BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1162 (Holden) - Medi-Cal:  tobacco cessation
          
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          |Version: July 14, 2015          |Policy Vote: HEALTH 8 - 0       |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 17, 2015   |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.


          Bill  
          Summary:  AB 1162 would require tobacco cessation services to be  
          a covered benefit in the Medi-Cal program with specified  
          requirements for benefits.


          Fiscal  
          Impact:  
           Minor administrative costs to update existing Medi-Cal  
            policies for the provision of smoking cessation services  
            (General Fund and federal funds).

           Unknown costs due to increased utilization of smoking  
            cessation services. Under current practice, about 30,000  
            Medi-Cal beneficiaries access smoking cessation services at a  
            total annual cost of about $4 million per year. Assuming that  
            the expanded benefits required in the bill result in increased  
            demand for smoking cessation services of 10% to 20%, the bill  
            would result in increased costs of $400,000 to $800,000 per  
            year (General Fund and federal funds).








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           Unknown cost from increased drug prices (General Fund and  
            federal funds). Under current practice, the Department of  
            Health Care Services and Medi-Cal managed care plans negotiate  
            with drug companies over the cost of prescription drugs. The  
            Department and the managed care plans use requirements such as  
            prior authorization to encourage beneficiaries to utilize less  
            costly drugs before trying more costly drugs. This system  
            gives the Department and managed care plans some leverage when  
            negotiating prices with drug companies. The bill is unclear as  
            to whether it would allow utilization controls for covered  
            drugs. To the extent that it was interpreted to limit or  
            prohibit utilization controls, the bill could limit the  
            Department and managed care plans' ability to negotiate drug  
            prices with manufactures, increasing costs.

           Unknown short term cost savings due to reduced smoking-related  
            health care costs for Medi-Cal beneficiaries. A review of a  
            new smoking cessation benefit in the Massachusetts Medicaid  
            program indicates that reducing smoking by beneficiaries led  
            to a net reduction in health care costs of about $2 for each  
            $1 spent on the program. Using the assumptions for utilization  
            increase above, potential cost savings of $800,000 to $1.7  
            million per year. The long-term health care spending impacts  
            of reduced tobacco use are less clear, because reduced health  
            care spending on smoking-related conditions will be offset by  
            increased longevity.


          Background:  Under state and federal law, the Department of Health Care  
          Services operates the Medi-Cal program, which provides health  
          care coverage to low income individuals, families, and children.  
          Medi-Cal provides coverage to childless adults and parents with  
          household incomes up to 138% of the federal poverty level and to  
          children with household incomes up to 266% of the federal  
          poverty level. The federal government provides matching funds  
          that vary from 50% to 90% of expenditures depending on the  
          category of beneficiary.
          Smoking cessation services are not specifically mandated as a  
          benefit in the Medi-Cal program. However, current state and  
          federal law require Medi-Cal to provide coverage for medically  
          necessary, FDA approved drugs. In addition, state and federal  
          law require coverage for preventative services assigned a grade  
          of A or B by the United States Preventative Services Task Force.  
          The Task Force had proposed, but not adopted, a grade of A for  








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          all FDA approved drugs or behavioral interventions for smoking  
          cessation.


          In September 2014, the Department of Health Care Services  
          updated its policy for coverage of smoking cessation services.  
          Current policy requires coverage of at least two quit attempts  
          per year, at least four counselling sessions, and seven  
          FDA-approved drugs (with at least one available without prior  
          authorization).




          Proposed Law:  
            AB 1162 would require tobacco cessation services to be a  
          covered benefit in the Medi-Cal program with specified  
          requirements for benefits.
          Specific provisions of the bill would:
                 Require tobacco cessation services to be covered  
               benefits in the Medi-Cal program;
                 Include at least four quit attempts per year;
                 Include at least four counselling sessions per quit  
               attempt, in person, on the telephone, or as part of a  
               group, at the beneficiary's option;
                 Include a 90-day treatment regimen of any drug approved  
               by the FDA for smoking cessation;
                 Require at least one prescription and all over the  
               counter medications to be available without prior  
               authorization;
                 Apply the requirements of the bill to medications  
               approved by the FDA and covered by Medi-Cal as of January  
               1, 2015;
                 Prohibit a requirement that a beneficiary receive any  
               form of service (e.g. counselling) as a condition of  
               receiving another form of service (e.g. drugs).


          Related  
          Legislation:  
                 SB 220 (Yee, 2010) would have required health plans and  
               health insurers to cover certain smoking cessation  
               services. That bill was vetoed by Governor Schwarzenegger.
                 AB 2662 (Dymally, 2007) would have prohibited receiving  








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               one form of smoking cessation services from being a  
               condition of receiving another form of service. That bill  
               was held on this committee's Suspense File.
                 SB 576 (Ortiz, 2005) would have required health plans  
               and health insurers to cover certain smoking cessation  
               services. That bill was vetoed by Governor Schwarzenegger.


          Staff  
          Comments:  As noted above, the Department of Health Care  
          Services revised its policy on coverage of smoking cessation  
          services in September 2014. The requirements of this bill are  
          similar to those requirements, but this bill expands certain  
          requirements. For example, this bill increases the number of  
          quit attempts per year from two to four. In addition, the  
          Department policy requires coverage for seven specific FDA  
          approved tobacco cessation medications, whereas this bill would  
          require coverage for any FDA approved drug for smoking cessation  
          that was covered by Medi-Cal on January 1, 2015.
          As drafted, the bill prohibits coverage of smoking cessation  
          services with any barriers, requirements or restrictions, except  
          that at least one prescription medication and all  
          over-the-counter medications shall be available without prior  
          authorization. These two provisions of the bill, in combination,  
          may have the effect of actually prohibiting any utilization  
          control for smoking cessation services. 




          Recommended  
          Amendments:  Staff recommends the bill be clarified to allow for  
          utilization controls, as long as at least one prescription  
          medication and all over-the-counter medications are available  
          without prior authorization.


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