Amended  IN  Senate  April 15, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 256

Introduced by Senator Pan

January 26, 2021

An act to amend Sections 14132 and 14301.1 of, and to add Section 14197.8 to, Section 14301.1 of, and to add Article 5.51 (commencing with Section 14184.100) to Chapter 7 of Part 3 of Division 9 of, the Welfare and Institutions Code, relating to Medi-Cal.


LEGISLATIVE COUNSEL'S DIGEST


SB 256, as amended, Pan. Medi-Cal: covered benefits. California Advancing and Innovating Medi-Cal.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Under existing law, health care services are provided under the Medi-Cal program pursuant to a schedule of benefits, and those benefits are provided to beneficiaries through various health care delivery systems, including fee-for-service and managed care.
Existing law authorizes the department to enter into various types of contracts for the provision of services to beneficiaries, including contracts with a Medi-Cal managed care plan. Existing law imposes various requirements on Medi-Cal managed care plan contractors, and requires the department to pay capitations rates to health plans participating in the Medi-Cal managed care program using actuarial methods, and methods. Existing law authorizes the department to establish health-plan- and county-specific rates, as specified. Existing law requires the department to utilize establish, and requires the department to utilize, health-plan- and county-specific rates for specified Medi-Cal managed care plan contracts, and requires those developed rates to include identified specified information, such as health-plan-specific encounter and claims data.
Existing law, the Medi-Cal 2020 Demonstration Project Act, requires the department to implement specified components of a Medi-Cal demonstration project, including the Global Payment Program, the Whole Person Care pilot program, and the Dental Transformation Initiative, consistent with the Special Terms and Conditions approved by the federal Centers for Medicare and Medicaid Services. Pursuant to existing law, the department has created a multiyear initiative, the California Advancing and Innovating Medi-Cal (CalAIM) initiative, for purposes of building upon the outcomes of various Medi-Cal pilots and demonstration projects, including the Medi-Cal 2020 demonstration project.
Existing federal law authorizes specified managed care entities that participate in a state’s Medicaid program to cover, for enrollees, services or settings that are in lieu of services in lieu of services and settings otherwise covered under a state plan.

This bill would require those mandatorily developed health-plan- and county-specific rates for specified Medi-Cal managed care plan contracts to include in lieu of services and settings provided by the Medi-Cal managed care plan. The bill would require each Medi-Cal managed care plan to disclose the availability of in lieu of services on its internet website and its beneficiary handbook, and to disclose to the department specified information on in lieu of services that are plan specific, including the number of people receiving those services. The bill would require the department to publish that information on its internet website.

This bill would, to the extent that federal financial participation is available and any necessary federal approvals have been obtained, expand the schedule of benefits under the Medi-Cal program to include enhanced care management if the service is provided in person to a beneficiary and, at a minimum, the service includes coordinating primary, acute, behavioral, oral, and long-term services and supports for that person. The bill would authorize the department to implement these provisions by various means, including all-county letters or provider bulletins, without taking regulatory action. The bill would require the department to adopt, by July 1, 2024, regulations on these provisions, and, commencing January 1, 2023, to provide a status report to the Legislature on a semiannual basis until regulations are promulgated. The bill would make technical, nonsubstantive changes to provisions on the Medi-Cal schedule of benefits.

This bill would establish the CalAIM initiative, and would require the implementation of CalAIM to support stated goals of identifying and managing the risk and needs of Medi-Cal beneficiaries, transitioning and transforming the Medi-Cal program to a more consistent and seamless system, and improving quality outcomes. The bill would require the department to seek federal approval for the CalAIM initiative, and would condition its implementation on receipt of any necessary federal approvals and availability of federal financial participation. To implement the CalAIM initiative, the bill would authorize the department to enter into exclusive or nonexclusive contracts, or amend existing contracts, and to implement these provisions by various means, including provider bulletins.
For purposes of the CalAIM initiative, this bill would additionally authorize the department to standardize those populations that are subject to mandatory enrollment in a Medi-Cal managed care plan across aid code groups and Medi-Cal managed care models. Commencing January 1, 2023, the bill would require the department to implement the Population Health Management Program under the Medi-Cal managed care delivery system to improve health outcomes, care coordination, and efficiency through application of standardized health management requirements. The bill would require the department to require each Medi-Cal managed care plan to develop and maintain a beneficiary-centered population health management program that meets specified standards, including identifying and mitigating social determinants of health and reducing health disparities or inequities. The bill would require the department to consult with specified stakeholders, including the State Department of Public Health, to establish requirements for the population health management program, as specified, and, beginning January 1, 2024, would require the department to annually develop and issue a public report, which includes prescribed information, on this program.
Under the CalAIM initiative, this bill would require the department to implement an enhanced care management benefit designed to address the clinical and nonclinical needs on a whole-person-care basis for certain target populations of Medi-Cal beneficiaries enrolled in Medi-Cal managed care plans, as specified. The bill would require Medi-Cal managed care plans to consult and collaborate with county mental health plans for the delivery of enhanced care management services for beneficiaries with certain health conditions, including serious mental illness, to maximize federal reimbursement and minimize duplication of services, and would require the department to require those plans to report specified information related to this benefit.
As part of the CalAIM initiative, and commencing January 1, 2022, this bill would require the department to authorize Medi-Cal managed care plans to elect to cover those services or settings approved by the department as cost effective and medically appropriate in the comprehensive risk contract that are in lieu of applicable Medi-Cal state plan services. The bill would provide that in lieu of services include specified services, such as housing transition navigation services, recuperative care, and asthma remediation. The bill would require the department to establish metrics for, and conduct an annual evaluation of, the utilization and effectiveness of in lieu of services, and to publicly report, as prescribed, the evaluation and conduct the evaluation in a specified manner.
Commencing January 1, 2022, this bill would require the department to make incentive payments available to qualifying Medi-Cal managed care plans that meet predefined milestones and metrics associated with implementation of applicable components of the CalAIM initiative, and to consult with specified entities, including Medi-Cal managed care plans, to establish the methodology pursuant to prescribed standards.
This bill would authorize the department to establish capitation rates to contracted health plans on a regional basis in lieu of health plan and county-specific rates, and would require the department to consult with affected entities and individuals, included consumer representatives. Before the implementation of a regional-based capitation rate, the bill would require the department to report to the Legislature on specified matters, including how these rates are to be established.
This bill would make its provisions severable and would make other legislative findings and declarations.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Article 5.51 (commencing with Section 14184.100) is added to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, to read:
Article  5.51. California Advancing and Innovating Medi-Cal Act

14184.100.
 (a) This article shall be known, and may be cited, as the California Advancing and Innovating Medi-Cal (CalAIM) Act.
(b) The implementation of CalAIM, as set forth in this article and the CalAIM Terms and Conditions, shall support all of the following goals:
(1) Identify and manage the risk and needs of Medi-Cal beneficiaries through whole-person-care approaches and addressing social determinants of health.
(2) Transition and transform the Medi-Cal program to a more consistent and seamless system by reducing complexity and increasing flexibility.
(3) Improve quality outcomes, reduce health disparities, and drive delivery system transformation and innovation through value-based initiatives, modernization of systems, and payment reform.

14184.101.
 For purposes of this article, and elsewhere in law where specified, the following definitions shall apply:
(a) “CalAIM” or “CalAIM initiative” means the respective components of the California Advancing and Innovating Medi-Cal initiative approved by the federal Centers for Medicare and Medicaid Services in the CalAIM Terms and Conditions.
(b) “CalAIM term” means the entire period during which an applicable component of the CalAIM initiative is in effect, as approved by the federal Centers for Medicare and Medicaid Services, including any applicable extension period.
(c) “CalAIM Terms and Conditions” means those terms and conditions issued and approved by the federal Centers for Medicare and Medicaid Services, including any attachments, appendices, or similar documents, and subsequent amendments thereto, that govern implementation of the respective components of the CalAIM initiative. CalAIM Terms and Conditions shall include, at a minimum, any terms and conditions specified in the following:
(1) California Advancing and Innovating Medi-Cal Demonstration, Number 11-W-00193/9, as approved by the federal Centers for Medicare and Medicaid Services pursuant to Section 1315 of Title 42 of the United States Code, effective for the period from January 1, 2022, to December 31, 2026, inclusive, and any applicable extension period, or for any period otherwise approved therein.
(2) Any associated Medicaid Waivers as approved by the federal Centers for Medicare and Medicaid Services pursuant to Section 1396n of Title 42 of the United States Code that are necessary to implement a CalAIM component, effective for the period from January 1, 2022, to December 31, 2026, inclusive, and any applicable extension period, or for any period otherwise specified in the CalAIM Terms and Conditions.
(3) Any associated Medi-Cal State Plan amendments approved by the federal Centers for Medicare and Medicaid Services that are necessary to implement a CalAIM component.
(4) Any comprehensive risk contract, nonrisk contract, intergovernmental agreement, or other similar arrangement approved by the federal Centers for Medicare and Medicaid Services to implement the authorities described in paragraph (1), (2), or (3).
(d) “CalAIM year” or “Initiative Year” means the applicable effective period identified in the CalAIM Terms and Conditions that corresponds to a specific period of time as set forth in paragraphs (1) to (5), inclusive. Individual programs or components under the CalAIM Initiative may be operated on program years that differ from the CalAIM years identified in paragraphs (1) to (5), inclusive, or may be operated without regard to program years, as applicable.
(1) Initiative year 1 corresponds to the period of January 1, 2022, to December 31, 2022, inclusive.
(2) Initiative year 2 corresponds to the period of January 1, 2023, to December 31, 2023, inclusive.
(3) Initiative year 3 corresponds to the period of January 1, 2024, to December 31, 2024, inclusive.
(4) Initiative year 4 corresponds to the period of January 1, 2025, to December 31, 2025, inclusive.
(5) Initiative year 5 corresponds to the period of January 1, 2026, to December 31, 2026, inclusive.
(e) “Comprehensive risk contract” shall have the same meaning as set forth in Section 438.2 of Title 42 of the Code of Federal Regulations.
(f) “Designated public hospital” means any one of the hospitals identified in subdivision (f) of Section 14184.10, and any successor, including any restructured, reorganized, or differently named hospital, that is operated by a county, a city and county, the University of California, or a special hospital authority described in Chapter 5 (commencing with Section 101850) or Chapter 5.5 (commencing with Section 101852) of Part 4 of Division 101 of the Health and Safety Code, or any additional public hospital to the extent identified as a “designated public hospital” in the CalAIM Terms and Conditions.
(g) “Federal disproportionate share hospital allotment” means the amount specified for California under Section 1396r-4(f) of Title 42 of the United States Code for a federal fiscal year.
(h) “Federal medical assistance percentage” means the federal medical assistance percentage applicable for federal financial participation purposes for medical assistance under the Medi-Cal State Plan pursuant to Section 1396b(a)(1) of Title 42 of the United States Code.
(i) “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a comprehensive risk contract with the department to provide covered full-scope health care services to enrolled Medi-Cal beneficiaries pursuant to any provision of this chapter or Chapter 8 (commencing with Section 14200).
(j) “Nonrisk contract” shall have the same meaning as set forth in Section 438.2 of Title 42 of the Code of Federal Regulations.
(k) “Nonfederal share percentage” means the difference between 100 percent and the applicable federal medical assistance percentage.
(l) “Total computable disproportionate share hospital allotment” means the federal disproportionate share hospital allotment for a federal fiscal year, divided by the applicable federal medical assistance percentage with respect to that same federal fiscal year.

14184.102.
 (a) Consistent with federal law, the department shall seek federal approval for, and implement, the CalAIM initiative, including, but not limited to, all of the following components:
(1) Continuation of the Medi-Cal Managed Care program, described in part in Sections 14184.200 to 14184.208, inclusive, and, elsewhere in this chapter and Chapter 8 (commencing with Section 14200), and which includes any comprehensive risk contract between the department and an individual, organization, or entity to provide covered full-scope health care services to enrolled Medi-Cal beneficiaries pursuant to any provision of this chapter or Chapter 8 (commencing with Section 14200).
(2) Continuation of the Global Payment Program, described in Section 14184.40, as amended by the act that added this section, and Section 14184.300.
(3) Continuation of the Medi-Cal Specialty Mental Health Services Program, as described in part in Section 14184.400.
(4) Continuation of the Drug Medi-Cal Organized Delivery System program, as described in part in Section 14184.401.
(5) Behavioral Health Medical Necessity Changes, Payment Reform, and Administrative Simplification, as described in Sections 14184.402, 14184.403, and 14184.404.
(6) The State Plan Dental Improvement Program, as described in Section 14184.500.
(7) Enhancing County Oversight and Monitoring, as described in Section 14184.600.
(b) The department shall report to the Legislature any conflicts between this article and the CalAIM Terms and Conditions, including identification of the specific conflicts and recommendations for conforming language.
(c) The department, as appropriate and to the extent practicable, shall consult with interested stakeholders with regard to implementation of applicable components of CalAIM under subdivision (a) in which they will participate, including, but not limited to, the issuance of departmental guidance pursuant to subdivision (d). Interested stakeholders may include, but need not be limited to, designated public hospitals, district and municipal public hospitals, other local governmental agencies, consumer representatives, and Medi-Cal managed care plans.
(d) 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, interpret, or make specific this article or the CalAIM Terms and Conditions, in whole or in part, by means of all-county letters, plan letters, provider bulletins, information notices, or other similar instructions, without taking any further regulatory action. The department shall make use of appropriate processes to ensure that affected stakeholders are timely informed of, and have access to, applicable guidance issued pursuant to this authority, and that this guidance remains publicly available until all payments related to the applicable CalAIM component are finalized.
(e) For purposes of implementing this article or the CalAIM Terms and Conditions, the department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis, and may implement changes to existing information technology systems. Notwithstanding any other law, contracts entered into or amended, or changes to existing information technology systems, pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(f) The department shall seek any federal approvals it deems necessary to implement CalAIM, this article, and other provisions of law amended by the act that added this subdivision. This shall include, but need not be limited to, approval of any amendment, addition, or technical correction to the CalAIM Terms and Conditions, as the department deems necessary. This article shall be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available and is not otherwise jeopardized.
(g) Consistent with subdivision (b), the director shall report to the Legislature on any recommended amendments to any provision, process, or methodology specified in this article, Article 5.4 (commencing with Section 14180), Article 5.5 (commencing with Section 14184), or other sections of law amended by the act that added this subdivision, to the extent necessary to comply with federal law or the CalAIM Terms and Conditions, to obtain or maintain federal approval, or to ensure federal financial participation is available and not otherwise jeopardized, if the amendment is consistent with the goals set forth in this article and its individual components, and does not significantly alter the relative level of support for participating entities. If the director, after consulting with those entities participating in the applicable CalAIM component and that would be affected by that amendment, determines that the potential amendment would be consistent with the goals set forth in this article and would not significantly alter the relative level of support for affected participating entities, the amendment shall be submitted to the Legislature for its consideration.
(h) During the course of the CalAIM term, the department may develop and implement successor payment methodologies or programs to continue to support entities participating in one or more components of CalAIM following the expiration of the CalAIM term and that further the goals set forth in this article. The department shall consult with the entities participating in the payment methodologies or program components under CalAIM, affected stakeholders, and the Legislature in the development of any successor payment methodologies or program components pursuant to this subdivision.
(i) The department may seek to extend the payment methodologies or programs described in this article, or in the CalAIM Terms and Conditions, including modification thereto, through the CalAIM term or to subsequent time periods by way of amendment or extension of the relevant CalAIM Terms and Conditions, amendment to the Medi-Cal State Plan, or any combination thereof, consistent with the applicable federal requirements. This subdivision shall only be implemented after consultation with the entities participating in, or affected by, those methodologies or programs, and only to the extent that any necessary federal approvals are obtained and federal financial participation is available and is not otherwise jeopardized.
(j) Notwithstanding any other state or local law, including, but not limited to, Section 5328 of this code, and Sections 11812 and 11845.5 of the Health and Safety Code, the sharing of health, social services, housing, and criminal justice information, records, and other data with and among the department, other state departments, including the State Department of Public Health and the State Department of Social Services, Medi-Cal managed care plans, Medi-Cal behavioral health delivery systems, counties, health care providers, social services organizations, care coordination and case management teams, and other authorized provider or plan entities, and contractors of all of those entities, shall be permitted to the extent the department determines necessary to implement applicable CalAIM components described in this article and the CalAIM Terms and Conditions, and to the extent consistent with federal law.

14184.200.
 Notwithstanding any other law, the department may standardize those populations that are subject to mandatory enrollment in a Medi-Cal managed care plan across all aid code groups and Medi-Cal managed care models statewide, subject to a Medi-Cal managed care plan readiness and continuity of care transition plan developed in consultation with stakeholders.

14184.204.
 (a) Commencing January 1, 2023, subject to subdivision (f) of Section 14184.102, the department shall implement the Population Health Management Program under the Medi-Cal managed care delivery system to improve health outcomes, care coordination, and efficiency through application of standardized health management requirements, in accordance with the CalAIM Terms and Conditions.
(b) The department shall require each Medi-Cal managed care plan to develop and maintain a beneficiary-centered population health management program, which is a model of care and plan of action designed to address member health needs at all points along the continuum of care, as described in the CalAIM Terms and Conditions.
(c) Each population health management program shall, at a minimum, and consistent with the requirements of subdivision (e), do all of the following:
(1) Prioritize preventive and wellness services.
(2) Identify and assess beneficiary member risks and needs on an ongoing basis, pursuant to the requirements of subdivision (e).
(3) Manage beneficiary member safety and outcomes during care transitions, across all applicable delivery systems and settings, through effective care coordination.
(4) Identify and mitigate social determinants of health and reduce health disparities or inequities.
(d) Each population health management program shall be developed in consultation with enrollees, community-based organizations, and regional public health, social services, and other stakeholders. Medi-Cal managed care plans shall be strongly encouraged to partner with existing regional multistakeholder coalitions.
(e) The department shall establish, in consultation with stakeholders, including, but not limited to, the Medi-Cal Children’s Health Advisory Panel, as described in Section 14005.271, the State Department of Public Health, providers, community-based organizations, consumer advocates, and Medi-Cal beneficiaries, requirements for the population health management program to ensure all of the following:
(1) Appropriate use of preventive services for children and adults, and other interventions, including chronic disease management, referrals for behavioral and oral health care services, housing, nutrition, and other health-related social needs.
(2) Risk assessment is comparable and consistent between Medi-Cal managed care plans.
(3) Any algorithm used by a Medi-Cal managed care plan to conduct member risk assessment is mitigated for racial and other biases through consideration of disease burden relative to utilization and other patient risk factors beyond cost and historical utilization.
(4) Any screening tool used to assess beneficiaries is age appropriate and comparable across Medi-Cal managed care plans.
(5) Each Medi-Cal managed care plan incorporates the findings of its Population Needs Assessment.
(6) Each Medi-Cal managed care plan describes how it will incorporate preventive and wellness services in partnership with community-based organizations, public health, and other entities.
(f) Beginning January 1, 2024, the department shall annually develop and issue a public report on the Population Health Management Program. The report shall include an analysis of the Population Health Management Program across the Medi-Cal program and the activities conducted by each Medi-Cal managed care plan to meet the requirements of this section.

14184.205.
 (a) Subject to subdivision (f) of Section 14184.102, the department shall implement an enhanced care management (ECM) benefit designed to address the clinical and nonclinical needs on a whole-person-care basis for certain target populations of Medi-Cal beneficiaries enrolled in Medi-Cal managed care plans, in accordance with this section and the CalAIM Terms and Conditions.
(b) (1) Subject to the effective dates listed in subdivision (c), the ECM benefit shall be available on a statewide basis to eligible Medi-Cal beneficiaries who are enrolled in an applicable Medi-Cal managed care plan and who meet the criteria in the CalAIM Terms and Conditions for one or more target populations, as determined by the department. ECM shall be available to qualifying dual eligible beneficiaries, as described under Section 14184.200, except for those dual eligible beneficiaries enrolled in a Cal MediConnect plan, as defined in paragraph (2) of subdivision (a) of Section 14132.277.
(2) ECM shall only be available as a covered Medi-Cal benefit under a comprehensive risk contract with a Medi-Cal managed care plan. Medi-Cal beneficiaries who are eligible for ECM shall enroll in a Medi-Cal managed care plan in order to receive those services.
(c) (1) Medi-Cal managed care plans operating in counties in which either the Whole Person Care pilot program, pursuant to Section 14184.60, or the Health Home Program, pursuant to Article 3.9 (commencing with Section 14127), or both, were implemented, as determined by the department, shall be required to cover ECM under their comprehensive risk contract as follows:
(A) Commencing January 1, 2022, Medi-Cal managed care plans described in this paragraph shall be required to cover ECM for existing target populations under either the Whole Person Care pilot program or the Health Home Program, or both, as identified by the department.
(B) (i) Commencing July 1, 2022, Medi-Cal managed care plans described in this paragraph shall be required to cover ECM for other select target populations described in subdivision (d), as identified by the department.
(ii) Commencing January 1, 2023, Medi-Cal managed care plans described in this paragraph shall be required to cover ECM for all target populations described in subdivision (d).
(2) Medi-Cal managed care plans operating in counties in which neither the Whole Person Care pilot program, pursuant to Section 14184.60, nor the Health Home Program, pursuant to Article 3.9 (commencing with Section 14127), was implemented, as determined by the department, shall be required to cover select ECM target populations, as identified by the department, under their comprehensive risk contract, commencing July 1, 2022. All other target populations, including the target population described in paragraph (7) of subdivision (d), shall be covered commencing January 1, 2023.
(d) Target populations of Medi-Cal beneficiaries may include, but need not be limited to, the following, to the extent approved in the CalAIM Terms and Conditions:
(1) Children or youth with complex physical, behavioral, developmental, or oral health needs, including, but not limited to, those eligible for California Children Services, foster care children or youth, or youth with clinical high-risk syndrome or first episode of psychosis.
(2) Individuals experiencing homelessness or chronic homelessness, or who are at risk of becoming homeless.
(3) High utilizers with frequent hospital admissions, short-term skilled nursing facility stays, or emergency room visits.
(4) Individuals at risk for institutionalization and eligible for long-term care services.
(5) Nursing facility residents who want to transition to the community.
(6) Individuals at risk for institutionalization with serious mental illness (SMI), and children with serious emotional disturbance (SED) or substance use disorder (SUD) with cooccurring chronic health conditions.
(7) Individuals transitioning from incarceration who have significant complex physical or behavioral health needs requiring immediate transition of services to the community.
(e) Notwithstanding any other law, for any time period in which a Medi-Cal beneficiary who is eligible to receive ECM services through enrollment in their Medi-Cal managed care plan, the beneficiary shall not receive duplicative targeted case management services as described in Section 14132.44 or otherwise authorized in the Medi-Cal State Plan, as determined by the department.
(f) Medi-Cal managed care plans shall consult and collaborate with county mental health plans for the delivery of enhanced care management services for beneficiaries with SMI, SED, or SUD, in order to maximize federal reimbursement and minimize duplication of services.
(g)  The department shall require each Medi-Cal managed care plan to report all of the following information related to the enhanced care management benefit:
(1) The number and demographic data of enrollees receiving enhanced care management services.
(2) A description of those services that are provided in case management, complex case management, and other levels of care when enhanced care management has been determined to be clinically inappropriate.
(3) Any criteria used to determine eligibility for enhanced care management when those services are provided to beneficiaries beyond the target population.

14184.206.
 (a) Commencing January 1, 2022, subject to subdivision (f) of Section 14184.102, the department shall authorize Medi-Cal managed care plans to elect to cover those services or settings approved by the department as cost effective and medically appropriate in the comprehensive risk contract that are in lieu of applicable Medi-Cal state plan services covered pursuant to subdivision (a) of Section 14184.201, in accordance with the CalAIM Terms and Conditions.
(b) (1) Approved in lieu of services or settings pursuant to this section shall only be available to beneficiaries enrolled in a Medi-Cal managed care plan under a comprehensive risk contract, subject to paragraph (2).
(2) Approved in lieu of services or settings shall not supplant other covered Medi-Cal benefits that are not the responsibility of the Medi-Cal managed care plan under the comprehensive risk contract, including, but not limited to, in-home supportive services provided pursuant to Article 7 (commencing with Section 12300) of Chapter 3, and Sections 14132.95, 14132.952, and 14132.956.
(3) An enrolled Medi-Cal beneficiary shall not be required by their Medi-Cal managed care plan to use the in lieu of service or setting.
(c) Subject to subdivision (f) of Section 14184.102, in lieu of services or settings may include, but need not be limited to, all of the following when authorized by the department in the comprehensive risk contract with each Medi-Cal managed care plan and to the extent the department determines that the in lieu of service or setting is a cost-effective and medically appropriate substitute for the applicable covered Medi-Cal benefit under the comprehensive risk contract:
(1) Housing transition navigation services.
(2) Housing deposits.
(3) Housing tenancy and sustaining services.
(4) Short-term post-hospitalization housing.
(5) Recuperative care, or medical respite.
(6) Respite.
(7) Day habilitation programs.
(8) Nursing facility transition/diversion to assisted living facilities, such as residential care facilities for the elderly or adult residential facilities.
(9) Nursing facility transition to a home.
(10) Personal care and homemaker services.
(11) Environmental accessibility adaptations, or home modifications.
(12) Medically tailored meals.
(13) Sobering centers.
(14) Asthma remediation.
(d) (1) The department shall establish metrics for, and conduct an annual evaluation of, the utilization and effectiveness of in lieu of services. The department shall publicly report the evaluation, and conduct the evaluation, in a manner that allows for an analysis of demographic populations, including age, sex, race, ethnicity, languages spoken, sexual orientation and gender identity, and disability status of children and adults, stratified by geographic region.
(2) The report shall include, at least, all of the following information:
(A) A description of in lieu of services offered to enrollees by each plan.
(B) The number and demographic data of enrollees receiving in lieu of services by each plan.
(C) The type of in lieu of services enrollees are receiving.
(D) The type of covered services that the in lieu of services are being provided for as an alternative to those covered services.
(E) The number of enrollees receiving in lieu of services who are homeless or at risk of being homeless.
(F) An evaluation of when or if an in lieu of service offered by plans may be able to be a covered benefit .
(e) The department shall take into account the utilization and actual cost of in lieu of services in developing capitation rates.
(f) For purposes of this section, the following definitions apply:
(1) “Comprehensive risk contract” has the same meaning as set forth in Section 438.2 of Title 42 of the Code of Federal Regulations.
(2) “In lieu of services” has the same meaning as set forth in Section 438.3(e)(2) of Title 42 of the Code of Federal Regulations.

14184.207.
 (a) Commencing January 1, 2022, subject to appropriation by the Legislature in an applicable fiscal year and subdivision (f) of Section 14184.102, the department shall make incentive payments available to qualifying Medi-Cal managed care plans that meet predefined milestones and metrics associated with implementation of applicable components of CalAIM, including, but not limited to, Sections 14184.205 and 14184.206, as determined by the department and in accordance with the CalAIM Terms and Conditions.
(b) The department shall establish, in consultation with Medi-Cal managed care plans, consumer advocates, and other stakeholder representatives, methodology, equity targets, parameters, and eligibility criteria for incentive payments pursuant to this section. This shall include, but is not limited to, the milestones and metrics that Medi-Cal managed care plans shall meet in order to receive an incentive payment pursuant to this section and the CalAIM Terms and Conditions.
(c) The department, in accordance with the CalAIM Terms and Conditions, shall determine if a Medi-Cal managed care plan has earned an incentive payment, and the amount of that payment, for any relevant time period in which this section is implemented.
(d) Incentive payments pursuant to this section shall be made in accordance with the requirements for incentive arrangements described in Section 438.6(b)(2) of Title 42 of the Code of Federal Regulations and any associated federal guidance.
(e) No later than July 1, 2023, the department shall convene stakeholders, including Medi-Cal manage care plans, consumer advocates, and other stakeholder representatives, to consider incentive payments related to the Population Health Management Program, pursuant to Section 14184.204.

SEC. 2.

 Section 14301.1 of the Welfare and Institutions Code is amended to read:

14301.1.
 (a) For rates established on or after August 1, 2007, the department shall pay capitation rates to health plans participating in the Medi-Cal managed care program using actuarial methods and may establish health-plan- and county-specific rates. Notwithstanding any other law, this section shall apply to any managed care organization, licensed 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), that has contracted with the department as a primary care case management plan pursuant to Article 2.9 (commencing with Section 14088) of Chapter 7 to provide services to beneficiaries who are HIV positive or who have been diagnosed with AIDS for rates established on or after July 1, 2012. The department shall utilize a county- and model-specific rate methodology to develop Medi-Cal managed care capitation rates for contracts entered into between the department and any entity pursuant to Article 2.7 (commencing with Section 14087.3), Article 2.8 (commencing with Section 14087.5), and Article 2.91 (commencing with Section 14089) of Chapter 7 that includes, but is not limited to, all of the following:
(1) Health-plan-specific encounter and claims data.
(2) Supplemental utilization and cost data submitted by the health plans.
(3) Fee-for-service data for the underlying county of operation or other appropriate counties as deemed necessary by the department.
(4) Department of Managed Health Care financial statement data specific to Medi-Cal operations.
(5) Other demographic factors, such as age, gender, or diagnostic-based risk adjustments, as the department deems appropriate.
(b) To the extent that the department is unable to obtain sufficient actual plan data, it may substitute plan model, similar plan, or county-specific fee-for-service data.
(c) The department shall develop rates that include administrative costs, and may apply different administrative costs with respect to separate aid code groups.
(d) The department shall develop rates that shall include, but are not limited to, assumptions for underwriting, return on investment, risk, contingencies, changes in policy, and a detailed review of health plan financial statements to validate and reconcile costs for use in developing rates.
(e) The department may develop rates that pay plans based on performance incentives, including quality indicators, access to care, and data submission.
(f) The department may develop and adopt condition-specific payment rates for health conditions, including, but not limited to, childbirth delivery.
(g) (1) Prior to Before finalizing Medi-Cal managed care capitation rates, the department shall provide health plans with information on how the rates were developed, including rate sheets for that specific health plan, and provide the plans with the opportunity to provide additional supplemental information.
(2) For contracts entered into between the department and any entity pursuant to Article 2.8 (commencing with Section 14087.5) of Chapter 7, the department, by June 30 of each year, or, if the budget has not passed by that date, no later than five working days after the budget is signed, shall provide preliminary rates for the upcoming fiscal year.
(h) For the purposes of developing capitation rates through implementation of this ratesetting methodology, Medi-Cal managed care health plans shall provide the department with financial and utilization data in a form and substance as deemed necessary by the department to establish rates. This data shall be considered proprietary and shall be exempt from disclosure as official information pursuant to subdivision (k) of Section 6254 of the Government Code as contained in the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).
(i) Notwithstanding any other law, on and after the effective date of the act adding this subdivision, the department may apply this section to the capitation rates it pays under any managed care health plan contract.
(j) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may set and implement managed care capitation rates, and interpret or make specific this section and any applicable federal waivers and state plan amendments by means of plan letters, plan or provider bulletins, or similar instructions, without taking regulatory action.
(k) The department shall report, upon request, to the fiscal and policy committees of the respective houses of the Legislature regarding implementation of this section.
(l) Prior to Before October 1, 2011, the risk-adjusted countywide capitation rate shall comprise no more than 20 percent of the total capitation rate paid to each Medi-Cal managed care plan.
(m) (1) It is the intent of the Legislature to preserve the policy goal to support and strengthen traditional safety net providers who treat high volumes of uninsured and Medi-Cal patients when Medi-Cal enrollees are defaulted into Medi-Cal managed care plans.
(2) As the department adds additional factors, such as managed care plan costs, to the Medi-Cal managed care plan default assignment algorithm, it shall consult with the Auto Assignment Performance Incentive Program stakeholder workgroup to develop cost factor disregards related to intergovernmental transfers and required wraparound payments that support safety net providers.
(n) (1) The department shall develop and pay capitation rates to entities contracted pursuant to Chapter 8.75 (commencing with Section 14591), using actuarial methods and in a manner consistent with this section, except as provided in this subdivision.
(2) (A)  The department may develop capitation rates using a standardized rate methodology across managed care plan models for comparable populations. The specific rate methodology applied to PACE organizations shall address features of PACE that distinguishes it from other managed care plan models.
(B) The rate methodology shall be consistent with actuarial rate development principles and shall provide for all reasonable, appropriate, and attainable costs for each PACE organization within a region.
(3) The department may develop statewide rates and apply geographic adjustments, using available data sources deemed appropriate by the department. Consistent with actuarial methods, the primary source of data used to develop rates for each PACE organization shall be its Medi-Cal cost and utilization data or other data sources as deemed necessary by the department.
(4) Rates developed pursuant to this subdivision shall reflect the level of care associated with the specific populations served under the contract.
(5) The rate methodology developed pursuant to this subdivision shall contain a mechanism to account for the costs of high-cost drugs and treatments.
(6) Rates developed pursuant to this subdivision shall be actuarially certified prior to before implementation.
(7) The department shall consult with those entities contracted pursuant to Chapter 8.75 (commencing with Section 14591) in developing a rate methodology according to this subdivision.
(8) Consistent with the requirements of federal law, the department shall calculate an upper payment limit for payments to PACE organizations. In calculating the upper payment limit, the department shall correct the applicable data as necessary and shall consider the risk of nursing home placement for the comparable population when estimating the level of care and risk of PACE participants.
(9) The department shall pay the entity at a rate within the certified actuarially sound rate range developed with respect to that entity, to the extent consistent with federal requirements and subject to paragraph (11), as necessary to mitigate the impact to the entity of the methodology developed pursuant to this subdivision.
(10) During the first two years in which a new PACE organization or existing PACE organization enters a previously unserved area, the department shall pay at a rate within the certified actuarially sound rate range developed with respect to that entity, to the extent consistent with federal requirements and subject to paragraph (11), to reflect the lower enrollment and higher operating costs associated with a new PACE organization relative to a PACE organization with higher enrollment and more experience providing managed care interventions to its beneficiaries.
(11) This subdivision shall be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available.
(12) This subdivision shall apply for rates implemented no earlier than January 1, 2017.
(o) (1) Notwithstanding any other law, as a component of the CalAIM Initiative authorized pursuant to Article 5.51 (commencing with Section 14184.100) of Chapter 7, and any successor waiver, demonstration, or state plan amendment authorizing the Medi-Cal managed care program, the department may establish capitation rates to contracted health plans on a regional basis in lieu of health plan and county-specific rates.
(2) Before implementing a regional-based capitation rate, the department shall report to the Legislature on the process that those regional rates and regions for regional rates shall be established and how regional rates shall provide for an adequate network, encourage quality improvement, and promote appropriate utilization incentives.
(3) The department shall consult with affected contracted health plans, providers, and consumer representatives to implement this subdivision.

SEC. 3.

 The Legislature finds and declares that this act is a state law within the meaning of Section 1621(d) of Title 8 of the United States Code.

SEC. 4.

 (a) The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
(b) The Legislature hereby declares that it would have enacted this act and each and every provision thereof not declared invalid or unconstitutional without regard to whether any other provision of this act or application thereof would be subsequently declared invalid or unconstitutional.