Notes from Conference Call with CHHS Secretary Dooley and Medi-Cal Director Douglas about Governor's 2013-14 Budget Proposal

January 14, 2013

Secretary of the California Health and Human Services Agency Diana Dooley hosted a stakeholder conference call on January 10, 2013 to discuss the Governor’s budget proposal for Fiscal Year 2013-14. She was accompanied by Medi-Cal Director Toby Douglas, as well as officials from other departments.

Secretary Dooley began by announcing that the budget was balanced for the first time since the Great Recession began in 2008. She also indicated that the Governor planned to maintain a balanced budget going forward and that it would grow only in a manner reflective of the California economy and tax revenues. As the Governor mentioned in his press conference, he and his Administration strive to break the boom and bust nature of the state budget by allowing programs to grow responsibly while repaying debts and building a reserve fund.

Dooley continued by announcing that Governor Brown is committed to expanding Medi-Cal, California’s Medicaid program, consistent with the Affordable Care Act (ACA). She mentioned that there would be two components to this expansion: one mandatory and one optional. The mandatory option includes individuals who are currently eligible but not enrolled. These individuals will likely enroll as a result of improved education and outreach, simplified eligibility rules and enrollment processes, and a streamlined and automated redetermination process. The optional expansion refers to the newly eligible beneficiaries, for whom the state will receive full federal financing for three years and no less than 90% thereafter.

The Secretary additionally described two proposed options for implementing the optional Medi-Cal expansion: statewide and county-based. For the statewide option, the DHCS would build on its current program by contracting with current participating managed care plans and defining a uniform benchmark benefit that would exclude long-term care. In addition, Director Douglas mentioned that in the statewide option, the State would expect to realign to counties the responsibility for certain human services programs, such as child care, in exchange for the State’s Medi-Cal expansion replacing all or part of counties’ indigent health programs.

Under the county-based option, the counties would accept programmatic and fiscal responsibility for the expansion program, which would be based on the Low-Income Health Programs (LIHPs) already in place through the State’s 1115 waiver. In designing their programs, the counties would be required to meet statewide eligibility rules and offer the minimum benchmark benefit package that was outlined in the ACA and will ultimately be fully defined by California law. Under this option, counties would establish provider networks and payment rates, and process claims consistent with state and federal laws, except to the extent the state seeks a waiver.

Secretary Dooley noted that the State will require additional federal guidance to implement the Medi-Cal expansion. One example that she offered was needed guidance regarding what rules the state should follow to determine which individuals will be classified as newly eligible beneficiaries and which are previously eligible beneficiaries. This distinction will be consequential because it determines the rate of federal financing for health care services: 50% for pre-ACA eligible beneficiaries and 100% for newly eligible beneficiaries. This rate will remain at 100% from 2014 through 2016 and then gradually decline to 90%, remaining at that level thereafter.

The Secretary mentioned that counties and the state will see savings as a result of reductions in their uninsured populations as implementation of ACA coverage expansions move forward in the coming years. She said that the State will engage with the counties in a collaborative discussion in the coming months to define what the state and counties’ respective programmatic responsibilities and fiscal relationship will be as the Medi-Cal program expands and the number of uninsured residents declines.

Medi-Cal Director Toby Douglas responded to questions regarding the 10% reduction in Medi-Cal provider payment rates, which were delayed as a result of a lawsuit that was recently resolved in the State’s favor. He stated that the rate cuts will go into effect this year, beginning in June, and that they will be retroactive to the date when the rate cuts were originally planned to go into effect (6/1/2011). The reductions for managed care plans will be prospective; however the retroactive savings will be captured under the rubric “program efficiencies.”

Douglas additionally said that Medi-Cal payment rates for primary care providers would be restored to their previous levels (before the 10% reduction) to allow the state to access full federal financing for the ACA primary care rate increase to Medicare levels, which requires that the State maintain these payment rates at their levels on the date the law was passed.

When asked about managed care efficiencies in the Governor’s proposal, Director Douglas replied that the State expected to see cost savings from better care management through managed care expansions to seniors and people with disabilities (SPDs), rural areas, and individuals dually eligible for Medicare and Medicaid. He additionally noted that the gross premium tax on Medi-Cal managed care plans, which the budget proposal reauthorizes permanently, would be dedicated to the SPD transition to managed care and to sustain services for children and adults.

Director Douglas also discussed that the implementation of the dual eligible demonstrations in certain counties (Coordinated Care Initiative) would be delayed. The previous budget assumed that all counties would enroll all beneficiaries over 12 months, beginning in March 2013. This proposal assumes that enrollment in managed care will begin for Medi-Cal benefits in September 2013. Los Angeles County will conduct enrollment over 18 months, while San Mateo will enroll all beneficiaries at once. Orange, San Diego, San Bernardino, Riverside, Alameda, and Santa Clara counties will enroll beneficiaries over 12 months. These pilots would integrate and coordinate Medicare and Medicaid benefits in one managed care plan. Beneficiaries would be passively enrolled with the ability to subsequently opt-out of managed care for their Medicare benefits only.

Several callers voiced dissatisfaction the lack of any increase in funding for In-Home Supportive Services, which were also reduced in previous budgets. The call hosts responded by affirming that the cuts would remain in effect, pending the outcome of lawsuits to block their implementation.