BILL ANALYSIS
AB 1985
Page 1
Date of Hearing: April 13, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1985 (Galgiani) - As Introduced: February 17, 2010
SUBJECT : Corrections: medical equipment and care.
SUMMARY : Permits the California Department of Corrections and
Rehabilitation (CDCR) to use Medi-Cal's methodology for
determining maximum allowable reimbursement rates for durable
medical equipment (DME), if approved by the federal receiver or
when CDCR is no longer under the authority of the federal
receiver. Exempts the provisions of this bill from the
Administrative Procedures Act.
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 person, nursing home residents, and refugees who
meet specified eligibility criteria.
2)Establishes the following DME reimbursement rules for
Medi-Cal:
a) Requires DHCS to establish a list of covered services
and maximum allowable reimbursement rates for DME, as
defined. Requires the list to specify utilization controls
to be applied to each type of DME;
b) Requires reimbursement for DME, except wheelchairs and
speech-generating devices to be the lesser of:
i) The amount billed pursuant to DHCS regulations;
ii) An amount that does not exceed 80% Medicare
allowance; or,
iii) The guaranteed negotiated acquisition cost by means
of exclusive or nonexclusive contracts on a bid plus a
specified percentage markup.
c) Requires reimbursement for wheelchairs and
speech-generating devices and their related accessories to
be the lesser of:
i) The amount billed pursuant to DHCS regulations;
ii) An amount that does not exceed 100% of Medicare
allowance; or,
AB 1985
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iii) The guaranteed negotiated acquisition cost by means
of exclusive or nonexclusive contracts on a bid plus a
specified percentage markup.
d) Requires reimbursement for all DME utilizing codes with
no specified maximum allowable rate to be the lesser of:
i) The amount billed pursuant to DHCS regulations;
ii) The guaranteed negotiated acquisition cost
negotiated by means of exclusive or nonexclusive
contracts on a bid plus a specified percentage markup;
iii) The actual acquisition cost plus a markup
established by DHCS;
iv) A specified percentage of the manufacturer's
suggested retail purchase price on June 1, 2006, as
specified, not to exceed 15% for wheelchairs and
wheelchair accessories if the provider employs or
contracts with a qualified rehabilitation professional;
or,
v) A price established through targeted
product-specific cost containment provisions developed
with providers.
e) Requires reimbursement for all DME supplies and
accessories billed to the Medi-Cal Program to be the lesser
of the amount billed pursuant to pursuant to DHCS
regulations or the acquisition cost plus a 23% markup; and,
f) Requires DHCS to establish a "capped rental"
reimbursement for specific items of DME and to reimburse on
a monthly rental basis not to exceed a period of continuous
use of 10 months. Requires, after Medi-Cal has paid rent
for 10 months, that the provider continue to provide the
item without charge except for maintenance and servicing
fees until the medical necessity ends or Medi-Cal coverage
ceases. Prohibits the monthly reimbursement for the rental
of these specific DME items from exceeding 80% of the
lowest maximum allowance for California established by the
federal Medicare Program for the same or similar item or
service.
3)Establishes the Department of General Services (DGS) as the
state's business manager with responsibilities that include
purchases, acquisition, printing, and reporting functions,
among others.
4)Sets forth the necessary conditions and procedures for the
purchase of state goods and services in the Public Contract
Code.
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5)Authorizes the Director of DGS to delegate acquisition
authority to any state agency that has been determined by DGS
to be capable of effective use of that authority.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THE BILL . According to the author, CDCR's medical
care system is currently in a state of crisis because of
decades of neglect, underinvestment, and increasing
over-crowding. This bill attempts to streamline the costs of
CDCR's medical care system by providing the same DME cost
savings in prison healthcare as was achieved for the Medi-Cal
program by mirroring the language that was introduced in AB
747 (Matthews) of 2003 and later adopted in AB 1762 (Committee
on Budget), Chapter 230, Statutes of 2003.
2)BACKGROUND . In December 2002, the State Auditor published a
report regarding the purchasing and contracting practices of
DHCS for DME, medical supplies, and hearing aids under
Medi-Cal. The report found that Medi-Cal expenditures for DME
rose by 70% from 1998 through 2001 while expenditures for
medical supplies decreased by 6.3%. As a response to these
cost increases, the Legislature implemented major cost savings
provisions by passing AB 1762, which were implemented in 2004.
According to DHCS, Medi-Cal spending on DME has decreased
significantly from $143 million in 2003 to $99 million in
2009. DHCS notes that other factors may have played a role in
reducing costs such as change in demand, participation of DME
providers, and activities of Medi-Cal Audits and
Investigations Branch.
3)FEDERAL RECEIVER FOR CDCR . In February 2006, as a result of
Plata v. Schwarzenegger (N.D. Cal. Oct. 3, 2005) No. C01-1351
TEH (Plata), the federal court appointed a Receiver to control
the delivery of medical services for prisoners in California.
The court found that an inmate died needlessly every seven
days because of inadequate medical care in California's 33
adult prisons, which violated the Eighth Amendment of the U.S.
Constitution forbidding cruel and unusual punishment. Nearly
two years later, the court appointed a new Receiver to
continue the efforts made by the first Receiver to bring
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prison medical care up to federal standards. The Receiver is
charged with taking over the operations of the state's prison
medical care system and bringing it up to constitutional
levels.
4)GROWTH IN PRISON HEALTH CARE COSTS . Since the beginning of
the Plata case prison health care costs have increased
substantially. While the state spent roughly $800 million on
health care costs in 2001, the administration estimates that
the state will spend $2.2 billion on inmate health care costs
this year. According to a recent CDCR report, increased
inmate health care costs are a result of implementing the
provisions of three class action lawsuits and the major costs
increases come from increased medical staffing levels, salary
increases, pharmaceutical and medical supplies, and increased
custody staff for medical guarding, access, and
transportation. The Plata case resulted in increased costs of
about $810 million, Coleman v. Schwarzenegger (E.D. Cal. Jul.
23, 2007) No. S90-0520 LKK JFM P (related to mental health),
and Perez v. Tilton (N.D.Cal. Nov. 13, 2007) No. C 05-05241
JSW (related to dental health), resulted in an additional $423
million in annual costs.
5)CURRENT CDCR DME PROCUREMENT . According to CDCR, prisons
purchase DME in the same manner as other non-medical
equipment. For purchase contracts of less than $100,000,
individual CDCR facilities must obtain at least two or three
bids and choose the lowest qualified bidder (with certain
exceptions designed to favor purchases from small businesses
and disabled veterans business enterprises). Purchases of
$100,000 or more are processed through DGS to determine if DGS
has a contract in place to purchase the specific item or
items. DGS secures contracts by using the competitive
invitation for bid process. This process includes advertising
DGS' requirements through the state contracts register,
receiving bids from at least three vendors, and accepting the
lowest competitive bid that meets DGS' requirements. The
Receiver may, but is not required to, follow existing state
law in the acquisition of DME.
6)PREVIOUS LEGISLATION .
a) AB 2119 (Galgiani) of 2008 would have applied Medi-Cal's
methodology for determining maximum allowable reimbursement
rates for DME to CDCR and would have required CDCR to
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establish a pilot project to deliver health care via
telemedicine, as defined. This bill was held in Assembly
Appropriations Committee.
b) AB 1762 (Committee on Budget) implements Medi-Cal
methodology for determining maximum allowable reimbursement
rates for DME that are nearly identical to provisions
contained in AB 2119 and AB 1985.
7)POLICY ISSUES : DME is provided directly to beneficiaries from
many different providers under Medi-Cal. This is not the case
for CDCR procurement of DME, which purchases items in bulk.
The author may wish to consider if this Medi-Cal approach is
feasible in CDCR.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Martin Radosevich / HEALTH / (916)
319-2097