BILL ANALYSIS �
AB 715
Page 1
Date of Hearing: April 6, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 715 (Galgiani) - As Amended: March 14, 2011
Policy Committee: HealthVote:18-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill prevents a decrease in hospital inpatient rates for
patients enrolled in certain state-funded health programs.
Specifically, this bill enacts an exception to the requirement
that hospital inpatient rates for the California Children's
Services Program (CCS Program) and the Genetically Handicapped
Persons Program (GHPP) for non Medi-Cal patients be identical to
payment rates for the same service performed by the same
provider type under the Medi-Cal Program, and instead requires
that hospital inpatient rates be 90% of the Medi-Cal hospital
interim rates of payment, as developed by the Department of
Health Care Services (DHCS). Under current law, the decrease to
Medi-Cal rates was effective beginning January 1, 2011.
FISCAL EFFECT
1)Annual costs in the range of $15 million to $25 million
(approximately 35% GF) to maintain current inpatient rates for
hospitals serving enrollees. These costs are already included
in the DHCS budget because this bill codifies a longstanding
DHCS reimbursement policy.
2)Costs for the hospital funding addressed in this bill can be
highly variable. Actual annual costs may be less to the extent
that certain patients costing $100,000 to $500,000 each for
in-patient services do not have significant health needs in a
given year.
3)Cost shifts from public programs to private insurance may
occur for children with serious health conditions due to
recent changes in federal law. Beginning in September 2010,
AB 715
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the federal Patient Protection and Affordable Care Act (PL
111-148) required children to be eligible for health insurance
without regard to pre-existing medical conditions. Over time,
this change, paired with the elimination of annual and
lifetime limits on health insurance, may reduce public payment
for children with serious health issues by shifting to private
payers. Any potential impacts associated with these health
insurance changes would be seen beginning in the current
fiscal year.
COMMENTS
1)Rationale . This bill is sponsored by the California Children's
Hospital Association (CCHA) to permanently exempt hospital
inpatient rates from the requirement that provider rates in
the CCS Program and GHPP be reimbursed at the lower California
Medical Assistance Commission (CMAC) Medi-Cal rate. The
sponsors state that the CMAC rate is negotiated based on
provision of inpatient services to the general Medi-Cal
population, and is inadequate for treatment of higher-acuity
CCS conditions.
2)Background . The CCS program provides a range of medical
services, including inpatient hospital stays to children from
low-income families (less than $40,000 per year) with major
medical conditions such as congenital heart disease and sickle
cell anemia. Children receive services in one of three
enrollment pathways: (a) CCS-Medi-Cal in which 130,000
children are enrolled, (b) CCS-Healthy Families in which
26,000 children are enrolled, and (c) CCS-only in which 18,000
children are enrolled. The Genetically Handicapped Persons
Program (GHPP) is a health care program for adults with
certain genetic diseases, in which about 1,500 people are
enrolled.
Current law, adopted as part of the 2002 health budget trailer
bill, specifies that hospital inpatient rates for non-Medi-Cal
patients in these programs shall be the same as the rates paid
for Medi-Cal patients (effectively the CMAC rate). Because
the rate methodology used prior to this resulted in rates
higher than the CMAC rates, this provision would result in a
rate cut. However, this provision was not implemented in
2002. In 2008, due to a re-interpretation of this trailer
bill, DHCS intended to implement this provision, but the
implementation was delayed until January 1, 2011 by prior
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legislation as described below. Under current law, the lower
CMAC rates are effective January 1, 2011; this bill would
instead continue to pay hospitals using the higher rate
methodology that has been used for the last several years.
3)High-cost conditions and services create significant fiscal
risk for in-patient children's hospitals. Due to the serious
nature of CCS-eligible conditions, such as leukemia, parasitic
disease, cancer, and hemophilia, the hospitals providing
services may incur significant losses on expensive treatments
if reduced to the CMAC rate if this bill is not enacted.
For example, according to the sponsors of this bill, a four-year
old with recently diagnosed leukemia was hospitalized for
three weeks at a cost of $65,000. Without the hold harmless
rate protections, reimbursement would be $25,000 less than
cost. Another example demonstrating the impact of high-cost
service provision is a 12-year old with a cardiac valve
malformation resulting in six weeks of hospitalization and a
$141,000 cost. This would be reimbursed at $82,000 less than
cost without this legislation.
4)Related Legislation . AB 1872 (Galgiani) of 2010, which
addressed the same hospital funding issue, and would have
delayed implementation of reduced rates to January 1, 2014,
was held on the Suspense in Senate Appropriations.
AB 896 (Galgiani), Chapter 260, Statutes of 2009 and AB 2474
(Galgiani), Chapter 496, Statutes of 2008 similarly delayed
implementation of reduced rates.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081