It’s Time to Pay Medi-Cal Plans Differently

CHCF testifies before California Senate


On February 27, 2019, Chris Perrone, director of Improving Access at CHCF, testified before the California Senate Committee on Health during an informational hearing titled “Improving Performance and Aligning Incentives in Commercial Health Insurance and Medi-Cal.” Below is his full testimony. A video of his presentation, and the Q&A that followed with legislators, is included at the bottom of this page.

Chairperson Pan, members of the Health Committee, thank you for this invitation to discuss opportunities to improve performance in Medi-Cal.

With nearly one in three Californians receiving their health coverage through Medi-Cal, it is the single largest source of health coverage in our state. Over 80% of Medi-Cal’s 13 million enrollees get their care through managed care plans. With 11 million enrollees, the Medi-Cal managed care program is larger than every other state’s entire Medicaid program.

One of the many potential benefits of managed care to Medicaid enrollees and to states is that, unlike a fee-for-service system, there is an accountable organization responsible for meeting specific federal and state requirements in areas such as network adequacy, timely access to care, quality, and cost. This accountability is a key reason the state transitioned seniors and persons with disabilities from fee-for-service into managed care starting in 2011 and that nearly all Medi-Cal enrollees with full-scope coverage are now required to enroll in managed care.

Against this backdrop, I will address two questions:

  1. What do we know about quality of care in Medi-Cal managed care?
  2. What might California do differently to accelerate improvements in access and quality of care for Medi-Cal enrollees?

What do we know about quality of care in Medi-Cal managed care?

First, we know that quality of care is highly variable depending on where you live, what plan you’re enrolled in, and your race and ethnicity. According to the Medi-Cal managed care dashboard, produced quarterly by the Department of Health Care Services, the aggregated quality scores of Medi-Cal managed care plans vary by a factor of 2.5 — meaning the top plan scores 2.5 times higher than the lowest scoring plan. These aggregate scores roll up several quality measures to provide a single snapshot of overall quality for each plan but mask the clinical significance and human toll of the variation. For example:

  • 74% of women enrolled in San Francisco Health Plan received their recommended cervical cancer screen; among women enrolled in Health Net in San Diego, only 41% did.
  • Among Medi-Cal beneficiaries with hypertension residing in the Inland Empire, 69% of those enrolled with Inland Empire Health Plan had their blood pressure adequately under control, whereas less than 40% of those enrolled with Molina Healthcare did.
  • Among Medi-Cal beneficiaries with diabetes, those enrolled in the San Francisco Health Plan are 50% more likely to have their diabetes (HbA1c levels) under control than those enrolled in the Alameda Alliance Health Plan

DHCS also found disparities by race and ethnicity, with black and Native Americans frequently faring worse than other Medi-Cal beneficiaries.

Second, we are learning that over the last 10 years, quality of care has not improved program-wide on most quality measures. A study by UCSF researchers soon to be published finds that of 41 quality and patient experience measures collected by DHCS, there has been statistically significant improvements in only 16 measures, on average, across all participating Medi-Cal managed care plans. For half of these 41 measures, there has been no significant improvement over the past decade. And for five measures, quality has actually declined over the past decade. How could this be? There are many possibilities, but I would like to draw your attention to two in particular:

  • When a managed care plan makes investments to improve the quality of care its members receive, and these investments also lead to more-efficient and lower-cost care, DHCS reduces what it pays the plan in the next rate-setting cycle. This phenomenon, called “premium slide,” discourages all but the most committed managed care plans with substantial reserves from making large investments in services such as housing supports or medically tailored meals and other food assistance, or investing to expand and improve their provider network. And for those that do, premium slide makes it more difficult to continue making such investments over time.
  • Unlike many other state Medicaid managed care programs, California does not have a financial incentive program for its health plans that rewards participating plans when they provide excellent quality care or demonstrate significant improvements in quality for their members.

What might California do differently to catalyze significant improvements in access and quality of care for Medi-Cal enrollees?

Taking these factors into account, and after hearing from a diverse cross-section of Medi-Cal stakeholders that they support a vision of shared accountability to provide high-quality, high-value, whole-person care, the California Health Care Foundation launched a project to design a financial incentive program that would address premium slide and promote more rapid quality improvement. We hired Cindy Mann, the former deputy administrator at the Centers for Medicare & Medicaid Services and director of the Center for Medicaid and CHIP Services in the Obama administration, and engaged an advisory group of health plan leaders. Their effort produced recommendations for an approach similar to shared savings in which a managed care plan would receive a rate adjustment if it meets three criteria: (1) it generates cost savings greater than a threshold established by DHCS and its actuaries, (2) it meets quality targets based on providing excellent quality of care or demonstrating significant quality improvement, and (3) it demonstrates that it is investing at least a specified amount into health-related initiatives as defined by the state. One of the main benefits of this approach is that it would not require additional state spending. (The approach is described in greater detail in our report Intended Consequences: Modernizing Medi-Cal Rate Setting to Improve Health and Manage Costs.)

This approach is just one of several approaches California could take, and today CHCF published a new report that describes five different types of financial incentive programs used by states for their Medicaid managed care programs. This report, Making Quality Matter in Medi-Cal Managed Care, describes each approach and, for each, provides an example of how a state is putting it into practice. Some are simpler to administer than others; some would require additional state funding or a reallocation of existing Medi-Cal funds.

Of course, financial incentives are not a panacea, and DHCS has and uses many tools in its tool chest to manage the managed care program: procurement; contract management and oversight, including performance measurements, audits, and corrective action plans; public reporting; and nonfinancial incentives such as the performance-based auto-assignment process. Later this spring, we will publish a report that provides recommendations in each of these areas based on review of practices by DHCS, Covered California, CalPERS, and five other state Medicaid programs.

Last, I want to acknowledge that DHCS and its plan partners are working hard to improve quality of care for their members, and the efforts of successful plans are reflected in improvements in their quality scores over time. You’ll hear today from extraordinary Medi-Cal managed care plan leaders, and several plans are making sizeable investments to improve care for their members. We have had the good fortune to partner with many of them to reduce unnecessary c-sections, to expand treatment options for those overusing opioids, to improve care at the end of life, and to expand access to care through telehealth. Moreover, what DHCS and its health plan partners have accomplished in just the last seven years is impressive — as the program has expanded to include millions of new enrollees — while tackling key priorities such as adding coverage for mild to moderate mental health conditions. With stronger incentives and appropriate flexibility, however, we can and should expect better outcomes from our Medicaid managed care program, as many states already do.