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California’s Medi-Cal Automation System May Get a Reboot

SACRAMENTO — The health and human services system in California is a beast. And administering that system is a pretty grand undertaking. It takes four immense computer systems to process claims, determine eligibility, track beneficiaries and distribute billions of dollars in benefits.

About one-third of the state’s human services caseload is concentrated in Los Angeles County. That one county alone provides services to 2.2 million people, at a cost of about $3 billion a year.

In Los Angeles County, the computer system that crunches all the numbers for that weighty system is nearing the end of its useful life, state officials say. That’s especially important now, officials say, with California preparing to increase eligibility for Medi-Cal, its Medicaid program, as called for in the federal health reform law.

The state Assembly Health and Human Services Committee recently assessed a $530 million plan to revamp Los Angeles’ computer system.

“The current platform is pretty much burning,” Erika Li, information technology analyst at the state Legislative Analyst’s Office, said. “It needs to be changed. It needs to be moved over to a modern platform.”

This computer system has been a huge success and extremely reliable so far, Li said, but computer systems don’t just keep working forever; they have life expectancies. If the state tries to “make do” with the current system in Los Angeles, she said, the number of glitches and fixes would increase over time. It would cost a lot of money to make those fixes, and as the system continued to take on and process more information, it would stand a much greater chance of crashing.

When the computer system crashes, people don’t receive their checks or food stamps, she said, and people wait a long time for services.

Four Systems in California

An effort to save money by consolidating the state’s four computer systems has started, and the state expects to finish a project to get down to three systems by the end of June. Each of those remaining three systems would handle roughly one-third of the state’s casework.

Eventually, all three systems will need to be updated, but the system that’s first in line is called LEADER and it handles public services for Los Angeles.

“We have been working for implementation of a replacement system for years,” said Frank Mecca, executive director of the County Welfare Directors Association of California. “I think centralized eligibility is one of the biggest successes in the health field. And moving forward with the new LEADER system is critical.”

The hope for the future of the entire state system is that, if the LEADER system can be completely rebuilt, it could be the template for overhauling the other two automation systems over time — so that, eventually, the state would have only one automation system, which would be much more efficient and less costly.

Proprietary vs. Open Source

Part of the problem with LEADER is that the system uses proprietary technology, meaning that the state must depend on a single company, Unisys, to operate the system and fix any problems with it, Li explained. Open-source programming would allow other entities to update and fix the system.

A Unisys representative at last week’s Assembly Health and Human Services Committee meeting said his company’s system has been a huge success and that Unisys should remain the vendor.

In a written statement, Unisys said, “The LEADER system … has proven to be by far the most cost-effective benefits system in the state. During this period of tremendous economic uncertainty and increasing demand for County services, Unisys believes LEADER will continue to fully and efficiently meet the needs of its residents.”

 Cost Pressures and Cost Savings

The state’s system already has saved the many millions of dollars, Li said. “It has allowed counties to administer (Medi-Cal and other benefits) more efficiently. The caseloads are so large for these systems, and there are 58 counties processing these cases. The systems allow business transactions and tracking beneficiaries to occur in a standardized way.”

She added, “That has saved administrative dollars. The figures here are in billions of dollars, in terms of what we spend on them, and that dwarfs the cost of administering them.”

In California, where the budget atmosphere is so dire and officials look so keenly at short-term, low-cost solutions, it can seem irresponsible to ask for half a billion dollars to fix a computer system that’s working right now.

“It will be costly,” Li said, “and California doesn’t have a lot of money. But it’s also necessary. So how do you balance that?”

When you check the Department of Health and Human Services budget and see a $4 billion cut this year — and all the lost services that represents – it looks even more daunting to secure money for a computer system upgrade.

But based on LAO research, Li said the real irresponsibility would occur if the state Legislature forgoes fixing this system.

“The system has to be changed eventually. We don’t want havoc,” she said. “The question is, how do you go forward in a responsible manner? Do you get a state-of-the-art system, or do you do the bare minimum and kick the can down the road, until the next system needs replacing?”

Timing Critical in Switching Systems

The biggest problem with deferring a LEADER system update is timing, Li said. Because there will be three different systems handling public benefits in the state, a technology update on each third of the system needs to be done sequentially.

If LEADER is not updated now, then it is likely to reach the end of its productive life at about the same time as the other two-thirds of the system. If the LEADER system is upgraded first, that would make the transition of the rest of the system smooth, Li said.

Upgrading the entire system all at once, five or 10 years from now would result in administrative chaos, Li said.

According to LAO officials, the decision facing the Legislature is whether to pony up the money now and update the LEADER computer system to save money in the long run, or to spend less on project costs but much more on maintenance costs as long as the update is deferred.

Mecca knows where he would come down on that choice.

“I am extremely skeptical of the savings — if any — if we don’t move forward with this,” he said. “And the risk of failure (of the entire system) goes up considerably.”

The first hurdle to rebuilding the system is approving the $530 million over five years to update LEADER. The appropriation is currently in the Assembly Health and Human Services Committee. The item is open, pending the May budget revision, and a committee decision is expected in June or July.

Related Topics

Insight Medi-Cal