PRIOR PRINTER'S NO. 4132 PRINTER'S NO. 4366
No. 2699 Session of 2006
INTRODUCED BY KENNEY, OLIVER, WATSON, ROSS, BEBKO-JONES, BISHOP,
JAMES, KIRKLAND, MYERS, WATERS, ADOLPH, BARRAR, BLACKWELL,
BOYD, BUXTON, CALTAGIRONE, CIVERA, COHEN, COSTA, CRAHALLA,
CRUZ, DALLY, DERMODY, FABRIZIO, GANNON, GEORGE, GILLESPIE,
GODSHALL, GOODMAN, HARHART, HENNESSEY, HESS, W. KELLER,
KILLION, LEACH, LEDERER, LEVDANSKY, MACKERETH, MAHER,
MAITLAND, MANN, McGEEHAN, MICOZZIE, O'BRIEN, PARKER, PETRONE,
PHILLIPS, QUIGLEY, RAYMOND, ROEBUCK, RUBLEY, SABATINA,
SHAPIRO, SIPTROTH, T. STEVENSON, E. Z. TAYLOR, J. TAYLOR,
THOMAS, TIGUE, TRUE, WILLIAMS, YUDICHAK, O'NEILL, SATHER,
CORNELL, BENNINGHOFF, PISTELLA, SONNEY, YOUNGBLOOD, BEYER,
GINGRICH, McILHINNEY AND PETRI, JUNE 6, 2006
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
JUNE 26, 2006
AN ACT
1 Authorizing and directing the Department of Public Welfare to
2 establish and maintain a managed health care program for
3 medical assistance recipients; requiring actuarially sound
4 rates for certain managed care organizations; providing for
5 the right of appeal and approval by the General Assembly of
6 changes to the Commonwealth medical assistance plan and
7 associated waivers; and repealing inconsistent portions of
8 other acts.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Short title.
12 This act shall be known and may be cited as the Health
13 Choices Act.
14 Section 2. Legislative intent.
15 It is the intent of the General Assembly to:
1 (1) Improve the accessibility, continuity and quality of
2 health care services for participants in the Commonwealth's
3 medical assistance program, while responsibly controlling
4 program costs.
5 (2) Establish a process for the establishment and
6 maintenance of a program to manage the care of participants
7 in the medical assistance program.
8 (3) Ensure that managed care organizations serving
9 medical assistance recipients receive compensation that is
10 actuarially sound and otherwise compliant with Federal and
11 Commonwealth statutes and regulations and that is determined
12 through a transparent process.
13 (4) Provide for legislative approval of certain
14 amendments to the Commonwealth State plan for the medical
15 assistance program.
16 (5) Establish procedures by which managed care
17 organizations may appeal decisions made by the Department of
18 Public Welfare with respect to the calculation of capitation
19 rates and payments and other contractual provisions.
20 Section 3. Definitions.
21 The following words and phrases when used in this act shall
22 have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 "Actuarial standards board." The body established by the
25 American Academy of Actuaries to promulgate actuarial standards
26 of practice.
27 "Actuarially sound rates." With respect to the health
28 choices program, capitation rates which:
29 (1) Are adequate to cover the reasonably expected
30 medical, administrative and assessment expenses, and a
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1 reasonable level of profit or contingency, associated with
2 the fulfillment of a contractor's obligations in the
3 applicable contract year.
4 (2) Make provision for assumed expense levels, for all
5 expenses, that are reasonably attainable by all contractors
6 in each geographic zone in the contract year, based primarily
7 on the actual expense experience of such contractor during
8 prior years and expenses actually expected to be incurred in
9 the applicable contract year.
10 (3) Are based on assumptions that represent the most
11 likely outcomes for costs and utilization expected within the
12 range of assumptions developed for the populations and
13 benefits covered in each geographic zone.
14 (4) Are compliant with all applicable standards,
15 statutes, rules and regulations governing the development of
16 such rates.
17 (5) Are based on methods, considerations and analyses
18 that conform to applicable guidelines promulgated by the
19 actuarial standards board.
20 "Capitation." A fee the Department of Public Welfare
21 periodically pays to a contractor for each recipient enrolled
22 under a contract for the provision of medical services, whether
23 or not the recipient receives the services during the period
24 covered by the fee.
25 "CMS." The Centers for Medicare and Medicaid Services of the
26 United States Department of Health and Human Services and such
27 successor entities which may from time to time discharge the
28 duties of CMS with respect to the medical assistance program.
29 "Contractor." A managed care organization providing managed
30 care services relating to medical care provided to recipients
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1 under one or more contracts with the Department of Public
2 Welfare pursuant to the health choices program. This term shall
3 also refer to a managed care organization seeking to enter into
4 a contract with the Department of Public Welfare to provide
5 services under health choices program.
6 "Department." The Department of Public Welfare of the
7 Commonwealth.
8 "HIPAA." The Health Insurance Portability and Accountability
9 Act of 1996 (Public Law 104-191, 110 Stat. 1936) and regulations
10 promulgated thereunder.
11 "In-plan services." Services included in the medical
12 assistance program pursuant to the State plan.
13 "Managed care organization." A public or private
14 organization that is a federally qualified health maintenance
15 organization or meets the State plan's definition of a health
16 maintenance organization or otherwise qualifies as a managed
17 care plan as defined in Article XXI of the act of May 17, 1921
18 (P.L.682, No.284), known as The Insurance Company Law of 1921.
19 "Medical assistance." The Commonwealth program authorized by
20 Subchapter XIX of the Social Security Act (49 Stat. 620, 42
21 U.S.C. 1396 et seq.), known as Medicaid and authorized in this
22 Commonwealth under the act of June 13, 1967 (P.L.31, No.21),
23 known as the Public Welfare Code, and subject to regulations
24 promulgated under such statutes. The term shall also refer to
25 any successor program implemented by either the Federal
26 Government or the Commonwealth, to the extent a contractor is
27 providing services contemplated in this act with respect to such
28 program.
29 "Program." The Commonwealth's health choices program, as
30 provided for in this act, which provides mandatory managed
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1 health care to recipients in specified areas of this
2 Commonwealth through contracts with managed care organizations.
3 "Program change." Amendments, revisions or additions to the
4 Department of Public Welfare's medical assistance fee schedule,
5 State plan or to Federal or Commonwealth regulations, laws,
6 guidelines, waivers or policies, insofar as they affect the
7 scope or nature of benefits available to eligible persons.
8 "Recipient." An individual eligible to receive health care
9 or health-related services under the medical assistance program.
10 "State plan." The document prepared by the Commonwealth in
11 the manner required by section 1396a(a) of the Social Security
12 Act (49 Stat. 620, 42 U.S.C. § 1396a(a)), as approved by the
13 Centers for Medicare and Medicaid Services, that describes the
14 nature, scope and operation of the medical assistance program
15 and gives assurances that the Commonwealth will administer the
16 program in compliance with Federal requirements. The term shall
17 also include waivers granted by the Centers for Medicare and
18 Medicaid Services not otherwise included in the plan submitted
19 by the Commonwealth for Centers for Medicare and Medicaid
20 Services approval.
21 "Waiver." A determination made by the Centers for Medicare
22 and Medicaid Services under Subchapter XIX of the Social
23 Security Act (49 Stat. 620, 42 U.S.C. 1396 et seq.), known as
24 Medicaid, and regulations promulgated thereunder, which allows
25 the Commonwealth to make modifications in its operation of the
26 medical assistance program.
27 "Zone." A geographic area, designated as provided in this
28 act, within which contractors provide services to recipients.
29 Section 4. General provisions regarding program.
30 (a) Administration.--The Commonwealth, acting by and through
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1 the department, shall implement and administer the program in
2 all areas of this Commonwealth as provided in this act.
3 (b) Replacing other law as the means for providing
4 assistance.--The program shall require the provision of all
5 medical assistance-covered medical benefits in the amount,
6 duration and scope set forth in the act of June 13, 1967
7 (P.L.31, No.21), known as the Public Welfare Code, for
8 recipients in the following categories:
9 (1) Supplemental Security Income.
10 (2) Temporary assistance for needy families.
11 (3) Healthy beginnings.
12 (4) General assistance.
13 (5) Successors to the categories listed in paragraphs
14 (1), (2), (3) and (4).
15 (c) Exclusion.--Recipients residing in long-term care
16 facilities, residential facilities and Commonwealth facilities,
17 other than State-operated intermediate care facilities for the
18 mentally retarded, shall be excluded from participation in the
19 program.
20 (d) Adding or removing optional benefits.--The department
21 may amend the State plan to add or remove optional medical
22 assistance benefits which are not required by this act, the
23 Public Welfare Code, other acts of the General Assembly or by
24 Subchapter XIX of the Social Security Act (49 Stat. 620, 42
25 U.S.C. 1396 et seq.), known as Medicaid, and regulations
26 promulgated thereunder to be provided by the Commonwealth to
27 recipients, with the exception of pharmaceutical services, which
28 shall remain a covered benefit under the program and provided by
29 contracts with managed care contractors.
30 (e) Mandatory participation exclusion.--Notwithstanding the
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1 provisions of subsection (b), the department may exclude
2 recipients from mandatory participation in the program as a
3 result of:
4 (1) Determination by the department that the recipient
5 is eligible for the Commonwealth's health insurance premium
6 payment program.
7 (2) The recipient becoming ventilator-dependent in an
8 acute or rehabilitation hospital for more than 30 consecutive
9 days.
10 (3) The recipient's enrollment in the Department of
11 Aging waiver.
12 (4) The recipient's enrollment in the Michael Dallas
13 Model waiver.
14 (f) Alternative services.--Contracts executed by and between
15 the department and contractors shall allow contractors to
16 provide supplemental and cost-effective alternative services to
17 recipients in lieu of or in addition to in-plan services and to
18 take other measures which in the contractor's judgment promote
19 quality of care or efficiency, and the process established in
20 this act for determination of actuarially sound capitation rates
21 shall take the effect of such supplemental and cost-effective
22 alternative services and other measures into account.
23 (g) Allocation of responsibility.--Contracts executed by and
24 between the department and contractors may provide for the
25 allocation of responsibility to provide health care services
26 between physical and behavioral health care among contractors.
27 Section 5. Program administration.
28 (a) Zones.--The department shall administer the program for
29 both physical health care and behavorial BEHAVIORAL health care <--
30 in the following areas of this Commonwealth, incorporating the
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1 provisions of this act:
2 (1) Southeast zone: Bucks, Chester, Delaware, Montgomery
3 and Philadelphia Counties.
4 (2) Southwest zone: Allegheny, Armstrong, Beaver,
5 Butler, Fayette, Greene, Indiana, Lawrence, Washington and
6 Westmoreland Counties.
7 (3) Lehigh and Capital zone: Adams, Berks, Cumberland,
8 Dauphin, Lancaster, Lebanon, Lehigh, Northampton, Perry and
9 York Counties.
10 (4) Other zones: Other counties, or groupings of
11 counties, which are covered by program contracts in effect as
12 of the effective date of this act SECTION by and between the <--
13 department and contractors which provide for the provision of
14 behavioral health care services to recipients residing in
15 such counties.
16 (b) Designation.--Within 120 days of the effective date of
17 this act SECTION, the department shall designate groupings of <--
18 counties not included in the groupings described in subsection
19 (a) as zones for expansion of the program to counties of this
20 Commonwealth not covered by the program. Such determination
21 shall be based upon factors, including, but not limited to:
22 (1) Population, in terms both of the total number of
23 people who live in an area, and population density, as well
24 as the number of current and anticipated recipients.
25 (2) Multicounty arrangements created under the act of
26 October 20, 1966 (3rd Sp.Sess., P.L.96, No.6), known as the
27 Mental Health and Mental Retardation Act of 1966, operating
28 under other statutes relating to the provision of human
29 services or cooperating in contracting with the Commonwealth
30 or in the operation of human services programs.
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1 (3) The department's regions.
2 (4) Constraints imposed by geography, transportation and
3 health care provider systems.
4 (5) Relationships among consumers and providers.
5 (6) Managed care organization service areas.
6 (c) Residents of seventh or eighth class counties.--The
7 department may exclude recipients residing in a county of the
8 seventh or eighth class, as such classifications are established
9 under the act of August 9, 1955 (P.L.323, No.130), known as The
10 County Code, from participation in the program upon making a
11 finding that population density, availability of providers or
12 other factors make inclusion of such recipients in the program
13 impracticable.
14 Section 6. Program expansion.
15 (a) Responsibilities of department.--Within 270 days of the
16 effective date of this act SECTION, the department shall: <--
17 (1) Issue one or more requests for proposals for the
18 expansion of the program to all counties of this Commonwealth
19 not covered by one or more program contracts for physical
20 health care at that time, based upon the zones created
21 pursuant to section 5.
22 (2) Review and evaluate responses from managed care
23 organizations to the requests for proposals issued pursuant
24 to paragraph (1), in accordance with applicable Federal and
25 Commonwealth laws and regulations.
26 (3) Select contractors for each zone into which the
27 program is to be expanded in accordance with the provisions
28 of section 7 and this section. The contractors having the
29 responsibility to provide services for the benefit of all
30 program recipients residing in these zones are subject only
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1 to the limitations imposed in section 4.
2 (4) Negotiate and execute contracts with selected
3 contractors for each zone into which the program is to be
4 expanded, incorporating terms and conditions in conformance
5 with the provisions of this act, including, without
6 limitation, actuarially sound capitation rates determined in
7 accordance with section 7.
8 (5) Seek and make all efforts to obtain any necessary or
9 desirable amendments to or approvals of waivers from CMS or
10 any other agencies of the Federal Government to allow timely
11 implementation of the expansion provided for in this section.
12 (b) Selection of contractors.--The department shall select
13 no fewer than two contractors to provide managed care services
14 for each zone into which the program is to be expanded, such
15 contractors having the responsibility to provide services for
16 the benefit of all program recipients residing in such zone,
17 subject only to the limitations provided in section 4. If the
18 department selects one or more counties to act as contractors to
19 provide managed behavioral health care services to recipients
20 residing in designated counties, the requirement to select more
21 than one contractor shall not apply as to the provision of
22 behavioral health care services in such counties only.
23 (c) Implementation of expansion.--The department may
24 implement the expansion required by this section in phases, but
25 program shall become operational in all zones to the full extent
26 required under this act no later than 24 months after the
27 effective date of this act SECTION. <--
28 Section 7. Capitation rates.
29 (a) Development and determination of rates.--The department
30 shall adopt by regulation a methodology for development and
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1 determination of actuarially sound capitation rates to be paid
2 to contractors which is in all respects compliant with this act.
3 The methodology shall include a list of all relevant factors
4 which the department shall take into account in the development
5 of such rates.
6 (b) Annual capitation rates.--
7 (1) Capitation rates paid by the department to
8 contractors shall be actuarially sound.
9 (2) Capitation rates shall be determined by the
10 department in accordance with the methodology in the
11 regulations adopted pursuant to subsection (a).
12 (3) The department shall use its best efforts to publish
13 final capitation rates for each contractor for the next
14 contract year not less than 120 days prior to the beginning
15 of such contract year and shall advise contractors of any
16 delays in the publication of such rates.
17 (4) The department shall disclose to contractors its
18 application of all factors used in the development of the
19 capitation rates for such contractor and all information
20 submitted to CMS relating to such capitation rates, no later
21 than the date the department discloses the rates it intends
22 to offer with respect to a contract period. The department
23 shall also provide the contractor with any other such
24 information which it submits to CMS after the initial
25 disclosure contemplated in this subsection within ten days of
26 its submission to CMS.
27 (c) Intrayear adjustments to capitation rates.--
28 (1) The department shall adjust capitation rates within
29 a contract year to achieve or maintain actuarially sound
30 capitation rates for contractors to reflect program changes,
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1 such adjustments shall cover all applicable portions of the
2 contract year to which such program changes apply and be
3 developed pursuant to the methodology required be established
4 under subsection (a).
5 (2) In considering the need for intrayear capitation
6 rate adjustments, the department shall evaluate the impact of
7 program changes which have been imposed during the course of
8 the contract year in combination with prospective program
9 changes.
10 (3) Other than program changes designated by the
11 department as being emergency program changes or program
12 changes required by changes in Federal law or regulation with
13 an earlier effective date, no program change shall become
14 effective with less than 60 days' notice to the contractor.
15 (4) The department shall disclose to contractors its
16 application of all factors used in the development of the
17 capitation rates with respect to an intrayear adjustment in
18 capitation rates for such contractors and all information
19 submitted to CMS relating to such capitation rates, no later
20 than the date when the department disclosed the rates it
21 intends to offer with respect to such intrayear adjustment.
22 The department shall also provide the contractor with any
23 other such information which it submits to CMS after the
24 initial disclosure contemplated in this subsection within ten
25 days of its submission to CMS.
26 Section 8. Appeals.
27 (a) Claims by contractor.--All claims against the department
28 relating to any matter regarding any contract relating to the
29 program may be filed by the contractor in the Board of Claims
30 under 62 Pa.C.S. Ch. 17 Subch. C (relating to Board of Claims),
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1 including, without limitation, claims relating to the actuarial
2 soundness of capitation rates.
3 (b) Effect of agreements between contractor and
4 department.--No provision of any agreement by and between a
5 contractor and the department, any request for proposal,
6 regulation, bulletin or other statement issued by any agency or
7 department of the commonwealth shall foreclose:
8 (1) The right of a contractor to file a claim before the
9 Board of Claims, including its right to appeal any
10 determination by the department as to the actuarial soundness
11 of any capitation rate or to appeal a finding by the Board of
12 Claims with respect to such claim.
13 (2) The right of a contractor to file any other claim or
14 appeal in any forum having jurisdiction to consider such
15 claim or appeal.
16 (3) The right of the contractor to perform at the
17 capitation rate accepted by the department during the
18 pendency of such claim or appeal. Any such provision shall be
19 void and unenforceable against a contractor.
20 (c) Notification by contractor.--A contractor which desires
21 to perform at the capitation rate accepted by the department
22 during the pendency of proceedings in the Board of Claims or any
23 appeal of a finding by the Board of Claims shall notify the
24 department of its intention to file a claim in the Board of
25 Claims no later than the date the contractor executes the
26 contract incorporating such rate.
27 Section 9. Replacement of contractors.
28 (a) Requests for proposals.--The department may, from time
29 to time, determine to issue requests for proposals:
30 (1) to expand the number of contractors serving one or
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1 more zones;
2 (2) to replace contractors;
3 (3) to assess the qualification or performance of
4 current contractors; or
5 (4) at the discretion of the department.
6 (b) Compliance by department.--In the event the department
7 exercises its right under this section, it shall comply with the
8 provisions of section 7 with respect to the determination of
9 capitation rates.
10 Section 10. Amendments to the State plan.
11 (a) Waiver or amendment submissions.--Prior to the
12 department submitting a waiver, an amendment to the State plan
13 or an amendment to a waiver to CMS for its approval where such
14 waiver, State plan amendment or amended waiver would cause a
15 change in expenditure of Commonwealth funds of more than $20
16 million during any fiscal year, the department shall submit such
17 proposed waiver, State plan amendment or waiver amendment for
18 review under the provisions of the act of June 25, 1982
19 (P.L.633, No.181), known as the Regulatory Review Act.
20 (b) Determination of expenditures.--In making the
21 determination of Commonwealth expenditures required by
22 subsection (a), the department shall take into account all
23 waivers, State plan amendments and amended waivers then proposed
24 or in effect, in combination with all waivers, State plan
25 amendments and waiver amendments expected to be requested for
26 the remainder of the then current fiscal year.
27 Section 11. General provisions.
28 In discharging its responsibilities under this act, the
29 department shall be subject to the provisions of the act of June
30 21, 1957 (P.L.390, No.212), referred to as the Right-to-Know
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1 Law. The department shall not make available any information:
2 (1) in violation of the provisions of HIPAA; or
3 (2) disclosing capitation rates for individual managed
4 care organizations, including, without limitation, financial
5 and actuarial information provided by a managed care
6 organization or a managed care orginization ORGANIZATION <--
7 contractor to the department for the purpose of negotiating
8 or determining capitation rates to be paid for health care
9 services on behalf of recipients.
10 Section 12. Report to General Assembly.
11 Within 12 months following the effective date of this act, <--
12 (A) OFFICIALS TO RECEIVE REPORT.--WITHIN 12 MONTHS FOLLOWING <--
13 THE EFFECTIVE DATE OF THIS SECTION, and annually thereafter, the
14 department shall deliver a report on the implementation and
15 operation of the program to:
16 (1) The Speaker of the House of Representatives.
17 (2) The minority leader of the House of Representatives.
18 (3) The chairman of the Appropriations Committee of the
19 House of Representatives.
20 (4) The minority chairman of the Appropriations
21 Committee of the House of Representatives.
22 (5) The chairman of the Health and Human Services
23 Committee of the House of Representatives.
24 (6) The minority chairman of the Health and Human
25 Services Committee of the House of Representatives.
26 (7) The President pro tempore of the Senate.
27 (8) The minority leader of the Senate.
28 (9) The chairman of the Appropriations Committee of
29 Senate.
30 (10) The minority chairman of the Appropriations
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1 Committee of the Senate.
2 (11) The chairman of the Public Health and Welfare
3 Committee of the Senate.
4 (12) The minority chairman of the Public Health and
5 Welfare Committee of the Senate.
6 (B) CONTENT OF REPORT.--THIS REPORT SHALL INCLUDE: <--
7 (1) THE NUMBER OF APPLICANTS PER SERVICE PER COUNTY,
8 SEPARATED BY THOSE SERVED AND THOSE DENIED.
9 (2) THE TOTAL COST OR SAVINGS TO THE COMMONWEALTH BY
10 CONTRACTORS, ITEMIZED BY COUNTY PER SERVICE PROVIDED.
11 (3) THE NUMBER OF DOCTORS IN EACH COUNTY, SEPARATED BY
12 THOSE WHO ACCEPT MEDICAL ASSISTANCE AND THOSE WHO DO NOT
13 ACCEPT MEDICAL ASSISTANCE.
14 (4) THE PERCENTAGE CHANGE OF EACH OF THE CATEGORIES
15 ABOVE SINCE THE IMPLEMENTATION OF THE ACT.
16 (5) POLICY RECOMMENDATIONS.
17 Section 13. Repeals.
18 All acts, including without limitation, the act of December
19 3, 2002 (P.L.1147, No.142), are repealed to the extent they are
20 inconsistent with this act.
21 Section 14. Effective date.
22 This act shall take effect as follows:
23 (1) Section 7 shall take effect immediately.
24 (2) The remainder of this act shall take effect in 60
25 days.
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