California’s reboot of troubled Medi-Cal puts pressure on health plans

Reviewed by Emily Henderson, B.Sc.Sep 21 2021

When Denise Williams' baby boy was 2 months old, she became alarmed by a rattling sound in his lungs and took him to the emergency room. While undergoing treatment, he spiraled into a disabling neurological disorder.

Now 2 years old, Markeano is attached to breathing and feeding tubes. He can't walk or move his arms.

"If I want him to sit up, I have to sit him up. If I want him to play with a car, I've got to put his hand on the car and move it back and forth," said Williams, 38, who lives with Markeano, her four other children and her husband, Marcus, in Adelanto, California, a small city in the High Desert region of San Bernardino County.

Markeano is enrolled in the Inland Empire Health Plan, a county-run managed-care insurer that provides coverage under Medi-Cal, California's version of the federal Medicaid program for people with low incomes or disabilities. He also receives care through California Children's Services, which covers kids with serious conditions.

But Williams still finds it difficult to get her son the specialized care he needs. What's worse, neither his insurers nor his doctors take responsibility for managing his care, she said. "No one coordinates the care except for me."

Poor care coordination is one of the many shortcomings of Medi-Cal, which covers over a third of the state's population and nearly 40% of children under 18. Advocates, patients and even the state auditor say Medi-Cal has failed to hold accountable the managed-care health plans that cover almost 12 million of its nearly 14 million enrollees.

To remedy these failings, the state has begun an ambitious contracting process that aims to commit the health plans to better service. The state's exact strategy is unclear. But it is expected to result in new rules for Medi-Cal managed care. The nine commercial insurers, including giants Health Net, Anthem Blue Cross, and Blue Shield of California, will have to bid for new contracts intended to set more rigorous care standards. While their members account for fewer than one-third of managed-care enrollees, the companies have made nearly $3 billion from Medi-Cal since 2014.

Non-commercial plans like the Inland Empire Health Plan, which are established by county authorities, won't have to submit bids, but they will be required to sign the new contracts.

"The state has had a lot of difficulty — because of skill and will — in managing and enforcing the terms of its existing contracts," said Alex Briscoe, head of the California Children's Trust and former director of Alameda County's Health Care Services Agency. "This represents an opportunity not only to redesign the contracts but also to reimagine the state's role in enforcing them."

It's also an opportunity for the state to make a statement in selecting plans.

"Some are doing worse than others, and that should be taken into account in terms of decisions as the plans bid," said Edwin Park, a California-based research professor at the Georgetown University Center for Children and Families.

Jacey Cooper, California's Medicaid director, said the state's focus will be assuring that plans provide access to care and are committed to improving the outcomes of Medi-Cal beneficiaries.

The recontracting process is intertwined with an ambitious $6 billion experiment to move Medi-Cal beyond medicine into the realm of social services.

'Deficient oversight'

Data shows that Medi-Cal plans are failing enrollees in many ways. Patients often have long waits or travel times for medical appointments, and get fragmented services and poor information about their care. Some communities of color, as well as rural residents, receive lower-quality service than others.

Faulty treatment hits the 4.6 million kids in managed-care Medi-Cal particularly hard because children need a lot of routine care, and many are not getting it. In July, close to 500 advocacy and provider groups sent a letter to the Department of Health Care Services, which runs Medi-Cal, urging it to make the managed-care plans improve pediatric care. "The deficiencies in the Medi-Cal managed care program contribute to health disparities for children across the state that can last a lifetime," they wrote. The new contracts, the letter said, should require health plans to fix the problem.

Federal law provides significant protection for all children in Medi-Cal and other state Medicaid programs. It requires coverage for regular checkups, immunizations, and other preventive and diagnostic care.

But state data shows that Medi-Cal managed-care plans often fail to meet these requirements. Only about one-quarter of infants and toddlers in Medi-Cal get the recommended number of well-child visits and screenings for developmental delays. The plans fall short on immunizations as well.

A 2019 report by the California State Auditor ranked California 40th among state Medicaid programs in use of preventive services by children.

The report blamed the state's poor performance on "deficient oversight of the managed care plans" and an insufficient number of health care providers willing to accept Medi-Cal's low payment rates.

"I don't see how we can have a high-performing Medi-Cal system that doesn't do well on those basic services for kids," said Mike Odeh, health policy director at Children Now, an Oakland-based advocacy group.

To be fair, Medi-Cal has had its share of successes, too, including early and robust expansion of enrollment under the Affordable Care Act, extension of coverage to large numbers of immigrants without legal documents, and pioneering programs that address not only medical and mental health but also the social and environmental circumstances of enrollees.

Nonetheless, Medi-Cal managed-care plans often earn poor to mediocre marks for the quality of their care. Meanwhile, the largest commercial plans have profited handsomely from the program, especially since the expansion of Medicaid in 2014. That helps explain why the rebidding process is such a sensitive matter for them. Health Net, Anthem Blue Cross, Molina Healthcare and Blue Shield of Californiaall declined to discuss their bidding strategies with KHN.

Collectively, the commercial plans have generated $2.9 billion in net profits from Medi-Cal since fiscal year 2014, according to data provided by the state. Health Net, the state's largest commercial Medi-Cal insurer, with around 2 million enrollees, accounted for $2.1 billion of that amount. Anthem Blue Cross, the second-largest commercial Medi-Cal plan, with 1.3 million enrollees, accounted for $873 million.

An Anthem Blue Cross spokesperson noted that Medi-Cal managed-care plans are required by law to spend at least 85 cents of every dollar on medical care or efforts to improve care. That, along with other factors, limits the health plans' profits, he said.

Kaiser Permanente, which is at or near the top of Medi-Cal quality scores, has lost money in the program every year since 2014 — and before that, too.

Health Net and Anthem Blue Cross get poor to mediocre marks on key pediatric services in many counties, according to state data. Health Net Medi-Cal plans in Sacramento, Kern, Stanislaus and San Diego counties, for example, were at or near the bottom of the pack in timeliness of pediatric appointments.

A Health Net spokesperson said the company has improved over the past two years and now outperforms its competitors on state quality indicators in nine of the 13 counties where it operates.

The 2019 state audit, citing earlier concerns about incomplete and inaccurate reporting, noted that the integrity of the state's quality data can be hard to assess.

And non-commercial plans often have low scores, too. "Quality is stubbornly low across all plans in Medi-Cal. Nobody gets a pass here," said Cary Sanders, senior policy director at the California Pan-Ethnic Health Network.

The state rarely holds any of the plans fully to account, advocates and Medi-Cal experts say. The Department of Health Care Services started imposing financial penalties for poor quality only in 2017, and since then it has levied only two such fines: one against Health Net for $335,000 and one against the publicly run Health Plan of San Joaquin for $135,000.

The department does require subpar performers to devise so-called corrective action plans, but critics say they rarely produce significant improvement.

Even if enforcement were effective, the standards for Medi-Cal plans are too low, advocates say. Until 2019, insurers needed to be only in the 25th percentile of Medicaid plans nationally to avoid corrective action. The department raised the bar to the 50th percentile in 2019 but has not enforced it so far because of the covid-19 pandemic.

The department next year will begin penalizing any health plan that "fails to exceed, rather than just meet" the minimum performance level on any measure, said Cooper, the state's Medicaid chief. It will do so every year, rather than target only persistently poor performers, she said.

Pay for performance

In June, the Department of Health Care Services released preliminary details on the bidding process, outlining some of the new requirements. It expects to issue more details by year's end but won't announce plan selections until the end of 2022. The new contracts are slated to take effect Jan. 1, 2024.

But will the state lean hard enough on the plans? Based on the documents released so far, this could be a "potential missed opportunity," said Sanders. "There aren't enough teeth here to improve health plan accountability."

Other advocates cite what they say has been a cozy relationship between health plans and the state. "I just think the whole delivery system has historically been filled with a lot of politics, favoritism, good old boys," said Isabel Becerra, CEO of the Coalition of Orange County Community Health Centers, whose members provide Medi-Cal services in the county.

Some advocates and analysts say the best way for the state to hold the managed-care plans' feet to the fire is to tie the fixed monthly rates it pays them to their performance on a number of measures, including preventive services and health equity.

"If you want to change how they work, you have to change the incentives that drive them," said Briscoe, of the California Children's Trust.

Medicaid chief Cooper said her staff is working to link payment to quality and health equity.

Some advocates say the state should withhold payments from poorly performing plans. The plans, however, would prefer being rewarded for exceeding expectations to being dinged for failing to meet them.

A communication breakdown

The rebidding process is expected to reduce the number of insurance companies participating in Medi-Cal — and some experts say that's a good thing.

"The idea of competition is you're supposed to be competing on the basis of quality, but if there are too many choices beneficiaries aren't able to discern the differences," said Georgetown University's Park.

In some regions, the Medi-Cal health plans that contract directly with the state outsource care and administrative tasks to other plans or physician groups. L.A. Care, for example, farms out enrollees to subcontractors such as Kaiser Permanente, Anthem Blue Cross and Blue Shield of California. The Department of Health Care Services says that in evaluating the bids it will look favorably on health plans that commit to keeping closer tabs on their subcontractors.

The state reports quality scores only for plans with which it contracts directly, and their data can be skewed by wide variation in the performance of the subcontractors.

Moreover, the divided responsibility between health plans and their subcontractors can confuse beneficiaries.

"The subcontractor says, 'No, call the plan' — and the plan says, 'Call the subcontractor,' and there's really no accountability," said Abigail Coursolle, a senior attorney at the National Health Law Program in Los Angeles.

Denise Williams faces a similar problem. She said the Inland Empire Health Plan does not communicate effectively — or at all — with California Children's Services or Markeano's doctors. As a result, she is saddled with hours of legwork to find care for her son, whether speech, swallowing and cognitive therapy or extra oxygen tanks to make sure he doesn't run out during long car trips to see his doctors.

"They tell me, 'Your pediatrician or neurologist should be doing this.' Then when I talk to the pediatrician and the neurologist, they say, 'Talk to your insurance,'" Williams said. "So it's like, 'I already talked to you guys. Can't you guys talk to each other — or can we get on a three-way? Because this is draining. I've got a kid that I need to take care of.'"

Inland Empire Health acknowledged the gaps in coordination among managed-care plans, California Children's Services and providers, saying it was "eager to embrace the care coordination improvements" that the state says it will require. The new contracts also will require plans to address some of the nonmedical problems that can compromise health, such as inadequate housing, unclean air and water, and food insecurity.

In addition to being predominantly poor, over two-thirds of Medi-Cal enrollees are from non-white communities that have historically been socially and economically marginalized — which is why the state says it will put a high priority on reducing health care inequities.

Denise Williams, who is Black, wonders if her travails are related to long-standing inequities.

"Sometimes I don't know if it's because of my color or what," she said. "I try to remain calm at all times, so that way it's not a stereotype of an angry Black lady or whatever. But at the same time, I'm my kid's only advocate, so if I never say nothing, my kid would just be lying in the bed all day."

California Healthline correspondent Angela Hart contributed to this report.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.