BILL ANALYSIS Ó AB 1 X1 Page 1 ASSEMBLY THIRD READING AB 1 X1 (John A. Pérez) As Introduced January 28, 2013 Majority vote HEALTH 13-6 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Pan, Ammiano, Atkins, |Ayes:|Gatto, Bocanegra, | | |Bonilla, Bonta, Chesbro, | |Bradford, | | |Gomez, | |Ian Calderon, Campos, | | |Roger Hernández, | |Eggman, Gomez, Hall, | | |Lowenthal, Mitchell, | |Holden, Pan, Quirk, Weber | | |Nazarian, V. Manuel | | | | |Pérez, Wieckowski | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Logue, Maienschein, |Nays:|Harkey, Bigelow, | | |Mansoor, Nestande, | |Donnelly, Linder, Wagner | | |Wagner, Wilk | | | | | | | | ----------------------------------------------------------------- SUMMARY : Enacts statutory changes necessary to implement the coverage expansion, eligibility, simplified enrollment and retention provisions of the Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act or ACA) related to the Medicaid Program (Medi-Cal in California) and the California Children's Health Insurance Program. Specifically, this bill : 1)Expands, effective January 1, 2014, Medi-Cal coverage as follows: a) Expands eligibility for Medi-Cal coverage to citizen and qualified immigrant non-disabled adults who are under age 65, not pregnant and not otherwise currently eligible for Medi-Cal coverage, with family incomes up 138% of the Federal Poverty Level (FPL). b) Establishes a benchmark benefits package that includes all benefits provided to other adults, supplemented by benefits, services, and coverage included in the essential health benefits package adopted by the state for the AB 1 X1 Page 2 population eligible for Covered California through the Health Benefits Exchange (Exchange). c) Transitions persons currently enrolled in a Low-Income Health Program (LIHP) under California's Bridge to Reform Section 1115(b) waiver to the new Medi-Cal expansion program. d) Extends coverage to any person under age 26, regardless of income or assets who was in foster care in the state at age 18 and who is not otherwise eligible. Provides, to the extent federal financial participation is available, the adolescent shall be deemed eligible without interruption and without requiring a new application. e) Provides that pregnant women with income up to 200% of FPL who are currently eligible for pregnancy related and postpartum services in the Medi-Cal program shall be eligible for full-scope Medi-Cal services provided to other eligible adults. Revises the period of coverage for pregnant women in the Access for Infants and Mothers (AIM) Program from 60 days after the end of the pregnancy to the end of the month in which the 60th day occurs, effective January 1, 2014, in order to align eligibility with open enrollment in Covered California. 2)Simplifies and streamlines effective January 1, 2014, the Medi-Cal application, eligibility and redetermination process by enacting the following changes to existing law: a) Requires the Department of Health Care Services (DHCS) to convert the existing income eligibility standard to a Modified Adjusted Gross Income (MAGI)-based income equivalency level (as defined in the Internal Revenue Code) as applied to families, children and non-disabled adults under age 65. Eliminates the deprivation requirement and any assets or resources limit for the MAGI population. b) Establishes a minimum MAGI eligibility level at 133% FPL, plus a standardized 5% income disregard in effect setting the 133% FPL standard at 138%. Provides that the maximum eligibility level shall be established at a level that is not less than the equivalent amount in effect on March 23, 2010, to ensure that any population eligible for AB 1 X1 Page 3 Medi-Cal, AIM, or the Healthy Families Program does not lose coverage. c) Establishes procedures to be used for cases of fluctuating income or family size to ensure that eligible individuals do not lose or are denied eligibility. d) Repeals the requirement that adults file mandatory semiannual status reports regardless of whether there have been any changes in income, family size, or other factors that affect continued eligibility for the MAGI-based categories. e) Requires all state health subsidy programs, (Medi-Cal, AIM, enrollment in a qualified health plan through the Exchange and a Basic Health Plan, if there is one) to accept self-attestation, instead of requiring production of documentation for age, date of birth, family size, household income, state residency, pregnancy, and any other applicable criteria permitted under the ACA. f) Revises provisions related to state residency as applied to a person 21 years of age or older or if under 21 is emancipated or married, by replacing the requirement of a demonstrated intent to remain with the requirement that he or she lives in the state and either intends to reside in the state or has entered the state with a job commitment or to seek employment. Specifies that the individual is not required to have a fixed address or to be currently employed. g) Conforms the residency determinations to federal requirements, for individuals under 21, not covered by c) above, not in the foster care program or linked to another public program, by providing that residency is established if the child lives in the state (no fixed address is required) or the child resides with a parent, parents, or caretaker relative who meet the requirements of c) above and provides that for an individual who is incapable of stating intent or who is living in an institution the state of residency is determined by applicable federal regulations. Conforms provisions relating to the reinstatement of a person who maintains a residence outside the state. AB 1 X1 Page 4 h) Specifies that a person applying for or renewing an application may do so on his or her own behalf, on behalf of the family, allows for authorized representatives as specified and other designated entities or individuals to be allowed to assist or represent the individual. i) Repeals the requirement of an annual reaffirmation and provides that the Medi-Cal eligibility is to be renewed annually and no more frequently than once every 12 months for individuals whose financial eligibility is determined by use of the MAGI-based standard. j) Revises the process for Medi-Cal eligibility redetermination by adding requirements, as specified in federal regulations, that information useful to verifying financial eligibility, such as wages or enrollment or eligibility in other similar income based programs, should be obtained from other state and federal agencies or electronically from federal and state databases prior to contacting the individual. aa) Revises procedures in the case of incomplete applications to require additional attempts to contact the individual and extends from 30 to 90 days the period for rescission of a termination if the individual submits a completed form. bb) Requires, in the case of an individual establishing eligibility on the basis of disability, the county to consider blindness and disability to be continuing until a determination otherwise as specified. 3)Makes other conforming and technical changes. FISCAL EFFECT : According to the Assembly Appropriations Committee: State and local fiscal impacts of this bill are complex and subject to substantial uncertainty. This stems from imprecision inherent in projecting future-year costs based on numerous assumptions about factors such as the number of people who will be newly eligible for Medi-Cal and the number who will actually enroll, as well as from uncertainty related to outstanding state AB 1 X1 Page 5 and federal policy decisions. The fiscal effects are divided into two categories: 1)The effect of optional Medi-Cal eligibility expansion to all adults below 138% FPL; and, 2)The effect of other state options. Effect of optional Medi-Cal eligibility expansion to adults below 138% of federal poverty level 1)Health care services costs for newly eligible individuals are funded 100% by the federal government for calendar years 2014, 2015, and 2016. Beginning in 2017, the state will have a 5% share of total health care services costs, and the state's share will increase gradually to 10% by 2020. If 1.2 million newly eligible adults enroll by 2016, the state's share would be in the range of $120 million, with the federal government paying the remainder of the $4.7 billion total for 2016-17, and $275 million in state General Fund (GF) (out of $5.0 billion total funds) in 2017-18. This cost is projected to increase to $600 million GF annually by 2020-21, which is the state's 10% share of $6 billion total funds based on enrollment growth, medical inflation, and the state's increased share of total medical services costs. 2)Administrative costs for newly eligible individuals are shared equally by the state and federal government. The addition of the optional population is expected to result in half-year administrative cost pressure in the range of $12 million GF ($24 million total funds) beginning in 2013-14, and full-year cost pressure in the range of $30 million GF ($60 million total funds) annually beginning in 2014-15. This estimate is uncertain, as administrative funding is provided as a lump sum to counties as part of the annual Medi-Cal budget and total funding does not directly grow based on enrollment numbers. In addition, per capita administrative costs for counties may change significantly in future years as new systems and processes are implemented. 3)Reduced costs for other state-funded programs, such as the Genetically Handicapped Persons Program and the Breast and AB 1 X1 Page 6 Cervical Cancer Treatment Program, to the extent some people receiving services in these types of targeted medical programs become eligible for Medi-Cal. 4)Potential reductions in inmate health care spending of up to $60 million GF annually, beginning after January 1, 2014, to the extent the state implements a process for identifying and claiming enhanced federal funding for eligible inpatient services provided to inmates newly eligible for Medi-Cal. Effect of other state options Several eligibility-related provisions in this bill appear to go beyond what is minimally required to comply with federal rules, and may have the effect of increasing Medi-Cal costs. In some cases, additional federal guidance or approval would be required in order to evaluate whether a provision goes beyond what is required for strict compliance with federal rules. Key provisions that may exceed what is minimally required for federal compliance, and may have associated costs, include the following: 1)Requiring adoption of the current Medi-Cal benefit package for populations with income eligibility determined by MAGI. 2)Requiring DHCS to develop specific procedures that ensure continued Medi-Cal eligibility for eligible foster youth. 3)Expanding the scope of benefits provided to pregnant women with income between 138% and 200% of the federal poverty level from pregnancy-only benefits to full-scope coverage, unless federal approval for fewer services is granted after January 1, 2014. 4)Requiring DHCS to adopt specific income eligibility verification procedures that take into account projected future changes in income and family size, in order to deem certain individuals Medi-Cal eligible who would not be found eligible based on current monthly income. 5)Requiring the state to use self-attestation as verification for any documentation for which self-attestation is allowable under federal rules. AB 1 X1 Page 7 6)Modifying the definition of residency for purposes of establishing Medi-Cal eligibility. Given the ambiguity about whether these provisions exceed what is minimally required for federal compliance and how they compare with alternative means of compliance that could also meet federal standards, as well as uncertainty related to how these provisions will impact enrollment and retention, specific fiscal impacts of these provisions are unknown. COMMENTS : On January 24, 2013, Governor Brown issued a proclamation to convene the Legislature in Extraordinary Session to consider and act upon legislation necessary to implement the ACA in: 1) the areas of California's private health insurance market, rules and regulations governing the individual and small group market; 2) California's Medi-Cal program and changes necessary to implement federal law; and, 3) options that allow low-cost health coverage through Covered California, California's Exchange, to be provided to individuals who have income up to 200% of the FPL. This bill along with SB 1 X1 (Ed Hernandez) addresses the second of the three areas identified in the Governor's proclamation, that is to adopt the provisions of the ACA related to changes in Medi-Cal. Specifically, the bill adopts the state option of expanding Medi-Cal coverage to non-disabled citizen and qualified resident childless adults, between the ages of 19 and 65 who are not currently eligible for other full-scope Medi-Cal programs and provides a full scope benefit package, as allowable under federal law. This category is limited to those with income under 138% of the FPL and the person must meet other citizenship and immigration status requirements. This bill also enacts the ACA requirement that the state Medicaid program extend coverage to former foster youth until age 26, without regard to income or assets. The ACA establishes a new simplified income standard for families, children and the new expansion population. It does not apply to seniors or person with disabilities. This bill includes provisions necessary to convert to the new MAGI methodology and income standard. Finally the bill includes a number of provisions that implement the goal of the ACA of reducing the number of uninsured by creating a continuum of coverage options for individuals with family incomes up to 400% FPL, streamlining and simplifying eligibility determinations and increasing reliance on electronically available data. AB 1 X1 Page 8 According to a model of California insurance markets known as the California Simulation of Insurance Markets, 5.6 million Californians were without health insurance in 2012 or 16% of the population under age 65. A recent study estimates that when California implements the Medi-Cal provisions, more than 1.4 million of these individuals will be newly eligible, of which between 750,000 and 910,000 are expected to be enrolled at any point in time by 2019. This study, Medi-Cal Expansion under the Affordable Care Act: Significant Increase in Coverage with Minimal Cost to the State, published by UC Berkeley Center for Labor Research and Education and UCLA Center for Health Policy Research in January 2013, also finds that about 2.5 million Californians are already eligible for Medi-Cal but not enrolled and between 240,000 and 510,000 of them are expected to be enrolled at any point in time by 2019 as a result of implementing the ACA. According to this report, most of the increase will happen regardless of the expansion due to the other mandatory provisions such as the individual minimum coverage requirements, simplified eligibility and enrollment processes and improved awareness of coverage. As written, the ACA included a provision that would have allowed the federal government to withhold a state's Medicaid funding if the state did not adopt the expansion. In National Federation of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012), the United States Supreme Court determined this provision violated the Constitution by threatening states with the loss of their existing Medicaid funding if they decline to comply with the expansion. However, because of the Severability Clause, the constitutional violation was fully remedied by precluding the federal Secretary of Health and Human Services (HHS) from applying the provision to withdraw existing Medicaid funds for failure to comply with the expansion requirements, but instead allowing the expansion as a state option. The ACA provides that for this population the federal share will be 100% for 2014, 2015, and 2016; decreasing to 95% in 2017; 94% in 2018; 93% in 2019; and 90% thereafter. Recent guidance from HHS clarified that states will only receive the enhanced 100% matching rate in 2014 through 2016 if they expand eligibility all the way up to 138% of the FPL. HHS will consider partial expansions to a lower income level, but states exercising this option would only receive the regular federal matching rate which is 50% in California. AB 1 X1 Page 9 Currently Governors in 20 states have expressed their intent to adopt this state option. The most recent, Florida was one of the states that sued to block the law. In announcing his position reversal, Governor Rick Scott said that the federal government is committed to paying 100% of the cost; therefore he could not in good conscience deny Floridians needed access to health care. As he put it, the only other option is that Floridians would be paying (through federal income tax) to fund the program in other states while denying health care to its own citizens. According to the Urban Institute, even when the federal share drops below 100%, for every dollar it spends, Florida would receive $12 in return from the federal government. Governor Scott now joins the Republican governors of Arizona, Michigan, Nevada, New Mexico, North Dakota and Ohio, who have decided to join the Medicaid expansion. Some, like Governor Jan Brewer of Arizona, were also staunch opponents of President Obama's overall health care law. With regard to California, the January 2013 UC Berkeley study and others have pointed out numerous benefits of adopting the expansion. For instance, there will be substantial savings to counties and providers of last resort, such as hospitals and clinics, due to the reduction in uncompensated care and providers as a whole would receive more revenue. This in turn has a positive impact on the economy by creating new jobs and increasing tax revenue. Research has also shown that health insurance coverage can improve educational outcomes and worker productivity. California's Legislative Analyst Office (LAO) is also in agreement. In a recent analysis Examining the State and County Roles in the Medi-Cal Expansion, February 2013, the LAO stated that in the short term, fiscal savings to the state would far outweigh costs. The LAO also pointed out that even after a decade, when the enhanced federal match is reduced from 100% to 90%, the overall savings to the state as a whole, including local governments, would likely continue to outweigh costs. The LAO concluded, in support of its recommendation to adopt the expansion, that despite the significant uncertainty about long-term costs and savings associated with the expansion, on balance, the policy merits of the expansion and the fiscal benefits that are likely to accrue to the state as a whole outweigh the costs and potential fiscal risks. Governor Brown's Budget as introduced for 2013-14 outlines two alternatives to the optional expansion - a state-based approach AB 1 X1 Page 10 or a county-based approach. The state-based option is described as a standardized, statewide benefit package comparable to the existing Medi-Cal benefit package but would exclude long-term care. The county-based option is described as building on the LIHPs with the counties acting as the fiscal and operational entity responsible for the expansion. No additional details of either proposal have been released. The Governor's Budget Summary states that implementation will require a broader discussion about the future of the state-county relationship with the goal to strengthen local flexibility, fairly allocate risk, and clearly delineate the respective responsibilities of the state and the counties. The Brown Administration has recently begun convening stakeholders to discuss possible options and has requested that stakeholders offer suggestions on implementation. The Director of the DHCS recently testified at a Senate Budget and Fiscal Review Committee hearing that it was their intent that this issue be considered as part of the budget and not in the Special Session. The LAO also made a recommendation with regard to the two alternate proposals, finding that the state is in a better position than the counties to effectively organize and coordinate the delivery of health services to the newly eligible population and to successfully implement the expansion by January 1, 2014. Among the reasons stated were that a consolidated state-administered program would decrease churning among a multitude of programs and would reduce administrative complexity and duplication. The LAO also pointed out that the proposal suffered from program detail uncertainties such as how a county-based expansion would be implemented state-wide if not all the counties were willing or capable of participating and that federal approval was problematic. Effective January 1, 2014, the ACA envisions a streamlined, simplified, and seamless enrollment system that employs minimal use of paper documentation and relies on modern technology to the greatest extent possible for all the state subsidy programs. To promote coordination and avoid gaps or overlaps in coverage, the new MAGI methodology is aligned with the one that will be used to determine eligibility for the premium tax credits and cost sharing reductions available to certain individuals purchasing coverage on the Affordable Insurance Exchanges starting in 2014 (Covered California). States must use a single streamlined application that is either the application developed AB 1 X1 Page 11 by the federal Secretary of HHS or an alternative that she approves. States are required to have the application available so that individuals and families may apply online, in-person, by telephone, by mail, or by fax and it must be accessible to persons with limited English proficiency and people with disabilities. The Medicaid eligibility determination process will start with a MAGI screen and state Medicaid agencies may enter into agreements with the Exchange to coordinate eligibility. The federal Centers for Medicare and Medicaid Services (CMS) states in the Preamble to the March 23, 2012, Rules and Regulations, as follows: whether conducted by a public or private entity, it is anticipated that eligibility determinations using MAGI-based standards will be highly automated, utilizing business rules developed by the State Medicaid agency. In the most simplified cases, which can be determined without human intervention or discretion, we are clarifying that automated systems can generate Medicaid eligibility determinations, without suspending the case and waiting for an eligibility worker to finalize the determinations. In an Informational Bulletin issued on February 21, 2013, CMS further stated that individuals must not be required to provide additional information or documentation unless information cannot be obtained electronically or the information obtained electronically is not reasonably compatible with self-attested information. Documentation from individuals is permitted only to the extent that establishing a data match would not be effective, considering such factors as: 1)Administrative costs related to establishing and using the data match compared to administrative costs related to relying on paper documentation; and, 2)Impact on program integrity in terms of the potential for ineligible individuals to be approved as well as for eligible individuals to be denied coverage. For example, if the state does not accept self-attestation of residency, before requiring the individual to provide documentation, the state would need to consider the effectiveness of conducting a match with a state database such as the Department of Motor Vehicles, Temporary Assistance for Needy Families, or Supplemental Nutrition Assistance Program. AB 1 X1 Page 12 States have the option to first request and accept an explanation from the individual as to why the information might not be reasonably compatible, such as a reduction in the number of hours worked, before requesting paper documentation. Analysis Prepared by : Marjorie Swartz / HEALTH / (916) 319-2097 FN: 0000017