BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 113 (Monning)
Hearing Date: 4/7/2011 Amended: 3/31/2011
Consultant: Katie Johnson Policy Vote: Health 9-0
_________________________________________________________________
____
BILL SUMMARY: AB 113, an urgency measure, would:
1)Create a program for non-designated public hospitals (NDPHs)
to use local funds to draw down the maximum available federal
funds for Medi-Cal expenditures,
2)Appropriate $1.5 billion from the Hospital Quality Assurance
Revenue Fund (HQAR Fund) and the same amount from the Federal
Trust Fund for the purposes of the 6-month Medi-Cal quality
assurance fee (QAF) program that would be established by AB
113's companion measure, SB 90 (Steinberg), and,
3)Make the bill contingent upon the enactment of SB 90.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
IGT Program local revenue ($30,700 in FY 2010-11)Local*
to state for federal matching (ongoing unknown)
IGT Program $36,300 in FY 2010-11 Federal/*
state payments $27,700 in FY 2010-11; Local
to NDPHs ongoing unknown
9 percent IGT fee expenditures for $3,000 in FY
2010-11;Local/**
state programs and administration ongoing unknown General
HQAF Fund appropriation $1,500,000 in FY 2010-11;
Special***
for provisions of SB 90 available until January 1, 2014
Federal funds appropriation $1,500,000 in FY 2010-11;Federal
for provisions of SB 90 available until January 1, 2014
*Local funds are held in the Medi-Cal Inpatient Payment
Adjustment Fund and appropriated back to local entities; federal
matching funds come into the state via the Federal Trust Fund
and are deposited into the Health Care Deposit Fund for
appropriation to local entities.
**See staff comments on General Fund cost pressure in ongoing
years.
***Hospital Quality Assurance Revenue Fund (HQAR Fund)-revenue
from private hospitals paid to the state under the QAF program
to be established by SB 90.
****Medi-Cal costs between April 1, 2011, and June 30, 2011, are
AB 113 (Monning)
Page 3
shared 56.9 percent federal funds and 43.1 percent non-federal
funds. Commencing July 1, 2011, and ongoing, Medi-Cal costs will
be shared 50 percent federal funds and 50 percent non-federal
funds. Here and in SB 90 the non-federal share would consist of
local funds.
_________________________________________________________________
____
STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill would establish the Nondesignated Public Hospital
Medi-Cal Rate Stabilization Act and would require the Department
of Health Care Services (DHCS) to establish the Non-Designated
Public Hospital Intergovernmental Transfer Program (NDPH IGT
Program), upon the receipt of federal approval, during FY
2010-11 and ongoing. The program would provide supplemental
payments to NDPHs for inpatient hospital services provided in
fee-for-service Medi-Cal in a manner that maximizes available
federal financial participation through IGTs provided
voluntarily by public entities (city, county, special purpose
district, or other governmental unit). The 48 NDPHs in
California are primarily owned by hospital districts.
Between April 1, 2011, and June 30, 2011, Medi-Cal costs are
shared 56.9 percent federal funds and 43.1 percent non-federal
funds, which is an enhanced rate compared to California's normal
federal medical assistance percentage (FMAP) of 50 percent
federal funds and 50 percent non-federal funds. Commencing July
1, 2011, the enhanced FMAP will be reduced to the normal FMAP.
In FY 2010-11, DHCS expects to collect $30.7 million in IGTs
from NDPHs, which would include a $3 million fee for
administrative purposes and children's health care programs
discussed below. The state would match the $27.7 million with
$36.3 million federal funds for a total of $64 million in
supplemental payments. In order to take advantage of the
enhanced FMAP, the supplemental payments related to
fee-for-service claims must be made by June 30, 2011.
The $64 million is the "Upper Payment Limit (UPL) room" for FY
2010-11 for NDPH inpatient Medi-Cal services. The UPL is
established in federal law and is the maximum payment that
categories of hospitals can receive under Medicaid. This bill
would require that DHCS calculate the UPL annually and use that
information to determine the "allocation", or the amount of
supplemental payments, an NDPH could receive that year if it
AB 113 (Monning)
Page 4
were to choose to participate in the IGT Program. This bill
would provide a methodology to be used for determining each
hospital's allocation based on a hospital's contracting status
with the California Medical Assistance Commission (CMAC), the
location of each NDPH, the amount of charity care provided, the
amount of bad debt held, the amount of Medi-Cal charges, and the
number of staffed acute care beds.
Since DHCS would need to calculate the UPL and the available
room annually, ongoing program costs are unknown. Any future
supplemental payments to NDPHs through this program, like those
for FY 2010-11, would consist solely of local and federal funds.
However, there would be General Fund cost pressure of an unknown
amount to maintain these supplemental payments to NDPHs in
future years in the event that the available UPL room is
insufficient to maintain or augment a previous year's rates.
Additionally, the state would retain 9 percent of the IGTs for
administrative purposes and for Medi-Cal children's health care
programs. This amount is approximately $3 million in local funds
for FY 2010-11 that could be matched by federal funds. DHCS
administrative expenses for the IGT program would be
approximately $350,000 annually in total funds. To the extent
that any of these funds offset what would otherwise have been
General Fund expenditures, there would be General Fund cost
pressure of unknown amounts to backfill these funds in the event
the amount changes and results in deficient funding from year to
year.
This bill also appropriates $1.5 billion from the HQAR Fund and
$1.5 billion from the Federal Trust Fund. The monies would be
available for expenditure until January 1, 2014, in order to
make the supplemental payments to private hospitals provided for
under the hospital QAF program that would be established by SB
90. There would be General Fund cost pressure in the hundreds of
millions of dollars to maintain these supplemental payments when
the 6-month fee ends June 30, 2011.
Companion Measure: SB 90 (Steinberg)
SB 90, which will be amended to also be an urgency measure, is
contingent upon the enactment of this bill. The bill passed out
of the Assembly Health Committee 14 - 1 on Tuesday, April 5, and
is scheduled to be heard in the Senate Health Committee pursuant
to Senate Rule 29.10 (c) as a new bill back on concurrence.
Although requested, it will not be heard by the Senate
AB 113 (Monning)
Page 5
Appropriations Committee.
The General Fund savings from all of the provisions of SB 90 and
AB 113, and assuming the enactment of a FY 2011-12 QAF program,
are estimated to be $57 million in FY 2010-11 and $305 million
in FY 2011-12. If the state continues to be unable to fully
implement a Medi-Cal rate freeze due to a court injunction,
savings could be even greater at an estimated $88 million in FY
2010-11 and $412 million in FY 2011-12.
SB 90 would:
a)Require the payment of a quality assurance fee (QAF) by
private hospitals to DHCS and the subsequent supplemental
payments by DHCS to private hospitals for Medi-Cal
fee-for-service, Medi-Cal managed care, and acute psychiatric
services under the Hospital Quality Assurance Fee Act of 2011
and the Medi-Cal Hospital Rate Stabilization Act of 2011,
respectively. The program would run from January 1, 2011,
through June 30, 2011.
In FY 2010-11, the QAF program that would be established by
this bill, subject to federal approval, would raise $1.04
billion in revenue from private hospitals; of that amount,
$210 million would go to the state for children's health care
programs and $831 million would be matched by $1.07 billion in
federal funds at the 56.9 percent FMAP. DHCS staff and
administrative costs to implement the QAF program would be
approximately $770,000 in total funds. To maximize the federal
funds available under the enhanced FMAP that ends June 30,
2011, DHCS would need to collect all of the QAF revenues and
make all of the Medi-Cal fee-for-service supplemental payments
by June 30, 2011. Medi-Cal managed care payments may be paid
after the June 30 deadline because they would be tied to dates
of service, not to dates of payment.
This 6-month QAF program would net $858 million in
supplemental payments for private hospitals. The DPHs and
NDPHs would not participate in the program nor would they
receive any supplemental payments, unlike in the previous QAF
program, after which this program is modeled, that ended
December 31, 2010, where they did not pay the fee, but did
receive supplemental payments. The previous QAF was
established by AB 1383 (Jones), Chapter 627, Statutes of 2009,
and AB 188 (Jones), Chapter 645, Statutes of 2009, and amended
by AB 1653 (Jones), Chapter 218, Statutes of 2010. SB 90 would
prohibit payment of the supplemental payments prior to 1) the
AB 113 (Monning)
Page 6
receipt of federal approval for both the QAF and the payment
provisions, and 2) the fee being imposed and collected. If
federal approval or a letter indicating likely federal
approval for the supplemental payment methodology is not
received by June 1, 2011, the payment methodology would become
inoperative. Similarly, if federal approval for the QAF is not
received prior to January 1, 2012, the QAF program would
become inoperative.
b)Require DHCS to establish an IGT program for all public
hospitals, commencing June 30, 2011, or upon federal approval,
whichever is later, to provide supplemental payments related
to Medi-Cal managed care services. In FY 2010-11, DPHs and
NDPHs could maximize federal financial participation up to
approximately $80 million in total funds. The public entities
would pay $34.5 million in IGTs to the state and would receive
$45.5 million in federal funds at the 56.9 percent FMAP in
enhanced payments through increased capitation payments made
by the state to Medi-Cal managed care plans. Ongoing annual
amounts would be unknown as they are based on future
calculations. Payments would be solely local and federal
funds. However, there would be General Fund cost pressure in
an unknown amount to maintain higher rates in years where
there was not a sufficient amount of federal financial
participation available to maintain or augment a previous
year's rates.
c)Repeal various hospital rate freezes and reductions made in
the 2008, 2010, and 2011 budget acts that are enjoined by the
courts. This would result in a loss of $27 million in savings
in FY 2010-11 and $93 million in savings as compared to the
proposed FY 2011-12 budget.
d)Give the CMAC new options when negotiating rates with contract
hospitals to deter a contracted hospital from becoming a
non-contracted hospital until January 1, 2013. It is
anticipated that this would slow the growth of hospital
Medi-Cal fee-for-service rates in future years.
e)Reduce disproportionate share hospital replacement payments by
$30 million in FY 2010-11 and by $75 million in FY 2011-12 for
General Fund savings.
f)Permit the Office of Statewide Health Planning and Development
(OSHPD) to extend hospitals' seismic safety deadlines for up
to 7 years. This provision would be contingent upon the
AB 113 (Monning)
Page 7
enactment and federal approval of legislation that would
create a QAF program for FY 2011-12 that would include $320
million in fee revenue to pay for health care coverage for
children. OSHPD would have authority to increase fees for
increased administrative costs of approximately $1 million in
Hospital Building Fund special funds in FY 2011-12 and ongoing
until at least 2020. There are 455 SPC-1 buildings that have
yet to be reviewed by HAZUS that could apply for a 2013
deadline extension. New staff, including Senior Structural
Engineers, Senior Architects, and administrative support,
would likely be needed to implement this section.