BILL ANALYSIS �
AB 2266
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Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2266 (Mitchell) - As Amended: April 17, 2012
Policy Committee: HealthVote:14-5
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires the Department of Health Care Services (DHCS)
to design and administer a program to provide "Health Homes" to
eligible individuals with high-health needs in order to take
advantage of enhanced federal matching funds for this purpose.
Specifically, this bill:
1)Requires DHCS to:
a) Design a program to provide enhanced health home
services to persons at high risk of avoidable and frequent
use of hospital services.
b) Conduct a request for proposals process and select
designated providers.
c) Submit necessary applications for a state plan amendment
under the Health Homes option.
d) Seek to define the population of eligible beneficiaries
with certain high-risk conditions, as specified.
1)Requires the program to provide services to Medi-Cal
beneficiaries and individuals eligible for county-based
Low-Income Health Programs, as applicable. Requires the
program to be designed to reduce avoidable hospitalizations.
2)Allows DHCS to limit services geographically, but requires
providers to be selected in at least five counties, provided
they meet certain criteria.
FISCAL EFFECT
1)As this is a new program without a defined scope, an overall
cost estimate is speculative at this time. A recent analysis
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performed for DHCS found that the provision of required Health
Home services costs around $65 per month ($780 annually),
about $13 of which (monthly) would already be included in
managed care rates paid to plans. For context, the average
reimbursement to a contracting hospital is $1,400 per day.
The Health Home model attempts to reduce inpatient and
emergency room (ER) costs by providing appropriate outpatient
and support services before medical conditions reach a crisis
point.
2)Direct costs to DHCS include:
a) Program development . One-time administrative costs to
DHCS in the hundreds of thousands of dollars or more,
depending upon the ultimate size and scope of the program.
DHCS has applied for and received a total of $1 million for
planning (50% federal, 50% matching funds from The
California Endowment). Depending upon the DHCS's other
workload priorities related to the Health Home option, the
funding received may or may not be adequate to fund the
necessary planning work.
b) Program administration . This bill specifies it shall be
implemented only to the extent non-GF moneys are available
for use as the non-federal share, and that providers must
identify funding sources for the nonfederal share of costs
for services for the first two years of the program (the
first two years are funded at a 90% federal match).
However, the state will incur costs for monitoring,
oversight, technical assistance, and administration during
this time. This bill does not require these costs to be
funded by participating providers. This annual cost could
be in the low millions of dollars, depending on the scope
of the program, the number and type of providers, and other
factors. Federal guidance appears to limit the 90%
enhanced federal match to Health Home services, so
administration would be funded at a 50% match rate.
In addition, once an infrastructure is in place, there will
be significant state cost pressure to continue the higher
level of service that comprises the Health Home model. Any
additional state costs, or potential savings, over the
longer term will be funded 50% GF, 50% federal funds.
c) Evaluation . DHCS indicates evaluations for similar
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projects generally cost upwards of $1 million. The cost of
the evaluation effort will depend on the size of the
program and other factors. This bill specifies that DHCS
must seek out and use only private funds for the
evaluation, which appears to bar DHCS from using federal
matching funds.
3)Limited DHCS Resources . This project will compete with other
projects for limited administrative resources for developing
and implementing health home pilots. DHCS is considering
other options for Health Home programs that will complement
current departmental efforts related to Medi-Cal managed care
and the provision of specialty children's services. The bill
does not preclude other Health Home projects from moving
forward, but in practical terms the bill could impact the
ability of the department to develop other approaches with
potentially greater cost avoidance.
4)Savings . Supporters of the approach described in this bill
believe a program targeting frequent users will be cost-saving
once an infrastructure is developed. It is difficult to
generalize cost savings from prior programs, as the framework,
provider infrastructure, eligible population, and scope of
services for this proposed Health Home option is necessarily
different than prior programs. Significant medical cost
savings may be possible. However, cost savings may also be
realized by other Health Home options DHCS is already
considering.
Similar projects targeting frequent hospital users have
demonstrated dramatic reductions in costs over a two-year
period. For example, the Frequent Users of Health Services
Initiative discussed below found frequent users in the pilot
program had an average of 10.3 emergency room visits per year
and related costs of $12,000. With supportive services and
intervention provided under the pilot, costs and visits
dropped by over 60% over a two-year period.
Hospital in-patient charges showed an even greater drop in the
pre- and post-pilot enrollment periods, with hospital charges
starting at more than $46,000 and dropping by 70% to $15,000.
Potential cost savings should be taken in context of the
funding for the different Medi-Cal populations. Financial
incentives are complicated, as cost savings would be realized
by the state, the federal government, and public hospitals
given their different role in funding services and based on
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different sharing ratios for different populations.
5)Societal Benefit . Enhanced services to stabilize high-needs,
high-cost Medi-Cal beneficiaries could have positive spillover
effects in local communities through reduced demand on social,
public health, and public safety services. These effects are
difficult to quantify but could be significant.
COMMENTS
1)Rationale . The author intends this bill to allow for the
development and funding of an infrastructure for the delivery
of Health Home services to frequent users of hospital
services. The author's primary interest appears to be
targeting Health Home services to the homeless population, who
face significant difficulties accessing regular or preventive
care and complying with treatment protocols. The author
contends stabilizing these populations and providing social
support, housing, and appropriate preventative care can
greatly improve health outcomes, as well as reduce medical
costs.
2)Federal Health Home Option . According to the federal centers
for Medicare and Medicaid services (CMS), the health home
service delivery model is an important option for providing a
cost-effective, longitudinal "Health Home" to facilitate
access to an inter-disciplinary array of medical care,
behavioral health care, and community-based social services
and supports for both children and adults with chronic
conditions. Section 2703 of the federal Patient Protection
and Affordable Care Act (ACA) allows states to apply for
enhanced federal funding for Health Home services through
submission of a State Plan Amendment. CMS explains that
certain Health Home services, including comprehensive case
management, transitional care from inpatient to other
services, and referral to community and supportive services,
qualify for a 90 % Federal medical assistance percentage
(FMAP) rate for the first eight fiscal quarters that a health
home State Plan Amendment is in effect. Health Home services
may be provided to eligible beneficiaries, which the state has
some latitude in defining. CMS has also made $500,000 in
federal matching funds available for planning grants for these
purposes.
3)The Frequent Users of Health Services Initiative was conducted
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from 2003-2008 in six California counties. The initiative
focused on a small group of frequent users of emergency
medical services to provide less intensive and more
appropriate on-going care. The participants have multiple risk
factors, including mental illness, substance abuse,
homelessness, and a lack of social supports. Cost savings and
outcomes from an evaluation of this program was noted above.
4)Related Legislation . SB 1738 (Steinberg), 2008, required DHCS
to establish the Frequent Users of Health Care Services Pilot
Program until 2013 at six sites statewide and with a combined
enrollment of 2,500 beneficiaries. SB 1738 was vetoed due to
cost concerns.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081