CDCAN REPORT #182-2011: Brown Administration moves forward on Medi-Cal provider rate cuts

BROWN ADMINISTRATION MOVES FORWARD ON $623 MILLION MEDI-CAL PROVIDER RATE CUTS AFTER APPROVAL FROM FEDERAL GOVERNMENT

Department of Health Care Services Withdraws Medi-Cal Provider Cuts To Physician and Clinic Services for Children, Home Health Services, Subacute Distinct Part Nursing Facilities and Outpatient Hospital Services - Public Stakeholder Meeting To Answer Questions on Cuts To Be Held in Sacramento Next Week by Department of Health Care Services

SACRAMENTO, CA (CDCAN)  [Last updated 10/27/2011 08:20 PM]  - Saying that the State was committed to preserving and maintaining access to important Medi-Cal services while also achieving needed savings to close an enormous budget shortfall, the Brown Administration announced late this afternoon that it received approval from the federal government to go forward on implementation of over $623 million in Medi-Cal provider rate reductions impacting most - but not all - Medi-Cal providers.  The news comes as the State faces yet another year of an on-going and unresolved budget shortfall that could mean another round of spending cuts and other reductions in 2012.

It was not clear when the reductions would begin to take effect - though the budget related bill that authorized the cuts,. AB 97, required that the reductions would go into effect June 1, 2011, or retroactively back to that date when federal approval is obtained (or whatever date the federal government approves). A retroactive reduction, depending on how it is applied, could have a devastating impact on many Medi-Cal providers already reeling from other cuts and reductions.  
A pdf copy of the budget related bill can be viewed or downloaded at: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0051-0100/ab_97_bill_20110324_chaptered.pdf

Since the Brown Administration assumed in March and again in June that the federal government would eventually approve the State's new request to cut Medi-Cal provider rates, today's action - beyond its impact on people in the Medi-Cal program and Medi-Cal providers -  simply helps the State's budget hole from growing even larger.

Obama Administration Says It Is Providing California With "Requested Flexibility" To Resolve "Difficult Budget Circumstances"

The Centers on Medicare and Medicaid Services under the Obama Administration issued the following statement:today regarding the approval of the rate reductions saying that “we are providing California with requested flexibility to address their difficult budget circumstances while protecting the health care needs of Californians served by the Medicaid program. . .The state has submitted extensive data demonstrating that the remaining cuts will not jeopardize Californian’s access to care, and has agreed to ongoing monitoring of access to care for the affected services.”

The Brown Administration, in a statement released today, said that California’s request for the Medi-Cal provider reductions were approved only after the federal government concluded that the proposals  were "...fully supported by a thorough access analysis completed" by the department and were accompanied by a "...unique monitoring plan that will collect data to ensure that access to care is not compromised as the reductions are implemented."

Toby Douglas, director of the Department of Health Care Services, the state agency that oversees California's Medicaid program(called "Medi-Cal"), said in a prepared statement that the department was "...pleased that CMS [Centers for Medicare and Medicaid Services] has determined that these painful but necessary reductions comply with all federal access requirements. We value our provider partners and look forward to continuing our service to our most vulnerable populations. We will conduct ongoing monitoring and assessment of beneficiary access, thus ensuring they continue to receive essential health care services.”

10% Cut Would Hit Most Medi-Cal Providers - Though Some Are Exempted And Some Cuts Withdrawn

Toby Douglas,in a public conference call late this afternoon that drew over 500 participants from across the State,
said that the federal Centers on Medicare and Medicare Services (CMS) - the federal agency responsible nationally for the Medicare and Medicaid programs - approved the following Medi-Cal provider cuts that the State intends to implement:

• A 10% Medi-Cal provider payment reduction on a number of outpatient services, including physicians (for adults), clinics (for adults), optometrists, therapists, laboratories, dental, durable medical equipment, medical transportation, and pharmacy. [according to the budget trailer bill - AB 97,  that for those Medi-Cal providers with an existing 1% or 5% reduction in rates in place, their total new reduction would be total up to 10%]
• A new 10% Medi-Cal provider payment reduction for freestanding nursing and adult subacute facilities.
• A 10% Medi-Cal provider payment reduction and rate freeze for distinct part/nursing facility-B services.

Douglas said that in some cases, the department's analysis of the potential impact of a provider reduction showed that some cuts would "not be appropriate to ensure access" and caused them to reconsider and not go forward with the following Medi-Cal provider cuts:

• Physician and clinic services for children - provider cut will not be implemented
• Home health services - provider cut will not be implemented
• Distinct part Subacute care facilities - provider cut will not be implemented.
• Outpatient hospital services - provider cut will not be implemented [this was rescinded due to later budget actions after March 2011]
• The Department of Health Care Services, in its announcement late this afternoon, said it is still reviewing some long-term care services to determine if additional proposed reductions should be reduced or if any additional reduction would be "appropriate". The department provided no specifics however on what services are being reviewed.

Status of Other Medi-Cal Related Cuts

According to the Department of Health Care Services, the federal Centers for Medicare and Medicaid Services previously took action or is still waiting to take action on the following requests:

• Approved the State's request to cap Medi-Cal optional benefit coverage of hearing aid benefits at $1,510 per Medi-Cal recipient for each State budget year (July 1 through June 30th).
• Approved the elimination, effective December 1, 2011, of Adult Day Health Care as a Medi-Cal optional benefit.
• Approved some previous proposals dating back to 2008 for payment reductions as authorized by previous budget legislation.  Some of those reductions that are not blocked by a court order will now be implemented, according to Douglas.
• Still NOT approved and pending further discussions between the State and the Centers on Medicare and Medicaid Services are several other 2011-2012 State Budget Medi-Cal related proposals including instituting a "soft cap" or limit of seven visits for physicians and clinics by Medi-Cal recipients; and requiring co-payments on most Medi-Cal covered services. Those reductions have not yet been approved by the federal government and have not yet been implemented by the State.  These issues were not discussed in today's (October 27th) brief conference call.

Department of Health Care Services Will Hold Public Stakeholder Meeting Next Week On Cuts

Douglas, at the end of the public conference call today (October 27th) said that because the numbers of participants on the call totaled over 500 did not allow for any questions to be asked, a public stakeholder meeting will be held in Sacramento next week for that purpose.  Location and time and other details will be announced [CDCAN will send out information as soon as it is available].

Over 7.4 Million Californians In Medi-Cal Program - Though Impact of Cuts Will Vary

Over 7.4 million Californians including over 1.7 million who are children and adults with disabilities, persons who are blind and seniors are enrolled in California's Medi-Cal program - though the impact of the reductions would vary depending on the types of services a person uses and needs. . The total number of Californians on the Medi-Cal program is nearly 19% of the State's over 38 million population.

Cuts Part of the 2011-2012 State Budget

Since the Brown Administration assumed in March and again in June that the federal government would eventually approve the State's new request to cut Medi-Cal provider rates, today's action - beyond its impact on people in the Medi-Cal program and Medi-Cal providers -  simply makes the State's budget hole from growing even larger.

• The Medi-Cal provider rate reductions were authorized by AB 97 which was passed by the Legislature on March 16, 2011 and signed by the Governor on March 24, 2011.
• Later budget related legislation passed in June as part of the final 2011-2012 State Budget, also impacted Medi-Cal services.
• The total Medi-Cal cuts in the 2011-2012 State Budget was over $2 billion in State general funds.
• The Medi-Cal cuts was part of the overall $15 billion reductions in State general spending in the 2011-2012 State Budget (some of which included fund shifts and new federal money - but the bulk was actual spending cuts).

Other reductions in health and human services beyond Medi-Cal in the current 2011-2012 State Budget includes:

• $861 million reduction for mental health services
• $567 million reduction in State general fund spending to developmental services (some of which resulted from fund shifts and new federal money)
• $413 million cut in State general fund spending to In-Home Supportive Services (some coming from new federal money)
• $178 million cut in State general funds due to cutting SSI/SSP (Supplemental Security Income/State Supplemental Payment individual grants to the lowest amount allowed by the federal government.
• $837 million cut in State general funds to CalWORKS - the State's "welfare to work" program that includes many children and adults with special needs and disabilities.

These reductions do not include possible additional cuts of up to $2.5 billion that are contained in State budget "trigger cuts" including  $100 million in additional reductions to In-Home Supportive Services and $100 million in additional cuts to developmental services if it is determined by the Governor's Department of Finance that State revenues will fall below a certain amount than what is projected in the 2011-2012 State Budget.  Nor does it include the possible impact of additional cuts that could come from the federal government as a result of the federal "trigger cuts" or the recommendations by the special congressional joint committee - called the "Super Committee" for other cuts in federal spending.

New Round of Lawsuits Likely

• Advocates from various provider groups or groups representing various Medi-Cal recipients have indicated their intention to try to block the latest round of reductions with new lawsuits to be filed soon.
• Some lawsuits - filed in 2008 - have stopped certain Medi-Cal provider reductions from going forward, including pharmacies and Adult Day Health Care.
• Some of those cases are now pending by the US Supreme Court after a hearing held on October 3, 2011. A ruling by the nation's highest court could come as early as December or as late as June and depending on how narrow or broadly the decision is written, could have enormous impact on some or all of the Medi-Cal related lawsuits filed and still pending in the lower federal courts.
• Until then, those lawsuits pending before the US Supreme Court or in the lower courts however do not stop the implementation of new Medi-Cal provider rate reductions as approved today by the federal government, that were part of the 2011-2012 State Budget.
• New legal action in the courts would be required to block those cuts from moving forward.

More Information and Data Submitted From State to Federal Government That Cuts Won't Hurt Access to Services

Douglas said during the conference call that there was a commitment "...that we preserve access to services.  We looked at this carefully and analyzed the data and really took to heart the Legislature's and the Governor's intent that we should implement these reductions but comply with all rules and make sure we continue to provide access.  And that's what we did. In some cases, we believed that it was important not to make the reductions."

He said that California provided the federal government with the request for various Medi-Cal provider rate reductions contained in a proposal called a "State Plan Amendment" (SPA) along with information and data on the impact to access to services as a result of a rate reduction.  He during the conference call that the basis for making decisions on requesting approval from the federal government on certain Medi-Cal providers - and not moving forward on some was based on the following factors to determine if the State had sufficient access to those services (if a reduction in rates were made):

• Utilization (use of service) trends for available services
• Medi-Cal provider participation and concentration of where those providers, by different groups in the fee-for service program (the program where a recipient pays - thru Medi-Cal - for each visit, treatment or service as opposed to managed care)
• Geographic regions
• Capacity for institutional type services such as nursing facilities
• Also looked at national indicators (data) and national benchmarks regarding access to different services and comparing those to what is available  in California's Medi-Cal program

Douglas promised that all the materials - the information and analysis and actual State Plan Amendment - including the State's analysis on where they should go forward on a Medi-Cal provider rate reduction and where they should not - would be made public on the department's website soon [CDCAN will issue links to this information as it becomes available].

Douglas Says Department Developed "Groundbreaking" Monitoring on Access to Services To Help Determine Impact of Rate Reductions

A key component, according to Douglas, of the implementation of the new round of Medi-Cal provider rate reductions is development by the Department of Health Care Services of a new process that it believes will monitor and measure on an on-going basis, access to Medi-Cal services to ensure that Medi-Cal recipients will always have appropriate access to health care in their communities.

Douglas said during the conference call today that the department's new process was "groundbreaking" and that its framework for monitoring access to Medi-Cal includes such factors as:

• State population groups (demographics) and health composition
• National and state economic and political influences
• Realized (actual) Medi-Cal recipient access to health care services and health care outcomes

Douglas said that the Department of Health Care Services selected 23 measures identified in three key areas (Medi-Cal recipient measures, Medi-Cal provider availability and service use and outcomes) that came from the Medicaid and Children's Health Insurance Program (CHIP) Payment and Access Commission’s report to Congress.

Douglas was optimistic that combined with the factors guiding the monitoring of access, these measures provide a "comprehensive" real picture of health care access in the Medi-Cal program.