(a) (1) Notwithstanding any other law, for dates of service no sooner than January 1, 2024, or on the effective date of any necessary federal approvals as required by subdivision (d), whichever is later, the reimbursement rates for the following services, as determined in accordance with subdivision (f), shall be the greater of 87.5 percent of the lowest maximum allowance established by the federal Medicare Program for the same or similar services or the level of reimbursement, which shall account for, and be inclusive of, the exemption of these services from payment reductions pursuant to Section 14105.192, and supplemental payments or rate increases, or both, as applicable, under the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 (Proposition 56, an initiative measure approved at the November 8, 2016, statewide general election) that were implemented with funds from the Healthcare Treatment Fund, as established pursuant to subdivision (a) of § 30130.55 of the Revenue and Taxation Code, in effect as of December 31, 2023, as determined by the department:

(A) Primary care services, including those provided by physicians or nonphysician health professionals, as defined in Section 51170.5 of Title 22 of the California Code of Regulations.

(B) Obstetric care services, and doula services as described in Section 14132.24.

(C) Outpatient mental health services that are not the financial responsibility of county mental health plans operating pursuant to Chapter 8.9 (commencing with Section 14700).

(2) The department shall annually review and revise the reimbursement rates in accordance with paragraph (1) based on changes to the lowest maximum allowance established by the federal Medicare Program for the same or similar services. Any revisions to the reimbursement rates determined in accordance with paragraph (1) shall be considered as part of the annual budget development process and take effect beginning on January 1, 2025, and each subsequent January 1 thereafter, of the calendar year following the department’s annual review.

(3) The department shall develop and implement a methodology for establishing reimbursement rates or payments for the services described in paragraph (1) where there is no specified maximum allowable rate established by the federal Medicare Program. The department shall review this methodology annually and may, in its sole discretion, modify the methodology on a prospective basis.

(b) (1) (A) For contract periods during which subdivision (a) is implemented, each Medi-Cal managed care plan shall reimburse a network provider furnishing the services subject to subdivision (a) at least the amount the network provider would be paid for those services in the Medi-Cal fee-for-service delivery system, as set forth by the department in the approved Medi-Cal State Plan and guidance issued pursuant to subdivision (e).

(B) Medi-Cal managed care plans that reimburse a network provider furnishing the services identified in subparagraphs (A) to (C), inclusive, of paragraph (1) of subdivision (a) on a capitated basis shall ensure that the network provider receives reimbursement that is equal to, or projected to be equal to, the level of reimbursement required in subparagraph (A) for the applicable services and, as applicable, shall increase reimbursement to the network provider to comply with this subparagraph.

(2) The department may require Medi-Cal managed care plans and network providers of the applicable services to submit information the department deems necessary to implement and monitor compliance with this subdivision, at the times and in the form and manner specified by the department.

(c) (1) The payments implemented pursuant to subdivisions (a) and (b) shall be supported by the managed care organization provider tax revenue, pursuant to Article 7.1 (commencing with Section 14199.80), or other state funds appropriated to the department as the state share for this purpose, including, but not limited to, funds transferred to the Medi-Cal Provider Payment Reserve Fund in accordance with Sections 14105.200 and 14199.82 and to the Healthcare Treatment Fund in accordance with subdivision (a) of § 30130.55 of the Revenue and Taxation Code.

(2) Notwithstanding any other law, increases to fee-for-service reimbursement rates and managed care directed payments that are made pursuant to subdivisions (a) and (b) constitute increases in accordance with subdivision (a) of § 30130.55 of the Revenue and Taxation Code, and all other fee-for-service supplemental payments and managed care directed payments for the services identified in subparagraphs (A) to (C), inclusive, of paragraph (1) of subdivision (a) that are made pursuant to subdivision (a) of § 30130.55 of the Revenue and Taxation Code shall be discontinued on the date the payments implemented pursuant to subdivisions (a) and (b) are effective.

(d) In implementing this section, the department shall seek any federal approvals that it deems necessary. This section 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.

(e) Notwithstanding the rulemaking provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this section, 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.

(f) The department shall develop the methodologies and parameters for the payments implemented pursuant to subdivisions (a) and (b), and may revise the methodologies and parameters, for purposes including, but not limited to, obtaining or maintaining any necessary federal approvals as required by subdivision (d).

(g) For purposes of this section, the following definitions shall apply:

(1) “Medi-Cal managed care plan” has the same meaning as that term is defined in subdivision (j) of Section 14184.101.

(2) “Network provider” has the same meaning as that term is defined in Section 438.2 of Title 42 of the Code of Federal Regulations.

(h) The Legislature finds and declares that this section, as it pertains to funding made available for expenditure pursuant to subdivision (a) of § 30130.55 of the Revenue and Taxation Code, is consistent and in accordance with the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 (Proposition 56, an initiative measure approved at the November 8, 2016, statewide general election).

(Added by Stats. 2023, Ch. 42, Sec. 140. (AB 118) Effective July 10, 2023.)