Appendix A

SCOPE AND METHODOLOGY

The Joint Legislative Audit Committee (Audit Committee) directed the California State Auditor to examine the status of children in Medi-Cal focusing on DHCS' efforts to ensure access and usage of preventive health care services for Medi-Cal eligible children. Table A below lists the objectives that the Audit Committee approved and the methods we used to address them.

Table A
Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE		METHOD
1	Review and evaluate the laws, rules, and regulations significant to the audit objectives.	Identified and reviewed relevant federal and state laws, rules, and regulations related to timely access to care and utilization of preventive services for children.
2	Determine what effort DHCS has made to do the following:
	a. Ensure that eligible children are receiving preventive health care services.	Interviewed key staff at DHCS. Evaluated the efforts and processes DHCS uses to ensure eligible children receive preventive health care services. Analyzed DHCS' data to evaluate the use of preventive care by children statewide and by age, language, ethnicity, health plan, and county. Our analysis included child Medi-Cal beneficiaries with full-scope benefits that were eligible for 11 or more months at a given age. For infants, our analysis included beneficiaries that were eligible for eight or more months prior to their first birthday. We calculated utilization rates using the Bright Futures recommended schedule of care, with the exception of infants. According to DHCS, infants may be tracked under their mother for three months. Therefore, we could only reasonably track the data for up to three of the seven infant services recommended by the Bright Futures schedule. As such, we considered infants that received three or more services prior to their first birthday to have received the recommended number of services. Reviewed external review reports and evaluated DHCS’ utilization of those reports to monitor and improve accessibility of preventive health care services for eligible children.
	b. Monitor and enforce standards for timely access, specifically for pediatric preventive care appointments.	Interviewed key staff at DHCS. Used plan and provider data to determine the extent of access and utilization of preventive services for children in California, including by region. Determined whether efforts by DHCS to address timely access deficiencies identified by external review reports were sufficient and effective.
3	Determine whether DHCS is fully compliant with all federal Medicaid EPSDT policies and reporting requirements related to pediatric preventive care access and utilization.	Identified and reviewed federal Medicaid laws and regulations related to EPSDT services. Obtained and reviewed CMS policy manuals and guidance for states on EPSDT services. Interviewed key staff at DHCS and obtained DHCS work products related to EPSDT services. Interviewed key staff at CMS. Evaluated DHCS’ work products, policies, and procedures to determine whether they meet all federal requirements and CMS guidance.
4	Evaluate Medi-Cal contract language and departmental guidance to ensure that they make clear the following:
	a. The requirements for timely access to care and delivery of preventive services for children.	Determined whether DHCS' contracting language and departmental guidance complied with, and made clear, all relevant criteria related to timely access to care and delivery of preventive services for children.
	b. The oversight and monitoring activities performed by DHCS.	Evaluated all Medi-Cal contract language and departmental guidance to ensure it addressed and made clear all relevant oversight and monitoring activities of timely access to care and delivery of preventive services for Medi-Cal children. Reviewed DHCS’ most recent annual audits of health plans to ensure its audit procedures related to utilization management, access, and availability of care addressed all oversight requirements specified in DHCS’ departmental guidance, contract language, and applicable law. Evaluated whether DHCS’ most recent audits of fee-for-service providers were adequate to ensure timely access to care and delivery of preventive services for Medi-Cal children. Evaluated whether DHCS’ oversight and guidance practices were adequate to ensure timely access to care and delivery of preventive services for Medi-Cal children. Determined whether DHCS ensured that plans address audit findings.
5	Identify and evaluate incentive or quality improvement programs DHCS operates or has plans to implement to address deficiencies in pediatric care access and utilization.	Interviewed key staff at DHCS. Examined annual quality strategy reports and other relevant documents to identify incentives or quality improvement programs DHCS currently operates, and assessed their impacts on deficiencies in pediatric preventive care access and utilization. Examined documents to assess the impacts of DHCS’ financial sanctions on pediatric care access and utilization. Evaluated the impact of DHCS’ annual medical audit corrective action plans on pediatric care access and utilization. Determined the amount of funds that are currently dedicated to quality improvement, and determined whether financial incentives have enhanced quality.
6	Identify and evaluate DHCS' policies and procedures to ensure that children receive timely care in the language of both the child and the family.	Determined whether DHCS’ policies and procedures related to language services comply with relevant criteria. Identified and evaluated DHCS’ methodology for identifying the prevalent non-English languages spoken by enrollees and potential enrollees throughout the State and in each health plan service area. Evaluated efforts by DHCS to notify enrollees, potential enrollees, and their families about available language services. Identified and evaluated DHCS’ methods for monitoring and enforcing the provision of language services in health plan service areas. Determined the extent to which DHCS and its health plans have made language and interpretation materials available for Medi-Cal enrollees, potential enrollees, and their families. Analyzed DHCS’ data to determine the preventive care utilization rates of children by language.
7	To the extent possible, identify and evaluate DHCS' policies and procedures for monitoring and mitigating disparities in preventive care access and utilization for children of differing racial and ethnic backgrounds.	Determined whether DHCS’ policies and procedures related to monitoring and mitigating disparities comply with relevant criteria and found no significant exceptions. Analyzed DHCS’ data to determine the preventive care utilization rates of children by ethnicity. Identified and evaluated DHCS’ processes for monitoring and mitigating disparities in preventive care access and utilization for children of differing racial and ethnic backgrounds.
8	Review DHCS' plan to prepare for, implement, and monitor upcoming changes to Medi-Cal rules related to pediatric care.	Identified and reviewed recent state and federal laws and regulations effecting changes to Medi-Cal rules broadly related to pediatric care, including changes to Medi-Cal managed care. Obtained and reviewed CMS policy manuals and guidance for states on recent and upcoming changes to Medicaid. Interviewed key staff at DHCS and obtained DHCS work products related to recent and upcoming changes to Medi-Cal broadly related to pediatric care. Interviewed key staff at CMS. Reviewed and evaluated DHCS’ work products, policies, procedures, and plans to implement and monitor recent and upcoming changes to Medi-Cal.
9	Review best practices for DHCS to consider to help ensure timely access to pediatric appointments and required children's preventive health services.	Interviewed key staff at DHCS. Evaluated well-performing Medi-Cal plans and identified best practices, including financial incentive programs that can be applicable to all plans. Identified best practices at other states that ranked higher in utilization rates for children screening services, including financial incentive programs. Reviewed online publications and other relevant documents to identify best practices for DHCS to consider to help ensure timely access and provision of care, including the Medicaid Health Plans of America: Centers for Best Practices.
10	Review and assess any other issues that are significant to the audit.	Reviewed the state budget and DHCS' Medi-Cal budget estimates to determine the State's Medi-Cal expenditures for various categories of service and health care delivery systems.

Sources: Analysis of the Audit Committee's audit request number 2018-111, and information and documentation identified in the table column titled Method.

Assessment of Data Reliability

In performing this audit, we relied on electronic data obtained from DHCS’ Management Information System/Decision Support System. The GAO, whose standards we are statutorily required to follow, requires us to assess the sufficiency and appropriateness of the computer-processed information that we use to support our findings, conclusions, or recommendations. To evaluate these data, we performed electronic testing of the data, reviewed existing information about the data, and interviewed agency officials knowledgeable about the data.

We also reviewed a report that revealed concerns with both the completeness and the accuracy of DHCS’ medical encounter data from 2012. This report issued several recommendations to DHCS in an effort to improve data quality and DHCS took some steps to address these recommendations. Further, the draft EQRO report finalized in January 2019 found that DHCS’ 2016 data were more complete and accurate than data from 2012, but it also found gaps in the quality of the data. However, we are unable to quantify the effect these issues had on the data we analyzed because source documentation was located at individual medical providers throughout the State, making testing of the data cost-prohibitive. As a result, we found the data to be of undetermined reliability for the purpose of determining preventive care utilization rates of Medi-Cal beneficiaries under the age of 21 during fiscal years 2013–14 through 2017–18. Although this determination may affect the precision of the numbers we present, there is sufficient evidence in total to support our findings, conclusions, and recommendations.

Appendix B

DHCS WILL NEED TO CONTINUE TO PREPARE TO IMPLEMENT RECENT AND UPCOMING CHANGES TO MEDI-CAL RULES RELATED TO PEDIATRIC CARE

Some of the most significant recent changes to Medi-Cal rules related to pediatric care stem from CMS’ 2016 Managed Care Final Rule (final rule). The final rule changed many federal regulations related to Medicaid managed care. For example, the final rule creates a new requirement that the State and plans have a transition-of-care policy to ensure that beneficiaries can continue to access their health care services during their transition from fee-for-service to managed care or during a transition from one plan to another. DHCS updated California’s transition-of-care policy, which includes additional provisions set forth in state law, to meet the requirements of the final rule and informed plans of these updates in an all-plan letter that DHCS published in July 2018.

One portion of the final rule that may have significant financial repercussions for Medi-Cal plans is the requirement that plans annually report to DHCS the percentage of their health care premium revenue that they spend paying claims, implementing quality improvement activities, and other specified expenditures. This portion is known as the medical loss ratio (MLR) and is governed by both state and federal law, which establishes new MLR standards that plans must meet starting in 2019. Specifically, plans must achieve a minimum MLR of at least 85 percent by allocating at least 85 percent of their adjusted premium revenues, as defined by federal law, to paying claims and other specific expenditures related to improving health care quality and fraud prevention. Further, if plans are unable to meet the new MLR standards by 2023, a new state law passed in response to federal regulations will require the plans to remit funds to DHCS, which will refund to CMS the federal portion of the affected Medicaid payments and transfer any remaining funds into an existing physician loan repayment program. As it begins to implement the new MLR requirements in 2019 and prepare for the remittance requirements that go into effect in 2023, DHCS will need to continue to work with plans to ensure that California maximizes the amount of federal funding available for Medi-Cal.

Appendix C

DHCS HAS STRUGGLED TO RAISE THE MEDI-CAL DENTAL UTILIZATION RATE AND IT CONTINUES TO RISK MAKING IMPROPER PAYMENTS

The utilization rate for Medi-Cal Dental remained largely flat from 2013 through 2016, and although DHCS implemented most of the recommendations from our 2014 report, it has not updated its beneficiary eligibility system with sufficient death information to prevent multiple improper payments. In December 2014, the State Auditor issued a report titled California Department of Health Care Services: Weaknesses in Its Medi-Cal Dental Program Limit Children’s Access to Dental Care, Report 2013-125, and made 24 recommendations. These recommendations are related to increasing the utilization rate and provider participation for services available to children accessing the Medi-Cal Dental program, better monitoring DHCS’ contract with its fiscal intermediary, and improving its data management to reduce improper payments. The term utilization rate refers to the percentage of Medi-Cal eligible children—persons aged zero to 20 years—who receive at least one dental service in a federal fiscal year. We focused our follow-up work on DHCS’ implementation of those recommendations most likely to result in an increase in the utilization rate or in preventing improper payments.

DHCS Has Begun Changing Its Medi-Cal Dental Program, but It Has Struggled to Increase Its Utilization Rate

Of the 19 recommendations in our December 2014 report related to DHCS’ utilization rate and its contract with its fiscal intermediary, DHCS has implemented or resolved the underlying issues for 15 of them. Table C.1 summarizes the 19 recommendations, the issues they relate to, and some of the key actions DHCS took to implement the recommendations. Nevertheless, according to data from CMS, California’s utilization rate for children’s dental services stagnated at 44 percent in federal fiscal years 2013 through 2016, and in federal fiscal year 2016 California ranked among the 10 states with the worst utilization rate nationwide.¹¹ In federal fiscal year 2016, 3.4 million children who participated in Medi-Cal did not receive any dental services, an increase of 500,000 children from 2013. DHCS is tasked with increasing the utilization rate, and in September 2016 the Legislature passed a bill setting the goal for the utilization rate at 60 percent or higher. DHCS set a preliminary timeline to reach that goal in calendar year 2024. Consequently, DHCS must show a gain in the utilization rate of 16 percentage points from its 2016 rate to meet its statutory goal.

Table C.1
DHCS Implemented Most of Our Recommendations Aimed at Increasing Its Utilization Rate and Strengthening Contract Management
CATEGORY	STATUS OF RECOMMENDATIONS	NUMBER OF RECOMMENDATIONS	ACTION
Beneficiary Utilization and Provider Participation	Fully Implemented	8	DHCS developed a statewide provider-to-beneficiary ratio, established guidelines to identify underperforming counties, developed processes to mitigate access issues in underperforming counties, removed inactive providers from the provider count, simplified the provider enrollment form, and published an annual reimbursement rate review that compares California to other states, among other actions.
	Not Fully Implemented	3	DHCS has not performed a trend analysis nor does it document steps to combat declining trends in its delivery system. DHCS did not document its implementation of supplemental payments for certain providers.
	Will Not Implement	1	DHCS will not include the provider-to-beneficiary ratio statewide as part of its reporting to the Legislature because it is not required to do so in law.
Strengthening Contract Management	Fully Implemented	7	DHCS entered into a new service provider contract that includes specific benchmarks, provided contract beneficiary data for outreach purposes, and required the contractor to submit outreach plans, among other actions.
	Total	19

Source: Review of documentation provided by DHCS.

The overall number of children in the Medi-Cal Dental program has increased and DHCS points to other reasons for its low utilization rate. Between federal fiscal years 2013 and 2016, the number of eligible children increased by 900,000. Because DHCS’ utilization rate has essentially remained unchanged during this time, the data indicate that it was able to absorb the enrollment growth but not increase the percentage of enrolled children it serves. According to DHCS, several factors contribute to the low utilization rate, including low provider participation, poor access to services in less populated areas of the State, low reimbursement rates for providers, a lack of education among enrollees of their benefits, and beneficiaries not prioritizing their oral health. Data show that seven counties did not have any Medi-Cal dental providers and six other counties had only one provider in calendar year 2016. In terms of reimbursement rates, Medi-Cal Dental’s fee-for-service rate was among the lowest in states using a fee-for-service model as of calendar year 2016. The American Dental Association reported that California reimbursed 38.7 percent of what dentists would have received from a private insurer whereas other states’ Medicaid reimbursement varied from 36.4 percent to 98.4 percent. When comparing California’s reimbursement rate against states with managed care programs, California still ranked near the bottom with reimbursement rates for other states ranging between 37.5 percent and 107.1 percent.

DHCS has entered into a contract it expects will improve its Medi-Cal dental utilization rate. Specifically, in its contract with an administrative services organization (ASO), the ASO must create a plan for outreach to beneficiaries, submit annual updates, and conduct monthly provider enrollment outreach workshops and weekly provider enrollment assistance events. The ASO must also meet benchmarks for increasing the utilization rate by 10 percentage points over three years. The transition to the new contract occurred in early 2018, and it is too soon for DHCS to know the efficacy of the changes it has made.

DHCS has also taken other steps to improve its dental utilization rate. In December 2015, CMS granted DHCS a five-year Medi-Cal waiver to implement the Dental Transformation Initiative (DTI), which included the goal of improving dental health for Medi-Cal eligible children by increasing usage of preventive dental services. The DTI funds four programs, termed domains. Domain 1 provides incentive payments for providers who meet or exceed preventive service benchmarks, Domain 2 incentivizes caries treatment plans aimed at preventing cavities, Domain 3 rewards providers for maintaining continuity of care, and Domain 4 supports the goals of domains 1 through 3 through pilot programs with broad-based provider and community support. DHCS has selected 15 projects initially for the DTI. The Medi-Cal waiver and its associated funding expire at the end of 2020.

DHCS was able to also provide supplemental payments to providers for fiscal year 2017–18 because of Proposition 56, which California voters approved in November 2016 to increase the excise tax rate on cigarettes and tobacco products. DHCS is allocated a portion of these funds for health care expenditures as a part of the annual state budget process. The Legislature authorized DHCS to extend the supplemental payments through June 2019. For fiscal year 2017–18 only, the Legislature allocated $140 million in Proposition 56 funds to reimburse dental providers for services.

Failure to Fully Implement Our Recommendations Could Lead to Continuing Improper Payments

In our December 2014 report, we made five data-related recommendations. DHCS has fully implemented two of them, as shown in Table C.2. DHCS has partially implemented the remaining three, including two recommendations we made to address reimbursements to providers for services purportedly rendered after a beneficiary’s date of death. To address these questionable payments, we recommended that DHCS recover any funds it paid to providers inappropriately and obtain and use the Social Security Death Master File as a data source for updating its beneficiary eligibility system.

Table C.2
DHCS Performed Some Actions to Address Our Recommendations to Improve Data Management
CATEGORY	STATUS OF RECOMMENDATIONS	NUMBER OF RECOMMENDATIONS	ACTION
Improve Data Management	Fully Implemented	2	DHCS corrected erroneous data in its data warehouse and fixed issues with transferring data from its mainframe to its data warehouse, among other actions.
Improve Data Management	Not Fully Implemented	3	DHCS has yet to update its monthly beneficiary eligibility system with accurate death information to ensure that payments are made only to eligible beneficiaries.
	Total	5

Source: Review of documentation provided by DHCS.

Since 2014 DHCS has taken some action but needs to do more to reduce its risk of making improper payments. In 2016 DHCS began identifying claims made for services purportedly rendered after a beneficiary’s date of death and has since recovered $58,000 in improper payments. However, DHCS has yet to access and use the Social Security Death Master File for date-of-death information to identify these claims; its current process relies on sources with incomplete death data. DHCS submitted an application in July 2018 requesting access to the Social Security Death Master File and the Social Security Administration is currently reviewing it. Until DHCS has complete death information in its beneficiary eligibility system, it risks making improper payments to providers by screening claims using incomplete information.

Footnote

¹¹ Data from the Centers for Medicare and Medicaid Services. Go back to text