BILL ANALYSIS
AB 1653
Page 1
Date of Hearing: April 6, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1653 (Jones) - As Introduced: January 14, 2010
SUBJECT : Med-Cal: hospitals: quality assurance fee.
SUMMARY : Establishes a quality assurance fee (QAF) on specified
private general acute care hospitals, as a condition of
participation in state funded health insurance programs other
than the Medi-Cal program. Specifically, this bill :
1)Requires private general acute care hospitals to pay a QAF
from January 1, 2011 until June 30, 2011, as a condition of
participation in state-funded health insurance programs, other
than the Medi-Cal Program.
2)Exempts specified public district hospitals, county and
University of California hospitals small and rural hospitals,
and certain long-term care hospitals.
3)Provides for an unspecified method of calculating the fee
amount.
4)Requires the fee proceeds plus Federal Matching Assistance
Program (FMAP) funds, to be used exclusively for:
a) Administrative costs incurred by the Department of
Health Care Services (DHCS) for implementation;
b) Health coverage for children up to $80 million per
quarter;
c) Grants to specified public hospitals and supplemental
payments to private acute care hospitals, as specified;
d) Increased payments to Medi-Cal managed care (MCMC) plans
to be passed through to hospitals;
e) Increased payments to Medi-Cal mental health plans to be
passed through to hospitals; and,
5)Requires the director of DHCS to seek federal approvals or
waivers as necessary and obtain federal financial
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participation.
6)Requires the fee and all federal funds to be deposited in the
Hospital Quality Assurance Revenue (HQAR) Fund and to be
continuously appropriated.
EXISTING LAW
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)Establishes a schedule of benefits under the Medi-Cal Program,
which includes hospital inpatient and outpatient services,
subject to utilization controls, and establishes Medi-Cal
hospital reimbursement requirements under the current federal
hospital waiver.
3)Imposes a gross premium tax on MCMC plans and a QAF on skilled
nursing facilities and intermediate care facilities for the
developmentally disabled.
4)Under federal law, the American Reinvestment and Recovery Act
(ARRA), provides a temporary enhanced FMAP of 61.59%,
retroactively from October 1, 2008 through December 31, 2010.
5)Establishes the Medi-Cal Hospital Provider Rate Stabilization
Act and the Quality Assurance Fee Act.
6)Requires acute care hospitals to pay the fee as a condition of
participation in state-funded health insurance programs, other
than the Medi-Cal Program.
7)Requires non-exempt hospitals to pay a fee of:
a) For patients covered by non MCMC plan, $27.25 per
inpatient day;
b) For patients covered by non Medi-Cal fee-for service
(FFS), $233.46 per inpatient day; and,
c) For patients covered by the Med-Cal Program, $293.00 per
inpatient day.
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8)Authorizes DHCS to change the fee amounts if necessary for
federal approval but limits the percentage and dollar amount.
9)Makes the fee effective upon federal approval for all or a
portion of the 2009, 2010 and 2011 federal fiscal years, and
sunsets the fee on January 1, 2011.
10)Creates the HQAR Fund for deposit of the fee, plus FMAP
funds, to be used exclusively as authorized in the following
priority:
a) Administrative costs incurred by DHCS for implementation
of this bill;
b) Health coverage for children up to $80 million per
quarter;
c) Grants to specified public hospitals and supplemental
payments to private acute care hospitals, as specified;
d) Increased payments to MCMC plans to be passed through to
hospitals; and,
e) Increased payments to Medi-Cal mental health plans to be
passed through to hospitals.
11)Directs DHCS to make supplemental payments to hospitals for
services provided in the Medi-Cal Program.
12)Ensures that payments made to hospitals or reimbursement
rates set pursuant to other provisions of existing law are not
affected or reduced as a result of the supplemental payments
established by this bill.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the purpose of
this bill is to be prepared to take advantage of an extension
of the enhanced FMAP under ARRA, if it is passed by the
Congress and enacted into law by the President. The author
states that the specifics of the extension cannot be
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determined until there is federal approval of the pending
State Plan Amendment (SPA) implementing the fee enacted in AB
1383 (Jones), Chapter 627, Statutes of 2009.
2)BACKGROUND . AB 1383 requires hospitals that elect to
participate in state-funded health insurance programs other
than Medi-Cal to pay a hospital QAF. Certain hospitals are
exempt from paying the fee, including all public hospitals,
long-term care hospitals, small and rural hospitals, and
certain specialty hospitals. DHCS is authorized to alter the
fee amount within limitations if necessary to achieve federal
approval. AB 1383 is estimated to generate $2 billion in
annual fee revenue, a portion of which is provided to public
hospitals as grants. In addition, there is $320 million
annually for health coverage to children and funds for DHCS to
administer the program. The remainder is matched with federal
Medicaid funds at the ARRA enhanced rate and is distributed as
supplemental payments to private hospitals based on the degree
to which they serve Medi-Cal and uninsured patients. AB 188
(Jones), Chapter 645, Statutes of 2009, appropriates up to $15
billion for these payments and provided the administrative
funds to DHCS immediately upon enactment in October of 2009.
3)PROVIDER FEES . Under federal law, health-care related
provider fees and taxes may only be imposed on 19 particular
classes of health care items or services. In addition, the
assessment must be broad-based on all providers in the class,
not just those who serve Medi-Cal. Members of a class may not
be exempted without a waiver. The assessment must be uniform
across the class. Finally, states may not guarantee that
providers are held harmless. The Centers for Medicare and
Medicaid Services (CMS) may waive the broad-based and
uniformity requirements and allow exemptions if the state
meets a complex statistical test that measure whether high
volume Medicaid providers are bearing a disproportionate share
of the fee.
California is one of 43 states with one or more provider taxes
or fees. As of 2008, more than half of the states impose
provider taxes on nursing facilities (33 states) and
intermediate care facilities for the developmentally disabled
(ICF/DD). Many states also impose provider taxes on hospitals
(21 states) and managed care organizations (15). California's
provider fees include a QAF for free standing skilled nursing
facilities, a QAF for ICF/DDs. California also had a Quality
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Improvement Fee for managed care organizations until it
expired on October 1, 2009. It has been replaced by an
extension of the 2.35% premium tax imposed on all insurance to
include MCMC organizations.
4)FEDERAL APPROVAL . The Governor's 2010-11 budget assumes
receipt of the AB 1383 funds before the end of the 2009-10
fiscal year. DHCS filed a SPA on June 31, 2009 to preserve
retroactive application and to take maximum advantage of the
enhanced FMAP under ARRA. However it is uncertain how many
quarters will be approved by CMS. As a first step, CMS has
agreed to amend the Section 1115 Hospital and Uninsured Waiver
terms that prohibited California from imposing a hospital fee.
CMS must still approve the terms of the specific fee and
payment structure and also the payments to managed care plans.
5)SUPPORT . According to the sponsors, the California Hospital
Association, California Children's Hospital Association and
Daughters of Charity, hospitals in California are under
serious financial pressures as a result of the traditional low
Medi-Cal reimbursement rate in California, recent reductions,
the increase in the number of uninsured and the economic
downturn. The sponsors, in support, state that this bill
would extend the Medi-Cal hospital provider fee to take
maximum advantage of an extension for the enhanced federal
match for an additional six months, if passed by Congress.
The supporters assert that this bill could provide an
additional $160 million to the state as well.
6)POLICY ISSUE . This bill is essentially a "spot bill" as it
does not specify the methodology for assessing the fee, nor a
payment structure. The author and sponsor have stated intent
to extend the precise structure of AB 1383 for six months but
have asserted that the details can't be determined until
federal approval. For instance, the total amount of funds
that may be paid to hospitals and will be eligible for match
cannot be known until CMS approves the AB 1383 fee. In
addition, AB 1383 contains specific time lines for collection
of the fee, the effective date of the dependent on the date of
federal approval and the dates that payments to hospitals are
to be made based on a fee that ends on January 1, 2011. These
dates must all be revised. The author may wish to describe
the plans to fill in the specifics of this bill. This
committee may also request that the author agree to an
opportunity for this committee to review this bill when the
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details are finalized.
REGISTERED SUPPORT / OPPOSITION :
Support
California Children's Hospital Association, cosponsor
California Hospital Association, cosponsor
Daughters of Charity, cosponsor
Adventist Health
Health Access
San Bernardino County Board of Supervisors
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097