Introduction

Background

Under the oversight of the Centers for Medicare & Medicaid Services (CMS), the federal Medicaid program authorizes grants to states for medical assistance to low‑income individuals and families who meet federal and state eligibility requirements. In 1966 California began participating in the federal Medicaid program through its California Medical Assistance Program (Medi‑Cal). The Department of Health Care Services (DHCS) is the designated state agency responsible for administering Medi‑Cal. In December 2013, before the implementation of the Affordable Care Act in 2014, the Medi‑Cal program had 8.6 million enrolled beneficiaries. As of November 2018, the Medi‑Cal program provided services to 13 million enrolled beneficiaries—nearly one‑third of California’s residents. During fiscal year 2018–19, the Governor’s budget funded DHCS with more than $102 billion, of which more than $21 billion came from the State’s General Fund.

Since the 1970s, the State has gradually transitioned Medi‑Cal beneficiaries by county from fee‑for‑service delivery systems to managed care systems. When the State first established the Medi‑Cal program, it relied solely on the fee‑for‑service system, under which beneficiaries choose the health care professionals from whom they receive care, and those professionals then bill DHCS directly for the approved services that they provide to the beneficiaries. Before 2012 DHCS transitioned 30 counties to managed care systems because of its belief that members enrolled in managed care can receive care coordination and case management services that are not available through the fee‑for‑service system. In 2012 state law required DHCS to transition the remaining 28 fee‑for‑service Medi‑Cal counties, which DHCS refers to as the rural expansion counties because many are largely rural, to managed care. ¹ 

The timeline for implementing the 2013 transition of the rural expansion counties to managed care was prompted in part by the State’s decision to end its Healthy Families program, a program that provided and promoted access to affordable health care services for families. The State wanted to continue providing managed care services to the individuals who had participated in that program.

Other states have also provided services to beneficiaries through managed care in a similar manner. Specifically, the four states that we reviewed—Arizona, Florida, Washington, and Oregon—all have enrolled the majority of their Medicaid beneficiaries in managed care and have continuously worked on expanding managed care over the last decade.

Under managed care, DHCS contracts with managed care health plans and pays monthly capitation payments—a specified amount per person covered—to each plan to administer beneficiaries’ services and pay health care professionals. In turn, the health plans establish provider networks by contracting with medical professionals and groups, known as providers, who supply health care to the beneficiaries. Establishing such a network allows health plans to monitor the quality of the providers that serve their beneficiaries, such as through conducting site reviews and monitoring providers’ data. The health plans’ provider networks include providers located within the counties where the plans’ beneficiaries live; in nearby counties; and—at times—in adjacent states, such as Oregon and Nevada. As we discuss in more detail below, some of the State’s managed care health plans are privately owned while counties oversee the others.

DHCS Established the Regional Model in 2013

As part of the State’s transition process from fee‑for‑service to managed care, DHCS has approved six models of managed care that it uses to contract with health plans to deliver services. Table 1 summarizes the models and the types of health plans that operate within each model, and Figure 1 identifies each county’s model. When transitioning counties to managed care, DHCS has allowed them to pursue various options, including establishing their own health plans, joining existing health plans that other counties had established, or contracting with a commercial health plan. The county‑operated health plan options include a county organized health system (COHS), which provides health care through a single nonprofit health plan under county oversight, and a local initiative, which is a health plan with county oversight that provides services to beneficiaries in Two‑Plan Model counties. For counties that did not join or create county‑overseen health plans—either because they chose not to or were unsuccessful in doing so—DHCS contracted with commercial health plans. According to DHCS, this approach has worked well because it ensured that DHCS could establish managed care regardless of a county’s willingness to create or join a COHS or local initiative but also allowed counties to do so if they had the ability and desire. The four other states we previously mentioned also contract with both commercial and nonprofit health plans to provide services to beneficiaries.

Table 1
DHCS Has Six Models of Managed Care That Involve Different Types of Health Plans

Source: Analysis of data from DHCS’ Medi-Cal managed care website, a DHCS presentation on Medi-Cal managed care, DHCS reports, Calviva Health’s website, and an Imperial County Board of Supervisors resolution.

Figure 1
All 58 of California’s Counties Now Receive Medi-Cal Through Managed Care Models

DHCS transitioned the rural expansion counties from fee‑for‑service to managed care in 2013. Figure 1 shows that of the 28 rural expansion counties, eight joined a COHS administered by Partnership Health Plan of California (Partnership), and DHCS worked with two to form their own unique models. Because none of the remaining 18 counties joined or created county‑overseen health plans, DHCS grouped them to create the Regional Model, which is the focus of this audit. In 2013 DHCS contracted with two commercial health plans, Anthem Blue Cross Partnership Plan (Anthem) and California Health & Wellness (Health & Wellness), to serve the Regional Model counties. When selecting health plans, DHCS intended to contract with additional health plans that met its selection criteria, but Anthem and Health & Wellness were the only plans that qualified. DHCS initially contracted with these health plans for five years, from 2013 to 2018, but it has since extended both contracts. We discuss DHCS’ contracts with the two plans in more detail in Chapter 2.

Two Agencies Share Responsibility for Overseeing Health Plans That Participate in Medi‑Cal

DHCS and the Department of Managed Health Care (Managed Health Care) are responsible for overseeing most health plans that contract with providers to deliver Medi‑Cal care to beneficiaries. As part of its role to administer Medi‑Cal, DHCS manages the health plans’ contracts and oversees their compliance with the terms of those contracts. In its role in protecting health care rights of consumers, Managed Health Care licenses health plans that are subject to the Knox‑Keene Act—a state law that regulates most commercial health plans—and monitors their service delivery. Both departments evaluate whether the health plans are performing adequately by auditing their service delivery processes in areas such as access to care and quality of care.

DHCS and Managed Health Care determine whether the health plans have provided adequate access to care and quality of care by assessing whether the plans meet the requirements established by law and the health plans’ contracts. For access to care, these requirements address providers’ availability to schedule appointments for beneficiaries within specific numbers of days, the distance beneficiaries must travel to obtain specified care, and the travel time needed for beneficiaries to arrive at the providers’ locations. For quality of care, the requirements include providers’ delivery of specific services, such as preventive services and some post‑appointment follow‑up services; the outcomes of some providers’ service delivery; and the health plans’ performance of certain administrative activities, such as authorizing service requests and addressing grievance claims. For the purposes of this audit, we focused our evaluation of the Regional Model health plans’ performance on the specific indicators that the text box lists.

State Law Establishes Limits on the Distances Health Plans Can Require Beneficiaries to Travel to Receive Care

Effective January 2018, state law established access requirements, which are predefined limitations on the times and distances Medi‑Cal plans may require their beneficiaries to travel to obtain care. The Legislature passed the law in response to regulations that CMS issued in 2016 requiring states contracting with managed care plans to develop and enforce by 2018 time and distance standards for primary, specialty, hospital, and pharmacy services. ² 

State law requires health plans to evaluate whether they can meet travel distance standards for 36 different types of providers as well as pharmacies, hospitals, and mental health outpatient services for each area they serve.

As the State’s administrator of Medi‑Cal, DHCS assumed responsibility for developing these requirements, which it did in 2016 and 2017, also establishing an evaluation process to ensure that those standards were reasonable. As part of that process, DHCS considered industry standards and solicited feedback from health plans and other stakeholders. Additionally, it analyzed data on the quantity of providers, the location of providers, and beneficiaries’ use of services to identify the extent of beneficiaries’ needs and the availability of providers to administer care.

When developing the access requirements, DHCS also considered the unique challenges of providing access in rural areas, such as the geographic dispersion of providers and beneficiaries; as a result, it established more lenient access standards for health plans operating in those locations. For primary care services, such as cancer screenings and vaccinations, DHCS established a universal requirement for all counties that aligns with a preexisting requirement in its contracts with managed care plans: within 10 miles or 30 minutes travel time from a beneficiary’s residence to the provider’s location. For specialty care, such as psychiatry and dermatology, DHCS created requirements based on four defined categories of counties’ population densities: dense, medium, small, or rural. In dense counties like Sacramento and San Francisco, health plans must ensure beneficiaries can access specialty care within 15 miles or 30 minutes. In rural counties, such as Alpine or Inyo, health plans must ensure that their beneficiaries are able to access care within 60 miles or 90 minutes.

DHCS uses an annual network certification process to determine whether health plans are complying with the access requirements, as state law requires. It verifies the health plans’ compliance in each zip code they serve by requiring them to indicate the locations of all of their providers. Using these data, DHCS calculates the time and distance required to travel to the plans’ nearest providers from each zip code. In principle, for a health plan to pass the annual network certification, it would need to contract with a sufficient number of providers to ensure that beneficiaries in every zip code it serves can access care without having to travel farther than the distances specified by the access requirements.

State law also authorizes DHCS to exempt health plans from meeting the access requirements and to establish alternative requirements for them. Specifically, DHCS may allow alternative access standards upon the request of a health plan if the plan has exhausted all other reasonable options to secure local providers that meet the applicable requirement. When DHCS allows alternative access standards, it establishes the health plan’s alternative standard as the distance between the location in question and the health plan’s closest available provider.

DHCS Requires Health Plans to Meet Specific Performance Levels

Federal regulations also require the State to annually measure and report the quality of care that Medi‑Cal managed care health plans provide using a set of standardized performance measures. To comply with this requirement, DHCS uses a selection of performance measures primarily from the Healthcare Effectiveness Data and Information Set (HEDIS), which the National Committee for Quality Assurance developed. HEDIS is a nationally accepted set of measures for assessing health plans’ performance, and DHCS uses HEDIS to evaluate health plans’ delivery of preventive services, provision of care for chronic conditions, and appropriate treatment and utilization of services. For example, DHCS evaluates plans against HEDIS measures such as the percentage of eligible beneficiaries who receive breast cancer screenings and the percentage of beneficiaries with persistent asthma who are prescribed appropriate medication.

DHCS’ contracts with health plans require the plans to score at or above minimum performance levels for a selection of HEDIS measures. DHCS establishes these minimum performance levels based on the national performance of the Medicaid program. Specifically, DHCS expects plans to perform in the top 75 percent of Medicaid plans nationally. ³ 

DHCS plans to modify its performance measurement process in 2020. DHCS will expect health plans to perform in the top 50 percent of Medicaid plans nationally to meet minimum performance levels, and it will select performance measures from lists published by CMS.

Health plans report their performance for each of their reporting units, which correspond to counties or groups of counties that the plans serve. For example, the Regional Model has two reporting units, which together represent the model’s 18 counties. The number of measures for which DHCS holds plans accountable may vary from year to year because it periodically adds or removes HEDIS measures to align with its areas of focus, such as maternal and child health, for quality improvement. When DHCS requires health plans to report on newly added measures, it does not require the health plans to meet the minimum performance levels until the second year in which those measures are in place.

Counties Are Important Stakeholders in the Medi‑Cal System

County health agencies are key to Medi‑Cal because they may participate as advocates for beneficiaries, as providers who serve beneficiaries, and as administrators of health plans. In addition, state law requires county health agencies to initially determine which applicants are eligible for Medi‑Cal and to assist the applicants in the application process as needed. As advocates, county health agencies may assist beneficiaries who have questions or are experiencing difficulty receiving services. For example, some counties help beneficiaries schedule appointments with providers and arrange transportation for them to attend appointments. Additionally, counties serve as primary providers for some beneficiaries in rural areas of the State through county‑operated clinics. Finally, several counties are involved in administering health plans through a COHS or through a local initiative in Two‑Plan Model counties.

As a result of the many functions county health agencies perform in the Medi‑Cal system, they often have specific expertise about the local conditions within their communities and may have experience working with local providers. Consequently, they are well‑positioned to negotiate and collaborate with health plans and with DHCS to improve the level of care beneficiaries receive.

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