Medi-Cal Redesign Effort Being Informed by Other States’ Experiences

When Gov. Arnold Schwarzenegger (R) embarked on the mission to redesign Medi-Cal, he wasn’t exactly breaking new ground.

In a climate of limited revenue, several states have looked for ways to restrict dollars spent on health care for low-income families, pregnant women, people with disabilities and the elderly. In 2004, 49 states and the District of Columbia planned to institute Medicaid spending controls, according to the Kaiser Commission on Medicaid and the Uninsured. Holding the line on prescription drug costs and provider fees remains a focus for many states, but a growing number of states are taking more drastic steps: 18 plan to restrict eligibility, 17 plan to reduce benefits and 21 plan to increase co-payments.

“Health care is often a major part of a state’s budget, so Medicaid becomes a target,” Angela Gilliard — a legislative advocate for the Western Center on Law & Poverty, an advocacy group for the rights of low-income people — said.

That approach to budget-cutting is misguided, she said, especially in California where state contributions to Medi-Cal already have been reduced.

“They keep squeezing and squeezing the program,” Gilliard said, adding, “How do you trim the slim?”

Health policy advocates in California are scrutinizing the results of Medicaid waiver programs in other states and finding the outcomes have not always met expectations. Some of those states have experimented with tiered-benefit options.

Oregon, which launched one of the nation’s most sweeping redesigns, has created a tiered system with two levels of benefits, increased premiums and enrollment caps for some beneficiaries.

At a roundtable discussion in Sacramento in July, Jeanene Smith, deputy administrator of the Office for Oregon Health Policy and Research, recommended that California policymakers carefully examine how they will enact changes.

“We did really have the best of intentions, in terms of really wanting to get more people covered, but the consequences are that we’ve had significant impacts on very vulnerable people, especially those with the lowest of incomes and the chronically ill,” Smith said.

Although Oregon has about three million residents — compared with California’s 36 million — the two states have had comparable unemployment rates. Both states also have seen increasing numbers of uninsured, including people who work at jobs that don’t provide private health insurance.

When overhauling its Medicaid program, Oregon created two benefit packages and discontinued a premium waiver for low-income and homeless beneficiaries. The state now has a strict premium payment policy intended to encourage people to maintain enrollment. Before the change, Medicaid beneficiaries could catch up on missed payments at the end of their six-month eligibility period. Now when beneficiaries miss a monthly premium payment, they are locked out of the program for six months.

Single adults in the lowest income bracket were most affected by the program changes, surveys from OOHPR found. Between January 2002 and October 2003, the number of adults enrolled in Medicaid who paid premiums decreased by nearly 50%, from 100,952 to 50,938.

Since the state instituted its new policies, people have been four- to five-times more likely to seek care at hospital emergency departments. The situation is especially the case for those in the lowest income levels and those with chronic conditions.

Oregon currently is considering further service reductions, according to Smith, who said enrollment in the standard health plan has been frozen. About 51,000 people are enrolled, and the state can only serve 45,000. They may have to lower income eligibility levels to reduce enrollment if attrition does not reduce the rolls, she said.

Despite funding cuts, California’s costs for Medi-Cal have increased by 41%, or $3 billion, since 1999. Despite the increasing cost of Medi-Cal, California allocates about 12% of its budget to the program, compared with a national average of 13% for other state contributions to Medicaid programs.

The move to redesign Medi-Cal, which serves more than 6.7 million California residents, started in January when the governor called for a $400 million reduction in state funding for the program. His initial budget proposed levying premiums and co-payments on some beneficiaries, limiting benefits and shifting more beneficiaries into managed care plans. Those proposals, coupled with a move to reduce Medi-Cal reimbursement rates to providers, raised an outcry from health advocates.

Gilliard of WCLP said to make low-income residents pay more for health care doesn’t make sense.

“People will make choices between food and health care,” Gilliard said. “Single moms and even two-parent families don’t even have bus fare when it comes time to take kids to the doctor. When flu season hits, who can afford to pay co-payments?”

Between January and April, more than 640 health advocates, Medi-Cal beneficiaries, providers and policymakers met in a series of stakeholder meetings that the Health and Human Services Agency hosted to gather viewpoints on the looming redesign.

In May, the governor separated Medi-Cal reform from the budget approval process and said a plan would be released in early August in preparation for an application for a federal waiver in September. When the scheduled Aug. 2 release date of the redesign proposal neared, HHSA announced that it was delaying the release while it resolved key issues such as financing for the safety-net hospitals that serve Medi-Cal beneficiaries and uninsured patients. The redesign will be submitted as part of the governor’s January budget proposal or as a series of legislative proposals.

The Schwarzenegger administration has made clear the goals of the redesign: to increase access and improve outcomes while containing costs. The governor’s May update of his plans for Medi-Cal highlighted beneficiary cost-sharing and tailoring benefits to the needs of the distinct populations. The specific cost-containment strategies in the proposal remain under wraps.

Earlier this year Stan Rosenstein, deputy director of Medical Care Services for the Department of Health Services, said the governor’s goal is to run an efficient, affordable Medi-Cal system that doesn’t limit benefits or beneficiaries.

Yet changes have to be made as the costs to run the program escalate faster than state tax revenue to support it. DHS is exploring what Rosenstein calls organized systems of care, a model that would shift more beneficiaries into managed care and emphasize disease management, case management and primary care.

“Medi-Cal offers one benefit package for everybody, and it’s a very extensive package,” Rosenstein said. “Is it important to offer the same benefits to everyone?”