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Program Enhancements and Other Budget Adjustments
Department of Health Care Services
The Department of Health Care Services (DHCS) works to ensure that eligible persons and families receive comprehensive health services. By ensuring the appropriate and effective expenditure of public resources to serve those with the greatest health care needs, DHCS promotes health and well-being.
MEDI-CAL
Medi-Cal, California's Medicaid program, is a health care entitlement program for low-income individuals and families who receive public assistance or lack health care coverage. Medi-Cal serves an estimated 6.6 million people each year, or more than one in six Californians (see Figure HHS-02).
Federal law requires Medi-Cal to provide basic services, such as doctor visits, laboratory tests, x-rays, hospital inpatient and outpatient care, hospice, skilled nursing care and mental health screening, diagnosis and treatment services for children until age 21. A wide range of public and private providers and facilities deliver these services. Providers are reimbursed by the traditional fee-for-service method or by payments from managed care plans.
2007-08 Expenditures
Medi-Cal expenditures are estimated to be $37 billion ($14.1 billion General Fund), a General Fund increase of 3.2 percent above the budgeted 2006-07 level. This increase is due primarily to increased caseloads and costs for services. General Fund expenditures for 2007-08 are estimated to be $206.5 million less than the Budget Act of 2007, due mainly to the proposed additional one-week delay in the fee-for-service provider payments. Figure HHS-03 displays year-to-year comparisons of Medi-Cal costs and caseload.
2008-09 Expenditures
The Governor's Budget includes $36 billion ($13.6 billion General Fund), a decrease of $962.3 million ($472.1 million General Fund) from the revised 2007-08 budget and a decrease of $915.9 million ($678.7 million General Fund) from the Budget Act of 2007. The General Fund decrease primarily reflects implementation of quarterly status reports and reductions in benefits and provider rates. Figure HHS-04 displays annual General Fund costs per average monthly eligible person.
Other departments, such as the Department of Developmental Services, have programs that are eligible for federal Medicaid reimbursement. Federal funding for these programs is included in Medi-Cal expenditure totals, but state and local matching funds of more than $5.6 billion appear in the budgets for the other state agencies or local governments.
Caseload
Average monthly caseload is forecasted to be 6.6 million persons in 2008-09, a decrease of approximately 73,900 people, or 1.1 percent, compared to 2007-08. This overall decrease compares to an expected 1.2 percent increase in the state's population for the same period. This decrease is due primarily to the proposed implementation of the quarterly status reports for children and parents.
The number of families enrolled in Medi-Cal through their public assistance cash grant eligibility had been declining since 1995 but is now showing a slight increase. These enrolled individuals will represent 18 percent of all Medi-Cal enrollees in 2008-09. In addition, the share of enrollees comprised of seniors and persons with disabilities is expected to increase by 1.7 percent, to approximately 1.4 million beneficiaries in 2008-09. Figure HHS-05 reflects Medi-Cal caseload by eligibility category.
Figure HHS-06 shows federal data from 2006-07 (the most recent information available) for the ten most populous states. By percentage of state population, California served 17.7 percent of state residents, exceeded only by New York, which served 21.7 percent.
California has one of the lowest average cost-per-beneficiary rates in the nation: $5,535 per beneficiary, versus a national average of $7,257 per beneficiary. California has achieved this relatively low-average cost primarily through negotiated hospital and drug rebate contracts, a high level of utilization review, extensive prepayment controls, extensive anti-fraud efforts and conservative provider rate reimbursements. Further, some program expansion populations, such as working parents and children, have resulted in a lower cost per eligible person.
Pharmaceuticals
The cost of drugs continues to increase dramatically, and pharmaceutical costs are a significant growth factor of all health care costs. Technological advances in the development of new drugs and increased advertising of new and more expensive drugs have contributed to rising costs. To control costs, Medi-Cal utilizes contracts for drugs and has a state rebate program. Medi-Cal will spend $1.463 billion General Fund in 2007-08 and $1.442 billion General Fund in 2008-09 for drugs. Rebates are projected to secure approximately $533.4 million General Fund savings in 2007-08 and $587.6 million General Fund savings in 2008-09. Net drug costs in the program are projected to be $929.5 million General Fund in 2007-08 and $854.6 million General Fund in 2008-09.
To limit the increase in prescription drug costs and align the program with federal requirements, the 2007 Budget Act included a savings proposal to switch the basis used to establish the drug reimbursement component of pharmacy claims in Medi-Cal from the Average Wholesale Price (AWP) to the Average Manufacturer Price (AMP). The first step in this process was to be the publishing of AMP data for generic pharmaceuticals in January 2008 by the Centers for Medicare and Medicaid Services (CMS). However, the United States District Court for the District of Columbia issued a preliminary injunction on December 14, 2007 barring CMS from releasing the AMP data or imposing any reductions in the Federal Upper Payment Limit for generic pharmaceuticals.
Because of the uncertainty regarding when, or if, CMS can release the necessary AMP data, no savings are being assumed for 2007-08. In 2008-09, savings are projected to be $4.7 million ($2.3 million General Fund) based on the anticipated settlement of a lawsuit with First Data Bank, which will result in a reduction of the selling price for brand name drugs. The settlement with First Data Bank was the second step in the savings proposal and is not impacted by the recent injunction regarding AMP data.
Managed Care
The Medi-Cal Managed Care Program is a comprehensive, coordinated approach to health care delivery designed to improve access to preventive primary care, improve health outcomes and control the cost of medical care. Approximately 3.3 million Medi-Cal beneficiaries (half of the people receiving Medi-Cal benefits and services) are currently enrolled in managed care plans. Managed care enrollment is projected to remain at 3.3 million enrollees through 2008-09. Funding for managed care plans will be $5.8 billion ($2.9 billion General Fund) in 2008-09.
As initiated in the Budget Act of 2005, the state is scheduled to transition the first 3 of 13 additional fee-for-service counties to managed care beginning in early 2008 with Marin, Placer and San Luis Obispo counties.
PROGRAM ENHANCEMENTS AND OTHER BUDGET ADJUSTMENTS
Adult Day Health Care Reform - The Governor's Budget includes $2.4 million ($1 million General Fund) and 19 positions to continue program reforms and develop a new rate methodology to increase California's ability to retain federal funding and help ensure services remain available for qualified beneficiaries, as required by Chapter 691, Statutes of 2006 (SB 1755).
Provider Enrollment Automation Project - The Governor's Budget includes $2.4 million ($0.6 million General Fund) to purchase and implement a provider enrollment case and document tracking system. This system will streamline the provider enrollment process, thereby shortening the time it takes to enroll providers in Medi-Cal.
Money Follows the Person Demonstration Grant - The Governor's Budget includes $0.2 million ($0.1 million General Fund) and 1.9 positions to begin implementation of the California Community Transitions (CCT) program as part of the Money Follows the Person Demonstration Grant. The goal of this program is to transition Medi-Cal eligibles from high-cost institutions such as acute hospitals and nursing facilities, into lower-cost home- and community-based care settings.
Medi-Cal Eligibility Data System (MEDS) Security Fixes - The Governor's Budget includes $1.8 million ($0.6 million General Fund) and 15.2 positions to enhance data security of MEDS and implement changes contained in the remediation plan signed with the federal Social Security Administration in June 2007.
Implementation of Chapter 328, Statutes of 2006 (SB 437) - The Governor's Budget includes $26.4 million ($13.1 million General Fund) and 1.9 positions to continue the simplification and acceleration of enrollment in Medi-Cal as well as to establish a two-county pilot program that will allow Medi-Cal beneficiaries to self-certify their income and resources at their initial application and during their redetermination process.
Provider Payment Reductions - As part of the budget balancing reductions, the Governor's Budget proposes to reduce 2007-08 by $66.8 million ($33.4 million General Fund) and 2008-09 by $1.4 billion ($704.3 million General Fund) through a 10-percent provider payment reduction on most fee-for-service and managed care providers, non-contracted hospitals, and certain long-term care facilities for services provided to Medi-Cal beneficiaries and participants in the California Children's Services program and the Genetically Handicapped Persons program. This proposal will not reduce specific reimbursement rates for individual services, but will be applied at the end of the payment cycle.
Reduction of Certain Optional Medi-Cal Benefits for Adults - As part of the budget balancing reductions, the Governor's Budget proposes to reduce 2007-08 by $20.2 million ($10 million General Fund) and 2008-09 by $268.2 million ($134 million General Fund) by reducing the number of optional benefits provided for adults over the age of twenty-one who are not in a nursing facility. The eliminated optional benefits include incontinence creams and washes, acupuncture, adult dental, audiology, optometry, optical, chiropractic, podiatry, psychology, and speech therapy. The elimination of adult dental benefits accounts for $115 million of the total $134 million in General Fund savings. The elimination of these optional benefits will mean the loss of access to these services through the Medi-Cal program.
Elimination of Continuous Eligibility and Reinstatement of Quarterly Status Reports - As part of the budget balancing reductions, the Governor's Budget proposes to reduce 2008-09 by $184.4 million ($92.2 million General Fund) by reducing the 12 month eligibility period for children and the semi-annual eligibility period for parents in Medi-Cal and reinstitute quarterly status reports. This proposal would not change the income or asset limits for program eligibility, but would require beneficiaries to report income every three months so that they can be disenrolled if their income or assets are above the maximum. The family will be referred to share-of-cost Medi-Cal or the children bridged to the Healthy Families Program if they appear to meet income eligibility requirements for those programs.
CHILDREN'S MEDICAL SERVICES
Children's Medical Services includes the California Children's Services (CCS) program, the Child Health and Disability Prevention (CHDP) program, and the Genetically Handicapped Persons Program (GHPP). Expenditures for 2007-08 are projected to decrease $5.5 million (an increase of $1 million General Fund) from the 2007 Budget Act, primarily due to a reduction in Medi-Cal cases and an increase in non-federally eligible cases. This potential deficiency will be included in a Supplemental Appropriations Bill.
For 2008-09, expenditures for these programs are projected to be $287.5 million ($109.6 million General Fund), a decrease of $28.3 million General Fund, or 20.5 percent from revised 2007-08 expenditures. This net decrease is primarily the result of anticipated implementation of the budget balancing reductions that include a provider rate reduction and the transfer of federal Safety Net Care Pool funds to the CCS and GHPP programs, which will free up an equivalent amount of General Fund. Program enrollment is projected to grow from 74,956 children by year-end 2007-08, to 76,094 children by year-end 2008-09, for a total increase of 1,138 children, or 1.5 percent.
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