BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
732 (Alquist)
Hearing Date: 5/4/2009 Amended: 3/31/2009
Consultant: Katie Johnson Policy Vote: Health 11-0
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BILL SUMMARY: SB 732 would require the Department of Health
Care Services (DHCS), in consultation with the Office of
Statewide Health Planning and Development (OSHPD), to establish
a cost reporting methodology that allows the DHCS to adjust
Medi-Cal long-term care reimbursement rates expediently.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
DHCS cost report unknown, but potentially
moreGeneral/
development than $50 General Fund
Federal*
Increased SNF significant annual General FundGeneral/
reimbursement costs in the millions of
dollarsFederal**
*Costs would be shared 50% General Fund and 50% federal funds.
**Medi-Cal costs are shared 50% General Fund and 50% Federal
funds. However, in February of 2009, President Obama signed the
American Reinvestment and Recovery Act (ARRA) into law. As a
result, the Federal Medical Assistance Percentage (FMAP)
increased from 50 percent to 61.59 percent. Thus, retroactively
from October 1, 2008 through December 31, 2010, the federal
government would pay for approximately 62 percent and the state
General Fund would pay for 38 percent of benefit-related
Medi-Cal expenditures.
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STAFF COMMENTS: This bill meets the criteria for referral to
the Suspense File.
Existing law provides for the Medi-Cal program, California's
Medicaid program, which provides health care services, including
nursing facility services, to qualified low-income individuals.
Existing law, the Medi-Cal Long-Term Care Reimbursement Act,
requires the department to implement a facility-specific
rate-setting system that uses a cost-based reimbursement rate
methodology that reflects the costs and staffing levels related
to the quality of care for skilled nursing home facilities'
residents. Existing law ceases to implement this rate
methodology on and after July 31, 2011.
By July 1, 2010, this bill would require the DHCS, in
consultation with OSHPD, to establish a cost reporting
methodology that would allow the DHCS to adjust rates in a way
that would expediently achieve the intent of the Medi-Cal
Long-Term Care Reimbursement Act.
This bill would require the cost reporting methodology to
itemize costs and would require the DHCS to consult with
stakeholders, as specified, when determining which
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SB 732 (Alquist)
ones would be itemized. This bill would require the DHCS to
continue to collect the cost data reported prior to July 1,
2010, in the new cost reporting methodology. This bill would
permit the DHCS to update and modify existing cost reporting
mechanisms, including Long-Term Care Facility Integrated
Disclosure and Medi-Cal Cost Report, which OSHPD recently
updated. This update could potentially address the issue of
itemization of cost.
AB 1629 (Frommer), Chapter 875, Statutes of 2004, changed the
Medi-Cal reimbursement system for skilled nursing facilities
(SNFs) from a flat rate to facility- specific rates based on the
actual costs of providing services. As the cost of providing
health care increases, the cost-based rate would increase
accordingly. This bill would update the system by which SNFs
report costs to the state for purposes of adjusting rates. The
Budget Act of 2008 provided for an AB 1629 workgroup. One of the
recommendations of the workgroup was to modify the cost
reporting methodology to expedite the determination of increased
rates. Since this bill would require the DHCS to develop a cost
reporting methodology that would increase the effectiveness of
rate-setting by DHCS, the reimbursement rates would increase
faster. As such, the DHCS would be required to reimburse SNFs at
higher rates sooner, thus creating an unknown, but significant
General Fund cost impact in likely the millions of dollars
annually.
In the Assembly Appropriations Committee analysis of SB 1755
(Chesbro), Chapter 691, Statutes of 2006, the DHCS identified
costs of $500,000 ($250,000 General Fund) over three years to
develop cost reports, reimbursement rates, and the reimbursement
methodology for Medi-Cal reimbursement of adult day health care
centers. There is already a reimbursement methodology in place
for SNFs, so the cost of developing a specific cost report would
be likely less than the fiscal figure for SB 1755, especially if
the DHCS were to exercise the option in this bill to update and
modify existing cost reporting mechanisms. However, since this
bill requires the DHCS to perform a similar duty to that in SB
1755, it is likely that the process to implement this bill would
not be minor and absorbable. Any ongoing costs are also unknown.
DHCS expenses would be shared equally between the General Fund
and federal funds. OSHPD does not anticipate increased costs
associated with the implementation of this bill.