Medi-Cal Faces Uncertain Changes

California’s Medicaid program is about to change. On Aug. 2, the Health and Human Services Agency will release a much-anticipated proposal to overhaul Medi-Cal, which provides health coverage to more than 6.7 million low-income California residents.

The move to redesign the program has been in progress since January when Gov. Arnold Schwarzenegger (R) called for a $400 million reduction in funding for the program. To achieve such savings, the governor’s initial budget proposal called for charging some beneficiaries premiums and copayments, limiting overall benefits and shifting more blind, disabled and elderly beneficiaries into managed care health plans. Those proposals, coupled with a move to reduce Medi-Cal reimbursement rates to providers, drew criticism from some health advocates who said Schwarzenegger was trying to run Medi-Cal like a private plan.

Although the governor abandoned the call for reimbursement rate cuts, other changes to Medi-Cal remain a high priority for the Schwarzenegger administration.

In September, Schwarzenegger plans to apply for a federal waiver to overhaul Medi-Cal. He is asking state lawmakers to review the proposal and waiver application before they adjourn at the end of August. That gives lawmakers 28 days to review the most dramatic redesign in the history of Medi-Cal amid a flurry of end-of-session legislative hearings. If lawmakers are not able to reach an agreement on the proposed changes in August, the administration has said it still plans to apply for a federal waiver in the fall and resume the legislative debate in January. Some critics are wondering how much can get done in that time frame.

“We think this is big and serious enough to do it deliberately,” Anthony Wright, executive director of advocacy group Health Access, said about the administration’s timeline to revamp the system. “Medi-Cal has evolved over 30 years of policy making. To say we’re going to redesign a system in this time frame verges on irresponsible.”

Wright is one of 640 health care advocates, providers and Medi-Cal constituents who attended stakeholder meetings that HHSA hosted between January and April. The goal of the meetings was to gather input from the people most affected by potential changes.

Wright, whose organization represents a coalition of labor and health advocacy groups, says many of the stakeholders will embrace efforts to reduce costs by streamlining the eligibility process and other administrative procedures, but he doesn’t see how $400 million can be cut from the Medi-Cal budget without reducing services.

Usefulness of Feedback?

The stakeholder groups will have a chance to review the proposal in August, but Wright questions how much influence their comments will have on the final proposal.

Stan Rosenstein, deputy director of Medical Care Services for the Department of Health Services, said the stakeholder meetings were invaluable in shaping the proposal.

“The issues all changed based upon their input,” Rosenstein said. “It’s led to an evolution.”

One thing the stakeholder efforts did not change was the urgency to contain costs, which have increased by 41%, or $3 billion, since 1999.

“The cost of the Medi-Cal program continues to grow dramatically, but the cost is going faster than the growth of state tax revenue,” Rosenstein said.

He attributes cost increases to a rise in enrollees, an aging population, general health care inflation, an increase in prescription drug costs and medical practice trends to treat patients with multiple drugs and procedures.

All of those cost-drivers add up to a program California cannot afford, he said, and the governor’s goal is to run an efficient, affordable Medi-Cal system that does not limit benefits or beneficiaries.

Expected Changes

What that final program will look like come Aug. 2 remains unclear as the proposal is still undergoing revisions.

Some stakeholders expect to see higher components of managed care, cost-sharing and tiered benefits in the overhaul. This would mean some beneficiaries would receive lower levels of covered services or pay more for them.

The biggest clues to what likely will be in the final proposal lie in the Medi-Cal revision update included with the governor’s revised budget in May.

According to the update, Schwarzenegger hopes to:

  • Expand the use of organized systems of care that increase access, improve outcomes and contain costs;
  • Revise the Medi-Cal eligibility and enrollment process to make it more efficient and improve customer service;
  • Tailor benefits to the needs of distinct Medi-Cal populations;
  • Incorporate beneficiary cost-sharing to promote personal ownership and responsibility, align Medi-Cal with other publicly-funded health programs, and encourage appropriate utilization of services; and
  • Stabilize financing of the state’s safety net to ensure that hospitals have the resources to care for low-income and uninsured California residents.

“I believe managed care would be a significant portion of the proposal,” Cheryl Bergan, public policy analyst for the California Foundation for Independent Living, said.

Bergan, like others who represent the interest of disabled and elderly Medi-Cal recipients, opposes mandatory managed care. She does not believe the state’s HMOs are equipped to treat a large influx of patients with disabilities in part because many HMOs won’t have fully accessible facilities and equipment. In rural communities, managed care providers are scarce, and Bergan is concerned that disabled patients who typically need to see multiple specialists to treat multiple health conditions will not find access to the care they need.

However, Rosenstein said the state already has proved that managed care can serve the disabled. Eight counties have mandatory managed care Medi-Cal programs and they work, he said. Those eight counties — Monterey, Napa, Orange, San Mateo, Santa Barbara, Santa Cruz, Solano and Yolo — have county-operated Medi-Cal health plans. All Medi-Cal beneficiaries are required to enroll in those plans. Other managed care Medi-Cal plans are in 14 additional counties, and about 3.3 million Medi-Cal beneficiaries are in some type of managed care plan.

Rosenstein says managed care produces better outcomes, referring to a report from the California HealthCare Foundation and the University of California-San Francisco. The report, which examined trends between 1994 and 1999, found that adults with disabilities under fee-for-service care had more incidents of hospitalization for conditions — such as urinary tract infections, diabetes, asthma and dehydration — that could be treated in ambulatory care settings. According to the report, there were 63.7 such instances per 10,000 enrollees under fee-for-service health plans, compared with 47.9 per 10,000 managed care enrollees.

Another point of contention for disability activists is the possibility that the plan would require copays or premiums, which they say would lead many disabled people to defer or forego needed care. With unemployment rates of 66% to 72% among people with disabilities, Bergan says many wouldn’t go to the doctor if they had to pay.

While Bergan can only speculate on the contents of the Aug. 2 plan, she is certain of one thing: “I suspect a plan devised by the HMOs and the administration would be very different than one devised by consumers.”

More on the Web

The California HealthCare Foundation-UCSF report addressing quality of care in managed care health plans is available online.

Schwarzenegger’s May revision of the fiscal year 2004-2005 state budget is available online. Note: You must have Adobe Acrobat Reader to access the report.

Related Topics

Health Care Costs Insight Insurance Medi-Cal