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 sets forth requirements for private duty nursing and home health care under the Medi-Cal program.

Existing law imposes 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. Under existing law, proceeds from the MCO provider tax may be used, upon appropriation by the Legislature, for the increased costs incurred as a result of reimbursement requirements, among other things.

This bill would provide that, for the above-described reimbursement purposes, that private duty nursing services provided to a child under 21 years of age by a home health agency are considered specialty care services. included as an eligible category for Medi-Cal reimbursement through the above-described scheme.

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 sets forth requirements for private duty nursing and home health care under the Medi-Cal program.

Existing law imposes 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. Under existing law, proceeds from the MCO provider tax may be used, upon appropriation by the Legislature, for the increased costs incurred as a result of reimbursement requirements, among other things.

This bill would provide that, for the above-described reimbursement purposes, private duty nursing services provided to a child under 21 years of age by a home health agency are considered specialty care services.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

SB 1492 (Menjivar) - Medi-Cal reimbursement rates: private duty nursing

Bill Summary:

SB 1492 would add private duty nursing services provided to a child under 21 years of age by a home health agency as an eligible category for Medi-Cal reimbursement under the Managed Care Organization (MCO) provider tax.

Fiscal Impact:

Unknown, potentially significant ongoing costs pressures in the Medi-Cal program to provide increased reimbursements for private duty nursing services (Managed Care Enrollment Fund and Medi-Cal Provider Payment Reserve Fund).

Background:

Private duty nursing is nursing services provided at a Medi-Cal recipient’s home, under the direction of their doctor, to an individual who requires more individual and continuous care than is available from a visiting nurse. Under federal and state law, Medi-Cal eligible children under age 21 are entitled to all of the services they need, including private duty nursing.

Federal Medicaid regulations allow states to impose taxes on health care service providers to use as the non-federal share of spending for health care services in a state’s Medicaid program, which allows the state to draw down additional federal funding for those services. State Medicaid programs may receive federal financial participation for expenditures using health care-related taxes, as long as the taxes are broad-based, uniformly imposed, and contain no hold-harmless provisions. Current state law authorizes a tax on managed care organizations to generate funds for the Medi-Cal program, including to increase provider rates.

As part of the MCO tax, some provider rates for primary care, maternal care, and mental health care have already increased, effective January 1, 2024. DHCS has recently issued its proposal for other rate increases. State law directs DHCS to increase Medi-Cal rates in the areas of specialty care services, community or hospital outpatient procedures, family planning services and women’s health providers, hospital-based emergency and emergency physician services, ground emergency transport services, designated public hospitals, behavioral health care for beneficiaries in hospital and institutional long-term care settings, and investments to maintain and grow the workplace. Private duty nursing is not identified as an area for provider rate increases.

Proposed Law:

SB 1492 would add private duty nursing services provided to a child under 21 years of age by a home health agency as an eligible category for Medi-Cal reimbursement under the MCO tax.

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SENATE COMMITTEE ON HEALTH

Senator Richard Roth, Chair

BILL NO: SB 1492

SUBJECT: Medi-Cal reimbursement rates: private duty nursing

SUMMARY:

1. Adds private duty nursing services provided to a child under 21 years of age by a

home health agency as an eligible category for Medi-Cal reimbursement under the Managed Care Organization provider tax.

Existing law:

1. Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which low-income individuals are eligible for medical coverage. [WIC §14000 et seq.]
2. Establishes a schedule of benefits under the Medi-Cal program, which includes benefits required under federal law and benefits provided at the state’s option, both of which are funded with federal and state dollars. The schedule of benefits include home health care services as well as all medically necessary services covered under the federal early and periodic screening, diagnosis, and treatment (EPSDT) for individuals under 21 years of age. [WIC §14132, §14059.5]
3. Establishes the Managed Care Organization provider tax (MCO tax) and deposits the revenues from the tax in the Managed Care Enrollment Fund to fund, among other things, transfers to the Medi-Cal Provider Payment Reserve Fund. [WIC §14199.80-14199.87]
4. Establishes the Medi-Cal Provider Payment Reserve Fund to fund, among other things targeted increases to Medi-Cal provider payments effective no sooner than January 1, 2025. Requires DHCS to submit a plan to the Legislature for targeted increases to Medi-Cal provider payments in the following domains:
5. Primary care services, including those provided by physicians and nonphysician health professionals, obstetric care and doula services, and outpatient mental health services that are not the responsibility of county mental health plans;
6. Specialty services;
7. Community or hospital outpatient services;
8. Family planning services;
9. Hospital-based emergency and emergency physician services;
10. Ground emergency transport services;
11. Designated public hospitals;
12. Behavior health care in hospital and institutional long-term care settings; and,
13. Investments to maintain and grow the workforce. [WIC §14105.200, §14105.202]

This bill: Adds private duty nursing services provided to a child under 21 years of age by a home health agency as an eligible category for Medi-Cal reimbursement under the MCO tax.

FISCAL EFFECT:

This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, children with complex medical illnesses require constant high-acuity care that typically takes place in a hospital setting. However, that does not have to be the case. Private duty nursing is specialized, continuous skilled-care nursing care in the home for medically complex and vulnerable children under Medi-Cal. Many of these patients require assistive technology such as ventilators and tracheostomies to sustain life. Because California is experiencing a profound nursing shortage, many families are struggling to get nursing care for these children. Increases in the cost of nursing services have made current private duty nursing payment rates uncompetitive. This means that families are unable to bring their medically fragile children home from the hospital, forcing some children to spend their first, second, and third birthdays in the hospital. Under current law, private duty nursing would not qualify as specialty care for purposes of rate increases under the MCO tax. Unfortunately, this means that private duty nurses will not receive critically important Medi-Cal rate increases necessary to continue and expand operations to serve children with complex illnesses who need care at home. Without the availability of private duty nurses, these children must remain in the hospital, or parents must find alternatives to provide care for their children. This bill ensures the necessary Medi-Cal rate increases for private duty nursing and ensures more children can be at home with their loved ones.
2. Private duty nursing shortages in Medi-Cal. According to federal Medicaid regulations, private duty nursing is nursing services provided at a Medi-Cal recipient’s home, under the direction of their doctor, to an individual who requires more individual and continuous care than is available from a visiting nurse. Under federal and state law, Medi-Cal eligible children under age 21 are entitled to all of the services they need through the requirement of EPSDT, including private duty nursing. In 2018, a class-action lawsuit was filed against DHCS for failure to ensure that children received this in-home nursing care, despite authorizing the services as medically necessary care. In 2019, the parties settled with DHCS agreeing, among other things, to designate Medi-Cal managed care plans, California Children’s Services, and Home and Community Based Waiver Agencies to serve as case management service providers for affected class members to ensure that they receive in-home nursing care. While not part of the settlement agreement, a rate increase also went into effect.

According to a 2023 analysis by California Health Policy Strategies commissioned by the sponsors, due to lagging Medi-Cal reimbursement rates, there currently are not enough in-home nurses to care for the medically fragile children who are able to leave the hospital. Private duty nursing positions tend to be filled largely by licensed vocational nurses who are paid a much lower rate than registered nurses are. The analysis cites the current nursing shortage and the failure of the Medi-Cal reimbursement rate to keep pace with the labor market, which has otherwise increased wages for nurses as causes of the private duty nursing shortage. Lack of in-home nursing drives up costs through: a) hospital discharge delays; b) increased length of stay waiting for adequate home nursing coverage; c) increased likelihood of readmission within 90 days; and, d) overall increased likelihood of hospital admissions for children who are being cared for at home, but not receiving enough treatment due to lack of adequate nursing coverage. The study concludes that current inadequate spending levels for private duty nursing care resulted in a 300% increase in delayed hospital discharges and hospital readmissions. If Medi-Cal reimbursement rates were increased by 40%, so that the Medi-Cal home nursing reimbursements were as competitive as they were in 2020, the increased private duty nursing cost would be $314 million, but would save $490 million in unnecessary hospital costs. A February 2022 story by the Los Angeles Times highlighted families that have been unable to find home health nurses even after Medi-Cal raised the rate it pays agencies for some categories of in-home nurses as there are jobs for these nurses with higher wages and better working conditions elsewhere.

1. MCO Tax and targeted rate increases. Federal Medicaid regulations allow states to impose taxes on health care service providers to use as the non-federal share of spending for health care services in a state’s Medicaid program, which allows the state to draw down additional federal funding for those services. State Medicaid programs may receive federal financial participation (FFP) for expenditures using health care-related taxes, as long as the taxes are broad-based, uniformly imposed, and contain no hold-harmless provisions. AB 119 (Committee on Budget, Chapter 13, Statutes of 2023) reauthorized a tax on managed care organizations licensed by the Department of Managed Health Care or contracted with the Medi-Cal program to generate funds for the Medi-Cal program, including to increase provider rates. Last month, the tax rate was increased to generate additional funding via SB 136 (Committee on Budget and Fiscal Review, Chapter 6, Statutes of 2024).

As part of the MCO tax, some provider rates for primary care, maternal care, and mental health care have already increased, effective January 1, 2024. DHCS has recently issued its proposal for other rate increases, as required by the accompanying legislation outlining how the MCO tax would be spent, AB 118 (Committee on Budget, Chapter 42, Statutes of 2023), starting in 2025. As outlined in AB 118, the additional areas where DHCS was instructed to increase Medi-Cal rates includes specialty care services, community or hospital outpatient procedures, family planning services and women’s health providers, hospital-based emergency and emergency physician services, ground emergency transport services, designated public hospitals, behavioral health care for beneficiaries in hospital and institutional long-term care settings, and investments to maintain and grow the workplace. Private duty nursing is not identified as an area for provider rate increases.

1. Related legislation. A number of other bills also require increased rates in the Medi-Cal program:
2. SB 1033 (Menjivar) would require DHCS prepare and submit a cost study evaluating all operational costs associated with licensed congregate living facilities and to adjust rates consistent with the study. SB 1033 is set for hearing in this Committee on April 24, 2024.
3. SB 1423 (Dahle) would require DHCS to develop a rate methodology for critical access hospitals to ensure participating hospitals are reimbursed at a minimum of 100% of the projected and reasonable costs for Medi-Cal covered inpatient, outpatient, and emergency department services. SB 1423 is set for hearing in this Committee on April 24, 2024.
4. AB 2303 (Carrillo) would require DHCS to develop a minimum wage add-on as an alternative payment methodology to increase rates for federally qualified health center and rural health center services covered under the Medi-Cal program to account for the increase in minimum wage, subject to an appropriation. AB 2303 is pending in the Assembly Health Committee.
5. AB 2342 (Lowenthal) would require DHCS to provide an annual supplemental payment to each critical access hospital that operates on an island at least ten miles offshore that is still within the jurisdiction of the state (i.e. Catalina). AB 2342 is pending in the Assembly Health Committee.
6. Prior legislation. SB 136 (Committee on Budget and Fiscal Review, Chapter 6, Statutes of 2024) raised the tax on rate on MCMC plans in the existing MCO tax.

SB 870 (Caballero of 2023) would have renewed the expired MCO tax on an unspecified timeline and with unspecified rates and stated the intent of the Legislature that the MCO tax would serve, in part, as a vehicle to better fund Medi-Cal reimbursements and prevent the closure of rural hospitals. SB 870 was held on the Assembly Appropriations suspense file.

AB 118 (Committee on Budget, Chapter 42, Statutes on 2023) among other things, created the Medi-Cal Provider Payment Reserve Fund to deposit moneys from the MCO tax for specified purposes, including to increase provider payments for specified services.

AB 119 (Committee on Budget, Chapter 13, Statutes of 2023) authorized an MCO tax, effective April 1, 2023, through December 31, 2026, with revenues to be used to support the Medi-Cal program, including new targeted provider rate increases.

Support. Sponsors the California Association for Health Services at Home write that because of stagnant Medi-Cal reimbursement rates for private duty nursing, home health agencies have been unable to compete with hospitals and other facilities that are paying large sign-on bonuses to nurses. Private duty nursing wages have frozen, compelling many private duty nurses to seek employment elsewhere and crippling the ability of home health agencies to recruit and retain an adequate supply of professionals to meet the demand.

Supporters Disability Rights California, who served as counsel in the 2018 class action lawsuit, write that despite federal and state law requirements to cover private duty nursing, children are tragically prevented from returning home from the hospital, or forced to go without needed care due to wholly inadequate reimbursement rates. They state it is particularly difficult in urban areas like the Bay Area where they have clients who cannot find a nurse for even a portion of the hours needed. Leaving such children without any nursing services is a clear violation of federal and state law and is an issue that will have to be litigated if this bill is not passed. They also state that beyond the legal requirement and moral imperative of providing these services to children, increasing rates would save money. They do recommend that this bill also apply to individual nurse providers serving medically fragile children and not only home health agencies.

1. Policy comment. While this bill would add private duty nursing provided by home health agencies as an item eligible for a rate increase under the MCO tax, this bill should be decided within the MCO tax spending discussion that is currently occurring. DHCS has already issued its targeted provider rate increase proposal as part of the Governor’s proposed 2024-2025 budget as required by last year’s budget trailer bill and the proposal is expected to be finalized with this year’s budget.

SUPPORT AND OPPOSITION:

Support: California Association for Health Services at Home (sponsor)

Disability Rights California

Maxim Healthcare Services

Oppose: None received

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