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treatment in a physician’s office.  Furthermore, providing non-emergency care in emergency rooms reimbursed at Medi-Cal payment rates puts significant strain on hospitals in the state.  

The fragmented and uncoordinated nature of care for Medi-Cal fee-for-service beneficiaries also may increase costs.  With a few exceptions, enrollees are on their own to find providers and forced to manage their own care.  Due to budget restraints, Medi-Cal is not able to provide the basic administrative services to its fee-for-service enrollees that one would receive in a managed care program.  

Change Options

To obtain meaningful reform, the state must look at how to reengineer the Medi-Cal program to provide greater access to care in lower cost settings, improve how care is delivered and how care is managed.   Medi-Cal payment systems need to incentivize providing care at the lowest cost option and reduce the program’s dependency on the use of the emergency room as the first line of treatment.  There are several alternative ways to structure this program, but reforming Medi-Cal rates to put a greater emphasis on primary and preventive care must be an important part of this process.  This is similar to the requirement that county organized health systems review their rate structures and, where appropriate, modify them to provide greater access to overall lower cost care.  

In assessing options, the State must consider the Department’s ability and resources to implement these changes and the length of time required for implementation.  Many of these changes require multi-year implementation periods, and might take much longer than estimated.  The long implementation timeframe reduces the savings available in a five year Section 1115 waiver time period.  

The options range from:


Expand Managed Care. California could further expand Medi-Cal managed care to cover more people who are seniors and/or people with disabilities.  This option poses a number of tradeoffs:


Generating Cost Savings. Expanding managed care has created savings nationally, and studies show that Medi-Cal managed care reduces the number of preventable hospitalizations.21  


California’s Managed Care Track Record.  The Department has a number of expansion efforts under way that have taken more time than initially anticipated, and managed care still is not available in all counties.   Two counties have chosen not to participate, and the rates in a third county weren’t high enough for the plan to be viable.


Opportunity to Drive Quality Improvements.  The Department has an effort under way to better define managed care plan performance standards for

21 California HealthCare Foundation, “Preventing Unnecessary Hospitalizations in Medi-Cal: Comparing Fee-for-Services with Managed Care,” February 2004.  Available at http://www.chcf.org/topics/medi-cal/index.cfm?itemID=21723.

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