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2010

Other Budget Issues

Last Updated: 5/20/2010
Budget Issue: Proposed Changes to California Medical Assistance Commission (CMAC)
Program: California Medical Assistance Commission
Finding or Recommendation: Recommend the Legislature adopt the Governor’s proposal to transfer contract negotiations for GMC health care plans to DHCS because we believe this action will likely achieve savings and may administratively streamline these contract processes. We have concerns with the Governor’s other proposals to shift other responsibilities to DHCS and allow the Department of Finance to reduce or eliminate CMAC appropriations in the budget year, because we believe they are premature.
Further Detail

Proposed Changes to CMAC

The California Medical Assistance Commission (CMAC) negotiates for certain hospitals inpatient hospital rates and supplemental payments as well as Geographic Managed Care health plan contracts on behalf of DHCS. To support these activities, CMAC has 16 full-time staff and a board with seven voting and two ex-officio members. Total budgeted expenditures are $2.6 million ($1.3 million General Fund) in 2010-11.

The Governor’s May Revision proposes the following changes related to CMAC:

  • Transfers Authority for Geographic Managed Care (GMC) Contract Negotiations to DHCS. The Governor proposes to transfer GMC health plan contract negotiation responsibilities to DHCS for total savings of $680,000.  Furthermore, the administration indicates that some unknown number of CMAC staff will transfer to DHCS. The DHCS is not requesting additional position authority. It is not clear if DHCS would need additional staff to take on these responsibilities.
  • Authorizes Other Changes to CMAC by Department of Finance. The administration proposes budget trailer bill language that would give the Director of the Department of Finance (DOF) authority to transfer responsibilities for determining the allocation of hospital supplemental payments, such as the Emergency Services Supplemental Payment program, to DHCS. This language would also authorize the Director to reduce or eliminate appropriations made to CMAC.

Analyst’s Comments.  California’s hospital financing landscape may change significantly over the next several years and we believe it is reasonable for the Legislature to consider the role and value of CMAC. There will likely be significant changes in hospital reimbursement due to a new hospital fee authorized by Chapter 627, Statutes 2009 (AB 1383, Jones) if the fees are federally approved. Furthermore, as part of the new 1115 waiver implementation plan, the administration has indicated its intent to work with the hospital industry to move private hospitals away from a per diem rate system to a diagnosis related group (DRG) payment instead. (DRGs are a way of classifying hospital cases into groups that are likely to have comparable resource use based on diagnosis, age and other patient related factors). A transition to such a payment system would also likely diminish CMAC responsibilities.

Analyst’s Recommendation. We recommend the Legislature adopt the Governor’s proposal to transfer contract negotiations for GMC health care plans to DHCS because we believe this action will likely achieve savings and may administratively streamline these contract processes. This transfer also appears consistent with other transfers of responsibilities to DHCS regarding County Organized Health System managed care plans.

We have concerns with the Governor’s other proposals to shift other responsibilities to DHCS and allow the Department of Finance to reduce or eliminate CMAC appropriations in the budget year, because we believe they are premature. Given the significant potential changes to the hospital financing landscape we described above, we believe it is reasonable for the Legislature to consider the future role and value of CMAC.  However, this issue may be more appropriately discussed in a policy committee.