For California to live up to its social and economic potential, everyone must have the opportunity to live in good health and contribute. That’s why one of the most important steps California can take to build a better future is to improve the effectiveness of the Medi-Cal program.

Medi-Cal, the Medicaid health insurance program for Californians with low incomes, covers one-third of the state population, but that doesn’t even begin to explain its profound impact. It provides necessary care to 40% of the state’s children, covers half of Californians with disabilities, and is a lifeline for more than one million seniors. It provides economic security to one in five workers. It’s the cornerstone of California’s mental health care system, our biggest asset in treating drug and alcohol addiction, and an important partner addressing homelessness.

A Unique Opportunity to Shape Medi-Cal’s Future

A program so pivotal to the state’s future has to be dynamic. Over the past several years, by testing new approaches to care and monitoring the program’s performance, state officials have learned a great detail about Medi-Cal’s strengths and shortcomings and how to address them. Many of the lessons are reflected in a bold and ambitious initiative by the California Department of Health Care Services (DHCS):  CalAIM — California Advancing and Innovating Medi-Cal.

The goal of CalAIM is “to address many of the complex challenges facing California’s most vulnerable residents, such as homelessness, insufficient behavioral health care access, children with complex medical conditions, the growing number of justice-involved populations who have significant clinical needs, and the growing aging population.” To achieve these improvements for vulnerable residents, DHCS proposes a strategy that relies both on “Enhanced Care Management” for individual Medi-Cal enrollees with complex needs and on Medi-Cal managed care plans expanding their use of population health management.

If fully realized, these approaches would represent major, necessary improvements to the way California cares for the people with the greatest health needs. There are three structural reforms that would dramatically increase the likelihood of success of these approaches:

1. Create strong financial incentives for health plans to invest in improvement.

Consider a scenario where a Medi-Cal managed care plan launches a program to provide housing supports and meal services to frail plan members, and as a result successfully reduces admissions to long-term care facilities. That investment in services not otherwise covered by Medi-Cal would have the effect of improving access and quality and lowering the cost of care. But under current rules, such savings would be subtracted from the amount that the health plan receives from the state in subsequent years, leaving the plan with less money — and a strong disincentive — to make improvements that we all want to see.

In its initial CalAIM draft, DHCS proposes creating a series of new incentives that aim to share both savings and risks for managed care plans as they take on new commitments to improve care. That’s a positive sign. In an ideal world, Medi-Cal would create financial carrots and sticks that hold plans accountable for improving the quality of care and health outcomes. If health plans are willing to make large-scale investments that lower costs while improving quality and access, DHCS should allow those plans to share in the savings. You can read about the kind of improvements managed care plans could make and sustain if they had the right incentives.

2. Unleash the potential of community health centers.

Today community health centers care for one-third of all Medi-Cal enrollees and half of all outpatient visits in Medi-Cal. Too often, health centers can’t provide the care their patients need because of the needlessly rigid, antiquated way health centers are paid.

Let’s say one patient is due for a Pap smear, a follow-up visit for depression, and a prescription refill. Because health centers can bill for only one encounter a day and cannot bill for physical health services and behavioral health services on the same day, that woman would likely have to schedule three visits on three different days. Similarly, a patient with lab results to discuss with his doctor must have that conversation in person because health centers cannot bill for phone encounters.

DHCS can unleash the potential of community health centers to deliver patient-centered care by modernizing the way it pays health centers. Instead of billing for each in-person visit, health centers should receive a fixed amount per patient and be allowed to deliver care when and how patients need and want it and when and how clinicians deem appropriate. For that flexibility, DHCS could require health centers to meet new standards for access, quality, and patient outcomes — and to be transparent about it. DHCS and California’s public hospitals have been testing this kind of payment arrangement and have seen promising results. Even though it’s not currently in the CalAIM proposal, DHCS should extend the same benefits to people cared for by community health centers.

3. Lift barriers to behavioral health integration.

Research shows that people with serious mental illness are more likely to experience chronic physical health issues, and they often face substance use problems as well. Unfortunately, people covered through Medi-Cal currently have to navigate three separate systems for help. Medi-Cal managed care plans are responsible for physical health problems and some limited mental health services; county mental health plans handle specialty mental health care; and county substance use disorder services cover drug or alcohol treatment. Predictably, those fragmented systems lead to poor outcomes due to fragmented care.

There is widespread agreement that Medi-Cal should provide a “whole person” approach to people with behavioral health conditions. That, however, is extremely difficult when the three systems bill Medi-Cal in different ways. Aligning payments across the three systems will make it much easier to get those systems to work together on behalf of people with behavioral health needs.

There is no better time than now to make that fix. The good news is that the initial CalAIM proposal from DHCS suggests that it is committed to the same goals and already is thinking along these same lines in terms of modernizing and aligning payment for behavioral health.

At the end of the day, our systems — including payment — should be designed to reflect the kind of care that people need. The first step to a healthier California is a more effective Medi-Cal.

To give Medi-Cal improvement efforts the attention they deserve, The CHCF Blog will publish more detailed articles about changes being considered in the CalAIM process.

Sandra R. Hernández

Sandra R. Hernández, MD, is president and CEO of the California Health Care Foundation. Prior to joining CHCF, Sandra was CEO of The San Francisco Foundation. She previously served as director of public health for the City and County of San Francisco. Read More

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