BILL ANALYSIS �
AB 1759
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1759 (Pan and Skinner) - As Amended: April 21, 2014
Policy Committee: HealthVote:19-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill makes permanent an existing temporary reimbursement
rate increase for specified Medi-Cal primary care providers by
tying Medi-Cal rates to Medicare rates, 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)Specifies payments to nonphysician providers of primary care
services must be paid at rates at least equal to
reimbursements paid in the Medicare program, to the extent
required by federal law beginning January 1, 2015 through and
including the date specified in federal law.
3)Continues payments to providers identified in (2) indefinitely to
the extent permitted by federal law.
4)Exempts this reimbursement rate increase from Medi-Cal payment
reductions adopted elsewhere in law, and applies it to managed
care and fee-for-service Medi-Cal.
5)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.
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FISCAL EFFECT
1)Total estimated annual costs of $650 million GF ($1.5 billion
total funds, remainder federal) for enhanced payments to
primary care providers, rising as Medicare rates rise. Costs
in 2014-15 would be for a half-year, approximately $300
million GF ($700 million total). Currently, the federal
government is funding increased payments to primary care
providers at 100% federal financial participation (FFP) for
calendar years 2013 and 2014; this bill would extend those
higher rates indefinitely, and the state would pay the state's
normal share of Medi-Cal costs.
Historically, the state paid a 50% share of cost for Medi-Cal.
However, those newly eligible as a result of the ACA-related
eligibility expansions are 100% federally funded through 2016,
with the federal share gradually declining to 90% FFP by 2020.
Therefore, the state (GF) share of total cost could change; it
depends on the number of primary care services provided to
newly eligible versus previously eligible Medi-Cal enrollees.
Given significant enrollment among newly eligible, the overall
state share of cost may decrease to around 40% or lower.
2)Unknown, potentially significant additional costs related to
provisions specifying payments for nonphysician providers.
The impact of these provisions related to nonphysician
providers ((2) and (3) in the summary above) is unclear. The
current federal requirement for a temporary increase in
primary care rates relates to physician services only, which
includes services rendered by practitioners working under the
personal supervision of a qualifying physician, but excludes
providers practicing independently of physicians. As drafted,
this bill may not require additional payments to nonphysician
providers outside of the current 'physician services'
structure, since it does so by reference to a future federal
requirement.
However, to the extent additional nonphysician providers who
are currently ineligible for the federally required payment
enhancements receive enhanced payments under this bill,
Medi-Cal costs will increase significantly. For example,
President Obama's recent federal budget proposal includes an
extension of the primary care payment enhancement as well as
proposed modifications to expand provider eligibility to
additional primary care providers, including physician
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assistants and nurse practitioners. If the federal government
implemented higher rates for nonphysician providers, the
contingency language in this bill would likely require the
state to also indefinitely maintain these higher rates.
3)Costs to the University of California of $900,000 GF for staff
and consulting services to annually assess the adequacy of
Medi-Cal rates.
4)Unknown, significant GF cost pressure on Medi-Cal rates, to
the extent the state-sanctioned assessment conducted pursuant
to this bill finds rates should be increased. In addition, a
permanent enhancement to rates for primary care may create
pressure on the state to increase rates for other services,
some of which may look underfunded by comparison.
5)AB 1805 (Skinner and Pan), also pending in this committee,
reverses reductions made to provider payments in 2011. If
both these bills are signed, the fiscal impact of this bill
will have been overstated by about $90 million (all funds),
since pursuant to AB 1805, rates would be higher than assumed
here and would therefore the gap between Medi-Cal and Medicare
rates, which this bill fills, would be smaller.
COMMENTS
1)Purpose . The author asserts it is critical for Medi-Cal
patients to have adequate access to primary care. This bill
seeks to accomplish this by maintaining enhanced rates for
primary care services, currently federally required, at state
option after the federal requirement ends.
2)Background . The expansion of Medicaid under the Patient
Protection and Affordable Care Act raised concerns about
whether the supply of primary care providers would be
sufficient to ensure access to care for this new population,
particularly given low reimbursement rates offered by many
Medicaid programs. For this reason, the ACA included a
so-called "primary care bump," which required states, for 2013
and 2014, to increase their Medicaid primary rates to those
rates provided by Medicare, and provided states 100% federal
funds to make up the difference between state rates and
Medicare rates. Final federal regulations were released in
November 2012, but a state plan amendment implementing the
federal requirement was only approved October 24, 2013, nearly
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11 months after the effective date.
The impact on physician acceptance of Medi-Cal is unclear at
this point, given that the Medi-Cal expansion just started in
January, the dollars actually started flowing out to providers
on a retroactive basis in November 2013, the payment bump is
expected to expire in 2015, and there are other, massive
changes happening throughout the health care system.
Observers have noted that states and the federal government
will need to make decisions about whether to extend these
increased rates or let them expire before it is clear how they
affect provider behavior.
3)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 pending this committee.
b) AB 900 (Alejo), 2013, eliminated scheduled Medi-Cal
payment reductions for distinct part skilled nursing
facilities. AB 900 was held on this committee's Suspense
File.
c) SB 646, 2013, (Nielsen) was similar to AB 900 and was
held in the Senate Appropriations Committee.
d) SB 640 (Lara), 2013, required scheduled Medi-Cal payment
reductions to 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)Staff Comments . While maintaining higher rates would
certainly decrease the financial burden on providers serving
Medi-Cal patients and would likely improve access, the overall
impact on provider behavior is unclear. For example, a recent
study in Health Affairs titled Physicians May Need More Than
Higher Reimbursements To Expand Medicaid Participation:
Findings From Washington State indicates that while physicians
welcomed planned increases in Medicaid rates, data also show
that other approaches could be even more effective in
increasing physicians' willingness to see Medicaid patients.
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Those approaches include lowering the costs of participating
in Medicaid by simplifying administrative processes, speeding
up reimbursement, and reducing the costs associated with
caring for those patients. In addition to payment rates, the
Legislature may wish to consider what other complimentary
avenues exist to enhance provider participation in Medi-Cal.
It is also possible that a permanent increase would have a
larger impact on provider behavior, given some physicians may
not view a temporary financial enhancement as an adequate
incentive to form a long-term primary care relationship with a
patient.
Enrollees in managed care, now a majority of enrollees in
Medi-Cal, have protections enforced by the Department of
Managed Health Care on licensed health plans, including
standards on network adequacy and timely access to care, which
fee-for-service (FFS) enrollees lack. However, discussion
around the adequacy of Medi-Cal rates and access to care tends
to focus on the FFS context, which serves a shrinking
population. The author may wish to consider whether the same
approach is optimal for both the FFS and managed care context.
Policy experts have also suggested ways to improve the primary
care bump; for example, rewarding higher-quality care instead
of providing it as a flat rate to all providers. The author
may wish to consider, given the significant state investment,
whether the state could leverage higher rates to meet quality
goals in addition to access goals.
Finally, there may be a technical discrepancy in the language
of this bill versus the federal final rule. The final rule
specifies that primary care services eligible for the bump
must be delivered under the Medicaid physician services
benefit. This means that higher payment will also be made for
primary care services rendered by practitioners working under
the personal supervision of a qualifying physician.
Particularly given that this bill adds an unrelated section
specific related to payment for nonphysicians, the author may
wish to clarify that services provided under the physician
service benefit are eligible for the enhanced payments,
instead of services delivered by a physician.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081
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