BILL ANALYSIS �
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 256
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AUTHOR: Strickland
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AMENDED: As Introduced
HEARING DATE: April 27, 2011
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CONSULTANT:
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Bain
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SUBJECT
Medi-Cal: California Medical Assistance Commission
SUMMARY
This bill would eliminate the California Medical Assistance
Commission (CMAC) and transfer the powers and duties of
CMAC to the Department of Health Care Services (DHCS), and
the powers and duties of the Executive Director of CMAC to
the Director of DHCS.
CHANGES TO EXISTING LAW
Existing law:
Creates CMAC in the Governor's Office for the purpose of
contracting with health care delivery systems for provision
of health care services to recipients under Medi-Cal.
Requires CMAC to be composed of seven voting members and
two ex officio members. Requires the voting members to be
selected from persons with experience in the management of
hospital services, risk management insurance or prepaid
health programs, the delivery of health services, the
management of county health systems, and a representative
of recipients of service. Requires the Directors of DHCS
and the Department of Finance, or their designees, to serve
as ex officio nonvoting members of CMAC.
Continued---
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Requires the Governor to appoint three members to CMAC, one
of whom is designated chairperson, and requires the
Assembly Speaker and the Senate Rules Committee to each
appoint two members to CMAC. All appointments are for
four-year terms.
Requires CMAC to hire an Executive Director, legal counsel
and other staff as necessary, consistent with funds
appropriated in the budget act. Exempts all professional
staff employees of CMAC from civil service.
Requires Commissioners to be reimbursed at an annual salary
of $50,000. Requires CMAC to set the salary of the
Executive Director and other staff consistent with funds
appropriated. Requires the annual compensation provided to
CMAC and its staff to be increased in any fiscal year in
which a general salary increase is provided for state
employees. Requires the amount of the increase provided to
be comparable to, but not exceed, the percentage of the
general salary increases provided for state employees
during that fiscal year.
This bill:
Eliminates CMAC and transfers the powers and duties of CMAC
to DHCS, and the powers and duties of the executive
director of CMAC to the director of DHCS.
States legislative intent to abolish CMAC and to transfer
all powers and duties of CMAC to DHCS.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, this bill eliminates CMAC and
transfers the powers and duties to DHCS. The author argues
the functions of CMAC have been greatly reduced over the
years and will continue to decline as our health care
system changes with the implementation of the federal
health care program, and as DHCS shifts to a
diagnosis-related group (DRG)-style reimbursement
STAFF ANALYSIS OF SENATE BILL 256 (Strickland) Page
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methodology for Medi-Cal inpatient hospital services. The
author states that, while the savings resulting from the
CMAC-administered Selective Provider Contracting Program
(SPCP) for fee-for-service Medi-Cal reimbursement for
inpatient hospital care are not in dispute, the continued
need for CMAC is questionable. The author states the true
value of CMAC is in its staff, not the
politically-appointed Commissioners. While the savings
achieved by this bill may be just a few hundred thousand
dollars, during these difficult budgetary times, the author
argues we need to look at all ways to reduce government
expenses and consolidate state efforts. The author
concludes that, as California continues to struggle with a
double-digit budget deficit, it is appropriate to
consolidate services and eliminate unnecessary expenses.
Background on CMAC
CMAC, which was created by legislation in 1983, is
responsible for negotiating Medi-Cal contracts with
hospitals on behalf of DHCS under what is known as the
SPCP. The goal of CMAC is to promote efficient and
cost-effective Medi-Cal programs through a system of
negotiated contracts that foster competition and maintain
access to health care for Medi-Cal beneficiaries. General
acute care hospitals contracting with CMAC (referred to as
contract hospitals) are generally paid a per diem rate (a
daily rate) for each day a Medi-Cal beneficiary is in the
hospital that is negotiated between CMAC and the hospital.
Hospitals that do not contract with the state through CMAC
in the fee-for-service Medi-Cal program are known as
non-contract hospitals, and are reimbursed at the lowest of
one of four methodologies contained in state regulation.
In fiscal year 2008-09, the fee-for-service Medi-Cal
program paid for approximately 2.6 million days of
inpatient hospital acute care at contract and non-contract
hospitals. Contract hospitals provided approximately 2.3
million patient days of care in fiscal year 2008-09,
representing 86 percent of the total inpatient acute care
days provided to Medi-Cal beneficiaries. In addition to
the negotiated per diem amount, CMAC makes supplemental
payments to specified hospitals, out of four separate
supplemental payment funds.
According to CMAC's 2010 Annual Report, 203 hospitals
contract with the state under the SPCP program. Through
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the contract negotiation process, CMAC estimates it saves
the state General Fund (GF) an estimated $479 million
annually, and has saved the GF more than $12.9 billion
since CMAC was established in 1983. These are funds that
would have been spent had the state continued operating
under the traditional, cost-based reimbursement system.
Based on the fiscal year 2009-10 average statewide Medi-Cal
SPCP contract rate of $1,414 per day, the average contract
rate has increased 175.6 percent, or approximately 3.9
percent per year on a compounded basis, since the inception
of the SPCP program. For non-contract hospitals remaining
under the cost-based reimbursement system, the average
payment rate for the same period increased 257 percent, or
approximately 5 percent per year on a compounded basis.
The Governor's proposed 2011-12 budget for CMAC is
$2,358,000 ($1,175,000 GF). CMAC is budgeted for 21
positions (which includes the 7 commissioner positions).
CMAC currently has five appointed Commissioners and two
Commissioner vacancies.
Medi-Cal hospital reimbursement methodology changing
SB 853 (Committee on Budget and Fiscal Review), Chapter
717, Statutes of 2010, the health budget trailer bill of
2010, requires DHCS, subject to federal approval, to
develop and implement a Medi-Cal methodology based on
diagnosis-related groups (DRGs) that will reimburse
hospital inpatient services based on the beneficiary's
diagnosis. This new DRG reimbursement system contrasts
with the current CMAC negotiated per diem rate, which is
typically a negotiated fixed dollar amount per each
inpatient day that does not typically vary by the type of
diagnosis of each patient. As part of the shift to DRGs,
DHCS is required to reconcile hospital payments to the
amounts that the hospitals would have received if the new
DRG methodology had been in effect. DHCS is required to
implement the reconciliation process on the date that the
payment methodology based on DRGs has been made final, but
no later than June 30, 2012.
The Governor's 2010-11 proposed budget requests 11 two-year
limited term positions in DHCS, at a total cost of $1.2
million ($480,000 GF), to support the requirement for DHCS
to develop and implement a new payment system for hospital
inpatient service-based DRGs.
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Related bills
SB 90 (Steinberg), Chapter 19, Statutes of 2011, contains
several hospital reimbursement-related provisions,
including a provision which repealed the Medi-Cal hospital
rate freeze for contract and non-contract private hospitals
and non-designated public hospitals enacted through the
health budget trailer bill of 2010, SB 853 (Committee on
Budget), Chapter 717, Statutes of 2010. Under SB 90, any
rates that were frozen are to be restored retroactively to
the rate that would have been in effect without the rate
freeze, and DHCS is required to explore other avenues for
achieving the stability needed in order to transition to an
inpatient hospital reimbursement methodology based on DRGs.
SB 90 also imposed a Quality Assurance Fee (QAF) on
specified hospitals for six months (January 1, 2011 until
June 30, 2011). The resulting revenue will draw down
federal funds to provide supplemental payments to private
hospitals in fee-for-service Medi-Cal, Medi-Cal managed
care, and for acute psychiatric days, will provide $210
million for children's health coverage in the current year
(CY) and will pay for DHCS administrative costs in
administering the hospital fee and supplemental payment
provisions.
Prior legislation
SB 853, (Committee on Budget and Fiscal Review), Chapter
717, Statutes of 2010 required inpatient contract and
non-contract hospital rates to be frozen. SB 853 required
DHCS to freeze the rates for inpatient hospital services to
the lesser of the amount paid on either January 1, 2010 or
July 1, 2010 for services provided on and after July 1,
2010. Contract hospitals that entered into a contract with
the SPCP after July 1, 2010, at a negotiated contract rate
less than the freeze amount received the contract rate. If
a contract hospital became a non-contract hospital after
July 1, 2010, the hospital continued to receive the lesser
of the rates paid on January 1, 2010, or July 1, 2010. SB
90 (Steinberg), Chapter 19, Statutes of 2011 repealed the
hospital rate freeze.
In addition, SB 853 shifted from CMAC to DHCS the authority
to negotiate the rates, terms, and conditions of Medi-Cal
geographic managed care contracts, and required DHCS to
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disclose, upon request, each negotiated contract or
contract amendment executed by both parties, including
contracts that reveal DHCS's rates of payment for health
care services, the rates themselves, and rate manuals.
SB 64 (Committee on Budget and Fiscal Review), Chapter 77,
Statutes of 2005, a budget trailer bill from 2005, changed
the requirement that CMAC Commissioners be reimbursed at
the annual salary of members of the Legislature. Instead,
SB 64 required Commissioners to be reimbursed at the annual
salary of $50,000 beginning on January 1, 2006. SB 64
required the annual compensation provided to CMAC
Commissioners to be increased in any fiscal year in which a
general salary increase is provided for state employees,
and required the amount of the increase to be comparable
to, but not to exceed, the percentage of the general salary
increases provided for state employees during that fiscal
year.
AB 2539 (Strickland) of 2008 would have prohibited a member
of a state board or commission from receiving any salary if
(1) in 2007 or later, the position of the member on the
state board or commission received or would receive a
salary totaling at least $100,000 per year and (2) the
members of the state board or commission were required to
meet two times or less per month. Instead of a salary, AB
2539 would have authorized a member of a state board or
commission member to receive a specified per diem payment.
AB 2539 was similar to AB 556 (Strickland) of 2003-04, AB
38 (Tran) of 2005-06, and AB 309 (Tran) of 2007-08, which
proposed to suspend the salaries in specified fiscal years
for the members of specified state boards and commissions
that pay salaries in excess of $100,000. All of these
measures failed passage in the Assembly Business and
Professions Committee.
AB 203 (Committee on Budget) Chapter 1348, Statutes of
2007, the health budget trailer bill of 2007, shifted from
CMAC to DHCS the authority to negotiate the rates, terms,
and conditions of Medi-Cal county organized health system
contracts, and required DHCS to disclose, upon request,
each negotiated contract or contract amendment executed by
both parties after July 1, 2007, including contracts that
reveal the department's rates of payment for health care
services, the rates themselves, and rate manuals.
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COMMENTS
1. Issues involving proposed transfer to DHCS. Once the
new Medi-Cal DRG payment system is implemented, the
competitive negotiation process that CMAC engages in with
hospitals for Medi-Cal inpatient services will no longer be
needed, unless the state continues to negotiate and provide
supplemental payments to hospitals. As part of the
transition to Medi-Cal DRG payments, DHCS is required to
reconcile Medi-Cal payments to hospitals to the amounts
that hospitals would have received if the DRG methodology
had been in effect. DHCS is required to implement the
reconciliation process on the date that the payment
methodology based on DRGs has been made final, but no later
than June 30, 2012.
Because this bill would take effect January 1, 2012, and
the current timeframe for implementation of the DRG
methodology is June 30, 2012, the proposed transfer of
functions under this bill would effectively shift the
hospital negotiation duties to DHCS for only six months.
This transfer of CMAC duties may be administratively
difficult for DHCS as this bill does not propose to
transfer the current CMAC staff to DHCS. One option to
address this issue is to have the requirements of this bill
take effect on July 1, 2012 or when the DRG system is
implemented, if the DRG implementation is delayed.
If existing CMAC hospital negotiation staff are not
transferred to DHCS, new positions would need to be
authorized in DHCS through the budget process, which is
likely to result in, at minimum, a six-month gap between
the enactment of this bill (January 1, 2012) and the
beginning of the new state fiscal year (July 1, 2012) even
if positions are approved, funding is appropriated and the
state budget is enacted prior to the start of the state
fiscal year. The process for hiring additional DHCS staff
is also likely to take several months after establishment
of the positions and funding is appropriated.
POSITIONS
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Support: None received.
Oppose: None received.
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