Sacramento Business Journal

April 11, 2008

Pilot would expand mandatory managed-care

By Kathy Robertson

Moving poor seniors, disabled to Medi-Cal HMOs seen saving millions

Health plans and policymakers have revived the idea of requiring low-income seniors and people with disabilities to enroll in managed-care plans.

The idea was included in Gov. Arnold Schwarzenegger's failed Medi-Cal redesign plan in 2005. It has also surfaced in legislation several times without gaining traction. But with the collapse of a plan for full-blown health care reform at the Capitol in January and the scramble to balance the state budget, it has found new life.

The budget mess has raised the stakes, too.

The state budget deficit has soared to an estimated $16 billion, compared with $9.1 billion in 2005. Last year's promise of better rates for Medi-Cal -- the state's health care program for the poor -- has soured to a proposed 10 percent cut in payments to care providers.

If mandatory managed care for seniors and people with disabilities was fully implemented in all counties with Medi-Cal managed-care plans, it could improve care and save the state as much as $192 million a year, according to a new study by Health Management Associates, a Lansing, Mich.-based consulting firm.

Pending legislation takes a more narrow approach; Assembly Bill 1332 by Gloria Negrete McLeod, a Chino Democrat, would test the waters with a pilot project for required Medi-Cal managed care in Riverside and San Bernardino counties. The potential savings is estimated at $21.7 million a year.

The move makes sense, and some other states have made it already with success, said Stephen O'Dell, president and chief executive officer of Molina Healthcare of California, which paid for the Health Management study.

"This is a stopgap to no action whatsoever," said O'Dell, who believes state regulators have the authority to unilaterally make the move. "When we're $14 billion to $16 billion upside-down on the budget, it doesn't make sense for major policymakers in the state to refuse to do this. In my mind, that demonstrates a lack of courage."

Health maintenance organizations and their trade associations like the idea but want details. Rates are higher for old and disabled patients, so HMOs stand to benefit from the move if they do a good job taking care of these patients.

The annual savings pale in comparison with the estimated $568 million a provider fee cut is expected to produce, though, and some disability advocates oppose any mandatory enrollment in managed care.

Other states already doing it

Molina Healthcare is leading the charge because the Long Beach-based health plan only treats patients covered by Medicaid, the federal health care program for the poor.

"Other plans ask the question: 'Are we going to stay in the business?' " O'Dell said. "For us, the question is 'How?' This is a business we've been doing for 26 years."

Rates paid by Medi-Cal -- the California version of the federal program -- are the lowest in the nation. Molina serves more than 300,000 low-income beneficiaries statewide, including almost 20,000 in Sacramento County.

The company made $741,000 on its California business in 2007, but lost $17 million the year before, O'Dell said. The $58.3 million in net income Molina posted for 2007 came from other states.

Most seniors and disabled residents enrolled in Medi-Cal are covered by traditional fee-for-service plans, but they may sign up voluntarily with HMOs in counties where Medi-Cal managed-care programs are available. Molina has 12,000 who have done so, and "they make up the most stable population we have," O'Dell said.

Ohio, Texas and Washington already require senior and disabled patients to use managed care. "Studies done on enrollees in this population show they get better, cheaper, higher-quality care," O'Dell said. "I have some passion regarding the fact that this population should be under managed care -- and some frustration at the inability to make progress."

Other health plans appear supportive of the move but were still looking at the details in the bill, which was amended Tuesday.

"We've been very supportive of the state's effort to expand Medi-Cal managed care to the aged, blind and disabled for years," Health Net Inc. vice president Dave Meadows said. "We do think they should do it in a bigger way than one pilot."

Anthem Blue Cross generally supports the move and already covers more than 40,000 low-income senior and disabled Californians who joined the HMO voluntarily, company spokeswoman Leslie Porras said. Less than half of 1 percent have opted to go back to fee-for-service, she said, and satisfaction rates for disabled patients in managed-care plans are higher than for the population as a whole.

"It's kind of a no-brainer," said Don Crane, president and chief executive officer of the California Association of Physician Groups, a trade group of doctors in managed care. "This is a high-risk, high-need population that does better in managed care than fee-for-service."

'Not going to go there'

Not everybody likes the idea.

"We haven't taken a position on the bill, but our board of directors does not support [mandatory] Medi-Cal managed care for people with disabilities," said Deborah Doctor, a legislative advocate for Protection & Advocacy Inc., a disability advocacy organization with an office in Sacramento.

"There's a lot more substance in the new (bill), but it's still, at heart, mandatory enrollment, and we are not going to go there," she said.

The California Medical Association has not taken a position on SB 1332, but the group opposed the governor's 2005 Medi-Cal redesign plan. The worry then was that a move to managed care would disrupt long-standing doctor-patient relationships, restrict patient access to specialists and place undue financial burdens on doctors.

Health Access, a San Francisco-based consumer group, worries about patient protection in managed care and how the change might affect clinics and hospitals that treat the poor.

While the governor has yet to take a position in the bill, the administration has been a strong supporter of moving seniors and the disabled into managed care, state Medi-Cal chief Stan Rosenstein said.

The Legislature appears more inclined to take change slowly, make it voluntary and make sure patient protections are in place, Rosenstein said. He's been working with the California Health Care Foundation on performance standards for a year.

"We set about working with state officials, health plans and others to find out what it is we want health plans to be doing -- and how we will know they are doing it," said Chris Perrone, a senior program officer at the foundation. Some are simple questions, such as whether a disabled patient can get onto an exam table or through the door, Perrone said.

"I'm very pleased that the health plans are embracing these recommendations and are interested in applying them to their proposal, as I understand it," he said.

Whether legislation will get out of committee this year is unclear.

"If past is prologue, we're tilting at windmills," O'Dell said. "But this is a different world. We are facing a $14 billion deficit. In this kind of environment, people have to consider alternatives -- particularly (when) there's concern about a 10 percent provider cut.".