Summary of the Enacted 2015-16 Budget: Impact on California’s Older Adults and People

with Disabilities

On June 24, 2015, California Governor Edmund G. Brown, Jr. signed the state’s

2015-16 budget. The enacted budget outlines the state’s spending plan for the

fiscal year beginning on July 1, 2015 and ending June 30, 2016. The budget

includes program modifications that impact the health and human services

delivery system serving older adults and people with disabilities.

The enacted budget reflects

General Fund resources of

$117.5 billion ($64 million

increase since May) and

anticipated expenditures of

$115.4 billion ($61 million

increase since May).

GF Resources$117.5 Billion

GF Expenditures $115.4 Billion

2015-2016

Fact Sheet • July 2015

Fact Sheet • July 2015

www.TheSCANFoundation.org 2

OverviewThe enacted budget includes total resources of $117.5 billion General Fund (GF), total expenditures of approximately $115.4 billion GF and total reserves of $4.6 billion. The budget includes $1.1 billion in the Regular Reserve and $3.5 billion in the Rainy Day Fund, as required by Proposition 2.1

New expenditures in the enacted budget for areas deemed a high priority by the legislature and the governor are as follows: restoration of the seven percent reduction in In-Home Supportive Services hours; Medi-Cal coverage for low-income undocumented children; additional funding for K-12 school system and community colleges; the California Earned Income Tax Credit for the state’s poorest working families; additional funding for pre-school and child care slots along with provider rate increases; and expanded enrollment for the California State University System. Additionally, Governor Brown issued proclamations to convene two special sessions of the Legislature to address issues related to 1) health care financing focusing on the Medi-Cal program, and 2) California’s roads, transportation and infrastructure.1

This fact sheet addresses budget items impacting older adults and people with disabilities included in the 2015-16 budget.

Managed Care Organization Tax

Background: The Managed Care Organization (MCO) tax, a revenue tax on Medi-Cal managed care plans authorized in Senate Bill 78 (2013), is a key financing resource for certain Medi-Cal 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.2 According to federal guidance, California’s current MCO tax is inconsistent with federal Medicaid regulations because the tax is only applied to Medi-Cal managed care plans verses all managed care plans. The current MCO tax will no longer be allowed after it expires on June 30, 2016.3

January Budget Proposal: The January budget assumed an MCO tax contribution of $803 million in 2014-15 and $1.1 billion in 2015-16. In January, Governor Brown announced that the state would replace the current tax with a broad-based MCO tax in 2016 that complies with federal law. This new tax would apply to all managed care plans regulated by Department of Managed Health Care and/or the Department of Health Care Services (DHCS), and must raise the same amount of general fund savings as the current tax.3

Fact Sheet • July 2015

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May Revision: The MCO tax proposal remained the same as proposed in the January budget.

Enacted Budget/Special Session: The MCO tax proposal will be addressed during the special session for health care financing. The special session will consider and act upon legislation necessary to enact permanent and sustainable funding through a new MCO tax and/or alternative fund sources in order to:

• Stabilize Medi-Cal funding through $1.1 billion in financing from the MCO tax;

• Continue restoration of seven percent reduction in IHSS service hours beyond 2015-16; and

• Identify funding for increased provider rates for both providers of Medi-Cal and developmental disability services.4

Long-Term Services and Supports

Coordinated Care Initiative

Background: The Coordinated Care Initiative (CCI) changed how medical care and LTSS are provided for low-income older 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 will be fully operational in seven counties (Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, and Santa Clara) as of August 2015.3

One component of the CCI is to transition the Mulitpurpose Senior Services Program (MSSP) from a federal waiver to a managed care benefit beginning January 1, 2015 or after 19 months of MSSP beneficiary enrollment into managed care. The MSSP, a 1915(c) Medicaid waiver program, provides care management to frail older adults by connecting them with community-based services to help them remain in their homes.

Governor to convene a special session to address health care financing focusing on the Medi-Cal program.

Fact Sheet • July 2015

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January Budget Proposal: The proposed budget assumed that the CCI would generate GF savings of $176.1 million in 2015-16, primarily attributed to funds generated through the MCO tax by the CCI plans. In his January budget proposal, the governor noted that implementation of Cal MediConnect as part of CCI has not aligned with the assumptions made when it was established in 2012, thereby impacting the projected savings. Specifically, less-than-anticipated savings shared with the federal government, enrollment delays, lower enrollment numbers, and higher than anticipated In-Home Supportive Services (IHSS) costs have impacted the attributed savings. As such, the January budget projected that the CCI could result in net costs to the state without solutions to improve participation, address the MCO tax, and lower state costs. The January budget noted that the CCI would stop operating in January 2017 if the program does not generate sufficient savings.3

May Revision: Core elements of the CCI remained the same as indicated in the January budget proposal. However, the governor’s May Revision proposal extended the MSSP transition deadline to December 31, 2017, and allowed earlier transition in a county/region when MSSP sites and managed care plans mutually agree on the early transition. In addition, both the MSSP sites and managed care plans would be required to meet readiness criteria to be developed by the DHCS, California Department of Aging (CDA), MSSP providers, managed care plans, and stakeholders.8

Enacted Budget: The core elements of the CCI remain as outlined in the January budget and May Revision. Additionally, the enacted budget reflects the MSSP policy change outlined in the May Revision, with an extended MSSP transition deadline and related readiness criteria requirements.9

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 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 need. IHSS is expected to serve 463,000 recipients per month on average in 2015-16.3

Governor plans to address MCO tax solution during a special session.

Fact Sheet • July 2015

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January Budget Proposal: The proposed budget included $8.2 billion ($2.5 billion GF) for the IHSS program in 2015-16, a 14.4 percent increase over the revised 2014-15 level.

• Restoration of Seven Percent Across-the-Board Reduction: The budget proposed to restore the current seven percent across-the-board reduction in service hours with proceeds from the revised MCO tax, effective July 1, 2015. The cost to restore the seven percent reduction were estimated to be $483.1 million in 2015-16.3

• Federal Overtime Regulations: A federal district court ruled that a portion of the U.S. Department of Labor Fair Labor Standards Act (FLSA) rule requiring overtime pay for domestic workers exceeded the Department of Labor’s authority and thus halted implementation of the regulations.* Therefore, the state 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.3,10

May Revision:

• Restoration of Seven Percent Across-the-Board Reduction: The proposal to restore the seven percent across-the-board reduction in IHSS service hours beginning July 1, 2015 remained in the May Revision.11

• IHSS Caseload: The May Revision reflected an increase of $147.6 million GF in 2014-15 and $179.1 million GF in 2015-16, primarily associated with increases in the number of people enrolled, hours authorized, and wage increases.

• FLSA Rule: To date, none of the 2014-15 funds designated to implement the overtime rule have been spent. Senate Bill 855 included a provision requiring that any unspent FLSA-related funding in the current year resulting from delayed federal implementation of the rule are used for other purposes within the IHSS program. The May Revision applied these one-time unspent funds to partially offset the $326.7 million in increased IHSS costs related to caseload, hours per case, and costs per hour. The May Revision continued to assume full-year funding of $316 million GF in 2015-16 for implementation of the federal rule, pending further legal developments.12

* In 2013, the United States Department of Labor announced new regulations that require overtime pay for domestic workers, compensation for providers who travel between multiple recipients, for wait time associated with medical accompaniment, and for time spent in mandatory provider training.

Fact Sheet • July 2015

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Enacted Budget: The enacted budget reflects all of the policy changes outlined in the May Revision, along with the following specifications:

• Restoration of Seven Percent Across-the-Board Reduction: Approves restoration of the seven percent reduction in IHSS hours, effective July 1, 2015 for $226 million GF in 2015-16. An ongoing fund source will be addressed through a special legislative session on health care financing.1,13

• FLSA Rule: Approves proceeding with the implementation of overtime for IHSS, and includes $270 million GF in 2015-16 with an assumed October 1, 2015 effective date if the federal rule is upheld.1

Health Homes Program

Background: Chapter 642, Statutes of 2013 (AB 361), permits DHCS to develop the Health Homes Program that would enhance care management and coordination for beneficiaries with complex needs. Upon implementation, the program seeks to provide comprehensive care management, care coordination, health promotion, comprehensive transitional care, individual and family support, and referral to community and social support services. The program will be funded primarily through federal funds, with non-federal funding coming from non-state sources.

May Revision: A May Revision proposal included budget and spending authority for $61.6 million in non-state funds for additional payments to health plans that participate in the Health Homes Program beginning January 2016.12

Enacted Budget: The enacted budget includes $61.6 million in non-state funds for additional payments to health plans that participate in the Health Homes Program beginning January 2016.1,9

Identifying an ongoing funding source for restoration of IHSS hours will be addressed in the special session on health care financing.

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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.

January Budget Proposal: The governor’s budget proposed an annual open enrollment period for certain Medi-Cal beneficiaries who are required to enroll in a Medi-Cal managed care plan. However, older adults, people with disabilities, people fully eligible for both Medi-Cal and Medicare, people in counties with only one Medi-Cal health plan, and adults newly eligible through the Affordable Care Act expansion are excluded, and not impacted by the more restricted enrollment opportunities of this proposal. Individuals can still apply for and be newly enrolled in Medi-Cal at any time during the year.14

May Revision: The annual open enrollment proposal remained as indicated in the January budget proposal.

Enacted Budget: The enacted budget does not include the governor’s proposal to limit Medi-Cal managed care enrollment to an annual open enrollment period, for a cost of $1 million GF.15

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 2013-14 and 2014-15.

January Proposed Budget: The governor’s budget proposed continuation of the quality assurance fee for an additional five years, including annual rate increases of 3.62 percent beginning in August 2015.3

May Revision: The Skilled Nursing Quality Assurance Fee remained as indicated in the January budget proposal.

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Enacted Budget: The enacted budget approves the extension of the quality assurance fee through July 31, 2020, including an annual rate increase of 3.62 percent, and other specifications as outlined.1,16

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 (COLA) 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 2015-16, a slight increase over the 2014-15 projected level.

January Budget Proposal: The proposed budget included a $2.8 billion GF for the SSI/SSP program, including 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.3,17

May Revision: Based on an adjustment of the federal Consumer Price Index, the SSA eliminated the 2016 COLA of 1.5 percent to individuals and couples. The May Revision reflected this federal change.18

Legislative Conference Report: The first budget sent to the governor, referred to as the Conference Report, included a $10 per month increase to the SSI/SSP grants to individuals (excluding couples) in an amount equal to $66 million GF for 2015-16, starting on January 1, 2016, with full-year costs of $132 million GF for 2016-17 and ongoing. However, this increase was not included in the final budget agreement between the Governor and the Legislature.19

Fact Sheet • July 2015

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Enacted Budget: The enacted budget includes the federal cost-of-living adjustment for all SSI/SSP recipients, as adjusted in the May Revision (1.7 percent for 2015 and zero percent for 2016).18

Community Care Licensing

Background: The CDSS 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 2002-03, most facilities licensed by CCL were required to be visited annually. Budget related legislation enacted in 2003 lengthened the intervals between visits for most facilities from one year to five years.20

The enacted 2014-15 budget included funding for quality enhancement and program improvements, as well as a 10 percent increase for licensing fees in order to improve the structure of the CCL program.21

January Budget Proposal: The proposed 2015-16 budget included $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. Under this proposal, beginning in January 2017, DSS would 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.3

May Revision: The CCL proposal remained as indicated in the January budget proposal.

Enacted Budget: The enacted budget approves the governor’s proposal for Community Care Licensing, with $3 million GF and 28.5 positions, increasing in later years, to address a backlog of complaint cases and expand training and technical assistance in CCL. Beginning in January 2017, DSS will increase 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. The ongoing staffing costs after full implementation will be approximately $14 million GF, with a total of 145 new permanent positions approved to achieve this new licensing standard.1

SSI/SSP recipients will receive a cost-of-living adjustment in 2015, but not in 2016.

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Developmental Center Closures

Background: In January 2014, The Plan for The Future of Developmental Centers in California, recommended that the state should plan to close the remaining developmental centers and operate a limited number of safety-net crisis and residential centers.

May Revision: The governor proposed that the state initiate planning for closure of Sonoma Developmental Center by 2018, and Fairview and Porterville Developmental Centers by 2021. The May Revision included $49.3 million ($46.9 million GF) to develop community resources to support the transition of Sonoma residents into the community.12

Enacted Budget: The enacted budget anticipates the closure of the Sonoma Developmental Center by the end of 2018, and plans for the closure of the Fairview Developmental Center and the non- secure treatment portion of the Porterville Developmental Center, with the last closure completed in 2021. In preparation for the closure of the Sonoma Developmental Center, the budget includes $49.3 million ($46.9 million GF) to support the transition of Sonoma residents to community settings. These resources will support the initial development of homes to support consumers, provide additional training for providers, and other programs including supported living services, crisis services, and transportation support.1

Additional Items in the Enacted Budget

Long-Term Care Ombudsman

The Long-Term Care Ombudsman program investigates and endeavors to resolve elder abuse complaints made by, or on behalf of, residents in long-term care facilities including nursing homes and residential care facilities for the elderly (e.g, assisted living facilities). The enacted budget includes $2.4 million ($1 million GF) to increase unannounced facility monitoring visits and complaint investigations and increase the recruitment, supervision, and training of paid and volunteer Ombudsman representatives.1

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Caregiver Resource Centers

Caregiver Resource Centers serve families and caregivers of individuals with chronic or degenerative cognitive disorders that affect adults, such as Alzheimer’s, stroke, or traumatic brain injury. Through eleven locations across the state, the program provides information and referral, consultation, respite care, counseling and other services to family caregivers. The enacted budget augments the Caregiver Resource Centers budget by $2 million GF, for a total funding level of 4.9 million GF.1

Medi-Cal Provider Rate Increase

The enacted budget repeals the AB 97 (2011 budget trailer bill) 10% rate cut for dental providers, effective July 1, 2015. Beyond dental rates, the enacted budget provides no rate increases to other Medi-Cal providers as part of the budget package, and defers the issue to the special session on health care financing.1

Governor included increased funding in the budget for Long-Term Care Ombudsman program and Caregiver Resource Centers.

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References1. California Department of Finance. California 2015-16

State Budget. 2015; http://www.dof.ca.gov/documents/FullBudgetSummary-2015.pdf. Accessed June 28, 2015.

2. The SCAN Foundation. Summary of the Enacted 2013-2014 Budget: Implications for Older Adults and People with Disabilities. 2013; http://thescanfoundation.org/sites/thescanfoundation.org/files/tsf-fact-sheet-ca_budget_final-2013-2014_1.pdf. Accessed May 14, 2015.

3. California Department of Finance. 2015-16 Governor’s Budget Summary. 2015; http://www.ebudget.ca.gov/2015-16/pdf/BudgetSummary/FullBudgetSummary.pdf. Accessed May 14, 2015.

4. State of California Executive Department. A Proclamation by the Governor of the State of California. 2015; http://gov.ca.gov/docs/6.16.15_Health_Care_Special_Session.pdf. Accessed June 28, 2015.

5. Senate Bill 1008 (Chapter 33, Statutes of 2012).

6. Senate Bill 1036 (Chapter 45, Statutes of 2012).

7. The SCAN Foundation. California’s Coordinated Care Initiative: Background and Overview. 2012; http://www.thescanfoundation.org/california%E2%80%99s-coordinated-care-initiative-background-and-overview. Accessed May 14, 2015.

8. California Department of Health Care Services. Department of Health Care Services Proposed Trailer Bill Legislation; 650 - Multipurpose Senior Services Program Transition Timeline. 2015; http://www.dof.ca.gov/budgeting/trailer_bill_language/health_and_human_services/documents/650MSSPTransitionTimeline.pdf. Accessed May 15, 2015.

9. Senate Bill 75 (Chapter 18, Statutes of 2015).

10. California Department of Social Services. State Halts Implementation of Overtime for In-Home Supportive Services. 2014; http://www.cdss.ca.gov/cdssweb/entres/pdf/PressRelease/Judges_Ruling_Vacates.pdf. Accessed May 14, 2015.

11. Assembly Budget Committee. Highlights of Governor’s Proposed 2015-16 May Revision. 2015; http://abgt.assembly.ca.gov/sites/abgt.assembly.ca.gov/files/May%20Revise%20Highlights2015%28MasterFinal%29.pdf. Accessed May 14, 2015.

12. California Department of Finance. 2015-16 May Revision. 2015; http://dof.ca.gov/documents/2015-16_May_Revision.pdf. Accessed May 14, 2015.

13. Senate Bill 97 (Chapter 11, Statutes of 2015).

14. California Department of Health Care Services. 2015-2016 Governor’s Budget Highlights. 2015; http://www.dhcs.ca.gov/Documents/2015-16GovBudgetHighlights.pdf. Accessed May 14, 2015.

15. Assembly Budget Committee. Updated Floor Report Reflecting AB 93 as Amended by AB 123/SB 97 2015-16 Budget,. 2015; http://abgt.assembly.ca.gov/sites/abgt.assembly.ca.gov/files/LATEST%20CHANGES%20to%20Floor%20Report%20%20Post%20June%2015%2C%202015.pdf. Accessed June 28, 2015.

16. AB 119 (Chapter 17, Statutes of 2015).

17. Assembly Budget Committee. Highlights of Governor’s Proposed 2015-2016 Budget. 2015; http://abgt.assembly.ca.gov/sites/abgt.assembly.ca.gov/files/January%209%202015%20Budget%20Highlights.pdf. Accessed May 14, 2015.

18. California Department of Social Services. Local Assistance Estimates for the 2015-16 Governor’s Budget. 2015; http://www.cdss.ca.gov/cdssweb/PG3682.htm. Accessed June 30, 2015.

19. Assembly Budget Committee. Floor Report 2015-16 Budget. 2015; http://abgt.assembly.ca.gov/sites/abgt.assembly.ca.gov/files/Floor%20Report%20%20FINAL--June%2015.pdf. Accessed June 28, 2015.

20. Assembly Budget Subcommittee No. 1 on Health and Human Services. Agenda: Assembly Budget Subcommittee No. 1 on Health and Human Services. 2014; http://abgt.assembly.ca.gov/sites/abgt.assembly.ca.gov/files/May%2019%202014%20Sub%201%20agenda%20DHCS.pdf. Accessed May 14, 2015.

21. California Department of Finance. California State Budget 2014-15. 2014; http://govbud.dof.ca.gov/FullBudgetSummary.pdf. Accessed June 20, 2014.

For more information, contact Megan Burke at MBurke@TheSCANFoundation.org Follow us on Twitter

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