As we start to emerge from the COVID-19 pandemic, California faces a critical question: Can the state also overcome the long-standing racial health disparities that were so painfully revealed as Californians of color disproportionately fell ill and died of the virus over the last 15 months?

To make any progress toward this goal, California must start with Medi-Cal. The program provides health coverage to 14 million Californians, 80% of whom are people of color and nearly 40% of whom report something other than English as their primary language.

The upcoming process to reprocure commercial Medi-Cal managed care plans — the first ever statewide competition for commercial plans to contract with Medi-Cal — represents an enormous opportunity to make progress on equity in the health care system. More than 11 million Medi-Cal enrollees get their care through a managed care plan. Yet the quality of care received by these Californians is often much worse than for those with other forms of insurance, there are significant disparities in quality by race and ethnicity (PDF), and improvement within Medi-Cal managed care has lagged over the last decade.

Leveraging California’s Purchasing Power

With this recontracting process, the state can use its substantial purchasing power to set a new course, requiring health plans to provide higher-quality care to their members. Because the requirements established with commercial plans also will apply to public Medi-Cal managed care plans, this procurement has the power to shape health care delivery for millions in the safety net for years to come.

On June 1, the Department of Health Care Services (DHCS) released a draft Request for Proposal (RFP), which outlines its requirements for health plans for the upcoming procurement. Public comment on the document is open until July 1, and DHCS will release the final version by early December (PDF).

The draft RFP reflects important progress in many areas. Among other positive steps, DHCS would:

• Impose new rules to advance the cause of health equity, including the requirement that each plan have a health equity officer whose responsibilities include developing and implementing policies and procedures aimed at reducing health disparities.
• Reduce the number of commercial plans in some counties. This more selective process should set a higher bar for access and quality and result in less fragmentation of provider networks. A previous study showed that the large number of plans in Sacramento and San Diego created a confusing system for patients and providers alike, while yielding few benefits in terms of quality or satisfaction for members.
• Give more counties the opportunity to offer a local plan for residents with Medi-Cal coverage. This too creates a more competitive process for commercial plans. Recent research has shown that public plans are more likely to provide higher-quality care than commercial plans.
• Add new requirements on plans regarding delegation of clinical responsibility and financial risk to subcontractors, such as other plans and independent practice associations, to ensure members receive quality care and service. For example, plans must annually certify delegated entities for compliance with network adequacy standards.

While the draft RFP contains important improvements, it leaves too many placeholders in key areas, such as the narrative proposal requirements, evaluation questions, and scoring. As such, it doesn’t provide the vision and clarity that are needed to drive significant changes in health access, quality, and equity. Moreover, it misses a big opportunity to solicit feedback from stakeholders in these areas. The following are a few recommendations that would strengthen the RFP.

Establish a Clear “North Star” for Health Equity

What is the state’s overall vision for reducing health disparities in Medi-Cal managed care? The state should set a “North Star” when it comes to health equity that all plans are required to work toward. It should address both disparities within the Medi-Cal population and disparities between Medi-Cal enrollees and other insured Californians on a key set of quality indicators, such as children getting recommended preventive care.

For example, DHCS could establish a five-year goal of cutting in half both disparities within the Medi-Cal population, as well as disparities between Medi-Cal enrollees and other insured Californians, and it could establish goals of reducing those disparities by 10% each year. Once the vision is set, the procurement can be used to determine which plans have the best strategies to address the disparities in the counties they want to serve. The procurement can also require plans to track and report the data necessary to ensure transparency and accountability at the plan level and program wide.

Raise Access and Quality Expectations for Medi-Cal Enrollees

DHCS has set the performance bar on quality for managed care plans at the 50th percentile of Medicaid managed care plans nationally. Plans that fail to achieve this level of quality risk fines. While this is an improvement in some ways from the department’s previous minimum performance level (MPL), which only required plans to exceed the lowest performing 25% of Medicaid plans nationally, it provides no incentive to plans that have achieved the MPL to invest further in improving the quality of care. Instead, DHCS should set the expectation — and provide the incentives — for plans to continuously improve quality year over year.

Pay Plans Based on Performance

DHCS payments to plans are not tied to their performance. Yet payment is one of the best tools at the state’s disposal to drive better performance from plans on a variety of goals, including the ones related to equity and quality noted above. DHCS leadership understands this. In fact, DHCS and CHCF collaborated to examine new ways to pay Medi-Cal managed care plans, which led to recommendations for financial incentives designed to spur better quality. Moreover, DHCS is taking steps to strengthen its authority to link payments to quality and require plans to comply with incentive arrangements.

The RFP is an opportunity to go further — for DHCS to present its new vision for rewarding plans that provide better quality and value for Medi-Cal and its enrollees, and to solicit feedback from stakeholders on this vision. The report recommends DHCS withhold a portion of plans’ capitation rate, which they can “earn back” by meeting predetermined goals around quality of care or equity. Plans that exceed the established goals could be further financially rewarded through an add-on to the capitation rate.

A Game-Changing Process

While much work is still needed, DHCS can produce a final RFP to launch a transformative procurement process that will eliminate health disparities and improve care for millions of Californians who rely on Medi-Cal.

Christopher Perrone

Christopher Perrone is director of CHCF’s Improving Access team, which works to improve access to coverage and care for Californians with low incomes. Read More

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