BILL ANALYSIS
AB 1864
Page 1
Date of Hearing: March 23, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1864 (Audra Strickland and Galgiani) - As Introduced:
February 12, 2010
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. 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 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 in order to make payments if:
a) On or after July 1st of the fiscal year no budget has
been enacted until the date upon which a budget is enacted
for that year; or,
b) The Medi-Cal Program has a deficiency.
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.
EXISTING LAW :
1)Establishes the Medi-Cal Program, administered by the
Department of Health Care Services (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
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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 that 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 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
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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 concludes this bill is necessary to allow the State
Controller to transfer an amount to the MPIP Fund that is
sufficient to cover payments to institutional Medi-Cal
providers for services after July 1 during a budget delay or a
cash flow crisis.
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.
Over the past fifteen years, from 1995 to 2010, the state budget
was signed into law on average 32 days late. During that
period, it has only been on time four times. The
constitutional deadline for the Legislature to pass the budget
is June 15th. In 2008, it was 84 days late, signed on
September 23, 2008. The 2009-10 budget was adopted by the
Legislature on time in February of this year, but revised on
July 28, 2009.
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
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paid for out of the 2003-04 budget appropriation into the
budget for the following year. However, this accounting
change also resulted in delayed payments to providers not only
of new fiscal year payments, but also any prior year payment
that has not been made before July when a budget is late as
there is no authority to make payments. This accounting
change therefore put a bigger draw on the MPIP Fund as the
state is using the existing $1 billion GF in the MPIP Fund to
pay the claims from the prior year, reducing 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 the 2008 lengthy budget delay the last
payment from the MPIP Fund was on August 29, 2008, when the
MPIP Fund was exhausted. For the four years prior to the 2008
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. The sponsors are estimating that
without this bill, the fund will be depleted by the third week
of July in 2010 if the budget is again delayed.
5)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) increased the percentage of Federal Medicaid Matching
Assistance Percentage (FMAP) from 50% to 62% through December
31, 2010. As a condition of receipt of the increased FMAP,
states are required to pay claims in accordance with federal
prompt payment standards. This requires 90% of the providers
are to be paid within 30 days or 99% within 90 days. The
enhanced FMAP is available from October 1, 2008 through
December 31, 2010. ARRA also extended the prompt payment
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requirements to nursing facilities and hospitals as condition
of a state receiving the enhanced FMAP, so these providers
should be reimbursed in the event of a late state budget
during the time period covered by the ARRA enhanced FMAP.
6)DELAYED CHECKWRITE . The shift from accrual to cash accounting
also allows the state to save money in a fiscal year by
delaying the last payment or checkwrite to providers in June
of the fiscal year until the start of the next fiscal year.
Since 2004-05, the last checkwrite has been delayed.
Beginning with 2009-10, DHCS is proposing to delay an
additional checkwrite for institutional providers whose claims
are processed by the Medi-Cal fiscal intermediary and paid
during the next fiscal year. The checkwrite normally paid on
June 17, 2010 will be paid in July 2010. From then on two
checkwrites will be delayed at the end of the fiscal year.
The delay of the checkwrite is expected to result in one-time
savings in 2009-10 and a one-time penalty in 2010-11 due to
the ARRA prompt pay requirement The one-time savings in
2009-10 is estimated to be $94.3 million GF, the one-time cost
in 2010 due to the penalty is estimated to be $38.5 million
GF. The net savings over the two fiscal years from the
checkwrite delay is $55.8 million GF. The additional
checkwrite delay will result in even earlier depletion of the
MPIP.
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 prior 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
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
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for patients.
Numerous individual adult day health care centers and skilled
nursing facilities also write in support stating that the
providers who care for the elderly and disabled they serve are
reliant on Medi-Cal are unable to shift costs to other payers
or to generate revenue from alternative sources to cope with a
loss of Medi-Cal revenue.
8)PREVIOUS LEGISLATION .
a) AB 367 (Galgiani and Audra Strickland) in 2009 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 and would have repealed the authority of DHCS to have
a one month payment hold in Medi-Cal. AB 367 died on the
Assembly Appropriations Committee suspense file.
b) AB 308 (Galgiani) of 2008 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
passed the Assembly but was never heard in a Senate policy
committee.
c) 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 Committee suspense
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file.
d) AB 119 (Audra 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 Committee Suspense File.
e) 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.
f) 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.
g) 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.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Health Facilities (sponsor)
2nd Century Adult Day Health Care Center
Acacia Adult Day Health Services
Adult Day Health Care of Mad River
Alzheimer's Family Services Center
Among Friends Adult Day Health Care Center
Ararat Nursing Facility
Arrowhead Home Convalescent Hospital
California Association for Health Services at Home
California Children's Hospital Association
California Communities United Institute
California Hospital Association
Central Valley Health Network
Chateau d'Bakersfield
Community SeniorServ Inc.
Eureka Adult Day Health Care Center
Fortuna Adult Day Health Care Center
George G. Glenner Alzheimer's Family Centers
Golden Empire Convalescent Hospital
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Hope Adult Day Health Care Center
Humboldt Senior Resource Center
Institute on Aging, San Francisco
KHEIR
Life Steps Foundation
Mission Creek Adult Day Health Care
Oxford Family Circle Adult Day Health Care Center
Self-Help for the Elderly
Stepping Stone
Sunny CAL Adult Day Health Care Center
Sunnyday Adult Day Health Care
Tender Heart Adult Day Health Care Center
Tuolumne Adult Day Health Care Center
Vienna Nursing and Rehabilitation Center
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097