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Infrastructure Reforms such as addressing workforce shortages, health information technology, and e-prescribing.

It is important to note that some of these initiatives may generate cost savings while others may be cost neutral.  Most, if not all, require some up-front investment. All are included because of our belief that in one regard or another, they respond to what can be reasonably considered the federal government’s priorities for health reform. Moreover, these ideas are designed to fit seamlessly together in the context of California’s efforts to realign the financial and programmatic incentives in Medi-Cal to promote the delivery of high quality health care in the most efficient delivery system possible.

It is also important to note that although these ideas, particularly around quality, are discussed in the generic Medi-Cal context, it is possible to apply these concepts across systems and populations, including developmental disabilities, behavioral health, and California Children’s Services. As stakeholders discuss and refine these ideas, it will be helpful to California policymakers if some consideration can be given to the advantages and disadvantages of the various approaches, and their specific applicability to the full range of programs.

As the state approaches this waiver, there are several underlying issues in Medi-Cal that could be addressed in a comprehensive waiver.

Realigning Provider Payments.  The State should review its overall rate and payment system.  The current structure makes access to lower cost services more difficult and instead relies upon providing care in higher cost settings.  For example, rate increases are available to hospitals for inpatient services through a negotiated process, but outpatient rates are not negotiated and have historically been frozen or reduced.  These incentives should be reversed.

Integrating Care Across Programs.  The State should review how care is provided based upon categorical funding.  Fragmented funding streams make it very difficult to integrate health care services, mental health, and alcohol and drug treatment.   As discussed later, a large percentage of high cost Medi-Cal members have chronic health conditions and mental health diagnoses and could benefit from better integrated care.  

Identifying New Funding.  The State appears to lack funding to pay for the cost of improving access to care in Medi-Cal or any eligibility expansion.  These changes will cost hundreds of millions in new annual spending.  The State should ensure that the current ban on establishing a hospital and physician fee is removed from the waiver and these sources of non-federal share are considered an option.  Other potential sources of non-federal share include any unmatched state, county or University of California funding.  Ways to partner with the counties, as has occurred in the coverage initiative, may create ways to use these funds to accomplish the goals of the waiver.  

Health Management Associates/Harbage ConsultingPage 5

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