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4. Quality Improvement Reform Objectives

This section of the paper looks at a variety of changes that could be made in the waiver to address the need for the waiver to be a demonstration and to address quality improvement reform objectives.   These are options that can be considered to be done individually or in various combinations including in combination with the system delivery reform objectives.   

4-A. Improvements to Care and Reductions in Cost: Medi-Cal Beneficiaries

President Obama and his Administration have spoken about the need to control the long term cost growth of the Medicare and Medicaid programs.  Based upon provisions in the American Recovery and Reinvestment Act of 2009 (ARRA), it is clear that the Administration is willing to invest now in order to achieve long term savings in Medicaid.  While California has done much to reduce the cost of Medicaid and should be recognized for this effort, the waiver will need to focus on how to reduce long term cost growth in Medicaid.  

Current Status of California

Like all Medicaid programs, an individual Medi-Cal beneficiary’s expenditures differ significantly based on their health status and care utilization patterns.  Costs are concentrated among those with lower health status and/or higher care utilization patterns.   The average cost for Medi-Cal beneficiaries with disabilities in 2006 was more than $15,000, compared to between $2,000 to under $3,000 for non-disabled children and adults.16  The top ten percent of high cost Medi-Cal beneficiaries are responsible for generating 76 percent of total program costs.17

Beneficiaries with higher health care needs tend to be in fee-for-service Medi-Cal as they are more likely to be the aged, blind and disabled populations for whom managed care is not mandatory.18  The fee-for-service system tends to encourage utilization patterns that drive up costs.  The Medi-Cal rate structure, with low physician rates limiting access, often results in beneficiaries finding care in settings more expensive than the physician’s office, such as emergency rooms and federally qualified health centers.  Medi-Cal beneficiaries are more likely to use emergency rooms than even the uninsured.19 Higher emergency room use has significant consequences for Medicaid costs.  Frequent users of the emergency room, with five or more annual emergency room visits a year, cost more than three times as much on an annual basis as the average enrollee with a disability.20  State data show that the cost of treatment in the emergency room is up to two-and-a-half times as expensive to the state as

16 California HealthCare Foundation, “Medi-Cal Facts and Figures: A Look at California’s Medicaid Program,” May 2007.  Available at http://www.chcf.org/topics/medi-cal/index.cfm?itemID=21659&subtopic=CL367&subsection=medical101.

17 Ibid.

18 Ibid.

19 McConville, Shannon and Helen Lee, “Emergency Department Care in California: Who Uses It and Why?”, Public Policy Institute of California and California Program on Access to Care, April 2009.  Available at  http://www.ucop.edu/cpac/documents/cpacfindings_mcconville_lee.pdf.

20 Toby Douglas, Deputy Director, California Department of Health Care Services, “Managing the Care and Costs of High Cost Beneficiaries in Medi-Cal FFS,” December 15, 2008 CHCF Conference presentation.

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