(a) This article shall be known and may be cited as the “Medi-Cal Hospital/Uninsured Care Demonstration Project Act.”

(b) The Legislature finds and declares all of the following:

(1) The preservation of the state’s disproportionate share hospitals and the University of California hospitals is of critical importance to the health and welfare of the people of the state.

(2) These hospitals, as well as many nondisproportionate district hospitals, are facing unprecedented financial challenges. Many are facing significant budget deficits impeding their ability to continue serving their essential role in the health care delivery system, including providing care to Medi-Cal beneficiaries and uninsured patients.

(3) The financial viability of these hospitals has been sustained through funding that has been available for California’s disproportionate share hospital program under Medi-Cal. Without these funds, many of these hospitals would be unable to keep their doors open and others would be forced to curtail services, thereby impacting service to Medi-Cal beneficiaries and other needy individuals.

(4) The federal Centers for Medicare and Medicaid Services has indicated in negotiations with the State Department of Health Services that it is changing its approach to federal funding of Medicaid in various respects. For instance, the methodology that many states, including California, have used to fund their disproportionate share hospital programs successfully for more than a decade has become the subject of negative attention by the federal Centers for Medicare and Medicaid Services, which is refusing to approve discretionary waivers and state plan amendments that rely on these funding methods. Accordingly, the State of California has proposed that the funding mechanism for inpatient hospital services under Medi-Cal be modified to secure federal approval and address continued and adequate funding to the University of California and disproportionate share hospitals. To this end, the state has negotiated a waiver from various federal Medicaid requirements that will allow it to implement a demonstration project using modified funding methodologies. The Medi-Cal Hospital/Uninsured Care Demonstration Project is intended to make up to $3.3 billion in additional federal funds available to California safety net hospitals over a five-year period.

(5) The methodologies used to fund the Medi-Cal program should maximize the use of federal funds consistent with federal Medicaid law in an effort to access all of the increased federal funding available under the Medi-Cal Hospital/Uninsured Care Demonstration Project.

(6) The amount of Medi-Cal funding to the University of California hospitals and disproportionate share hospitals as a whole should not be less than the amount of funding for the 2004-05 fiscal year. Similarly, the amount of Medi-Cal funding for the public disproportionate share hospitals as a group and for the private disproportionate share hospitals as a group should not be less than the amount of funding for the 2004-05 fiscal year.

(7) The distributions of Medi-Cal funds should provide a predictable and stable amount of funding for these hospitals in order to allow them to engage in short-term and long-term planning. The distribution methodologies should be fair and equitable, and take into account utilization changes among hospitals.

(8) The payments of Medi-Cal funds to these hospitals should be made regularly and periodically throughout the year in order to provide hospitals with necessary cashflow.

(Added by Stats. 2005, Ch. 560, Sec. 1. Effective October 5, 2005. Conditionally inoperative as provided in Section 14166.26 or in subd. (b) or (g) of Section 14166.2. Repealed on date prescribed in Section 14166.26 or in subd. (b) or (g) of Section 14166.2.)