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Medi-Cal Managed Care: An Overview and Key Issues

California’s Medicaid program, Medi-Cal, is the largest state Medicaid program in the nation, insuring almost one-third of California’s more than 38 million residents. In the early 1970s, California was the first state to enter into risk contracts with managed care plans to serve some Medicaid beneficiaries, rather than pay for services on a fee-for-service (FFS) basis. Over the decades since that time, Medi-Cal has been progressively moving more beneficiaries into managed care. More than three-quarters of all Medi-Cal beneficiaries, including low-income children, adults, seniors, and people with disabilities, are now enrolled in managed care plans. Besides being the earliest Medicaid managed care program and, by far, the largest in the nation, at nearly 10 million enrollees, the Medi-Cal managed care program has a unique structure, an outgrowth of underlying historical differences in the health care systems and traditions in different counties of the state. As other state Medicaid programs increase their use of risk-based managed care, and policymakers, plans and providers, and advocates seek to understand and learn from developments in this area to guide future change, a review of Medi-Cal’s managed care evolution is both timely and illustrative. It also serves to illuminate some potential implications of the proposed rule on Medicaid managed care issued by the federal Centers for Medicare & Medicaid Services (CMS)  and expected to be finalized in the Spring of 2016, which represents a major overhaul of current regulatory requirements and standards.

A number of observations stand out from this review:

  • County-based structure. California’s managed care program is unique, involving six different managed care models, shaped by the historical and continuing role of counties in financing and delivering primary care, public hospital services, mental health services, and certain long-term services and supports to poor and medically indigent residents. More than two-thirds of all Medi-Cal managed care enrollees are enrolled in public safety-net plans; the others are served by a mix of commercial and private non-profit health plans.
  • Phased managed care expansion. In the early days of the state’s managed care program, in a limited number of counties, managed care enrollment was mandated for nearly all Medi-Cal beneficiaries, including seniors and people with disabilities. Over time, California has expanded mandatory managed care to additional counties and to broader segments of the beneficiary population, including seniors and people with disabilities statewide, under the state’s “Bridge to Reform” section 1115 waiver (2011); children who were transitioned from CHIP to Medi-Cal (2013); low-income adults covered previously through the state Low Income Health Program and those newly eligible for Medi-Cal under the ACA (2014); and, under the state’s seven-county Financial Alignment Demonstration and on a voluntary basis, beneficiaries dually eligible for Medicare and Medicaid (2014).
  • Access to care. Problem with access to care in Medi-Cal FFS carry over into managed care, challenging Medi-Cal health plans to establish adequate provider networks and improve care. Gaps in access to certain specialists, including psychiatrists and other behavioral health providers, and long-term care services, are the most significant gaps. Providers have cited Medi-Cal’s low payment rates as a barrier to their participation in the program and sued the state on the basis that the fees violate federal Medicaid payment standards. Language and cultural gaps in access to care and gaps in rural access are additional issues.
  • Benefit carve-outs. Medi-Cal managed care plans provide for most primary and acute care services. However, certain services are “carved out” from managed care contracts. In particular, while mental health services for mild or moderate mental illness are included in plan contracts, specialty mental health services and substance use disorder treatment continue to be delivered through county mental health departments and local and county alcohol and drug programs. In most counties, nursing home care and certain home and community-based services (HCBS) are also carved out of managed care.
  • Managed long-term services and supports. In 2014, under its Coordinated Care Initiative in seven counties, California required all Medi-Cal beneficiaries, including dually eligible enrollees who were previously exempt from managed care, to enroll in a managed care plan to receive their Medi-Cal benefits, including nursing home and certain HCBS.
  • Transitions for people with complex needs. California’s experience shows that robust transition planning is necessary to minimize disruptions in care for beneficiaries with complex needs who are required to move from FFS to managed care. Beneficiary and provider engagement, timely transfers of data, continuity of care protections, beneficiary information and navigation assistance, and coordination with carve-out services emerge as essential elements of sound transitions.
  • Increasing focus on metrics, performance, and accountability. California has taken significant steps to improve the data reported by Medi-Cal managed care plans, which are needed for rate-setting, managed care monitoring, efforts to move to value-based purchasing. The state also established a managed care performance dashboard that makes plan-level quality and other data available to the public, increasing the program’s transparency and plan accountability.
  • Major current issues. Two recent developments – CMS’ proposed modernization of the Medicaid managed care regulations and the approval of “Medi-Cal 2020,” the renewal of California’s section 1115 waiver – can be expected to bear on the Medi-Cal managed care program, by increasing plan- and state-level requirements and state oversight responsibilities, and by setting the stage for potential changes in the role and operation of managed care plans in a transforming health care delivery and payment system.
Issue Brief

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.