BILL ANALYSIS �
AB 1759
Page 1
Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 1759 (Pan and Skinner) - As Amended: April 21, 2014
SUBJECT : Medi-Cal: reimbursement rates.
SUMMARY : Makes permanent the existing temporary reimbursement
rate increase for specified Medi-Cal primary care providers,
beginning January 1, 2015. Specifically, this bill :
1)Makes permanent the reimbursement rate increase for physicians
who have primary specialty designations of family medicine,
general internal medicine, or pediatric medicine. Requires
the reimbursement rate in the Medi-Cal program be at least
equal to the reimbursements paid in the federal Medicare
program.
2)To the extent permitted by federal law, establishes a
reimbursement rate for Medi-Cal primary care providers who are
not physicians and requires the reimbursement in the Med-Cal
program be at least equal to reimbursements paid in the
Medicare program.
3)Exempts this reimbursement rate increase from Medi-Cal payment
reductions adopted elsewhere in law.
4)Applies these increased reimbursements rates to specified managed
care health plans that contract with Department of Health Care
Services (DHCS) and requires DHCS to increase the
reimbursement to the plans by the actuarial equivalent amount.
5)Requires DHCS to adopt regulations implementing the rate increase
by July 1, 2017, and allows DHCS to use provider bulletins or
similar instructions for administering the rate increase until
the regulations are adopted.
6)Requests the University of California (UC) to conduct an annual
independent assessment of Medi-Cal rates. Establishes an
advisory commission to provide input to UC with appointments
made by the Governor, Speaker of the Assembly, and the Senate
Rules Committee.
EXISTING LAW :
AB 1759
Page 2
1)Establishes the Medi-Cal program, administered by DHCS, under
which qualified low-income patients receive health care
benefits. Medi-Cal is California's version of the federal
Medicaid program in which funding is provide by both the state
and federal government.
2)Requires Medi-Cal provider payments and payments to Medi-Cal
managed care plans to be reduced by 10% for dates of service
on and after June 1, 2011.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee
COMMENTS :
1)PURPOSE OF THIS BILL . According to the authors, this bill is
intended to support adequate access to providers and quality
of care in the Medi-Cal program. The authors argue Medi-Cal
reimbursement rates are among the lowest in the nation and
many Medi-Cal patients do not have timely access to a primary
care provider. The authors state, the problems associated
with inadequate Medi-Cal reimbursements are exacerbated with
the implementation of the federal Patient Protection and
Affordable Care Act (ACA) in California, there will be
approximately 1.3 million new Medi-Cal enrollees. The authors
argue that given the recent substantial improvements in
California's budget situation, the state should have the means
to maintain adequate reimbursement rates.
2)BACKGROUND . Medi-Cal reimbursement rates are among the lowest
in the nation. According to the California Budget Project,
California's Medicaid payments to physicians in 2012 were the
third lowest in the nation. California spends over 30% less
per Medi-Cal beneficiary than the national average and the
least per beneficiary among the ten largest states. Medi-Cal
payments frequently do not cover the costs of care delivery.
Low reimbursement rates can discourage providers from
accepting new Medi-Cal patients. Due to years of persistent
underfunding, there is now a serious shortage of practitioners
willing to accept new Medi-Cal patients. According to a
AB 1759
Page 3
recent study, only 57% of office-based physicians in
California accept new Medi-Cal patients, the second lowest
rate in the nation. Consequently, many Medi-Cal patients do
not have timely access to a primary care provider.
3)BUDGET ACTIONS . The long-standing problem of low Medi-Cal
rates has been exacerbated by the state's multiple attempts
over the past several years to reduce reimbursement rates to
Medi-Cal providers in efforts to reduce program spending and
balance the state budget. However, many of these reductions
were later blocked by courts or repealed and replaced by
alternative budgetary actions.
AB 97 (Committee on Budget), Chapter 3, Statutes of 2011,
mandated a 10% reduction in Medi-Cal provider fee-for-service
(FFS) rates and payments made to Medi-Cal managed care plans
effective June 1, 2011. Additionally, payment rates for
skilled nursing facilities that are a distinct part of a
general acute care facility were rolled back to 2008-09
payment rates and then further reduced by 10%. Shortly
afterwards, a district court blocked these cuts, ruling that
they would harm the millions of low-income Californians who
depend on Medi-Cal to receive health care. In January 2013, a
three judge panel of the federal Ninth Circuit Court of
Appeals ruled that the state could proceed with rate cuts.
Plaintiffs subsequently requested rehearing of this case by
the full Ninth District Court of Appeals but this request was
denied. The U.S. Supreme Court was then asked to review the
Ninth Circuit hearing but this petition was also denied. The
Governor announced this past January in his 2014-15 budget
proposal that the state would not proceed with retroactive
collection of payment cuts but made clear the state's
intention to proceed with the mandated cuts moving forward.
4)HEALTH CARE REFORM . The federal ACA significantly expands
Medicaid program eligibility to cover individuals up to 138%
of the federal poverty level (FPL). There is serious concern
however about access to care and quality of care for the 8.5
million Californians currently enrolled in the program, as
well as the additional 1 to 2 million Californians now newly
eligible under ACA provisions. Increased primary care
provider capacity is necessary to care for this large influx
of new beneficiaries.
Federal legislation increased reimbursement to certain Medi-Cal
primary care providers to match Medicare rates for specified
AB 1759
Page 4
services starting in 2013, but this increase is only
temporary. The provision, funded entirely by the federal
government, was intended to encourage health providers to
accept additional Medi-Cal patients, to help address the rate
and access problems outlined above.
However, these provisions, known as the primary care bump, are
set to expire after December 31, 2014. Medi-Cal providers are
discouraged from accepting additional Medi-Cal patients when
it is clear that reimbursement rates will soon be dropping
down to levels that many practices report are not sustainable.
The state has also been very slow in implementing the
federally mandated rate increase and it still has not taken
effect for many Medi-Cal providers.
5)RATE SETTING. An additional challenge facing the Medi-Cal
program is the fact that the state's Medi-Cal provider
reimbursement rate setting process is neither data driven nor
evidence-based. There is no systematic evaluation process to
ensure that Medi-Cal reimbursement rates are sufficient to
ensure adequate access to care and quality of care. Medi-Cal
requires a systematic, data-driven, and evidence-based process
to establish Medi-Cal rates and determine their impact on
access and quality. This is also necessary to ensure
responsible stewardship of taxpayer dollars.
Any oversight process should be independent, have sufficient
analytic capacity to inform sound public policy development,
and be efficiently operated. One example that is often
pointed to as a success it the Medicare Payment Advisory
Committee (MEDPAC) which is an independent board of Medicare
experts that advises Congress on Medicare policy. The authors
have chosen UC to support the state's Medi-Cal policy
development. UC is already involved in conducting research
for state government, in particular the California Health
Benefit Review Program, which evaluates health insurance
mandates.
Various partnerships between state Medicaid programs and state
universities already exist in approximately 14 states,
including in California. In California, this partnership is
directed by UC's California Medicaid Research Institute
(CAMRI), which has a record of collaboration with DHCS.
6)SUPPORT . Supporters argue this bill would stabilize and
AB 1759
Page 5
strengthen the Medi-Cal program by continuing the primary care
provider rate increase beyond its currently scheduled end
date. They point to very low Medi-Cal reimbursement rates
that often do not cover the costs of delivering care. Many
note that Medi-Cal reimbursement rates are already among the
lowest in the nation. Supporters also note as the Medi-Cal
program enrollment expands substantially under health care
reform, adequate reimbursement to ensure timely access to
providers will be necessary.
Supporters also argue there is no formal systematic process to
ensure that Medi-Cal reimbursement rates are sufficient to
ensure access to care and quality of care. This bill would
provide the Legislature with an annual assessment of Medi-Cal
provider reimbursement rates and their impact on access and
quality of care. Supporters conclude this would establish
stronger oversight of provider rates and will help to ensure
access to quality health care for California's most vulnerable
individuals.
7)SUPPORT IF AMENDED . The California Ambulance Association is
seeking an amendment that would include ground ambulance
transportation providers as eligible providers. They note
California provides the fourth lowest reimbursement rates for
ambulance services provided to Medicaid recipients in the
nation.
The Developmental Services Network is seeking an amendment that
would end rate cuts and the rate freeze to all of California's
Medi-Cal providers adversely impacted by AB 5 X4 (Evans),
Chapter 5, Statutes of 2009-10 Fourth Extraordinary Session,
and AB 97 including intermediate care facilities serving
individuals with developmental disabilities. They note there
are more than 1,100 such facilities in California caring for
disabled and highly vulnerable Californians who otherwise may
not have other options. According to the Developmental
Services Network, rates have been frozen at 2008 reimbursement
levels despite evidence that rates should be significantly
increased, which is forcing some facilities to close.
The Planned Parenthood Affiliates of California have a support
if amended position. They are seeking an amendment that would
expand eligible provider types to include a physician with a
primary specialty designation of obstetrics and gynecology, or
a clinic or health center (other than a hospital-based clinic
AB 1759
Page 6
or health center, Federally Qualified Health Center, or Rural
Health Clinic) that employs or contracts with physicians that
meet the expanded definition of primary care providers. In
addition they have requested an amendment that would allow
licensed community clinics that bill on behalf of their
employed or contracted physicians or other providers to retain
the enhanced rate for primary care services.
8)RELATED LEGISLATION :
a) AB 1805 (Skinner and Pan) requires DHCS to disregard the
10% payment reductions for Medi-Cal providers, to the
maximum extent permitted by federal law and for the maximum
time period for which federal financial participation is
obtained. AB 1805 is set for hearing on April 22, 2014 in
this Committee.
b) AB 900 (Alejo) would have eliminated scheduled Medi-Cal
payment reductions for distinct part skilled nursing
facilities. AB 900 was held on the Appropriations
Committee suspense file.
c) SB 646 (Nielsen) was similar to AB 900 and was held in
the Senate Appropriations Committee.
d) SB 640 (Lara) would have required scheduled Medi-Cal
payment reductions not apply to Medi-Cal provider and
managed care health plans for services delivered after June
1, 2011. SB 640 was held on the suspense file of the
Senate Appropriations Committee.
1)PREVIOUS LEGISLATION
a) AB 5 X3 (Committee on Budget), Chapter 3, Statutes of
2007-08 Third Extraordinary Session, reduced Medi-Cal
provider fee-for-service payments and payments to Medi-Cal
managed care plans by 10% effective July 1, 2008, and also
reduced payments for specified non-Medi-Cal programs in a
similar manner and reduced non-contract Medi-Cal hospital
payments as specified. AB 5 X3 exempted specified
providers from payment reductions.
b) AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008, rendered inoperative the AB 5 X3 rate reduction
AB 1759
Page 7
provisions on February 28, 2009, and applied various
payment reductions to other providers.
c) AB 5 X4, for specified providers, froze Medi-Cal payment
rates for services provided in the 2009-10 rate year and
beyond, by prohibiting reimbursement rates from exceeding
rates applicable in the 2008-09 rate year after the 5%
reduction mandated by AB 1183.
d) AB 97 requires the rate reductions required by AB 1183
and AB 5 X4 not be instituted for services delivered on or
after June 1, 2011 (with specified exceptions). Reduces
Medi-Cal provider FFS and managed care payments by 10%
effective June 1, 2011. Reduces payments for non-Medi-Cal
programs for services on and after June 1, 2011, with
exceptions. AB 97 was dependent upon federal approval and
specified that payment reductions would be collected
retroactively to June 1, 2011. Federal approval was
obtained October, 2011 and effectively voided the payment
reductions mandated in AB 1183 and AB 5 X4.
e) AB 102 (Committee on Budget), Chapter 29, Statutes of
2011, continued the 1% and 5% Medi-Cal reductions set to
expire effective June 1, 2011, until the reimbursement
reductions specified in AB 97 received federal approval, at
which time payments were to be collected retroactively back
to June 1, 2011.
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association (co-sponsor)
California Academy of Family Physicians (co-sponsor)
AARP
Adventist Health
Alliance of Catholic Health Care
American Academy of Pediatrics, California District IX
American Federation of State, County, and Municipal Employees
Amyotrophic Lateral Sclerosis Association
AB 1759
Page 8
California Academy of Family Physicians
California Healthcare Institute
California Chapter of the American College of Cardiology
California Chapter of the American College of Emergency
Physicians
California Communities United Institute
California Pan-Ethnic Health Network
California Primary Care Association
California Retailers Association
Central California Alliance for Health
Children's Specialty Care Coalition
Congress of California Seniors
Health Access California
Private Essential Access Community Hospitals
Opposition
None on file.
Analysis Prepared by : Edward Sheen, M.D. and Roger Dunstan /
HEALTH / (916) 319-2097