BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 42 (Alquist)
          
          Hearing Date: 5/23/2011         Amended: 5/10/2011
          Consultant: Katie Johnson       Policy Vote: Health 6-3
          _________________________________________________________________
          ____
          BILL SUMMARY: SB 42 would require any health care service plan 
          that coordinates services for patients eligible for both 
          Medi-Cal and Medicare to report to the Department of Health Care 
          Services and the Legislature if the actual use of services 
          differs substantially from the anticipated use of services in 
          the plan's agreement with the department.
          _________________________________________________________________
          ____
                            Fiscal Impact (in thousands)

           Major Provisions        2011-12      2012-13       2013-14     Fund
           
          Medi-Cal payments      unknown, potentially significant 
          General/**
          or recoup of costs     costs or savings*                Federal
          *See Staff Comments
          **Medi-Cal costs shared 50 percent General Fund, 50 percent 
          federal funds.
          _________________________________________________________________
          ____

          STAFF COMMENTS: This bill meets the criteria for referral to the 
          Suspense File.
          This bill would require any health care service plan that 
          manages services for beneficiaries dually eligible for both 
          Medi-Cal and Medicare to report to the Department of Health Care 
          Services (DHCS) and the appropriate policy and fiscal committees 
          of the Legislature in the event that the actual use of services, 
          in amount and type, differs substantially from the anticipated 
          use of services, in amount and type, assumed in the plan's 
          capitation agreement with the department. 

          This bill would not address any action by DHCS to investigate 
          such a report, but, if DHCS were to investigate a report, alter 
          a rate methodology, or pursue legal action, 1) there could be 
          General and federal funds cost pressure to pay a plan more if 
          utilization is higher than assumed in the agreement with DHCS, 








          SB 42 (Alquist)
          Page 1


          or 2) there could be General Fund and federal fund revenue if 
          utilization is substantially less than assumed in the agreement.

          For example, on May 13, 2010, DHCS provided to Senators Alquist 
          and Lowenthal a Special Financial Evaluation of the Senior Care 
          Action Network (SCAN) Health Plan. DHCS estimates that SCAN's 
          profit margin for the Medi-Cal line of business was 83 percent 
          for 2007 and 82 percent for the first 8 months of 2008. The 
          normal industry standard is 4 percent. On August 11, 2010, State 
          Controller John Chiang wrote a letter to the Executive Director 
          of SCAN requesting that SCAN repay an estimated $339 million to 
          the state, of which roughly half are General Fund and half are 
          federal funds, that was overpaid between July 1, 2001, and 
          December 31, 2008. SCAN indicates that it has entered into 
          settlement discussions with the California Attorney General and 
          the United States Attorney's office and expects a proposal in 
          June 2011.