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Gold Coast Health Plan Its Reimbursements to Pharmacies Are Reasonable, but Its Pharmacy Benefits Manager Did Not Always Process Claims Correctly Report Number: 2018-124

Introduction

Background

The Centers for Medicare & Medicaid Services administers the federal Medicaid program that provides medical assistance to certain low-income individuals and families who meet federal and state eligibility requirements. California participates in the federal Medicaid program through its California Medical Assistance Program, known as Medi-Cal, and the Department of Health Care Services (DHCS) is the single state agency responsible for administering Medi-Cal. Medi-Cal provides beneficiaries with a safety net of health care services, including prescription drugs, hospitalization, emergency care, and mental health treatment. As of November 2018, the Medi-Cal program provided services to about 13 million beneficiaries—nearly one-third of Californians. During fiscal year 2018–19, the Governor’s budget allotted DHCS more than $102 billion, of which over $21 billion came from the State’s General Fund.

Medi-Cal Managed Care Models

The State provides Medi-Cal benefits through one of two delivery systems: fee-for-service or managed care. Under fee-for-service, medical providers bill DHCS directly for approved services they provide to Medi-Cal beneficiaries. Under Medi-Cal managed care, DHCS contracts with Medi-Cal managed care health plans (health plans) and pays each a monthly capitation rate (premium)—an amount per person covered—to provide health care to the Medi-Cal beneficiaries who are enrolled in the health plan. Managed care is considered a cost-effective system that emphasizes primary and preventive care. DHCS estimates that more than 80 percent of Medi-Cal beneficiaries receive services under the managed care delivery system, while the remaining beneficiaries receive care under fee-for-service. The State’s significant use of managed care is a result of its focus on shifting beneficiaries out of fee-for-service and into a lower-cost system.

The health plan options available to a beneficiary depend on the county in which the beneficiary resides. Each county participates in one of six Medi-Cal managed care models, which the text box describes: County Organized Health System (COHS), Geographic Managed Care, Two-Plan, Regional, Imperial, and San Benito. Although DHCS has overall responsibility for Medi-Cal, state law identifies counties as the entities responsible for local administration of Medi-Cal. Ventura County participates in Medi-Cal through a COHS Model. Specifically, DHCS contracts with the Gold Coast Health Plan (Gold Coast), which the Ventura County Medi-Cal Managed Care Commission (commission) created.

The Commission and Gold Coast

In 2009 the Ventura County Board of Supervisors (board) created the commission. In 2011 DHCS began contracting with the commission to administer health care benefits to the 200,000 Medi-Cal beneficiaries who live in Ventura County. As the text box indicates, the commission is a public body of 11 members, including representatives from local health care providers. The commission holds regular public meetings at which it discusses issues such as contractual relationships, employee appointments, and grants.

In 2010 the commission created Gold Coast, a public entity, to oversee the Medi-Cal program in Ventura County and to provide health care services to Medi-Cal beneficiaries. Gold Coast provides many services, including primary care and pharmacy services. Gold Coast manages these services through its staff and two administrative contractors. One contractor oversees Gold Coast’s administrative services, which include processing claims received from medical providers and responding to beneficiary concerns. The other contractor is responsible for administering Gold Coast’s pharmacy benefits. Specifically, Gold Coast provides prescription drugs and associated services to its beneficiaries by contracting with a pharmacy benefits manager (PBM).

Pharmacy Benefits Management at Gold Coast

Under the terms of its contract with Gold Coast, the current PBM, OptumRx, Inc. (OptumRx), processes prescription claims on behalf of Gold Coast, which is a standard practice for both commercial and public health plans. OptumRx manages the administrative and logistical services that make the transactions possible when pharmacies fill prescriptions for beneficiaries. For example, OptumRx establishes contractual relationships with pharmacies and pharmacy services administrative organizations (PSAOs) to set reimbursements for specific medications. When a beneficiary attempts to obtain a medication, the pharmacy submits a claim to OptumRx. If OptumRx verifies that the beneficiary is eligible and the medication is covered by Gold Coast, then OptumRx reimburses the pharmacy for the medication and pays a dispensing fee. Twice each month, Gold Coast reimburses OptumRx for the amount it pays the pharmacies. In part, health plans contract with PBMs because administering pharmacy benefits can be complex and resource-intensive.

As Gold Coast’s PBM, OptumRx contracts with a variety of pharmacies and PSAOs across Ventura County. OptumRx oversees all direct relationships with the pharmacies, while Gold Coast has authority for overseeing OptumRx and its compliance with contract requirements. As Figure 1 indicates, OptumRx has established relationships with large chain pharmacies, such as WalMart and CVS, as well as with independent pharmacies that are not a part of such national chains. In Ventura County, the independent pharmacies generally belong to one of four PSAOs, which serve as intermediaries between the member pharmacies and OptumRx. The PSAOs manage contractual relationships and disputes with OptumRx on behalf of their member pharmacies and therefore are responsible for many of the pharmacies’ financial and business interests. In 2018 Gold Coast’s pharmacy network within Ventura County included 52 independent pharmacies, or 33 percent of the total pharmacies, and 104 chain pharmacies.

Figure 1
Gold Coast Provides Pharmacy Services to Beneficiaries Through OptumRx

Source: Contracts between Gold Coast and DHCS and between Gold Coast and OptumRx; interviews with Gold Coast; and the U.S. Government Accountability Office’s report titled Prescription Drugs: The Number, Role, and Ownership of PSAOs, January 2013.

Gold Coast requires its PBM to establish a network of pharmacies that provides prescription services for Medi-Cal beneficiaries in compliance with state and federal law. Specifically, state law requires that health plans must establish a network that includes pharmacies within 10 miles or 30 minutes’ driving distance of all beneficiaries. Although this requirement in state law became effective only in 2018, federal law and Gold Coast’s contract with DHCS required Gold Coast to provide adequate access to these services for much longer. To demonstrate compliance with this standard, Gold Coast submits pharmacy network data to DHCS using information that OptumRx provides.

Governor’s Executive Order Regarding Medi-Cal Pharmacy Services

In January 2019, the Governor issued an executive order regarding the accessibility and affordability of prescription medications under Medi-Cal. This executive order aims to generate substantial annual savings for the State by transitioning Medi-Cal pharmacy services from managed care to a system in which the State is the single payer for all medications that pharmacies dispense to Medi-Cal beneficiaries. The goal of the executive order is to leverage the State’s purchasing power to obtain better prices on prescription medications for Medi-Cal beneficiaries. To this end, the executive order directs that by July 2019, DHCS review state purchasing initiatives and consider options that will increase the State’s bargaining power for the Medi-Cal program. According to DHCS, it completed this review and submitted it to the Governor. Further, the executive order directs the State to implement bulk purchasing of prescription medications. As a result of this order, the State will likely take on the role of PBM for all Medi-Cal health plans in California, including Gold Coast’s program.

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