they note that the recession has
been devastating to the investment portfolios of many
private hospitals, including their own.
Health Access California supports the bill if it were
amended. The specific amendments that they request is that
the bill restore funding for Healthy Families, reinstate
important Medi-Cal benefits such as adult dental and assure
funding for California's share of comprehensive health
reform. They acknowledge that Medi-Cal funding is in
adequate to provide decent provider compensation, but also
note that the current level of Medi-Cal funding fails to
provide adequate benefits for Medi-Cal beneficiaries.
Arguments in opposition
(All based on prior versions of the bill)
The opponents, consisting of Cedar-Sinai Health System,
Kaiser Permanente, Scripps Health, St. Joseph Health System
and Sutter Health, argue that AB 1383 creates a tax on
hospital services but does not specify the details of this
tax. They argue that it is premature for the Legislature
to agree to a hospital tax without knowing even the most
basic details regarding how the tax would be structured.
They note that the hospital association has been unable to
achieve consensus among its members, reflecting the
concerns that the membership has about this proposal. They
argue that consensus among the hospital community must
occur before the proposal moves forward. The opponents
also argue that there is no urgency to pass this proposal
and that there is adequate time remaining in the
legislative session to enact such an agreement should
consensus be reached within the hospital community.
PRIOR ACTIONS
Assembly Floor: 71-3
Assembly Appropriations:12-4
Assembly Health: 15-0
COMMENTS
1.Many details are left to the second bill.
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The plan of the sponsors includes a second bill and,
possibly, an initiative in 2010. According to the author
and sponsors, this bill represents a starting point for
discussion leading to the framework for a hospital fee.
A second bill is envisioned within a short period that
would provide the necessary details for implementing a
provider fee. The second bill is envisioned to be
operative for a limited duration, with an initiative
being considered as a longer term financing measure.
Because the second bill will reflect the important
decisions that are in the process of being negotiated,
the current bill, AB 1383, does not propose a specific
fee structure, leaving the decisions about the fee rate,
the base the rate is applied to, and possible exemptions
to the second bill.
2.Urgency clause and urgency of issue.
The author and sponsors argue that this bill should be
enacted by, or very close to, June 30, the last day of
the third quarter of the federal fiscal year. They argue
this increases the state's chances of gaining federal
approval sooner, which would maximize the amount of
federal funds that can be drawn down. Others, including
DHCS, do not agree that adhering to this time line is
necessary.
Part of the reason for the urgency for the bill is that
it would allow the state and hospitals to take advantage
of the increased federal funds that are available because
of the federal stimulus act. The American Recovery and
Reinvestment Act of 2009 provides an enhanced Federal
Medicaid Matching Assistance Percentage from October 1,
2008 through December 31, 2010.
The bill has had an urgency clause since its
introduction, but due to a technical error in the
processing of the July 1 amendments to the bill, the
urgency clause was deleted. The author will propose an
amendment to restore the urgency clause. The need for
the urgency is that the bill should take effect
immediately in order to increase Medi-Cal payments to
hospitals and improve access at the earliest possible
time.
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3.We do not know which hospitals will benefit or lose from
this proposal.
A hospital fee can be established in many ways, such as a
fee based on inpatient days that vary by type of day,
(e.g., a different fee for fee-for-service inpatient days
vs. managed care inpatient days). Since these details
have not been decided and are not in the bill, it is
impossible to know the impact on specific hospitals.
Generally, hospitals that have a relatively larger
proportion of Medi-Cal will benefit. Inevitably there is
a great variation in results for hospitals within larger
systems, even though an individual hospital may do
poorly, others in the system may do well, evening out the
impact. Also, it is likely that no matter how a fee is
structured, there will be hospital systems in California
that will be net donors, meaning they pay more in the
hospital fee than they get back in higher rates for
Medi-Cal.
This question of impact is usually answered by modeling
the net impact of the fee. However, the specific
provisions of this bill have not been decided and have
not been modeled. The model results can be important in
gaining federal approval.
4.There is concern that this bill could have a harmful
impact on the negotiations for the state's hospital
waiver.
The current Medi-Cal Hospital/Uninsured Care Waiver
expires in 2010. The state is beginning the process of
developing a new waiver proposal which will be submitted
to the federal government later this year. This waiver
is very important to public hospitals because it is the
means by which they access federal funding. The waiver
will also be an opportunity for the state to reform or
redesign portions of the Medi-Cal program and obtain
additional federal funds. A provider fee has been
mentioned as a possible source of funding for the new
waiver.
Because there are concerns that this proposal could hurt
the state's negotiating position for the new waiver, the
author has taken amendments that direct DHCS to gather
information from the federal government and requires the
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director to grant specific assurance that this bill would
not have a detrimental impact on the waiver. The author
has also taken amendments that require the negotiations
with the federal government over this bill to proceed in
concert with the waiver, and make its approval
conditioned upon waiver approval.
5.This bill could put pressure on the state's General Fund.
If adopted, the provider fee would result in new money
for hospitals. If the program sunsets, there would be
pressure on the General Fund to continue the Medi-Cal
increases and to continue coverage expansions for
children formerly funded by the provider fee. To reduce
the possible pressure, the author has taken amendments
that eliminate the maintenance of effort requirement for
the state and allows DHCS to be paid administrative
costs.
6.The bill directs funds for children's coverage.
The bill directs that a portion of the coverage dividend
fee funds be used for coverage of children. These
funds, if matched with federal Children's Health
Insurance Program funds, would result in almost $1
billion in total funds (2/3 federal, 1/3 state).
When the provider fee was considered during health care
reform debates, it was seen as a way to expand coverage
to low-income parents and adults and a higher level of
funding was directed to coverage expansion. A number
of cuts have been proposed or made to health programs
during the current budget deliberations. While
providing coverage for children is worthy, there are
many other worthy health programs the Legislature could
choose to fund. The bill could limit the flexibility of
the Legislature to make those choices by earmarking the
funds for children's' coverage.
POSITIONS
(All positions based on prior versions of bill)
Support: California Children's Hospital Association
(cosponsor)
California Hospital Association (cosponsor)
Daughters of Charity Health System (cosponsor)
STAFF ANALYSIS OF ASSEMBLY BILL 1383 (Jones) Page
18
100% Campaign (co-sponsor), a collaborative of
Children Now,
Children's Defense Fund, The Children's
Partnership and PICO California
Adventist Health
California Association of Public Hospitals and
Health Systems
Citrus Valley Health Partners
Health Access California (if amended)
Integrated Healthcare Holdings, Inc.
Loma Linda University Medical Center
Lucile Packard Children's Hospital
Pacific Alliance Medical Center
Private Essential Access Community Hospitals (PEACH)
SEIU, California State Council
Oppose: Cedar-Sinai Health System
Kaiser Permanente
Scripps Health
St. Joseph Health System
Sutter Health
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