Think Tank

How To Build Medi-Cal Waiver Bridge to Health Care Reform

A new Medi-Cal waiver being negotiated now between California and CMS is portrayed as a bridge between the existing Medi-Cal program and the full-access expansion envisioned for 2014 in federal health care reform.

The federal government allows states to make changes to their Medicaid programs — Medi-Cal in California — to adjust to specific circumstances. These changes, made through a series of waivers to federal rules, are negotiated between states and CMS. California has several waivers in place, the largest and most significant being the 1115 waiver that has been in effect since 2005 and expires Aug. 31.

For the past five years, California has used its 1115 waiver to wring out millions of extra federal dollars and design efficient ways to use Medicaid money — including managed care Medi-Cal programs, augmented payments for hospitals serving large Medi-Cal populations, and special payments and services for safety-net community clinics serving large numbers of low-income and uninsured people.

The last 1115 waiver was seen as an end unto itself, but this time, the waiver comes in the foreground of profound change that will increase Medi-Cal enrollment by millions in the second half of this decade.

We asked stakeholders how California can best design this bridge to make the most of the next four years, while creating the best environment for health care reform to take root in California.

  • What are the most important considerations in creating the new waiver?
  • What are the potential pitfalls to be avoided?
  • How can the waiver best be used to get California ready for the Medi-Cal expansion?

CMS officials said they could not comment during negotiations. We got responses from:

Waiver Can Help California Seize Reform Initiative

Medi-Cal, California’s Medicaid program,  has long been characterized by innovative delivery systems that recognize the diversity of the state and its people.  Through the state’s Section 1115 waiver application, California proposes to seize this moment in the history of health care reform to advance additional program changes.  Some of these changes involve expanding coverage to the “newly eligible” under health care reform, while others seek to develop and implement innovative models for a more comprehensive and coordinated system of care for some of our most vulnerable residents.  Other changes include various strategies to strengthen the state’s health care infrastructure to prepare for the additional 1.6 million to 1.9 million people who will have access to health care once health care reform is fully implemented on Jan. 1, 2014.

Through a series of steps under the waiver, California proposes to lead the nation in resolving the inevitable issues that will be presented as the state and nation move to implement the most sweeping social reform in 50 years.  The waiver is designed to be the bridge to health care reform in 2014, specifically by preparing the current newly eligible population for transition to Medi-Cal through an expansion of the Health Care Coverage Initiative and by bolstering organized systems of care through system delivery reforms, in addition to the continuation of the safety-net care pool.

The most important components of our waiver that bridge to health care reform are the expansion of the coverage initiative and continuation of safety-net care pool.  The expansion of coverage could potentially prequalify more than 500,000 new eligibles prior to Jan. 1, 2014, for immediate transition into Med-Cal.  The continuation of the safety-net pool funds will cover three program areas:

  • Partial reimbursement to designated public hospitals for services to the uninsured;
  • Support for six critical state-operated programs that address the health care needs of particularly vulnerable populations; and
  • The HCCI for expanding health care coverage to otherwise ineligible populations.

These funds are pivotal to ensuring preparation of California’s safety-net infrastructure.

However, it is important to recognize the cost of this effort for California’s already cash-strapped counties.  The expansion of the HCCI will require an investment of county dollars in order to take full benefit of the opportunities present in the waiver.  Without this investment, preparation of the newly eligible population could be delayed.

California has been a leader in the design and implementation of cost-effective health service delivery systems both for its Medi-Cal and commercially insured populations.  California pioneered the use of a managed care delivery system, developed cost-effective selective contracting measures as early as 1982 and has worked with its county governments to utilize county resources, both financial and infrastructure, to expand and extend health care coverage to the uninsured through the HCCI created under the state’s current waiver.  We will continue our efforts to meet the challenge of preparing California for the coming health care reforms of January 2014.

Waiver Has Potential To Make California Healthier

California’s next 1115 Medicaid waiver presents a unique opportunity for federal investment to improve health outcomes for poor Californians through expanded coverage, as well as delivery system advancements.  Because of the state’s fiscal crisis, expanding Medi-Cal to all poor adults, though allowed by federal reform law, is not feasible in the state.  Instead, the waiver rightly seeks to draw down federal dollars to match county funds spent on indigent health care.  In so doing, we must strike the right balance between recognizing the fiscal constraints on counties and providing meaningful access to health care with federal Medicaid dollars.  A benefit package with primary and preventive care, care coordination and integration of behavioral health will improve health outcomes and has been shown to be cost effective.

One of the critical efforts leading up to 2014, when everyone will be required by law to have health insurance, is to design an eligibility and enrollment system for Medi-Cal, Healthy Families, the new state exchange and county residual programs that is simplified and streamlined in effectively enrolling and transitioning people into the right coverage program.  The waiver is one important piece of this effort, as counties develop the systems and infrastructure to link their county indigent health systems to Medi-Cal and the Exchange.  Since the Medi-Cal expansion population will be 100% federally funded in 2014, eventually decreasing to 90% in 2020 and thereafter, the state and counties have a huge financial incentive to have as many of the people as possible newly eligible for Medi-Cal on Jan. 1, 2014 actually enrolled.

The waiver also has an important role to play in improving the delivery system through which poor consumers get health care services. Patient-centered health care homes provide a coordinated, team-based approach to health care where patients help direct their care, chronic disease registries are used to provide recommended treatment for chronic illnesses, comprehensive medical records are maintained, and a range of providers coordinate to provide needed care.  Health care homes are particularly important and effective for consumers with complex conditions, including those with multiple chronic conditions or a combination of medical and behavioral health conditions.  Meaningful health care home standards should be included in the waiver to develop the most effective delivery system to both improve care and control costs.  The waiver has the potential to make California a healthier state.

Focus Should Be Better -- Not Just Cheaper -- Care

Beginning in late 2009, California began work on a renewal of a massive waiver of Medi-Cal rules designed to re-shape how we provide health care to many low-income people. The state proposed to change the way we serve high-needs children, the mentally ill, and seniors and persons with disabilities. It also sought to use the waiver to prepare for expanded coverage under health reform and to protect essential safety-net hospitals and clinics.

As advocates for seniors, the Congress of California Seniors has focused on proposals to mandate all seniors and people with disabilities to enroll in Medi-Cal managed care plans for their care and to extend such plans to serve people who are eligible for both Medicare and Medi-Cal. Together the two groups represent more than 1.5 million of the frailest, sickest and most expensive health consumers in the state. Elderly and disabled people are heavy users of health care because they have chronic conditions, often have multiple conditions, need the care of specialists and take many medicines. They may also need special equipment, accessible facilities or special arrangements for the vision or hearing impaired. Younger Medi-Cal enrollees have been served by managed care systems for some years. But they are generally healthier and likely to be more mobile than the SPD population.

We have worked with advocates for seniors, the disabled, low-income persons and health care consumers to advocate for consumer protections during the development of the waiver. We have sought clear standards for health plan readiness, such as an adequate number of physicians and specialists to meet the special needs of this population. We have argued for standard protections such as timely access to care, second opinions, adequate time for enrollment, and clear procedures for grievances and resolving disputes. We have demanded that plans assess new enrollees and develop a coordinated plan of care in order to fulfill the promise of good managed care. We have sought transparency and data reporting of health outcomes to make sure that the care is improving. We have also worked to make sure that medical care is coordinated with essential psycho-social services and community-based services such as transportation, housing, homecare and the like.

We are committed to making sure that care management means better care not just cheaper care. We have made some progress but still see more to be done. As the waiver plan and health reform proceed, we will monitor implementation and speak out to the state and the federal government to ensure that California’s most vulnerable groups get the health care and support services they need.

Waiver Brings Challenges, Opportunities

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, collectively known as the Affordable Care Act, set in motion a five-year sprint to implement the new law, followed by five years of fast-paced adjustments and responses from the government and private sector.  Health care reform will have a profound impact on the financing and delivery of health care in California.  How the state, payers, providers, suppliers, purchasers and individuals react to reform is the most important question of this decade.

Coincidentally, the state’s Section 1115 Medi-Cal waiver expires on Aug. 31, 2010.  The replacement waiver could make improvements in the structure, delivery and financing of health care for Medi-Cal beneficiaries. The existing waiver is a hospital financing waiver and the importance of improving hospital safety-net financing should not be lost in the broader goals of a waiver renewal.  In 2009, hospitals lost more than $4.6 billion in actual costs for providing health care services to Medi-Cal patients.  Every hospital that provides services to Medi-Cal patients plays an important and necessary role in delivering care to this vulnerable population, but the mounting losses are becoming unsustainable.

The California Hospital Association believes that slowing the rate of growth in overall Medi-Cal utilization is an important element and can be accomplished through improving care coordination, especially to the limited number of beneficiaries who are driving the majority of the program costs (e.g. seniors and persons with disabilities).  Reducing costs should be the result of responsible and thoughtful actions aimed at improving outcomes and increasing efficiencies, and not by arbitrary payments that fall far short of covering the cost of care.

Over the course of the current hospital 1115 waiver, California hospitals have shouldered nearly $20 billion in cumulative unreimbursed costs for providing care to Medi-Cal patients.  Over the next 10 years, hospitals face more than $17 billion in new payment reductions in the Medicare program, further increasing hospital losses and threatening their ability to continue providing services to their communities and implement reforms.  Hospitals’ losses from Medi-Cal will be even worse.  California hospitals must have the resources necessary to meet the needs of their patients and provide safe high-quality care to all patients.  Hospitals’ challenges to meet the goals of health care reform, function under a new 1115 waiver and maintain operations in the face of Medicare and Medi-Cal payment shortfalls are enormous.

The next 1115 waiver presents challenges and opportunities.  It is critical that changes and ideas for the waiver be balanced with the financial realities that hospitals must deal with under HCR, the state budget crisis and a five-year HCR transition period that will put greater financial pressure on hospitals with little improvement in coverage of the uninsured.

Patients Should Be First Priority

On Jan. 1, 2014, at least two million Californians will become newly eligible for Medi-Cal; but this is not to say that they will magically be enrolled when the ball drops in Times Square.  Without carefully laying the proper groundwork, this and other provisions of health reform law won’t have their full impact.

How to best make this transition for Medi-Cal, which currently serves more than seven million Californians — including low-income children, parents, seniors and people with disabilities — is just one of the key goals through the current negotiations between the state and federal governments over the program’s next five years. The stakes are high on these and other issues, all considered as part of discussions around a new Medicaid waiver.

In addition to being ready to expand the program, the waiver is the key vehicle for bringing in new federal funds for California’s beleaguered and overstretched safety net of health care providers. After years of running the Medicaid program with the lowest per-patient spending in the country, the state of California is currently requesting an additional $2 billion a year for the next five years from the federal government. Those resources would help our public hospitals and other key providers weather the storm of budget cuts and start to prepare for the many changes under health reform.

Some of those resources will be used to expand county-based initiatives to provide a medical home to low-income adults who now don’t qualify for Medi-Cal. The state has proposed that starting next year counties be able to use a portion of the dollars they already spend on indigent care to draw down these new federal funds. Even more exciting than getting hundreds of thousands of Californians care for the first time, these county-based efforts can — if done right — serve as a bridge to reform, having all these folks ready to get full Medi-Cal coverage in January 2014.

We need to go further and set an explicit goal to have more than a majority — over one million — of those newly eligible Californians enrolled on day one. Given that the federal government will pick up 100% of the costs for these newly insured for the first three years, the state of California has every incentive to get people in the door as soon as possible. We would be leaving money on the table in Washington, D.C., if we don’t. To prepare, we should implement early expansions of programs that can be shifted to Medi-Cal and start pre-enrolling people early as well. It’s an exciting opportunity, but only if we take advantage of it.

The waiver also seeks to change the way care is delivered for some, most particularly seniors and people with disabilities. One proposal would shift such vulnerable populations into more “organized delivery systems,” including Medicaid managed care plans. While there is certainly room for improvement for these patients, particularly on coordinating care if it’s done right, we need to ensure that the health plans are ready to care for this new population. We need to ensure that doctors’ offices can accommodate people with disabilities and that health plans have the adequate number of specialists to meet these patients’ specific needs. We need to ensure the transition is smooth for the patient, with no interruptions in care. We are urging that the final waiver include stronger consumer protections for these patients who need them the most.

In short, the waiver is full of both opportunities and challenges. The new federal health law opens new possibilities and potential, and we must make sure that through the waiver, the next five years of Medi-Cal helps fulfill its promise.