Since the Affordable Care Act (ACA) became law in 2010, the number of Medi-Cal beneficiaries in California has nearly doubled (PDF), from 7.2 million (19% of the state’s population) to 13.5 million (34% of the state’s population) in 2017. During this same period, the state expanded its use of managed care as the way to deliver Medi-Cal services. Approximately 80% of Medi-Cal beneficiaries currently receive managed care services from one of 23 health plans in the state.

Medi-Cal managed care was originally targeted toward children and their parents with low incomes living in more urban parts of the state. It is now mandatory throughout the state and includes not only children and parents but also seniors, persons with disabilities, and the ACA-related expansion population of childless adults. Medi-Cal is also testing a voluntary program of managed care enrollment for people eligible for both Medicaid and Medicare in the seven counties that are home to more than half of dual-eligible beneficiaries in the state.

The state’s organizing unit for managed care is the county, and across counties there are different models for Medi-Cal plan ownership and competition. Approximately 21% of Medi-Cal managed care beneficiaries reside in counties where the state contracts with a single plan that is responsible for furnishing Medi-Cal services; 64% are in “Two-Plan” counties where the state has selected two plans to compete, typically one commercial plan and a local public plan; and 14% are in other counties where the state has allowed two or more commercial plans to compete to provide Medi-Cal services.

Further complicating the way Medi-Cal services are delivered is the separating, or “carving out,” of certain services, such as mental health care, from the managed care contracts for physical health services. This may also be done with the subcontracting that some plans use to delegate financial and management responsibilities to other plans or large medical groups. This fragmentation can make it difficult for providers to integrate a patient’s care plan and for patients to know who is responsible when they encounter problems receiving services.

In 2016, the US Centers for Medicare and Medicaid Services (CMS) issued regulations detailing the state’s responsibilities in monitoring and supporting improvement in Medicaid managed care plans. The federal rule requires Medi-Cal to establish network adequacy standards, including for specialty mental health services; a strategy for disseminating evidence-based practice guidelines to health plans; a plan for continuous quality improvement; an external independent review of access and quality outcomes; a transition of care policy; and a plan to reduce disparities by demographic and disability characteristics.

Open for Comments

While Medi-Cal has recently posted for public comment a proposal to meet those federal requirements (PDF), the state doesn’t go far enough. Here are my recommendations of next steps for DHCS:

• Build a system of accountability tied to the measurement of health plan performance. DHCS has missed an important opportunity to use data to drive improvements in access and quality by linking data to incentives. The penalty for health plans that consistently score the lowest on access and quality metrics has been little more than a requirement that they develop an improvement plan. Rewards for high-performance health plans are similarly weak. Medi-Cal uses the incentive of auto-assigning beneficiaries who do not choose a plan to those within a county that performed better on specified measures in the prior year. Medi-Cal has not evaluated whether this is a successful strategy, and prior research suggests that this approach does not result in quality improvements, most likely because auto-assigned beneficiaries are a weak incentive. When Kaiser Permanente earned this opportunity, it declined the additional auto-assigned beneficiaries (PDF).
• Collect, report, and act upon robust information on health care disparities by demographic characteristics. The state has been slow, especially given the enormous diversity within the program, to produce information on access and quality by sex, race, ethnicity, and primary language within plans. It is not enough to incentivize overall quality; Medi-Cal should also establish ways to incentivize health care equity.
• Require plans to capture and report information at the level of any subcontracted health plans or large medical groups caring for Medi-Cal beneficiaries. Any organization prepared to accept the financial responsibility for furnishing Medi-Cal services should also be capable of demonstrating the quality of the services it provides. Beneficiaries rely on Medi-Cal to ensure that the information they are given to choose a provider is relevant. Sampling at the health plan level is not adequate if the service is subcontracted to another entity.
• Harvest the lessons from the variable ways in which Medi-Cal has organized managed care across counties and restructure the program to ensure it is returning maximum value. The state’s own data suggest that in counties where the state has structured a competition between public and commercial plans to furnish Medi-Cal services, the local initiatives tend to perform better. Furthermore, counties that rely on a single public plan (County Organized Health Systems) tend to achieve higher quality than counties that rely on competition among multiple plans.
• Assess the outcomes achieved when carving out specific services from managed care contracts and be more selective in using this approach to finance services. Carve-outs may be sensible for the small number of patients whose health care needs are dominated by a single clinical problem that is best managed by a highly specialized practitioner. But this approach creates a barrier that can undermine the value that health plans can return by coordinating care for patients, including the majority with mental health care needs who have multiple conditions.

Overdue Opportunity

Since the ACA was enacted, Medi-Cal has played the lead role in reducing the number of uninsured in California. It now provides coverage for one in three Californians, including half of all children. During this time Medi-Cal has also demonstrated its commitment to using managed care to deliver health care.

Federal regulations require states to improve how Medicaid programs hold managed care plans accountable for their performance. These regulations provide an overdue opportunity for Medi-Cal to reconsider how managed care is organized and incentivized to improve value and the care experience for beneficiaries over time.

Andy Bindman

Andy Bindman is professor of medicine, epidemiology, and biostatistics and an affiliated faculty member within the Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco. He served as director of the US Agency for Healthcare Research and Quality (AHRQ) from May 2016 until the conclusion of the Obama administration. He is a primary care physician who has practiced and taught clinical medicine at Zuckerberg San Francisco General Hospital while also conducting health services research to improve care within the health care safety net. In 2009–10, he was a Robert Wood Johnson health policy fellow on the staff of the US House Energy and Commerce Committee and helped draft legislative language for the Affordable Care Act. From 2011 to 2014, Bindman served as a senior adviser to the US Department of Health and Human Services (HHS) within the Office of the Assistant Secretary for Planning and Evaluation, and later was a senior adviser to the Centers for Medicare & Medicaid Services. He received his medical degree from Mount Sinai School of Medicine.

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