Proposed Budget: Impact on California s Older Adults and People with Disabilities

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1 Proposed Budget: Impact on California s Older Adults and People with Disabilities Fact Sheet January 2015 This fact sheet summarizes the key initiatives and program adjustments in California s proposed budget that impact the state s older adults and people with disabilities GF Resources $114.8 Billion GF Expenditures $113.3 Billion Governor Brown s proposed budget reflects General Fund resources of $114.8 billion and anticipated expenditures of $113.3 billion.

2 Overview On January 9, 2015, California Governor Edmund G. Brown, Jr. released his proposed budget, outlining his spending plan for the fiscal year beginning on July 1, 2015 and ending June 30, The proposed budget reflects an improved fiscal picture for California, with total General Fund (GF) resources of $114.8 billion and anticipated expenditures of $113.3 billion. 1-3 The budget reflects $3.3 billion in total reserves, including $534 million in the regular reserve, and $2.8 billion in the Budget Stabilization Account 3, referred to as the Rainy Day Fund, in accordance with Proposition 2, the voter-approved Constitutional amendment. 4 This fact sheet addresses items impacting older adults and people with disabilities. Financing Proposal: Managed Care Organization Tax Background: The Managed Care Organization (MCO) tax, a revenue tax on Medi-Cal managed care plans authorized in Chapter 33, Statutes of 2013 (SB78), is a key financing resource for certain Medi-Cal funded long-term services and supports (LTSS). Half of these total funds draw down federal matching funds and reimburse Medi-Cal managed care plans for the incurred taxes. The other half of the funds will offset GF expenditures for Medi-Cal managed care rates. 9 The federal government released guidance indicating that California s current MCO tax is inconsistent with federal Medicaid regulations because it only applies narrowly to Medi-Cal managed care plans. The current tax will no longer be allowed after it expires in June 30, Proposed Budget: The budget includes a GF offset from current MCO tax of $803 million in and $1.1 billion in Additionally, the governor seeks to replace the current tax with a broad-based MCO tax in 2016 that complies with federal law. This new tax will apply to all managed care plans regulated by Department of Managed Health Care and/or the Department of Health Care Services, and must raise the same amount of general fund savings as the current tax

3 Long-Term Services and Supports Coordinated Care Initiative The proposed budget says Background: The Coordinated Care Initiative (CCI) changed how medical care and LTSS that CCI is at risk if state systems are provided for low-income older savings are not realized. adults and people with disabilities. 5,6 The main components of the CCI include: 1) provisions of Cal MediConnect; 2) mandatory enrollment of dual eligible beneficiaries (individuals eligible for both Medicare and Medi-Cal, California s Medicaid program) into Medi-Cal managed care; and 3) integration of Medi-Cal-funded LTSS into managed care. 7 The CCI is slated for implementation in seven counties (Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, and Santa Clara). Operations began April Proposed Budget: The proposed budget assumes the CCI will have a GF savings of $176.1 million in , primarily attributed to the MCO tax. Several changes have occurred since the CCI was established through the 2012 Budget Act, affecting current budget projections. Changes include the following: exemptions for specific populations; enrollment delays; reduced savings shared with the federal government; required revisions to the current MCO tax in 2016; higher than expected opt-out rates of Cal MediConnect; and increased In-Home Supportive Services (IHSS) costs due to new U.S. Department of Labor regulations. Recent analysis shows that the CCI could result in net costs in and beyond without solutions to improve participation, address the MCO tax, and lower state costs. Of these, the governor s budget specifically proposes a revised, broad-based MCO tax aligned with federal regulations. If the CCI does not generate program savings, the state will stop operations in January In-Home Supportive Services (IHSS) Background: The IHSS program provides in-home personal care assistance to low-income adults who are over 65 years of age, blind, or disabled, and to children who are blind or disabled. Services include assistance with bathing, feeding, dressing, and/or domestic services such as shopping, cooking, and housework so that individuals can remain safely in 3

4 their own homes. County social workers assess individuals using a standardized assessment to determine need and then authorize service hours per month based on functional scores. IHSS is expected to serve 463,000 recipients per month on average in Proposed Budget: The proposed budget includes $8.2 billion ($2.5 billion GF) for the IHSS program in , a 14.4 percent increase over the revised level. Restoration of Seven Percent Across-the-Board Reduction: The budget proposes to restore the current seven percent across the board reduction in service hours with proceeds from the revised MCO tax, effective July 1, The cost to restore the seven percent reduction is estimated to be $483.1 million in The governor proposed restoration of the seven percent reduction in IHSS service hours, a program serving 463,000 people a month. Federal Overtime Regulations: A federal district court has ruled that a portion of the U.S. Department of Labor regulations requiring overtime pay for domestic workers exceeds the Department of Labor s authority and has halted implementation of the regulations. In light of the federal district court ruling, the state has halted implementation of overtime and related requirements, including compensation for providers traveling between multiple IHSS recipients, wait time associated with accompanying recipients to medical appointments, and time spent in mandatory provider training. 1,8 Other Medi-Cal Proposals Annual Open Enrollment for Specified Medi-Cal Managed Care Enrollees Background: Currently, people using Medi-Cal are able to switch health plans each month. Proposed Budget: The governor s budget proposes changing to an annual open enrollment period for certain Medi-Cal beneficiaries required to enroll in a Medi-Cal managed care plan. However, older adults, people with disabilities, people fully eligible for both Medi-Cal and 4

5 Medicare, people in counties with only one Medi-Cal health plan, and adults newly eligible through the Affordable Care Act expansion are excluded from this proposal. Individuals can still apply for and be enrolled in Medi-Cal at any time during the year. 10 Skilled Nursing Facility Quality Assurance Fee Background: Current law authorizes a quality assurance fee on skilled nursing facilities that leverages additional federal funding to offset GF expenditures in these facilities. Authority for the current quality assurance fee lasts through July 31, 2015, and includes a three percent increase in reimbursement rates in and Proposed Budget: The governor s budget proposes continuation of the fee for an additional five years, including annual rate increases of 3.62 percent beginning in August Other Program Changes Supplemental Security Income/State Supplementary Payment (SSI/SSP) Background: The federal SSI program provides a monthly cash benefit to eligible aged, blind, and disabled persons who meet the program s income and resource requirements. The federal Social Security Administration (SSA) administers the SSI/SSP program, making eligibility determinations, grant computations, and issuing combined monthly checks to recipients. In California, the SSI payment is augmented with an SSP grant. The SSA applies an annual cost of living adjustment to the SSI portion of the grant equivalent to the year over year increase in the Consumer Price Index. Effective January 2015, maximum SSI/ SSP grant levels are $881 per month for an individual and $1,483 per month for couples. The average monthly caseload in this program is estimated to be 1.3 million recipients in , a slight increase over the projected level. Proposed Budget: The proposed budget includes $2.8 billion GF increase for the SSI/SSP program, passing through the federal cost-of-living adjustment for SSI/SSP recipients (1.7 percent for 2015 and a projected 1.5 percent for 2016). These changes keep the SSI/SSP grant levels at their minimum as allowed under federal law for both couples and individuals in order to maintain eligibility for Medicaid funding. 1,3 5

6 Community Care Licensing Background: The Department of Social Services (DSS) Community Care Licensing (CCL) Division oversees the certification of approximately 66,000 licensed community care facilities, including residential care facilities for the elderly, adult residential facilities, child care centers, family child care homes, as well as foster family and group homes. Prior to , most facilities licensed by CCL were required to be visited annually. Budgetrelated legislation enacted in 2003 lengthened the intervals between visits for most facilities from one year to five years. 11 The enacted budget included funding for quality enhancement and program improvements, as well as the 10 percent increase for licensing fees in order to improve the structure of the CCL program. Proposed Budget: The proposed budget includes $3 million GF and 28.5 state positions to address a backlog of facility complaint cases and expand training and technical assistance to implement quality enhancement and program improvements. Beginning in January 2017, DSS will begin increasing inspection frequency to every three years for all facilities, every two years by 2018 for all facility types except child care, and annually by 2019 for adult day care and residential care facilities for the elderly, with ongoing GF expenditures totaling $14 million. 1 What s Next in the Budget Process The governor s proposed budget requires approval by the Senate and the Assembly. The Legislature will deliberate the budget through a series of subcommittee hearings in each house, from March through May. In May, the governor will release an updated revenue forecast, referred to as the May Revision, which accounts for changes in revenues and proposed changes to the January budget. Each subcommittee votes on its respective issue area(s) in the budget and submits a report to the full budget committee for a vote. From the floor, each house s budget bill is referred to a joint budget conference committee where differences between the houses can be resolved. The conference committee votes on a compromise version, which if passed, is sent to the floor of each house simultaneously. 6

7 By law, the Legislature must approve the budget by June 15 th in time for the governor to sign it by July 1 st. The provisions of California s Proposition 25 lower the vote requirement for approving the budget from two-thirds to a majority (50 percent plus one) of each house of the Legislature, and requires a forfeit in pay to Legislators if the budget is not enacted by the June 15 th deadline. 12 Finally, the governor has the authority to blue pencil (reduce or eliminate) any appropriation contained in the budget. 13 Key Budget Dates May 2015 Governor s May Budget Revision June 15, 2015 Deadline For Legislature To Approve Final Budget July 1, 2015 Governor Must Sign The Budget References 1. State of California Department of Finance Governor s Budget Summary. 2015; ca.gov/fullbudgetsummary.pdf. Accessed January 9, Senate Bill 1008 (Chapter 33, Statutes of 2012). 6. Senate Bill 1036 (Chapter 45, Statutes of 2012). 2. Senate Committee on Budget & Fiscal Review. Quick Summary Proposed Budget. 2015; senate.ca.gov/sites/sbud.senate.ca.gov/files/quicks/ QuickSummary2015_16Budget.pdf. Accessed January 13, The SCAN Foundation. California s Coordinated Care Initiative: Background and Overview. 2012; thescanfoundation.org/california%e2%80%99s-coordinatedcare-initiative-background-and-overview. Accessed January 13, Assembly Budget Committee. Highlights of Governor s Proposed Budget. 2015; ca.gov/sites/abgt.assembly.ca.gov/files/january%209% %20Budget%20Highlights.pdf. Accessed January 13, California Department of Social Services. State Halts Implementation of Overtime for In-Home Supportive Services. 2014; pdf/pressrelease/judges_ruling_vacates.pdf. Accessed January 20, California Attorney General. Proposition 2, State Budget Stabilization Account. Legislative Constitutional Amendment. 2014; pdf/proposition-2-title-summary-analysis.pdf. Accessed January 13, The SCAN Foundation. Summary of the Enacted Budget: Implications for Older Adults and People with Disabilities. 2013; thescanfoundation.org/files/tsf-fact-sheet-ca_budget_ final _1.pdf. Accessed January 15,

8 References (Continued) 10. California Deparment of Health Care Services Governor s Budget Highlights. 2015; ca.gov/documents/ govbudgethighlights.pdf. Accessed January 14, Assembly Budget Subcommittee No. 1 on Health and Human Services. Agenda: Assembly Budget Subcommittee No. 1 on Health and Human Services. 2014; assembly.ca.gov/sites/abgt.assembly.ca.gov/files/may%20 19%202014%20Sub%201%20agenda%20DHCS.pdf. Accessed January 13, California Secretary of State. Proposition ; voterguide.sos.ca.gov/past/2010/general/propositions/25/ analysis.htm 13. Accessed January 13, California State Senate. How the Budget Process Works (Taken from The Budget Process, prepared by the Senate Rules Committee). senate.ca.gov/files/bworkings.pdf. Accessed January 13, For more information, contact Like us on Facebook MBurke@TheSCANFoundation.org Follow us on Twitter 8