CDCAN Report #115-2011  – MAY 26, 2011 – EARLY THURSDAY

SENATE BUDGET SUBCOMMITTEE ON HEALTH & HUMAN SERVICES SET TO APPROVE RETAINING FULL $85 MILLION STATE GENERAL FUNDING FOR ADULT DAY HEALTH CENTERS FOR LONGER TRANSITION

• Budget Subcommittee Also Set to Approve Budget Related Language To Expedite Implementation of New Medicaid Waiver to Implement New Adult Day Health Care Program (“Keeping Adults Free From Institutions”);
• Subcommittee Agenda Also Covers Healthy Families Program Transfer and Historic $241 Million Settlement of Whistleblower Lawsuit by Quest Diagnostics Incorporated with the State of California For Fraud
• Budget Subcommittee Will Meet Upon Adjournment of Senate Appropriations Committee Thursday Morning (May 26^th);
• 64 Page Hearing Agenda Released – Attached To This Report

SACRAMENTO, CALIF  (CDCAN)  [Last Updated 05/26/2011  2:26 AM] -  In an action that is sure to dramatically ease major anxiety and uncertainty for over 7,000 Adult Day Health Care center workers, and over 34,000 people with disabilities and seniors in over 300 Adult Day Health Care center programs across the State, the Senate Budget Subcommittee #3 on Health and Human Services is set to approve, when it meets Thursday (May 26^th), an action that will retain $170 million ($85 million in State general funds) for Adult Day Health Care centers to provide for a longer transition period during the 2011-2012 State Budget year that begins July 1^st. .  

May 26^th Hearing Agenda Released and Attached to CDCAN Report

• The action is recommended by Senate budget subcommittee staff in the subcommittee’s 64 page hearing agenda released late Thursday and is attached to this CDCAN Report titled “20110526-Agenda-SenateBudgetSub3Health.pdf”.  [It was saved as a document so persons who are blind or sight impaired should be able to read it using a screen reading device]  See below for summary of agenda. 
• The Senate budget subcommittee’s agenda also covers the Governor’s proposed transfer of the Healthy Families program to the Medi-Cal program, and the historic $241 million settlement by Quest Diagnostics Incorporated with the State of California of a lawsuit that alleged the medical laboratory testing provider overcharged the Medi-Cal program for over 15 years including illegal kickbacks to doctors, hospitals and clinics. (see below for details).
• The Senate Budget Subcommittee #3 on Health and Human Services is scheduled to meet Thursday, May 26^th, at the State Capitol in Room 4203, immediately following the adjournment of the Senate Appropriation Committee hearing, which is meeting in that same room at beginning at 09:30 AM.  Both hearings will be televised and webcasted on Cal Channel (www.calchannel)
• The Adult Day Health Care Center budget issue is item #7 on the subcommittee agenda and is “for vote only”.  Items under “for vote only” are issues taken up and voted on with no additional discussion or public comment because they previously heard this issue (in March).

Adult Day Health Care Is Currently A Medi-Cal “Optional Benefit”

A Medi-Cal “optional benefit”, Adult Day Health Care (ADHC) centers are licensed community-based day care programs providing a variety of health, therapeutic, and social services to those at risk of being placed in a nursing home.  The centers are licensed by the Department of Public Health and certified for participation in the Medi-Cal Program by the California Department of Aging.

Each Adult Day Health Care center has a multidisciplinary team of health professionals who conduct assessments of each potential participant to determine and plan the services needed to meet the individual’s specific health and social needs. Services provided at the center include: medical services; nursing and personal care services; physical, occupational and speech therapy; psychiatric and psychological services; social services; therapeutic activities; hot meal and nutritional counseling; and transportation to and from the center.

Action Would Reject Governor’s May 16^th Budget Revision Funding Proposal

• The action by the Senate budget subcommittee on Thursday would reject the Governor’s May 16^th budget revision proposal that would only provide $25 million in State general funds for the transition of the people in the program to other Medi-Cal services  – but not transition or implementation of a new form of Adult Day Health Care under a new Medicaid waiver to replace the existing Adult Day Health Care program which is a Medi-Cal “optional benefit” (called that because the federal government does not require the states to provide it as part of their Medicaid program, which in California is called “Medi-Cal”). 
• In January the Governor proposed the complete elimination, which the Legislature approved in March, but included $170 million in total funding ($85 million in State general funds) for transition of people in the program and development and implementation of a new model of Adult Day Health Care.
• The Senate Budget Subcommittee is also set to approve “placeholder” budget related language (called budget trailer bill language) in order to expedite the development, submission and approval to the federal government of a new federal Medicaid waiver that would create a new model of Adult Day Health Care centers called “Keeping Adults Free from Institutionalization” or “KAFI”. 
• The language would be similar, according to Senate budget subcommittee staff, to nearly identical policy bills  – SB 73 by Sen. DeSaulnier and AB 96 by Assemblymember Bob Blumenfield (Democrat – Van Nuys)  though neither bill as of May 26^th, 2:26 AM, have been amended to include provisions about Adult Day Health Care centers yet.
• “Placeholder” refers to language that the subcommittee agrees to in concept with details to be finalized later – usually by budget staff – that follows the intent of the subcommittee’s action, in this case, expedite implementation of the new model of Adult Day Health Care centers.

What This Action Would Mean

• The action expressly rejects Governor Brown’s May 16^th budget revision proposal that only allocates $25 million in State general funds for only the transition of the over 34,000 people with disabilities and seniors in the program into other Medi-Cal services during the 2011-2012 State Budget year – and no funding or effort to continue with a new form of Adult Day Health centers.  The funding of $170 million would be about half of the Adult Day Health Care program budget for the current 2010-2011 State Budget year or a 50% reduction. 
• While the existing Adult Day Health Care program as a Medi-Cal optional benefit is still slated for elimination, pending approval from the federal government, the Senate Budget Subcommittee action would restore funding that the Legislature allocated in March ($170 million of which $85 million would be State general funds) and also put in place in State law requirements for the Department of Health Care Services to expedite implementation of the new form of Adult Day Health Care centers providing relief to over 300 community-based Adult Day Health Care center providers and the over 7,000 people they employ or contract with across the State – all who faced closure of their centers and elimination of their jobs as early as possibly September.
• The Senate Budget Subcommittee action would also need final action by the entire State Senate, which is likely and also approval by the Assembly Budget Subcommittee on Health and Human Services (and then the full Assembly), which seems certain given that the Assembly Budget Committee Chair, Assemblymember Bob Blumenfield (Democrat – Van Nuys) is authoring legislation, AB 96, that essentially would accomplish the same thing.  Sen. Mark DeSaulnier is authoring SB 73, which is identical to AB 96.  
• Either bill (or more likely its contents) could end up as part of a package of budget related bills that will be sent to the Governor whenever the main budget bill for 2011-2012 is approved by the Legislature. 
• Final language that will be part of the final package of budget trailer bills that will follow (or “trail”) the main budget bill will be worked on by both State Senate and Assembly budget committee staff, with likely continued input from advocates and other stakeholders and the Brown Administration. 
• The Department of Health Care Services submitted to the federal government for approval on May 19 a proposed State Plan Amendment (SPA) to the California Medicaid State Plan that calls for elimination of Adult Day Health Care as a Medi-Cal (Medicaid) optional benefit .  The department expects approval sometime in June, with the effective elimination date possibly as early as September 1^st. 
• It is not clear what will happen if the Department of Health Care Services receives approval to eliminate Adult Day Health Care as a Medi-Cal optional benefit before it develops or submits a proposed Medicaid waiver to the federal government for a new form of Adult Day Health Care (“Keeping Adults Free from Institutions”). 

Issue Has Major Impact For 34,000 People With Disabilities & Seniors, Over 300 Community Based Providers Who Employ Over 7,000 People

• The issue has major impact on over 34,000 adults with disabilities (including developmental), and seniors, over 300 community-based providers who employ over 7,000 staff across the state, who faced an uncertain future since the Governor’s January proposal, which the Legislature approved in March as part of a package of 13 budget related bills, to eliminate completely Adult Day Health Care as a Medi-Cal “optional benefit”.  [CDCAN is issuing an Action Alert on this issue to urge people to contact not only the Legislature and Governor but the federal Centers on Medicare and Medicaid Services or CMS – watch for it later today]
• The Legislature however modified the Governor’s proposal to include $170 million ($85 million State general fund) for transition of people receiving Adult Day Health Care into other Medi-Cal or related services and also to fund in the 2011-2012 State budget year a new form of Adult Day Health Care. 
• Assembly Budget Committee Chair Assemblymember Bob Blumenfield urged community based providers, in March at the final Budget Conference Committee hearing before sending a package of  budget related bills to the Governor, to “keep your doors open” and not close because of the Legislature’s intent that a new form of Adult Day Health Care be developed.
• The Department of Health Care Services however in late April indicated at the Olmstead Advisory Committee meeting (and again at a stakeholder meeting in late May) that while it was moving forward on transitioning people in the program to other Medi-Cal related services, it felt it was not authorized yet to develop and submit a new Medicaid waiver to the federal government proposing a new form of Adult Day Health Care centers because the March budget legislation was only “intent language” and not actually state law directing the department to do so.
• The budget related language or budget trailer bill language that the Senate Budget Subcommittee on Health and Human Services intends to approve on Thursday is meant to put into State law direction to the Department of Health Care Services to move forward on creating a new model of Adult Day Health Care. 

Subcommittee Will Also Take Action To “Recognize” $241 Million Settlement By Quest Diagnostics Incorporated With State Of California

In addition to the Adult Day Health Care issue and many other health budget items, the Senate Budget Subcommittee on Health and Human Services will take action (page 47 of the 64 page agenda) to “recognize” the $241 million settlement with the State of California by Quest Diagnostics Incorporated announced this week by California Attorney General Kamala Harris, the largest recovery in the history of California’s False Claims Act.  Quest is the largest provider of medical laboratory testing in California.

The settlement is the result of a 2005 whistleblower lawsuit accusing that Quest overcharged the Medi-Cal program for more than 15 years and gave illegal kickbacks in the form of discounted or free testing to doctors, hospitals and clinics that referred Medi-Cal patients and other business to Quest.  There are similar cases still pending against four other defendants including Laboratory Corporation of America (LabCorp), the second largest medical laboratory services provider in California.  Trial is scheduled for early next year. 

The $241 million settlement amount would be divided and go to the following Federal and State agencies:

• $96.4 million would go back to the federal government for their portion in the Medi-Cal (Medicaid) program
• $69.9 million is for the whistleblower
• $50.056 million would go back to the Medi-Cal program
• $24.6 million is for the California Department of Justice (Attorney General)

The settlement came after the Governor’s May 16^th budget revision, so the Senate budget subcommittee would take action to reflect a State general fund savings of $50.056 million in the Medi-Cal program by decreasing the program’s State general fund appropriation by that same amount (and increasing reimbursements by an equal amount).  With that action, the overall Medi-Cal program budget would not see an increase – because any savings would go back to the State general fund. 

Advocates for people with disabilities, mental health needs and seniors citing misplaced priorities, expressed outrage following the news of the $241 million settlement by Quest,  noting how the State and many county district attorneys have spent millions of State general funds for allegations of fraud and abuse against In-Home Supportive Services recipients and workers that have turned up few actual cases or convictions. 

MAY 26, 2011 – AGENDA – SENATE BUDGET SUBCOMMITTEE #3 ON HEALTH & HUMAN SERVICES HEARING

Note: words or comments in brackets [  ]  are not part of the actual agenda but notes or explanations by CDCAN to explain an abbreviation, term or budget issue]

The Adult Day Health Care budget item and OTHER potential major, important or controversial budget items are listed in color bold red below and preceded by *** for persons who are blind or sight impaired who use a screen reading device. 

FOR VOTE ONLY ON SELECTED ISSUES

Department of Health Care Services (Budget Item 4260)

1.     1Medi-Cal Estimate: Adjustments Due to Erosion of Solutions

2.      Medi-Cal Estimate: Balance of the Estimate [technical adjustments to budget]

3.      Medi-Cal Program: Technical [Budget] Trailer Bill for Correction to SB 90, Statutes of 2011 [corrects drafting error]

4.      Maddy Fund Shift

5.      ***Medi-Cal Program: Technical [Budget] Trailer Bill for 10% Rate Reduction [would maintain existing 1% or 5% provider rate reduction in place since March 2009 pending federal approval of the 10% Medi-Cal provider rate reduction]

6.      Medi-Cal Program: Adjustment for 10% Rate reduction [technical adjustment that corrects initial estimate in May 16^th budget revision]

7.      ***Adult Day Health Care Transition Program [budget subcommittee staff recommends(1) reject Governor’s May 16^th budget revision; (2) adopt “Keeping Adults Free From Institutionalization (KAFI) budget trailer bill language, and (3) retain the full $170 million ($85 million State general funds) appropriation for Adult Day Health Care for 2011-2012 State Budget year as contained in SB 69 – the main budget bill passed by the Legislature in March but never sent to the Governor]

8.      Restoration of General Fund in Lieu of Proposition 10 Funds

9.      Extension of Hospital Fee to June 2012

10.  May Revision Updates for Family Health Programs [Genetically Handicapped Persons Program, California Children’s Services program, and Child Health & Disability Prevention program for a total reduction of $132.2 million in State general funds due to reduction in caseload estimates, reflection of federal Safety Net Care Pool Funds transferred to these programs and adjustment to reflect a 10% provider rate reduction as contained in AB 97, Statutes of 2011 ]

11.  Department of Health Care Services – State Support Requests [for State option to provide health homes to enrollees with chronic conditions, health care reform, federally mandated HIPAA (Health Insurance Portability and Accountability Act), and proposed compromise on positions for Development of Hospital DRGs (diagnosis related groups)]

12.  Technical Adjustment to Managed Care Organization (MCO) Tax

Department of Public Health (Budget Item 4265)

1.      Every Woman Counts (EWC) Program

2.      State Operations: Adjustment for Breast Cancer Research

3.      Proposition 99 Funds: Research Account & Health Education

4.      Medical Marijuana Program Loan Repayment

5.      Reappropriation: Health Care Surge Capacity

6.      Health Care Reform: National Background Check Program

7.      General Fund Loan Repayment by Childhood Lead Prevention

8.      Licensing and Certification: Technical Adjustment to Staffing Ration

9.      Increase for Vaccine Purchases

10.  State Operations: Women, Infants and Children (WIC) Nutrition Program

Department of Mental Health (Budget Item 4440)

1.      Technical Adjustment to Reimbursements for Local Assistance

2.      State Staff: Legal Resources [budget subcommittee staff recommending denial of department’s request for $2.1 million (State general fund) increase for legal services to be performed by the Attorney General’s Office for the department regarding health education and welfare work and all new tors and condemnation work.]

Managed Risk Medical Insurance Board (Budget Item 4280)

1.      Various Health Families Program Adjustments

2.      Access for Infants and Mothers (AIM) [subcommittee budget staff recommends approval of Governor’s May 16^th budget revision proposal and placeholder budget trailer bill language regarding the use of the Medi-Cal fee-for-service system on a reimbursement funding basis to deliver AIM benefits beginning October 1, 2011]

3.      The Major Risk Medical Insurance Program (MRMIP)

4.      County Health Initiative Matching Fund Program Estimate

ISSUES FOR DISCUSSION

A. ***Department of Health Care Services and Managed Risk Medical Insurance Board – Transfer of Healthy Families Program

A. Department of Health Care Services (Budget Item 4260) – Medi-Cal Program

1.      [Section] 1115 Medicaid Waiver: Trailer Bill Fund Shift for Federal Dollars

2.      Managed Care: General Fund Reimbursement from Designated Public Hospitals

3.      Managed Care: New Processing Fee for Inter-Governmental Transfers

4.      Managed Care: Trailer Bill to Extend Managed Care Organization Tax

5.      Managed Care: Proposed Trailer Bill Language for a One-Year Lock In

6.      Medi-Cal Eligibility: Trailer Bill For New Budgeting Methodology

7.      Trailer Bill: Average Acquisition Price as New Pricing Benchmark

8.      ***Trailer Bill: Extension of Sunset Date for AB 1629 Quality Assurance Fees and Expansion of Fee to Pediatric Subacute Care Facilities [Budget subcommittee staff says that due to the “sweeping nature” of the Governor’s May 16^th budget revision regarding this program, “further discussions are warranted” and it recommends adopting “placeholder” trailer bill language to extend and expand the quality assurance fee, and work with all constituency groups on a resolution.

9.      ***Settlement in California v. Quest Laboratories – Recognize Settlement  [The settlement is result of 2005 whistleblower lawsuit alleging that Quest overcharged the Medi-Cal program for more than 15 years. Settlement provides that Quest pay State of California $241 million – of which $50.056 million would go back to the Medi-Cal program. ]

10.  Gradual Transition of Community Mental Health To DHCS [Department of Health Care Services]

11.  ***Transfer of Community Mental Health

12.  Transfer of Drug Medi-Cal Program to DHCS [Department of Health Care Services]

B. ***Managed Risk Medical Insurance Board (Budget Item 4280) – Transition [Budget subcommittee staff recommends that the subcommittee adopt in concept  the Governor’s May 16^th budget revision proposal to eliminate this board and to adopt “placeholder” budget bill language.

C. CA Medical Assistance Commission (CMAC)  (Budget Item 4270)

1. Dissolve the California Medical Assistance Commission [Budget subcommittee staff recommends that the subcommittee approve the Governor’s May 16^th budget revision proposal to eliminate this commission]

1. D.     Department of Public Health (Budget Item 4265)
2. 1.      Office of AIDS

E.     Department of Mental Health (Budget Item 4440)

1.      Mental Health Managed Care – Technical Adjustments

2.      State Support for Mental Health Services Act (Proposition 63)

F.     Emergency Medical Services Authority (Budget Item 4120)

1. Eliminate the Commission on Emergency Medical Services [Budget subcommittee staff recommends that the subcommittee approve the Governor’ May 16^th budget revision that proposes to eliminate this commission by adopting “placeholder” trailer bill language