State Analyst Sees $51-Million Loss From Medi-Cal’s 2-Year HMO Test

A program to force Medi-Cal patients to get care from state-selected health maintenance organizations rather than their own doctors would lose $51 million in its two years of existence, a state report said Tuesday.

The experiment, called Expanded Choice, would affect about 250,000 people in the San Fernando Valley and San Diego whose medical bills are paid by Medi-Cal, the state health program for the poor and handicapped. It is scheduled to start next year.

Expanded Choice would save $646,000 in treatment costs, about 0.01% of current Medi-Cal expenditures, but that amount would be eclipsed by $52 million in start-up costs, said the office of the state legislative analyst. The office is a nonpartisan agency whose mission is to supply lawmakers with objective information on state government and legislation.

The report said the state would lose $50 million in interest payments because of a one-time change in reimbursement to health-care providers. Medi-Cal now reimburses physicians several months after they have submitted their bills. Under Expanded Choice, the state would pay the health maintenance organizations monthly for anticipated services. The state also would spend $2 million to evaluate the experiment and explain the program to the recipients.

Summary From Expert

David Maxwell-Jolly, a Medi-Cal expert in the office, presented its report during a hearing of the Joint Committee on Medi-Cal Oversight at Los Angeles Valley College. His summary triggered a murmur throughout the crowd and a rush for copies of the report. Among the surprised listeners was Assemblyman Burt Margolin (D-Los Angeles), the committee chairman, who told the analyst: “I’m shocked by the size of the figure you cited. It’s a lot of money.”

Later, Margolin said: “The natural question which arises is, ‘Why are we doing this?’ ”

The California Medical Assistance Commission, a state body that seeks ways to hold down medical costs and helped to create Expanded Choice, originally estimated that it would save the state 5% of its current Medi-Cal costs in the Valley and San Diego. This savings would be accomplished by forcing most Medi-Cal beneficiaries to give up their private physicians in what is called the fee-for-service system and to enroll in prepaid health plans.

Recently, state officials have conceded that the savings would not materialize the first year and possibly not the second year. Officials contended, however, that the program would at least cut the growth rate of Medi-Cal costs.

The latest report questions those assertions. “Recent history has shown a faster rate of increase in prepaid health plan costs than in the costs of fee-for-service Medi-Cal beneficiaries,” it said. “Based on this past trend, Expanded Choice would not help to reduce the rate of increase in Medi-Cal costs.”

Comment Put Off

Jim Foley, an official of the Medical Assistance Commission and director of the Expanded Choice program in the Valley, said he could not comment on the report until the state Department of Finance examines the figures.

Don Mulford, the only medical assistance commissioner to hear Maxwell-Jolly speak, also said he could not comment because he had been on the commission only a few months.

Maxwell-Jolly warned that the state’s losses could exceed $51 million if certain Medi-Cal groups are excluded from the experiment. Opponents of Expanded Choice have been urging the state to exempt the elderly, the developmentally disabled and people with multiple handicaps on the ground that health maintenance organizations are not equipped to treat them adequately. Commission officials have said they are considering exempting other groups.

Margolin said Expanded Choice has a “potential for disaster.” The Medical Assistance Commission, he said, should guarantee that the program will offer recipients high-quality medical treatment or scrap the program.