BILL ANALYSIS �
SB 677
Page 1
SENATE THIRD READING
SB 677 (Ed Hernandez)
As Amended May 23, 2011
Majority vote
SENATE VOTE :24-13
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Atkins, |Ayes:|Gatto, Blumenfield, |
| |Bonilla, Eng, Gordon, | |Bradford, |
| |Hayashi, | |Charles Calderon, Campos, |
| |Roger Hern�ndez, Bonnie | |Davis, Fuentes, Hall, |
| |Lowenthal, Mitchell, Pan, | |Hill, Cedillo, Mitchell, |
| |V. Manuel P�rez, Williams | |Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Donnelly, |
| |Nestande, Silva, Smyth | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Requires, the Department of Health Care Services
(DHCS) to implement the provisions of the Patient Protection and
Affordable Care Act of 2010 (Public Law 111-48) as amended by
the federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152) (ACA) that apply the Modified Adjusted
Gross Income (MAGI) test without regard to a person's assets or
other resources as the income eligibility standard for Medi-Cal.
Specifically, this bill :
1)Effective January 1, 2014, prohibits the use of an assets or
resources test for determining eligibility for the Medi-Cal
program, except for seniors and person with disabilities.
2)Requires DHCS to establish income thresholds to be used for
eligibility for the Medi-Cal program, including the imposition
of premiums and cost sharing, to apply to individuals and
families using the MAGI test as defined by reference to the
Internal Revenue Code.
3)Requires the income eligibility thresholds set pursuant to 2)
above to be no less than the effective income eligibility
levels that applied under Medi-Cal or under a Medi-Cal waiver
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at the date the ACA was enacted.
4)Requires DHCS to set an equivalent income test that ensures
that individuals who would have been eligible on the date the
ACA became effective do not lose coverage during the
transition to MAGI in order to comply with the maintenance of
effort requirements of the ACA.
5)Requires a 5% income disregard to be used when applying the
MAGI test to determine income eligibility.
6)Provides that this bill will become operative on January 1,
2014, and requires implementation only to the extent required
by federal law.
7)Requires DHCS to adopt regulations to implement these
provisions.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)One-time costs to DHCS to coordinate with the California
Health Benefit Exchange (Exchange) and the federal government,
analyze federal guidance and requirements, and adopt
regulations, of at least $400,000 (50% federal funds, 50%
General Fund).
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
information technology (IT) changes, including eligibility
system changes and interfaces with related systems.
The 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
3)cost is the implementation of the MAGI-based eligibility
determination system.
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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
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 : According to the author, this bill is needed to
conform to the federal ACA requirement prohibiting use of an
asset test and the requirement to use MAGI in determining
eligibility for Medi-Cal, except for certain populations. These
federal requirements streamline the complex Medi-Cal application
process for individuals applying for benefits in the program,
and for workers administering the eligibility determination
process.
Under the ACA most U.S. citizens and legal residents will be
required to have health insurance beginning in 2014. It is
estimated that 4.7 million California children and adults who
were uninsured during some part of 2009 will be eligible for
health coverage under the ACA. DHCS estimates that of these 2.1
million persons will be newly eligible for Medi-Cal and
approximately 1 million are currently eligible but not enrolled.
According to a Kaiser Family Foundation, October 2010 Report,
"Explaining Health Reform: Building Enrollment Systems that Meet
the Expectation of the Affordable Care Act," Congress included
strong provisions designed to ensure that state enrollment
policies and procedures and supporting technology systems
genuinely help individuals and families enroll and stay covered,
and also foster efficient administration. The ACA also
increases uniformity in income rules for all health subsidy
programs by streamlining applications and eligibility rules,
where possible. It does this, in part, by expanding access to
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health insurance coverage through improvements to the Medicaid
and Children's Health Insurance (CHIP) programs, the
establishment of the Exchanges, and the assurance of
coordination between Medicaid, CHIP, and Exchanges. The ACA
also requires states to change their Medicaid and State CHIP,
�Healthy Families Program in California] eligibility rules in
three fundamental ways: 1) states must change the way income is
counted for the purpose of determining eligibility; 2) states
must eliminate the asset test for most populations; and, 3)
states must make a series of changes intended to streamline and
improve the process for determining and maintaining eligibility
for their public programs.
In March of 2012, the United States Supreme Court held three
days of testimony on the constitutionality of two major
provision of the ACA arising out of two cases in the 11th
Circuit Court of Appeals, National Federation of Independent
Business v. Sebelius, and Florida v. Department of Health and
Human Services (2011) 11th Circuit Nos. 11-11021 & 11-11067. As
passed , the ACA required states to extend Medicaid coverage to
all individuals between ages 19 and 64 with incomes up to 133%
of the federal poverty level (FPL), �$14,856 for an individual
based on the 2012 FPL] known as the "newly eligible" category.
However, in National Federation of Independent Business v.
Sebelius, the Supreme Court agreed to consider the
constitutionality of two major provisions of the ACA: the
individual mandate and the Medicaid expansion. A majority of
the Court upheld the individual mandate. And, while the Court
found the Medicaid expansion unconstitutionally coercive of
states, because states did not have adequate notice to
voluntarily consent and the federal Health and Human Services
(HHS) Secretary could potentially withhold all of a state's
existing federal Medicaid funds for non-compliance, a majority
of the Court found that this issue was appropriately remedied by
circumscribing the HHS Secretary's enforcement authority, thus
leaving the Medicaid expansion intact in the ACA.
The court left the provisions that are related to simplification
and streamlining intact. In place of a multitude of existing
income disregards and deductions, such as child care costs or
work expenses, a 5% across the board disregard is applied
bringing the MAGI level to 138% of FPL for Medi-Cal. Children
are currently and will remain eligible for either Medicaid or
CHIP based on the eligibility standards already in effect. This
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bill and AB 43 (Monning), currently pending in the Senate, are
intended to be the vehicles to make the necessary statutory
changes to implement these provisions.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0005026