Medi-Cal Gets a Bad Rap

The Wall Street Journal published a commentary by editorial writer Allysia Finley devoted entirely to California’s Medicaid program, known as Medi-Cal. “If ObamaCare’s expansion of Medicaid were measured merely by growth in enrollment and spending, California’s Medi-Cal program would rank as a huge success,” she wrote on July 18. “But despite the surge in enrollment and spending — or perhaps because of it — Medi-Cal has failed to fulfill its stated goal of improving health-care access for the indigent and disabled.” She argues that by opening Medi-Cal to younger, healthier people, “California made it harder for those who most need low-cost care to get it.” I asked Chris Perrone, who has spent nearly two decades helping Medi-Cal work better and is director of Improving Access at the California Health Care Foundation (CHCF), what he thought of the article and the issues it raised.

Chris Perrone, Director, Improving AccessQ: What was your reaction to the Wall Street Journal article?

A: I was deeply disappointed. The main thrust of the piece is that Medi-Cal is broken and that those who gained Medi-Cal coverage under the Affordable Care Act would be better off in “skinny” plans offered through the individual market — that is, plans that offer less comprehensive benefits than Medi-Cal. The article reflects a deep misunderstanding of the Medi-Cal program, the people it serves, the experiences of those who are newly enrolled, and how best to improve access to care for Californians. While it is certainly true that access to care for many Medi-Cal enrollees is worse than it is for Californians with employer-sponsored insurance, the author provides no evidence that those enrolled in Medi-Cal would be better off in skinny plans that offer fewer benefits and fewer consumer protections. These skinny plans typically keep their costs down by offering narrow provider networks, providing fewer benefits, and requiring higher cost-sharing. It’s difficult to see how this would benefit the millions of Californians with low incomes newly enrolled in Medi-Cal. For many new enrollees with chronic illnesses, psychiatric conditions, and substance use disorders, Medi-Cal’s comprehensive coverage has been key to addressing their previously unmet physical and behavioral health care needs.


Q: The article suggests that Medi-Cal spending is out of control. Is that true?

A: On a per-person basis, Medi-Cal spending has grown more slowly than employer-based or individual coverage. One way in which California has tried to slow the growth of Medi-Cal spending is to require those it covers to enroll in a managed care plan. Today, nearly all Medi-Cal beneficiaries are enrolled in managed care. Medi-Cal’s managed care program includes a blend of commercial plans like Blue Cross, HealthNet/Centene, and Kaiser, and an array of local public plans such as L.A. Care and Inland Empire Health Plan.


Q: We’ve seen a lot of press coverage, including in the Journal article, about the rapid rise in the use of emergency rooms by Medi-Cal beneficiaries. Are you concerned?

A: The latest data from state officials on ER use in California certainly have caused a stir, but much of what’s been written reflects a poor understanding of what these data tell us. For starters, the growth in ER use among Medi-Cal beneficiaries since 2014 is about what one would expect after Medi-Cal coverage was expanded. A few simple calculations show that newly enrolled adult Medi-Cal beneficiaries are using the ER at about the same rate as previously covered adult Medi-Cal enrollees. Second, a closer look at the data reveals that ER use started to decline last year. This is good news, although largely expected. The initial spike in ER use reflected pent-up demand among Californians with low incomes who were previously uninsured and had avoided seeking care before they were covered by Medi-Cal. ER use has begun to drop as these new enrollees have joined a health plan, selected a primary care physician, and developed a relationship with their care team. For example, at Partnership HealthPlan, ER use among newly eligible members enrolled for at least 12 months has declined by 37%. I expect ER use to continue to decline over time and would be concerned if it didn’t. We must continue to find ways to improve access to primary and specialty care in community settings to drive down the rate of ER use among Medi-Cal enrollees. We also should be realistic about the many reasons some people with low incomes rely on ERs despite long wait times. Those include the limited availability of public transportation, high trust in hospital-based physicians, and the convenience of one-stop shopping at ERs for primary care, specialist consults, and prescription drugs. For these reasons, as well as the fact that Medi-Cal enrollees are more likely to report that they are in poor health, ER use rates among those with coverage will always be higher than for other insured Californians.


Q: Medi-Cal beneficiaries are the foremost experts on how well the program works. How do they feel about their health coverage?

A: In past surveys about their experience with Medi-Cal, we have consistently found that the vast majority of beneficiaries appreciate their coverage and say that Medi-Cal is a good program. Four in five report it is easy to find a doctor to care for them, and they are happy with their doctor. When we compare their experience to the uninsured, Medi-Cal enrollees say it is easier to find a doctor who will treat them and are much more likely than uninsured people to have a usual source of care.


Q: Many in Congress want to repeal the Medicaid expansion and increase the use of private health plans to provide benefits to people with low incomes in the insurance market. How would that work?

A: The alternative to covering people through Medi-Cal would be to buy them into a private plan. But there are clear trade-offs. If California or another state chose to pay the cost of a typical employer-based plan and cover the cost of patient copays and deductibles, timely access to care would likely improve. But in the process, the cost to the state and federal government would skyrocket. Conversely, the state could buy into a “low-cost” plan that provides fewer benefits and narrow networks, but access to important services, including mental health care, is likely to be worse than for Medi-Cal enrollees.


Q: California reimburses physicians at some of the lowest rates in the country, which suppresses physician interest in accepting Medi-Cal patients. How can California address this?

A: California has already shifted nearly all its Medi-Cal beneficiaries to managed care, and all health plan executives I talk with say they pay physicians rates that are much greater than Medi-Cal fee-for-service – closer to Medicare rates or even higher. Also, Californians voted last year to increase the state’s tobacco tax , and some of the revenue is being used to improve access to health care services by increasing Medi-Cal provider payment rates. California’s recently passed budget includes $546 million to increase Medi-Cal rates for physicians, dentists, and other providers. There are additional steps California could take to improve physician participation in Medi-Cal, including reducing the administrative burden on physicians and training more physicians likely to practice in underserved communities. The state budget also includes $100 million to support the teaching health center graduate medical education programs in the state.


Q: What will happen if one of the health care bills under consideration in Congress becomes law?

A: The challenges we face in Medi-Cal today pale in comparison to those we would confront if the federal government backs out of its commitments to fund Medi-Cal at current federal matching rates. In California, these proposals would nearly double the number of uninsured and reduce federal Medicaid spending by $115 billion from 2020 to 2027. This decrease in federal support would have far-reaching consequences as state leaders look for ways to curb state Medi-Cal spending by cutting benefits, decreasing reimbursement rates, or both. Hospitals, nursing homes, physician practices, and other providers throughout the state would suffer financially, and this would limit their ability to deliver care to all Californians, not just populations with low incomes.


Q: Let’s say you wanted to make Medi-Cal work better in terms of both access and quality, and let’s say you need to do that without lots of new funding available. What are the key steps you would take?

A: At CHCF, we are making a concerted effort to support Medi-Cal payment reforms that emphasize greater value over more volume, and we seek delivery system reforms that move us toward more efficient and effective models of team-based, whole-person care. This includes greater integration of physical and behavioral health services, which is especially important in the safety net because people with both physical and behavioral health conditions are overrepresented in Medi-Cal, and because most of Medi-Cal’s highest-cost enrollees have both physical and behavioral health conditions. We are also finding opportunities to drive greater value in specific service areas that account for a significant share of spending and where care doesn’t align with patient needs and preferences. We are partnering with health plans and providers throughout the state to reduce unnecessary c-sections, discourage the use of ineffective treatment at the end of life, and decrease the overprescribing of opioids to bring down the overdose death rate.


Q: Is the impact of Medi-Cal on the overall health system infrastructure underappreciated?

A: I don’t think it’s well understood just how important Medi-Cal is to the overall health of California’s health care delivery system. For example, because Medi-Cal pays for half of all births in the state and two-thirds of nursing home care, this expands the available options available for everyone, particularly in regions with low rates of employer-based coverage, like the San Joaquin Valley. Also, it’s very difficult for safety-net providers to invest in new approaches to care when 40% or more of their patients are uninsured and operating margins are in the red. Since the Affordable Care Act, we have seen a growing appetite for innovation, in no small part due to funding opportunities available through the law. For example, we are working with several health plans and clinics in rural areas to expand the use of telehealth to address the paucity of specialty care in sparsely populated areas. There are many challenges to running a successful telehealth program, but it’s nearly impossible for a clinic to do so if a large share of its patients are uninsured. Transformative delivery system reforms that benefit us all are much easier to advance when everyone has coverage.


Q: Popular support for Medicaid may be higher now than at any time since it was established in 1965. Is Medicaid a new “third rail” of American politics?

A: In a recent survey sponsored by CHCF, 88% of Californians said Medi-Cal is important to the state. Californians recognize the enormous benefits that stem from coverage, including greater access to care, better health, lower rates of personal bankruptcy, and the freedom to move between jobs without fear of losing coverage. Most people who aren’t on Medi-Cal know a family member or coworker who has been helped by it. As they experience it themselves or hear stories from family members about care they’ve been putting off for months or years, their appreciation for the program grows. What we are seeing is a growing sense that everybody — regardless of income or other factors — should have affordable coverage.

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