BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 152
S
AUTHOR: Cox
B
AMENDED: As Introduced
HEARING DATE: April 1, 2009
1
FISCAL: Appropriations
5
CONSULTANT:
2
Tadeo/
SUBJECT
Medi-Cal funding: mental health services
SUMMARY
Requires the Controller to reimburse cities and counties
for certain mental health services within 90 days after the
Department of Mental Health (DMH) receives a claim for
reimbursement. Provides that interest shall be paid from
the DMH budget if the claim is not paid on time.
CHANGES TO EXISTING LAW
Existing federal law:
Existing federal law establishes the Medicaid program to
provide comprehensive health benefits to low-income
persons.
Existing state law:
Existing state law establishes the DMH, which directs and
coordinates statewide efforts for the treatment of mental
illness. Existing law 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;
Continued---
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 2
nursing home residents; and, refugees who meet specified
eligibility criteria. Existing law provides for DMH to
implement managed mental health care for Medi-Cal
beneficiaries through fee-for-service or capitated rate
contracts with county mental health plans (MHPs), as well
as other entities. Existing law provides counties the
right of first refusal for these contracts.
Existing state law generally requires state agencies to pay
properly submitted, undisputed invoices within 45 days of
receipt, or automatically calculate and pay appropriate
late payment penalties, as specified. This does not apply
to claims for reimbursement for health care services
provided under the Medi-Cal program, unless the Medi-Cal
health care services provider is a small business or
nonprofit organization.
This bill:
This bill would require the Controller to reimburse any
city, county, or city and county within 90 days after the
receipt of a reimbursement claim by DMH for mental health
care services provided by the city, county, or city and
county to Medi-Cal beneficiaries. This bill would require
that, beginning on the 91st day, interest would accrue at
the Pooled Money Investment Account rate, to be paid from
the DMH budget. This bill would also require that interest
charges would not accrue against the department's budget
for periods when the funding to the department is
insufficient to pay the claim. If sufficient funds are
unavailable, this bill would also require the Controller to
request the Director of Finance to include any amounts
necessary to satisfy the claims in a request for a
deficiency appropriation.
FISCAL IMPACT
Undetermined future costs for possible interest penalties,
according to the Senate Appropriations Committee analysis
of SB 1349 (Cox) of the 2007 - 08 session, which was
substantially the same as this bill.
BACKGROUND AND DISCUSSION
Need for the bill
The author contends that counties administer Medi-Cal's
mental health program on behalf of the state, and that this
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 3
bill is needed to expedite the payment of overdue county
reimbursement claims held by DMH. The author states that
California's small and rural counties do not have the
fiscal capacity to sustain millions of dollars in overdue
claims for the Medi-Cal program, and as a result, county
mental health departments are forced to borrow to pay for
staff and services. A Department of Finance report on
DMH's payment of local assistance claims confirms that MHPs
are not paid in a timely manner, primarily due to
fragmented program governance and continued use of
defective and outdated information systems.
Mental health services in Medi-Cal
Generally, Medi-Cal is responsible for providing both
physical and mental health care services to beneficiaries.
Medi-Cal services are provided by a combination of
fee-for-service providers and Medi-Cal managed care plans.
Specialty mental health services, defined in regulation,
include medically necessary inpatient and outpatient
services delivered by a mental health professional to
patients who meet certain diagnostic and impairment
criteria. These services have been "carved out" of the
Medi-Cal program, meaning they are not administered by
DHCS, but are the responsibility of DMH and county mental
health programs. These services are provided by counties
through contracts with DMH, using a managed care model of
service delivery. Each county mental health department is
responsible for providing specialty mental health services
to Medi-Cal recipients in its county, and may provide those
services itself, or through contracted providers.
Since this carve-out was implemented, the services provided
by the county plans have been further expanded to include
services provided under the Medicaid Early and Periodic
Screening, Diagnosis, and Treatment (EPSDT) program. EPSDT
is a federal Medicaid entitlement program which states must
administer as a condition of receiving federal Medicaid
funds. The program covers screening, diagnosis, and
treatment services, and any service that falls under the
federal definition of "medical necessity," including mental
health services, even if the service is not covered by a
state's Medicaid program, for Medicaid recipients up to the
age of 21.
Office of State Audits and Evaluations (OSAE) report
In 2007, the Office of State Audits and Evaluations (OSAE)
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 4
within the Department of Finance released a report on the
fiscal processes DMH uses in the payment of local
assistance claims. The report confirmed that MHPs are not
paid in a timely manner. One of the most far-reaching and
mission critical weaknesses cited in the report was the
fragmented, decentralized, and ineffective program
governance between DMH and DHCS. Another was the continued
use of defective and outdated information systems. County
mental health plans are not being paid in a timely manner
because of problems with DMH's claims reimbursement system,
which is outdated, unreliable, and at risk of failure. A
limited sample of claims processing times revealed that the
average processing time was 96 days for claims involving
state funds and 109 days for those involving federal funds.
OSAE also identified other problems, which include the
continued risk of over billing of the federal government by
DMH because of insufficient corrective measures to address
previous billing errors.
DMH response to OSAE's findings
DMH has acknowledged that there are problems with its
reimbursement system and has been working with DHCS on
solutions, but progress has been slow. In response to
OSAE's findings, DMH reports that it has developed and
implemented a corrective action plan in collaboration with
DHCS, MHPs, and the federal Centers for Medicare and
Medicaid Services to identify solutions to improve the
claims processing system. With regard to the EPSDT
estimating methodology, DMH reports that it has instituted
changes to improve its projections of the program's cost
and has established a Medi-Cal Claims Customer Service
Office to provide counties direct access to staff who can
deliver up-to-date claim payment information, assist
counties with their claim submissions, and answer any other
Medi-Cal-related questions.
DMH billing systems
According to briefing documents from DMH, the current
computer system that adjudicates behavioral health Medi-Cal
claims from counties and select direct providers processes
approximately 1.5 million claims monthly. Annual approved
claim reimbursement is approximately $1 billion. The
current mainframe adjudication system was built in the
early 1980's. A new claims system which will be fully
compliant with the Health Insurance Portability and
Accountability Act will begin to be utilized in July, 2009,
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 5
starting with a new accounting system for payments.
Counties will begin using the system by October, 2009.
Claims are expected to be paid in 30 days, adjustments will
be automated and the data will be standardized for
reporting purposes. The entire system, including new
claims processing system will be in place by February,
2010, at which time the current system will be completely
retired.
Prior legislation
SB 1349 (Cox, 2008) was a previously introduced version of
this bill. This bill was held in the Assembly
Appropriations Committee.
AB 1780 (Galgiani), Chapter 320, Statutes of 2008,
establishes new administrative requirements for specialty
mental health services provided under the Medi-Cal
specialty mental health services waiver.
SB 604 (Cox, 2007) would have required the Controller to
pay interest after 90 days, charged at the Pooled Money
Investment Account rate, on local government claims for
costs incurred for services to state prisons or prisoners.
This bill was held in the Assembly Appropriations
Committee.
AB 308 (Galgiani, 2007) would have required the DMH to
prepare regulations to assure prompt payment to counties
for provision of services under the EPSDT.
This bill was held in the Senate Health Committee.
Arguments in support
The Regional Council of Rural Counties (RCRC) states that
it has become commonplace for county Medi-Cal mental health
claims to be held at DMH for 90 days or longer and a large
number of claims have been held for more than a year. RCRC
further states that, while DMH has begun to revamp their
current financial management practices and systems to
address these delays, layers of problems with staffing,
processes, and computer reliability continue. RCRC
contends that California's rural counties do not have the
fiscal capacity to sustain millions of dollars in overdue
claims for the state's Medi-Cal program and argues that
prompt reimbursement is in the best interest of the state,
counties, and local providers.
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 6
The California State Association of Counties writes that
the DMH's inability to process reimbursement claims from
counties in a timely manner has created a cash flow crisis
in several small counties, limiting their ability to match
state and federal dollars, borrow money, and provide
mandated contractual services. In some cases, the claims
date back to 2004.
The County of San Bernardino states that if counties are
forced to cut or stifle mental health services because of
slow and/or delinquent reimbursement by DMH, counties will
be faced with increased emergency visits, homelessness and
incarcerations caused by untreated mental illness.
Arguments in opposition
DHCS states that this bill is unnecessary because, along
with DMH and the OSAE, they are currently taking direct
actions to address late payment issues by implementing a
corrective plan. DHCS reports that this plan includes the
establishment of a Medi-Cal Claims Customer Service Unit
within DMH and the development of a new electronic claims
processing system, which will streamline claims processing
and increase accuracy and timeliness. DHCS further states
that the plan also includes the revision of an automated
accounting system which will replace the current manual
process for federal financial participation invoices. DHCS
contends that this bill does nothing to address the factors
that contribute to delayed reimbursement and instead may
require the state to redirect general fund money from other
valuable state programs in order to pay interest on claims
after the 91st day.
COMMENTS
1. Implications of charging interest accrued on late
payments are unclear. There is a clear record of late
payments by DMH for Medi-Cal mental health care services
provided by counties, which has been substantiated by the
Department of Finance. DMH has begun addressing the issues
set forth in this bill. However, it is not clear that
penalizing the department by making it pay interest on late
payments will actually help to expedite the process.
2. Controller's responsibilities not accurately defined.
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 7
This bill would require the Controller to reimburse a claim
within 90 days after the receipt of the claim by DMH;
however, the problem does not appear to be at the
Controller's point of involvement in the claim process.
According to the Controller, claims are paid within three
days of receiving a reimbursement claim from DMH. The
Controller also reports that it does not issue deficiency
letters to the Director of Finance on behalf of a
department or agency. These letters are the responsibility
of the particular department or agency.
Suggested amendments:
2a) On page 2, lines 3 - 7:
5778.5. (a) For mental health services reimbursed through
a fee-for-service payment system, the Controller
Department of Mental Health shall send a reimbursement
claim to the Controller within 90 days after the receipt of
a reimbursement claim from reimburse any county contractor
that submits a claim under Section 5778 . within 90 days
after the receipt of a reimbursement claim by the
department.
2b) On page 2, lines 16 - 18:
(c) If sufficient funds are unavailable, the Controller
Department of Mental Health shall request the Director of
Finance to include any amounts necessary to satisfy the
claim in a request for a deficiency appropriation.
3. Proposed author's amendment. The author will be
proposing an amendment to provide that the interest to be
paid beginning on the 91st day on claims unpaid be shared
equally between DMH, DHCS and the Health and Human Services
Agency.
Proposed author's amendments:
a) On page 2, lines 14 - 15:
The interest shall be paid in equal amounts from the State
Department of Mental Health 's , the State Department of
Health Care Services and the State Health and Human
Services Agency budget s .
STAFF ANALYSIS OF SENATE BILL SB 152 (Cox) Page 8
POSITIONS
Support: Board of Supervisors County of Santa Clara
California Communities United Institute
California Mental Health Directors
Association
California State Association of Counties
County of Sacramento
County of San Bernardino
Regional Council of Rural Counties
Urban Counties Caucus
Oppose: California Department of Health Care Services
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