BILL ANALYSIS �
SB 677
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 677 (Hern�ndez) - As Amended: May 23, 2011
Policy Committee: Health Vote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill, effective January 1, 2014, implements a new
eligibility methodology for the Medi-Cal program as required by
federal law. Specifically, this bill:
1)Prohibits the Department of Health Care Services (DHCS) from
applying an assets or resources test for purposes of
determining eligibility for Medi-Cal, except when assessing
eligibility for seniors and person with disabilities (SPDs).
2)Requires DHCS, notwithstanding any other provision of state
law, to use modified adjusted gross income (MAGI) or household
income, as applicable, to establish income thresholds to
determine eligibility and levels of cost-sharing in Medi-Cal.
Requires income thresholds that are not less than the
effective income eligibility levels in place on the date of
enactment of the federal Patient Protection and Affordable
Care Act (ACA) (March 23, 2010).
3)Requires DHCS to, during the transition to the use of modified
adjusted gross income and household income, work with the
federal Secretary of the United States Department of Health
and Human Services to establish an equivalent income test that
ensures individuals eligible for Medi-Cal or a Medi-Cal waiver
program on the date of enactment of the ACA do not lose
coverage, in order to comply with federal maintenance of
effort requirements.
4)Prohibits any type of expense, block, or other income
disregard from being applied by the department to determine
income eligibility, except for a five percent income disregard
required by the ACA.
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5)Provides that this bill's provisions become operative on
January 1, 2014 and requires implementation of provisions (2)
through (4) only to the extent required by federal law.
6)Requires DHCS to adopt regulations to implement these
provisions.
FISCAL EFFECT
1)One-time costs to DHCS to coordinate with the California
Health Benefit Exchange and the federal government, analyze
federal guidance and requirements, and adopt regulations, of
at least $400,000 (50% federal funds, 50% GF).
2)Most costs the state will incur associated with the transition
to MAGI-based income eligibility methodology are required
under federal law, and not as a direct result of this bill.
The major component of the transition to this methodology is
IT changes, including eligibility system changes and
interfaces with related systems.
The California Health Benefit Exchange (Exchange), in
cooperation with DHCS, has awarded a $183 million contract to
build a web-based California Healthcare Eligibility,
Enrollment and Retention System (CalHEERS), which will serve
as the consolidated IT system for eligibility, enrollment, and
retention for the Exchange and MediCal. The initial funding
for this contract is from a federal grant available for this
purpose. One component of the system cost is the
implementation of the MAGI-based eligibility determination
system.
Once the system is in place, the contract also includes $176
million for the continued development and initial operating
costs over about three and a half years (approximately $50
million per year). These costs will be allocated to the
Exchange, Medi-Cal, and any other programs that benefit from
the system, based on federal cost allocation rules that apply
to IT system development.
Training county Medi-Cal eligibility workers and redesigning
work flow at eligibility offices, as well as provision of
outreach, education, and communication regarding the new MAGI
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standards will also be required to implement the transition to
a MAGI-based system. The state is also likely to experience
administrative cost savings due to a simpler eligibility
determination process. However, the state will incur these
costs and savings as it complies with federal law even in
absence of this bill.
COMMENTS
1)Rationale . The author believes this bill is needed to
implement federal requirements to use a new income standard
for Medi-Cal eligibility. These federal requirements help
streamline the complex Medi-Cal application process for
individuals applying for benefits in the program, and for
workers administering the eligibility determination process.
2)Background . The ACA extends and simplifies Medicaid
eligibility (Medi-Cal in California). Starting in calendar
year 2014, it replaces complex categorical groupings and
limitations to provide Medicaid eligibility to all individuals
under age 65 with income at or below 133 percent FPL, provided
that the individual meets certain non-financial eligibility
criteria, such as citizenship.
Also beginning in 2014, the ACA requires the MAGI to be used
in determining eligibility for Medi-Cal and for subsidized
coverage through the California Health Benefit Exchange. MAGI
is defined in the federal Internal Revenue Code as adjusted
gross income as determined under the federal income tax, plus
any foreign income or tax-exempt interest that a taxpayer
receives.
Under the ACA, eligibility for most beneficiaries under age 65
will be determined using MAGI, or household income in the case
of a family. Assets will not be considered in determining
eligibility for most Medi-Cal applicants. This simplified
eligibility test is a significant departure from the current
Medi-Cal eligibility system, where a family's assets must be
under a certain threshold in order to qualify.
3)The CalHEERS system will align the rules and methodologies
used to evaluate eligibility for most individuals under
Medi-Cal and payments of premium tax credits and cost-sharing
reductions available through the Exchange. According to the
federal Center for Medicare and Medicaid Services, the
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alignment of the methods for determining eligibility is one
part of an overall system established by the Affordable Care
Act that allows for real-time eligibility determinations of
most applicants, and allows for prompt enrollment of
individuals in the ''insurance affordability program'' for
which they qualify.
4)Supreme Court Decision . On June 28, 2012, the Supreme Court
ruled on the constitutionality of a number of ACA provisions,
including whether the mandatory expansion of Medicaid
unconstitutionally coerced states into participating in a
federal regulatory regime. The court found that the mandatory
expansion to 133% of the federal poverty level violates the
Constitution to the extent that states are threatened with the
full loss of Medicaid funding.
In practical terms, this makes the expansion of Medicaid as
envisioned in the ACA voluntary for states, as the federal
government would no longer be authorized to revoke all
Medicaid funding from states that choose not to comply with
the expansion. The eligibility-related provisions implemented
by this bill, however, were not specifically considered or
invalidated by the court.
5)Related Legislation. AB 43 (Monning) requires the DHCS to
establish Medi-Cal eligibility for any person under 65 years
of age who meets specified criteria and whose income does not
exceed 133% FPL. AB 43 is pending in the Senate
Appropriations Committee.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081