Bill Summary – FastDemocracy

Fiscal Note
                                        Fiscal Services Division
HF 2402 – Psychiatric Medical Institutions for Children, Medicaid Rates (LSB5260HV.3)
Staff Contact: Eric Richardson (515.281.6767) eric.richardson@legis.iowa.gov
Fiscal Note Version – Final Action
Description
House File 2402 relates to Medicaid reimbursement for psychiatric medical care in institutions
for children. Section 1 of the Bill removes the requirement that an applicant for a license has
been awarded a certificate of need. Section 2 of the Bill allows the Director of the Department
of Health and Human Services (HHS) to determine whether the approval of an application for
the total number of beds reimbursed by Medicaid to more than 430 beds is necessary for good
cause.
Section 3 of the Bill does the following:
• Requires the HHS, no later than January 1, 2025, to select one or more psychiatric medical
   institutions for children (PMICs) with specialized needs.
• Requires the HHS to implement a Medicaid program enhanced reimbursement methodology
   for PMICs.
Section 4 of the Bill requires the HHS to review administrative rules regarding PMICs and to
update the rules according to the findings of the Association of Children’s Residential Centers’
most recent nationwide survey and scan of psychiatric residential treatment facilities, and the
recommendations of the Coalition for Family and Children’s Services in Iowa, to:
• Allow a physician assistant or advanced registered nurse practitioner to serve on a plan of
   care team and to be a member of the team to complete the certification of need for PMIC
   placement services.
• Allow licensed professionals, based on competencies rather than license type, to order the
   use of restraints or seclusions. The Department of Inspections, Appeals, and Licensing
   (DIAL) is required to adopt administrative rules to administer this subsection of the Bill.
• Allow family therapy and family behavioral health intervention services to be included as
   billable services provided during a placement at a PMIC.
• Provide reimbursement codes to cover services beyond those provided outside the PMIC
   care team.
• Standardize managed care organization (MCO) rules and authorizations for PMICs.
• Allow a previously licensed PMIC with capacity to increase its licensed capacity to include
   additional beds without further review including by the Health Facilities Council.
• Allow for step-down PMIC placements or supervised apartment living for a child to utilize
   PMIC programs while living independently in a smaller residential setting without 24-hour
   supervision.
Section 5 of the Bill addresses the inclusion of applied behavior analysis services as a covered
benefit under the Healthy and Well Kids in Iowa (Hawki) program. By December 1, 2024, the
HHS is required to report the findings of the review of benefits included in a qualified health plan
under Hawki to the General Assembly.
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Section 6 of the Bill requires the HHS to review the effectiveness of the reduction of regulatory
barriers and restrictions specified in the Bill and report the resulting costs and savings to the
Governor and the General Assembly by March 1, 2025.
Background
Iowa Code chapter 135H defines a PMIC as an institution providing more than 24 hours of
continuous care involving long-term psychiatric services to 3 or more children in residence for
expected periods of 14 or more days for diagnosis and evaluations or for expected periods of
90 days or more for treatment.
Enhanced reimbursement rates provide funding for services to Medicaid members based on the
severity of the member’s needs. Reimbursement to providers is higher for members with more
severe needs and lower for members with less severe needs, as documented by a reliable
assessment. Currently, Iowa’s Medicaid program reimburses providers for each child in a PMIC
with no differentiation for the severity of the child’s needs.
Federal fiscal year (FFY) 2025 Federal Medical Assistance Percentage (FMAP) rates are based
on per capita personal incomes for calendar years 2020 through 2022. Iowa’s FFY 2025 FMAP
rate decreased by -0.88% to 63.25%, meaning for every dollar spent on the Medicaid program,
the federal government will pay $0.6325 and Iowa will pay $0.3675, beginning on October 1,
2024.
Assumptions
• According to the HHS, there are currently eight PMIC providers, one of which operates with
   an enhanced fee. The average stay in a PMIC is approximately 120 days. The regular per
   diem rate for PMICs is $465, with one provider receiving an enhanced per diem rate of $763
   for higher acuity needs (a $298 increase), which is assumed as the enhanced rate for this
   Fiscal Note.
• According to the HHS, based on FY 2022 data, it is estimated there will be an 8.7% increase
   in bed day services at the enhanced rate, from approximately 55,000 per year to 60,000 per
   year.
• The Program will begin on January 1, 2025, reducing the fiscal impact in FY 2025 by 50.0%.
• For State FY 2025, the State share for provider reimbursement is approximately 36.53%,
   which is a blended FMAP rate consisting of 25.0% of the FFY 2024 FMAP rate and 75.0%
   of the FFY 2025 FMAP rate. In FY 2025, the enhanced rate to providers is expected to cost
   $777,000 total, with the State paying $284,000 and the federal government paying
   $493,000.
• For State FY 2026, the State share for provider reimbursement is approximately 36.75% or
   the State share of FY 2025 Medicaid costs via the FMAP rate. Beginning in
   FY 2026 and continuing annually, the enhanced rate is expected to cost $1.6 million total,
   with the State paying $571,000 and the federal government paying $983,000.
• According to the HHS, an actuarial services contract to analyze the development of provider
   rates is necessary to administer the Bill, costing $100,000 in FY 2025 (split 50.0% each
   between the State and the federal government).
• According to the HHS, a Medicaid Management Information System (MMIS) contract
   amendment to properly identify claims and pay at enhanced rates is necessary to administer
   the Bill, costing $141,000 in FY 2025 (1,370 programming hours at $103 per hour), with the
   State paying 25.0% and the federal government paying 75.0%.
• An increase in the General Fund appropriation to the HHS for Medicaid will be necessary to
   pay for costs in the Bill.
• According to the HHS, review and update of the following administrative rules is anticipated
   to have a fiscal impact that cannot be estimated due to a lack of data:
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    •    The rules that allow family therapy and family behavioral health intervention services to
         be included as billable services provided during a placement at a PMIC will allow a
         person to see the person’s current therapist; allow the PMIC to receive a per diem;
         update detailed rates for therapists; and decrease the number of days stayed at a PMIC,
         an inpatient hospital, or out-of-state facilities (costing $630 per day). These rules may
         have an offsetting cost to reduce the fiscal impact.
    •    The rules that provide reimbursement codes to cover services beyond those provided
         outside the PMIC care team will decrease the number of days stayed in a PMIC,
         inpatient hospital, or out-of-state facility while potentially increasing utilization. These
         rules may have an offsetting cost to reduce the fiscal impact.
    •    The rules that standardize MCO rules and authorizations for PMICs will increase costs
         due to an increase in authorization days, prohibiting an MCO from denying PMIC
         authorizations and requiring an MCO to offer support to families, a service that is
         currently available but not utilized.
    •    The rules to allow for step-down PMIC placements or supervised apartment living for a
         child to utilize PMIC programs while living independently in a smaller residential setting
         without 24-hour supervision will increase utilization of community-based services for the
         foster care populations ages 16 to 20 that would be impacted since those members may
         currently be living in supervised apartments.
Fiscal Impact
Section 2 of House File 2402 is estimated to increase costs to the State by approximately
$369,000 in FY 2025 and $571,000 annually beginning in FY 2026.
                         Figure 1 — Total Costs of Enhanced Rate to PMICs
                                                             FY 2025               FY 2026
                 Expense Category
                                                        Total       State     Total       State
   Actuarial Services Contract                       $ 100,000 $ 50,000 $            0 $        0
   MMIS Contract                                         141,000     35,000          0          0
   Enhanced Rate to Providers                            777,000   284,000   1,553,000   571,000
   Total Costs                                       $ 1,018,000 $ 369,000 $ 1,553,000 $ 571,000
Section 3 of the Bill is expected to have a fiscal impact that cannot be estimated due to a lack
of data.
Sources
Department of Health and Human Services
Legislative Services Agency analysis
                                                                               /s/ Jennifer Acton
                                                                                 April 19, 2024
Doc ID 1449499
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
                                                 www.legis.iowa.gov
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Statutes affected: 
Enrolled: 135H.6