Cost-Cutting Medi-Cal Test Called Threat to the Poor

Times Staff Writer

Six-month-old Warren Rabb, his tiny hands tugging at the stethoscope around the neck of San Diego pediatrician Dr. Joseph Joyner, is about to become the subject of a multimillion dollar medical experiment.

Like 165,000 other San Diego County residents whose health care is paid for by Medi-Cal, Warren early next year will become a member of a health maintenance organization (HMO), the cost-cutting plan called “Expanded Choice” that already has revolutionized health delivery for nearly 17 million Americans.

San Diego County is one of two areas in California--the other is the San Fernando Valley--selected by the state for an experiment of two years or longer in which Medi-Cal hopes to trim 5% from the runaway costs of health care for the poor. In San Diego County alone, where Medi-Cal otherwise would expect to spend more than $160 million next year, annual savings could reach $8 million, state officials say.

In concept, the change is simple. Rather than reimburse doctors, pharmacists, hospitals and other health providers as services are rendered to Medi-Cal patients, the state will contract with HMOs and pay them a single monthly fee for each beneficiary they enroll.

The switch will inspire savings, the state hopes, because doctors, hospitals and other providers who join will have an incentive to eliminate all unnecessary services, instead of providing unneeded care in order to collect additional fees.


But as the April 1 date for implementing the new “Expanded Choice” plan draws closer, Joyner and other physicians, along with others serving Medi-Cal patients and some patients’ groups themselves, are warning of dire consequences. Among them:

- The quality of care to patients will be reduced.

- Doctor-patient relationships will be severed.

- Doctors, pharmacies and other providers will suffer serious financial loss.

- Patients will lose access to care, because they may be assigned to health facilities far from their homes, or simply because of confusion about how to use the new system.

Joyner insists service will decline under the financial strictures of the new program. The only savings, he warned, will come from ignoring medical needs.

“It’s going to limit the type of care you can give children in this area,” Joyner said last week in his Southeast San Diego office. “It’s going to be what you call ‘two-class medicine.’ ”

Added Mickey Rabuka, president of Paradise Valley Hospital in National City: “There will be reduced care. There has to be to survive on 95% of what (the money) was a year ago.”

Earlier this summer, outraged state lawmakers in the San Fernando Valley considered introducing legislation to cancel the valley’s 87,000-person Expanded Choice experiment. With just two weeks left in the legislative session, however, legislative aides now say it is too late to propose such a bill.

The outcry in San Diego has been more subdued--in part, the project’s critics say, because Medi-Cal has done little to alert beneficiaries to the advent of Expanded Choice.

But local health providers, legal aid and welfare rights groups, along with advocates for the disabled, have raised dozens of questions about Expanded Choice in meetings with the California Medical Assistance Commission, the seven-member panel headed by San Diego businessman Richard Silberman charged with setting up the project.

“There’s just too much left to do,” said Rosemary Bishop, an attorney with the Legal Aid Society of San Diego. “We just don’t see how they can do it by April.”

The critics’ nagging doubts, fueled by negative results in similar projects elsewhere in California and the nation, are numerous.

Besides the fear of a reduced quality of health care for the poor, there is concern that patient-doctor relationships will be severed when Medi-Cal recipients are forced to join HMOs. (Those who don’t pick among the plans the state will offer during a three-month selection period will be assigned one.)

Advocacy groups contend, too, that the state is not prepared to explain the HMO system to Medi-Cal recipients. Under the system, they will go for care to the doctor designated by the plan as their primary physician, rather than move from doctor to doctor or receive health services on demand at emergency rooms. That change, expected to confuse many poor patients, has posed serious problems in HMO projects in Arizona, Wisconsin and Michigan, according to studies by legal aid societies.

For doctors and HMOs, meanwhile, Expanded Choice is rife with economic uncertainties.

HMOs with large clienteles in San Diego, including the Kaiser Foundation and Protective Health Providers, were undecided last week about participating in the project, plan officials said. The hesitancy stems, in part, from the state’s proposed reimbursement rate--about $49 per month for most Medi-Cal recipients.

“They are squeezing the rates so significantly that we have concerns whether we can provide the kind of service that needs to be provided at the rates they’re willing to pay,” said Gary Schultz, president of the 30,000-member Protective Health Providers.

Even community pharmacists are anxious, wondering if HMOs will provide drugs in-house, thus eliminating pharmacists’ Medi-Cal business.

“The state’s not too concerned about the disruption of economic circumstances,” complained James Crocker, owner of Crocker Drug in National City. “That applies to pharmacists, hospitals, doctors--whoever provides care.”

For more than a decade, San Diego has been a laboratory for California’s experimentation with prepaid health care for the poor.

The earliest trial runs collapsed amid scandal and lawsuits. More than 13,000 local Medi-Cal recipients joined health plans in the early 1970s, when the administration of then-Gov. Ronald Reagan put forward a prepaid system, hoping to cut Medi-Cal costs by 10%.

Patients complained about poor care, transportation problems and hard-sell tactics. One plan was prosecuted for misleading solicitations. The state canceled plans that failed to pay physicians or refused to serve the chronically ill.

“People joined them without understanding what they’d signed up for,” said Merkel Harris, president of San Diego’s Welfare Rights Organization. “They would go elsewhere thinking their services would be taken care of, and they ended up having to pay for them themselves.”

After the initial debacle, the California Legislature enacted a body of laws to regulate health plans, establishing standards for financial stability, quality-of-care reviews, marketing and the handling of patient grievances.

With better regulation and growing concern about health care costs, other HMOs joined the long-popular Kaiser plan in gaining converts in California. Today, as many as 5 million Californians belong to HMOs, mainly through employers, according to the state Department of Corporations.

In San Diego, about 10,000 Medi-Cal recipients already have voluntarily joined three plans, state officials said. But Expanded Choice, by placing nearly all Medi-Cal recipients in HMOs, will make prepaid health care a bigger business than ever in San Diego’s medical marketplace.

The UC San Diego Medical Center, for instance, is applying to become a licensed HMO so it can participate in Expanded Choice. “It’s something the university eventually would have done to position itself for the remainder of the health-care environment,” said Associate Director Sumiyo Kastelic. “The timing has been dictated by Medi-Cal.”

Other health organizations that state officials expect to apply for Expanded Choice contracts include American Medical International, AV-MED, Family Health Services, the Greater San Diego Health Plan, Grossmont District Hospital, Mercy Hospital, the Palomar Pomerado Hospital District, Ross Loos Healthplan of Southern California, the San Diego Foundation for Medical Care, the San Ysidro Health Center and U.S. Health Plans.

Economic pressures are prompting many of the applications, health officials say: The plans and hospitals, and doctors affiliated with them, cannot afford to be left out of the Medi-Cal system.

“While they do not make a lot of money, a significant portion of their overall income comes from that population,” said Gus Anderson, executive director of the medical foundation, an organization of 2,300 physicians who provide reduced-rate care to health insurers.

“Without that population base, there is no basis for their survival,” Anderson said. “It’s not a matter of choice. It’s a matter of absolute need.”

Doctors with heavy Medi-Cal patient loads are among the harshest detractors of Expanded Choice.

Many health plans intend to pay physicians the way the state pays them, with a monthly fee per patient. That means doctors will assume the risk of losing money if they fail to cut their Medi-Cal patients’ use of health services. They also assume responsibility for finding a way to provide adequate care within the program’s financial constraints.

Dr. Charlie Johnson, an internist who is chief of staff at San Diego Physicians and Surgeons Hospital, says doctors will have no choice but to provide inadequate care for the poor. Johnson said last week that he plans to give up his Medi-Cal patients rather than participate in Expanded Choice.

“Unfortunately, I think what’s going to happen is that no matter what the state determines is required to take care of these patients, the groups will deliver whatever service they can afford without losing money,” Johnson said. “The end result will be that there won’t be enough money to take care of the patients.”

State officials say Expanded Choice is designed to improve Medi-Cal patients’ health care, and that the needed precautions against profit-seeking health plans are in place.

“Our hope is that people will now be in a plan and have a primary care doctor and have better coordination of their health services,” said Michael Murray, executive director of the Medical Assistance Commission. About 15 percent of local Medi-Cal recipients with serious health problems--the mentally ill, severely handicapped children and others under continuous treatment--will not be required to join HMOs, he added.

Quality control reviews by HMOs and input from an advisory board of Medi-Cal recipients will spot under-utilization of services by physicians, officials contend. If nothing else, they note, the threat of malpractice suits will encourage physicians to provide adequate treatment.

Despite the state’s goal of enlisting in Expanded Choice HMOs the bulk of doctors currently serving Medi-Cal recipients, groups working with the poor and medical providers say one of their worst fears is that patients will have to change doctors when the new plan begins.

That anxiety is highest among representatives of the disabled and handicapped.

“There’s frustration mixed with a little anger and fear for some people,” said Nancy Higginson, coordinator of counseling services for the United Cerebral Palsy Assn. of San Diego County.

Added Rabuka, the Paradise Valley president:

“If this were a business and they were advertising it as an ‘Expanded Choice’ program, they could be called in before the Better Business Bureau for misrepresentation. How in the world they get ‘Expanded Choice’ out of a restricted choice is beyond me.”