Bill Text: CA SB870 | 2023-2024 | Regular Session | Amended
Bill Title: Medi-Cal: managed care organization provider tax.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Failed) 2024-02-01 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB870 Detail]
Download: California-2023-SB870-Amended.html
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Amended
IN
Senate
April 17, 2023 |
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Amended
IN
Senate
March 20, 2023 |
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Senate Bill
No. 870
| Introduced by Senator Caballero (Principal coauthor: Senator Padilla) (Coauthor: Senator Archuleta) |
February 17, 2023 |
An act to amend Sections 14199.60, 14199.61, 14199.64, 14199.65, 14199.66, and 14199.67 of the Welfare and Institutions Code, relating to Medi-Cal, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 870, as amended, Caballero.
Medi-Cal: managed care organization provider tax.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts with various types of managed care plans.
Existing law, inoperative on January 1, 2023, and to be repealed on January 1, 2024, imposed a managed care organization (MCO) provider tax, administered and assessed by the department, on licensed health care service plans and managed care plans contracted with the department to provide full-scope Medi-Cal services. Those provisions set forth taxing tiers and corresponding per enrollee tax amounts for the 2019–20,
2020–21, and 2021–22, fiscal years, and the first 6 months of the 2022–23 fiscal year. Under those provisions, all revenues, less refunds, derived from the tax were deposited into the State Treasury to the credit of the Health Care Services Special Fund, and continuously appropriated to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates, as specified.
Those inoperative provisions authorized the department, subject to certain conditions, to modify or make adjustments to any methodology, tax amount, taxing tier, or other provision relating to the MCO provider tax to the extent the department deemed necessary to meet federal requirements, to obtain or maintain federal approval, or to ensure federal financial participation was available or was not otherwise jeopardized. Those provisions required the department to request approval from the federal Centers for Medicare and Medicaid Services (CMS) as was necessary to implement those
provisions. In April 2020, CMS approved a modified tax structure that the department had submitted as part of a waiver request, involving taxing tiers that were based on cumulative Medi-Cal or other member months for certain fiscal years.
This bill would extend the above-described MCO provider tax to an unspecified date and would make conforming changes to the timeline of related provisions by incorporating other unspecified dates. The bill would reorganize the taxing tiers of the MCO provider tax, in a manner consistent with the above-described modified tax structure under the previous waiver, but with unspecified tax rate amounts. By extending the authority to fund the nonfederal share of Medi-Cal managed care rates from the continuously appropriated fund, the bill would make an appropriation.
This bill would make these provisions inoperative on an unspecified date, and would repeal the provisions as of
an unspecified date.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
Digest Key
Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:(a) The huge losses sustained due to the COVID-19 pandemic, in the amount of approximately $12 billion, and skyrocketing inflation, combined with severe underfunding of the state’s Medi-Cal reimbursement rates, have created a health care crisis that risks access to care for communities that need it most. Multiple hospitals throughout the state will be closing and are currently reducing the services that they offer, and many more are just weeks or months away from having to consider similar measures. The cost of providing care has skyrocketed, with a 16-percent increase in labor, a
41-percent increase in pharmaceutical costs, and a 19-percent jump in medical supplies.
(b) Exacerbating the current crisis is a structural problem with Medi-Cal reimbursement. As the state has expanded the number of Medi-Cal beneficiaries, reimbursement for their care has not kept pace. The state pays just 74 cents for each dollar that it costs to care for Medi-Cal beneficiaries, a rate that has not been adjusted in over a decade. Medi-Cal underfunding has created a two-tiered system of care that is exacerbating health care inequities.
(c) Hospital closures and service reductions are not prospective, on some far-off horizons. Rather, they are immediate and clear threats to health care in the communities that the Legislature represents in the state. An expert analysis affirmed
the likelihood that, in the coming months, even more hospitals will be forced to close or reduce services — a deeply troubling prospect for communities throughout the state.
(d) The managed care organization (MCO) provider tax under this act will serve, in part, as a vehicle to better fund Medi-Cal reimbursements and to prevent the closure of rural hospitals.
SEC. 2.
Section 14199.60 of the Welfare and Institutions Code is amended to read:14199.60.
It is the intent of the Legislature that the department implement a managed care organization provider tax effective July 1, ____, to provide ongoing funding for health care and prevention, minimize to the extent possible any need for new reductions to the program, and meet both of the following goals:(a) Generate an amount of nonfederal funds for the Medi-Cal program equivalent to the funds generated by the tax imposed pursuant to former Article 6.7 (commencing with Section
14199.50).
(b) Comply with federal Medicaid requirements applicable to permissible health care-related taxes, including, but not limited to, Section 433.68 of Title 42 of the Code of Federal Regulations.
SEC. 3.
Section 14199.61 of the Welfare and Institutions Code is amended to read:14199.61.
The following definitions shall apply for the purposes of this article:(a) “Base data source” means the quarterly financial statement filings submitted by health plans to the Department of Managed Health Care retrieved by the department as of _______, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved as of _______.
(b) “Base year” means the 12-month period of January 1, ____, through December 31, ____.
(c) “Countable enrollee” means an individual enrolled in a health plan, as defined in subdivision
(f), during a month of the base year according to the base data source. “Countable enrollee” does not include an individual enrolled in a Medicare plan, a plan-to-plan enrollee, as defined in subdivision (i), or an individual enrolled in a health plan pursuant to the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) to the extent the imposition of the tax under this article is preempted pursuant to Section 8909(f) subsection (f) of Section 8909 of Title 5 of the United States Code.
(d) “Department” means the State Department of Health Care Services.
(e) “Director” means the Director of Health Care
Services.
(f) “Health care service plan” or “health plan” means a health care service plan, other than a plan that provides only specialized or discount services, that is licensed by the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) or a managed care plan contracted with the State Department of Health Care Services to provide full-scope Medi-Cal services.
(g) “Medi-Cal member” means an individual enrolled in a health plan, as defined in subdivision (f), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(h) “Other member” means an
individual enrolled in a health plan, as defined in subdivision (f), who is not a Medi-Cal beneficiary.
(i) “Plan-to-plan enrollee” means an individual who receives their health care services through a health plan pursuant to a subcontract from another health plan.
SEC. 4.
Section 14199.64 of the Welfare and Institutions Code is amended to read:14199.64.
(a) A managed care organization provider tax shall be imposed on each health plan. The tax shall be imposed for the following fiscal years or periods:_______.
(b) The department shall compute the annual tax for each health plan subject to the tax during each applicable state fiscal year or period pursuant to Section 14199.65.
(c) The department shall collect the annual tax for each health plan in four installments and shall determine the amount due for each installment in the applicable state fiscal year or period by dividing the annual tax for that state fiscal year by four,
except for the _______ fiscal period, for which the department shall collect the applicable amount in two installments.
(d) The department shall not collect the tax imposed pursuant to this article until the department receives approval from the federal Centers for Medicare and Medicaid Services that this tax is a permissible health care-related tax in accordance with Section 433.68 of Title 42 of the Code of Federal Regulations and is eligible for federal financial participation.
(1) By _______, or within 10 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, whichever is later, the director shall certify in writing that federal approval has been received, and the department shall post the certification on
its internet website and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.
(2) By _______, or within 10 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, whichever is later, the department shall send a notice to each health plan subject to the tax that shall contain the following information:
(A) The annual tax due for each fiscal year or period.
(B) The dates on which the installment tax payments are due for each fiscal year or period.
(3) A health plan shall pay the annual tax in
installments as calculated pursuant to Section 14199.65, based on a schedule developed by the department. The department shall establish the date that each tax payment is due, provided that the first tax payment shall be due no earlier than 20 days following the date the department sends the notice pursuant to paragraph (2), and the tax payments shall be paid at least one month apart, but no more than one-quarter apart.
(4) A health plan shall pay the taxes that are due, if any, in the amounts and at the times set forth in the notice unless superseded by a subsequent notice issued by the department.
(e) The tax assessed pursuant to this article shall be paid by each health plan subject to the tax to the department for deposit in the Health Care Services Special Fund created
pursuant to Section 14199.62.
(f) (1) Interest shall be assessed on an applicable health plan for any amount of the managed care organization provider taxes that are not paid on the date due at a rate of 10 percent per annum. Interest shall begin to accrue the day after the date the tax payment was due and shall be deposited in the Health Care Services Special Fund created pursuant to Section 14199.62.
(2) If a tax payment is more than 60 days overdue, a penalty equal to the total accrued interest charge described in paragraph (1) shall also be assessed on the applicable health plan and due for each month for which the tax payment is not received after 60 days.
(g) (1) Subject to paragraph (2), the director may waive a portion or all of either the interest or penalties, or both, assessed under this article in the event that the director determines, in their sole discretion, that the health plan has demonstrated that imposition of the full amount of the tax pursuant to the timelines applicable under this article has a high likelihood of creating an undue financial hardship for the health plan or creates a significant financial difficulty in providing needed services to Medi-Cal beneficiaries.
(2) Waiver of some or all of the interest or penalties pursuant to this subdivision shall be conditioned on the health plan’s agreement to make tax payments on an alternative schedule developed by the department that takes into account the financial situation of the health plan and the potential impact
on the delivery of services to Medi-Cal beneficiaries.
(h) In the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees under this article from a health plan to another health plan or similar entity, and that occurs at any time during which this article is operative, the resultant health plan or similar entity shall be responsible for paying the full tax amount as provided in this article that would have been the responsibility of the health plan to which that full tax amount was assessed upon the effective date of any such transaction. If a merger, acquisition, establishment, or any other similar transaction results in the transfer of health plan responsibility for only some of a health plan’s countable enrollees under this
article but not all countable enrollees, the full tax amount as provided in this article shall remain the responsibility of that health plan to which that full tax amount was assessed.
SEC. 5.
Section 14199.65 of the Welfare and Institutions Code is amended to read:14199.65.
(a) Cumulative Medi-Cal member months from 0 to 675,000, inclusive, shall be taxed at the following rates: _______.(b) Cumulative Medi-Cal member months from 675,001 to 4,000,000, inclusive, shall be taxed at the following rates: _______.
(c) Cumulative Medi-Cal member months in excess of 4,000,000 shall be taxed at the following rates: _______.
(d) Cumulative other member months from 0 to 675,000, inclusive, shall be taxed at the following rates: _______.
(e) Cumulative other member months from
675,001 to 4,000,000, inclusive, shall be taxed at the following rates: _______.
(f) Cumulative other member months in excess of 4,000,000 shall be taxed at the following rates: _______.
(g) (1) The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other provision specified in this article to the extent it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain
federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized, provided the modification or adjustment does not otherwise conflict with the purposes of this article, or result in an increase in the aggregate tax amounts projected to be collected under this article that the department, in its sole discretion, determines is significant.
(2) If the department identifies that modification or adjustment is necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(3) In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Joint
Legislative Budget Committee, the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days of that modification or adjustment.
(h) The department shall request approval from the federal Centers for Medicare and Medicaid Services as is necessary to implement this article. In making that request, the department may seek, as it deems necessary, a request for waiver of the broad-based requirement, waiver of the uniformity requirement, or both, pursuant to Section 433.68(e)(1) and (2) of Title 42 of the Code of Federal Regulations, or a request for waiver of any other provision of federal law or regulation necessary to implement this article.
(i) Notwithstanding Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this article by means of provider bulletins, all-plan letters, or other similar instructions, without taking regulatory action. The department shall provide notification to the Joint Legislative Budget Committee and to the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days after the above-described action is taken.
SEC. 6.
Section 14199.66 of the Welfare and Institutions Code is amended to read:14199.66.
(a) The tax assessed under this article shall become effective and operative on July 1, ____, or the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, whichever occurs later. The director shall post the certification of federal approval on the department’s internet website and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.(b) This article shall cease to be operative the first day of the state
fiscal year beginning on or after the date the director, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.60, or the department has not obtained the federal approval necessary for receipt of federal financial participation. The director shall post the determination on the department’s internet website and send a copy of the determination to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
(c) This article shall cease to be operative the first day of the state fiscal year beginning on or after the effective date of a final judicial determination made by any court of appellate jurisdiction or a
final determination by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services that the tax assessed pursuant to this article or former Article 6.7 (commencing with Section 14199.50) cannot be implemented and any amount of the tax paid under this article or former Article 6.7 (commencing with Section 14199.50) shall be refunded. The director shall post a notification of that final judicial determination on the department’s internet website and provide this notification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
(d) Notwithstanding this section, any tax and any applicable interest and penalties imposed
under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
(e) Upon execution of the declaration described in subdivision (b) or subdivision (c), the director shall implement a plan, in consultation with the Department of Finance, to end the program consistent with the purpose of the article, including the recoupment of payments made under this article if required by a final judicial determination made by any court of appellate jurisdiction or a final determination made by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services.
SEC. 7.
Section 14199.67 of the Welfare and Institutions Code is amended to read:14199.67.
(a) This article shall become operative on July 1, ____, or the date specified in subdivision (a) of Section 14199.66 for purposes of assessing the tax under this article, whichever occurs later.(b) (1) This article shall become inoperative on January 1, ____, or on a date as specified in subdivision (b) or (c) of Section 14199.66, whichever occurs first, and as of January 1, ____, is repealed.
(2) Notwithstanding paragraph (1), any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until
the tax and any applicable interest and penalties are fully paid.
