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2010

Other Budget Issues

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Governor's Proposals.  The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) reauthorized the Children’s Health Insurance Program (CHIP) and established a number of new requirements for CHIP programs.  These new requirements have several budget-year impacts on the Healthy Families Program (HFP).  The MRMIB requests $7.2 million ($2.5 million from the General Fund) and 9.0 two-year limited-term positions for start-up costs related to implementation of three separate requirements: (1) so-called prospective payment system (PPS) for making federally required payments to federally qualified health centers (FQHCs) and rural health clinics (RHCs), (2) CHIP must programs meet certain standards that currently apply to Medi-Cal Managed Care programs, and (3) health and dental quality management activities, as well as a Consumer Assessment of Health Providers and Systems (CAHPS) survey.  Approximately $880,000 ($308,000 from the General Fund) would fund the related state positions, and approximately $6.3 million ($2.2 million from the General Fund) would be for local assistance activities, including payments to FQHCs and RHCs, funding for the CAHPS survey and for quality improvement projects, and for a contract with the administrative vendor to collect encounter and claims data from plans.  MRMIB is proposing to administer the PPS payments through an interagency agreement with Department of Health Care Services (DHCS) that administers the Medi-Cal program, because it already has such a system in place for making PPS payments.

Some level of permanent staffing will likely be required to administer the new functions on an ongoing basis, but at this time the position requests are limited-term since at least a portion of the new workload will be one-time in nature.  MRMIB states that the positions and funding requested reflect only the minimum needed for start-up.

Analyst’s Comment.  These proposals reflect the need for additional personnel and funding to implement several new federally mandated activities.  We concur with the need to increase personnel and funding in order to meet the new requirements, but also note that some requirements are not yet defined by the federal government.  We expect that the Centers for Medicare and Medicaid Services (CMS) will be issuing regulations to clarify what is federally required. The levels of funding for the various provisions proposed at this time are estimates based on incomplete information.  For example, the funding request for $2.9 million total funds to implement the health and dental quality management activities and the CAHPS survey is based on the DHCS’s $2.3 million cost for contracting for similar services for the Medi-Cal program, with the costs adjusted upward to account for (1) the cost to survey dental plans, which are not included in the Medi-Cal contract, and (2) the fact that the CAHPS survey had historically been conducted in five languages for HFP, and is only conducted in English and Spanish for Medi-Cal.  However, it is not yet known whether CMS will require the survey to be performed in five languages— therefore, the costs to conduct the federally required activities may be lower than what is proposed.  

We also note that MRMIB will likely submit future funding and position requests to fully implement CHIPRA based on forthcoming federal guidance and better estimates of ongoing cost and workload associated with the new activities. In particular, CHIPRA requirements regarding mental health, substance abuse, and dental benefits may require changes to the benefit package offered through HFP that will result in additional costs in the program.  According to MRMIB, it is not clear at this time whether the federal government believes that the state satisfies the CHIPRA requirements in these areas, or whether changes will be required. 

Finally, we note that many CHIPRA provisions applied requirements that already apply to Medicaid programs, to CHIP programs.  This is true for all three of the requirements discussed above.  Thus far, we are not aware that there is a clear strategy on coordination and integration of all of these activities between the DHCS and MRMIB.  As we stated in our report released earlier this month, The Patient Protection and Affordable Care Act: An Overview of Its Potential Impact on State Health Programs, recent changes in federal law create opportunities for the state to reevaluate its systems for administering and delivering health care programs.  There are a number of programmatic choices with respect to implementing CHIPRA requirements that MRMIB will make over the next couple of years, and the approach chosen may make it easier or more difficult for the state to streamline its administration of health care programs, should it choose to do so in the future.  For example, we believe the decision to administer the PPS payments through an interagency agreement with DHCS serves the state well in terms of reducing the number of systems for administering these payments, and will make the transition easier if the state chooses to eventually further simplify or consolidate its public health care programs.

Analyst’s Recommendation.   We recommend approving the administration’s request for $7.2 million and 9.0 two-year limited-term positions, along with budget bill language that (1) specifies the Legislature’s intent that the funding be used only for activities that are federally required, and (2) requires MRMIB to report in a letter to the Joint Legislative Budget Committee on the level of funding that is necessary to comply with federally mandated activities within 30 days of the promulgation of federal regulation by CMS. 

We further recommend that the Legislature direct MRMIB, as it decides on in its approach to complying with various CHIPRA provisions, ensure that the approach it pursues maximizes flexibility in order to facilitate the implementation of the federal Patient Protection and Accountable Care Act.  As such, MRMIB should give explicit consideration to where they can partner with DHCS to implement CHIPRA provisions.