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Think Tank

How To Design, Deliver New, Improved Medi-Cal

If it works the way it’s supposed to, health care reform will usher in a new era in which health coverage is the rule rather than the exception for everybody, regardless of social strata, income or where you work. One of the main vehicles to this new “culture of coverage” will be Medicaid, but it probably won’t be — and perhaps shouldn’t be — your father’s Medicaid.  

The expansion of Medicaid under the Patient Protection and Affordable Care Act offers the opportunity to redefine and redesign a program that for its first half century has been perceived first as a part of welfare and then as a safety net for poor people.

According to a new report from the Kaiser Commission on Medicaid and the Uninsured, Medicaid program directors, experts and thought leaders see several opportunities for ways to create a new, improved system for the 21st century. For the new Medicaid to be successful, it will need a new public image, according to the KCMU issue paper, “Optimizing Medicaid Enrollment: Perspectives on Strengthening Medicaid’s Reach under Health Care Reform.” Consensus among those interviewed for the paper is that the planned expansion of Medicaid offers a strategic opportunity to recast the program as an affordable option for working people and families, as well as to improve its enrollment and renewal operations.

How California’s Medi-Cal, the nation’s largest Medicaid program with more than seven million participants, approaches this new “culture of coverage” could be a major factor in how successful health care reform is in California.

We asked experts:  

  • How can the system be redesigned to not only deal with many more participants but to encourage a whole new portion of the state’s population to consider Medi-Cal as an option?
  • For many potential new participants, the thick red tape associated with government programs may be a serious detraction. How can California streamline the process?
  • In addition to expanding Medi-Cal, California will be setting up a health insurance exchange offering discounted and subsidized coverage for those who don’t qualify for Medi-Cal. Should the state create one screening process to handle both the exchange and Medi-Cal?

We got responses from:

Question No Longer 'Whether,' But 'How'

The new insurance exchange will be the linchpin of federal health care reform.  In addition to being a portal into a more transparent insurance market, the exchange will be one place where people will learn of their eligibility for public programs such as Medi-Cal.  An open question is whether this eligibility determination and enrollment function will complement or supplant California’s existing county-based system. 

There is some history to this issue.  The Legislative Analyst’s Office has proposed and blue ribbon task forces have debated centralizing eligibility and enrollment for Medi-Cal.  The experience with centralization of states such as Florida shows that this can be a rocky process.  Improving administrative efficiencies is crucial, though, if we are to make our public health insurance programs affordable for governments as well as for program participants. 

Last year, I ran the California Task Force on Affordable Care, a group of health care leaders that developed a comprehensive plan to get the state vastly better value for its medical spending.  We estimated that removing administrative inefficiencies from public and private health care programs would save the state $91 billion over the course of the next 10 years. 

One person’s inefficiency, though, is another person’s livelihood.  Efforts to centralize Medi-Cal eligibility and enrollment in the past have run into stiff resistance from the county welfare directors responsible for administering the existing systems.  They have many valid concerns including how program participants will adapt to new systems. 

There are two crucial differences in the current environment, though.  The first is that the state is required under federal reform to provide a centralized point for these functions through the exchange.  The question, therefore, is no longer whether but how.  We could and probably will attempt to graft the new exchange onto the current county-based system. But to the extent that this increases rather than decreases the cost of administering these programs, this raises another issue.

Finding ways to save money in public programs without sacrificing medical quality is not only good governance, it is a moral necessity.  In an environment where we will have constrained public resources for the foreseeable future, we will either figure out how to get better value for our medical spending or — as was thrown into stark relief in the latest round of budget proposals — we will decrease the services available through these programs while increasing the financial burden on program recipients of accessing them.  The implementation of federal reform offers a once in a generation opportunity to rework our public programs in ways that make the both less costly and more effective.  We should seize this opportunity. 

Single Screening Process Will Be Crucial

The expansion of Medicaid in health reform will transform the image of the program from one that has focused primarily on providing health coverage for poor moms and children (plus some disabled and poor elderly persons)  to one that serves a broader cross-section of the low-income population.     Large expansions in enrollment, infusions of new federal funding and increases in reimbursement rates for primary care (at least temporarily) will provide opportunities to transform and elevate the role of the program in the U.S. health care system.

It will be crucial to have a single screening process for both Medicaid and the insurance exchanges, as multiple systems will lead to confusion among enrollees and inconsistencies in determining eligibility for various programs. Such an integrated system of enrollment could also help to blur the distinction in the public’s mind between the different programs.

However, coverage through Medicaid will still be very distinct from coverage through the insurance exchanges. Medicaid has traditionally provided broad coverage of services with little or no cost sharing for enrollees, but the tradeoff has been reduced access to physicians due to low reimbursement rates. By contrast, participants in the insurance exchanges will incur some cost sharing for both premiums and services — the exact amount is based in part on their income — but they may find it easier to access physicians to the extent that provider payment rates are comparable to what private plans currently pay. Because of these differences in provider payment rates between Medicaid and private plans, the image of Medicaid as a poor person’s program is likely to continue for many physicians and other health care providers.

A potential opportunity to chart a new direction for Medicaid is the emphasis in the legislation on patient-centered medical homes, accountable care organizations, and payment reform as ways to both lower costs and improve quality. Such efforts require greater integration of health care providers in a community than currently exists. State Medicaid programs have an opportunity to be a leader in these new systems of care delivery as most state programs are now organized around managed care programs which often have close affiliations with Federally Qualified Health Centers. These centers already incorporate many of the features of the patient-centered medical home in their practices. Thus, there is an opportunity for state Medicaid programs to be a leader and model for the types of changes in delivery of medical care that the health reform legislation has identified as crucial to controlling costs and improving quality.

Opportunity To Streamline, Modernize Medi-Cal

Health reform not only requires California to make notable changes to the Medi-Cal program, it also offers our state the opportunity to radically simplify coverage and allow Medi-Cal to become the cornerstone of a more streamlined, systemwide approach to covering low-income citizens and legal, permanent residents.

First, there are certain things California must do. By Jan. 1, 2014, there will be a clear, bright line of Medi-Cal eligibility at 133% of the federal poverty level (roughly a $14,000 annual income for an individual). All the uninsured with incomes below this level would go into Medi-Cal, and all above will find coverage in the state’s insurance exchange.  Medi-Cal’s outdated assets test will be eliminated, and its complicated rules for determining income eligibility replaced by the far simpler adjusted gross income test of the federal tax system.

While implementing these mandatory simplifications, California can also develop a more modern Medi-Cal system. To do so, we should:

  • Drop Medi-Cal’s complex and unnecessary aid codes, income disregards and exemptions. By eliminating all the vestiges of the welfare-based eligibility system, we can make Medi-Cal an employee-friendly system, easier to understand for both subscribers and program administrators;
  • Modernize and streamline Medi-Cal’s eligibility determination and enrollment systems. There should be “no wrong door” to enrollment; applications should be taken in provider’s offices, in community settings, by mail, online or in-person at any government office;
  • Ensure seamless transitions of eligibility between Medi-Cal, the exchange and employment-based coverage; and
  • Implement Medi-Cal “wrap around” coverage for working families with limited coverage through employers. 

Medi-Cal began as “fee-for-service” with choice of providers, low- or no copayments, and reimbursement based on provider’s reasonable and necessary costs — concepts that were well accepted in the 1960s when the program was created, but are largely out of date today. Health reform offers the opportunity for Medi-Cal to evolve into fully integrated care for all subscribers.

Rather than maintaining the artificial system of county boundaries, we can design locally or regionally administered systems that correspond to the provider networks where subscribers actually receive care. Mental and physical health services should be integrated, rather than carved apart.

Let’s also make the system more incentive- and outcome-based. Plans and providers should be paid based on “pay-for-performance” linked to improvements in quality, patient outcomes and effectiveness. Wherever possible, reimbursements in Medi-Cal should be designed to improve outcomes and effectiveness of treatment, corresponding to those in Medicare and private insurance.

Finally, Medi-Cal’s financing system needs to be modernized. Instead of cutting benefits and coverage in times of need, our system should be designed to reduce required state match when the economy is in distress (i.e. when our citizens use Medi-Cal the most) and increase the match during economic good times. To do so, state financing can be partially linked to fees on tobacco, alcohol and other substances that increase the societal use of health services. Like other states already do, we should lower the state sales tax on goods and apply the sales tax to most services.  Also, counties should be released from Elizabethan “poor law” obligations to pay for indigent health care; this should be a shared responsibility of states, the federal government, and individuals and families.

If California truly takes advantage of this once-in-a-generation opportunity and significantly streamlines and modernizes our health system — including the enormous complexities of the Medi-Cal program — we can achieve a more efficient, higher quality system of care and better health for all Californians.

Clinics Hold Key to Success in California

We strongly agree with the consensus of the experts consulted in the Kaiser Family Foundation report, “Optimizing Medicaid Enrollment: Perspectives on Strengthening Medicaid’s Reach Under Health Care Reform,” that achieving strong Medicaid participation is essential to fulfilling reform’s broader coverage goals.  This expanded Medicaid population must have access to care in order for the system to move strongly toward universal coverage, and community clinics and health centers hold the key to the system’s success. 

California’s clinics and health centers are already the medical home for 1.3 million uninsured Californians.  These individuals represent a significant portion of the 1.7 million to two million patients in California who will become eligible for Medicaid when it expands income eligibility to 133% of the federal poverty level in 2014.  These clinics and centers will play a vital role in the enrollment of the newly insured into Medicaid.  The Kaiser report clearly states that community-based organizations are the key to breaking down barriers to coverage and care.  Community clinics and health centers have a successful track record of innovation in the area of enrollment, including early adoption of one e-app, which has greatly simplified the enrollment process.

We believe that newly covered individuals will continue to want their care provided at community clinics and health centers.  The experience in Massachusetts supports this claim. Since implementation of reform in that state, health centers have reported increases in overall patient caseload and a decline in the proportion of uninsured patients.  CommCare (Massachusetts‘ state coverage program) enrollees were already patients of clinics and health centers.  Patients tended to remain with health centers because they were satisfied with the care received, and in some cases, because health centers had additional capabilities — such as bilingual clinicians or interpreters, or services that other primary care providers lacked including urgent care, mental health or dental services.

Clinics and health centers will be able to leverage the significant funds for the expansion of community health centers combined with the funds provided by the Medicaid expansion to serve both the population newly covered by healthcare reform and all of those still left behind by the system. It is not lost on clinics that significant numbers of immigrants, including new legal permanent residents, either will not be provided access to insurance in Medicaid or will find coverage through the exchanges financially prohibitive. Clinics and health centers understand a strong safety net must remain in place to serve this population.

We also support the recasting of Medicaid as a broader program for working adults and their children.  Giving Medicaid an appealing new program name such as Healthy US, will recast it in the minds of the public and better represent the fuller mission of the program. 

The Kaiser report contends that Medicaid expansion will be a key factor in the success of health care reform. Whether it is enrollment in the new program or access to providers for this population, clinics and health centers are the key to that success.  


State Budget Presents Significant Challenges

In California, we are excited about moving forward with implementing national health care reform.  The changes promise to expand the scope of health care coverage in California, where there are currently 6.7 million people without insurance.  We see health care reform as an enormous opportunity, but reality, in terms of our budget situation, tells us that we also will face significant challenges.

California views the overall policy goals of national reform in a positive light, including provisions to expand Medicaid, control health care costs, and focus on prevention and wellness.  It has long been a goal of this state to ensure that health care services are delivered effectively at the lowest cost possible.  We see Medicaid expansion as a vehicle for accomplishing this goal. 

Currently, Medi-Cal covers more than 7.5 million people, giving California significant influence as a purchaser.  With expansion, we will likely see an additional 1.6 million to 1.9 million people join Medi-Cal, strengthening our bargaining position as we negotiate the best price, quality of care and health care outcomes for our taxpayers.

We also want to simplify eligibility processes for Medi-Cal.  Currently, we establish eligibility through complex methodologies.  Health care reform will give us the opportunity and means to revamp this process and make it more consumer friendly and efficient.

As for challenges, the budget situation is critical.  California currently faces a budget shortfall of roughly $20 billion.  The cost of health care reform to the state is estimated to be between $2 billion and $3 billion when fully implemented.  We must focus on increasing provider capacity to ensure adequate access for Medi-Cal beneficiaries; strengthening the safety net system; and ensuring that Medi-Cal and other state programs have sufficient staff and resources to implement the system changes.

Medi-Cal will need to continue to evolve and drive health care system transformation so we can get the best value and most positive health outcomes for Californians.

Integrate Medi-Cal Into Overall System

Medi-Cal will play a more critical role in the implementation of the Patient Protection and Affordable Care Act than most people realize.  Medi-Cal enrollment is estimated to grow to about 12 million people in 2019, according to a recent report.  Meeting the health care needs of these enrollees will be a tremendous challenge, but that is just the starting point.

The vision of health reform is a source of affordable coverage for everyone, regardless of their circumstances. Eligibility for Medi-Cal (except for elders and people with disabilities) and for income-based subsidies through the new health exchange will be based on “Modified Adjusted Gross Income” along the lines of what the tax code uses.  This is a fundamental shift away from measurements rooted in the welfare system.

Applicants for either Medi-Cal or the exchange should be able to present a limited amount of information, have that information electronically verified in real time, and be provided with their enrollment options within moments of submitting an application.  This will require completely retooling the county-based eligibility determination systems currently in use in California, as in most states.  Indeed, with dramatically simplified uniform eligibility standards and currently available technology, a nationwide or statewide approach to eligibility probably makes more sense.

But our ambitions for Medi-Cal should be even larger.  Medi-Cal must be a driving force along with other health care purchasers for overall improvements in the health care system.  Needed improvements include reducing medical errors, eliminating racial and ethnic disparities in access to care and outcomes, and, ultimately, improving the health of Californians.

As California develops its overall approach to implementation of health care reform, it should focus on 10 aspects of reform that states must get right if they are to be successful. These are described in a National Academy for State Health Policy paper, “State Policymakers’ Priorities for Successful Implementation of Health Reform.“ Medi-Cal has a role to play in almost all of these.

As the largest purchaser of health care services in the state, the goal must be integration of Medi-Cal into the entirety of the health reform agenda.  As challenging as the Medi-Cal expansion may seem, breaking down the barriers between Medi-Cal and the rest of the health care system will be an even bigger and more important challenge.

Patient-Centered Medical Home is Key

Providing every Medi-Cal enrollee with a patient-centered medical home is the best way to deliver care, accommodate millions of new participants and encourage those newly eligible to enroll. Word-of-mouth will spread quickly when excellent, personalized, comprehensive care is conveniently available and results in the best possible health outcomes.

Last week, CMS announced the Multi-payer Advanced Primary Care Practice Demonstration, designed to assess the effects of a patient-centered medical home supported by government and private insurers. We encourage the state to apply to participate with Medicare, Medicaid and private insurers in this large-scale demonstration project.

The medical home is a model of care in which each patient has an ongoing relationship with a primary care physician and his or her team of providers. Research and experience show that the best care and outcomes are achieved through a robust system of primary and preventive care, state-of-the-art chronic disease management, and patient care coordination throughout the entire health care system and community.

Using this model, North Carolina’s Medicaid program saved more than half a billion dollars over a few years while improving care for more than 700,000 enrollees. Geisinger Health System in Pennsylvania decreased hospitalizations by 20% among a patient population of 2.5 million people. The state of California already is looking at ways to use this model for joint Medicare-Medi-Cal enrollees. Let’s expand this effort and include every Medi-Cal enrollee.

The same-day, after-hours and urgent care available in a medical home help prevent unnecessary emergency room visits. Expert chronic disease care addresses the epidemic of largely preventable illnesses and conditions such as asthma, diabetes, obesity and heart disease. With expanded Medi-Cal coverage and good access to care, people will no longer have to wait until illnesses become crises to seek care.

The Orange County Health Care Agency reported recently that nearly half of all emergency room visits could have been prevented if patients had greater access to primary and preventive care. A statewide study found that more than 80% of all Medi-Cal and uninsured patient visits to the emergency room could have been treated in a non-emergency environment.

We do need to solve the primary care physician shortage to make this model succeed, in part by correctly paying for primary care. In a medical home, physician and patient satisfaction both increase because primary and preventive care are valued and the patient-physician relationship is stronger.