Medi-Cal’s HMO Test --a Death by Politics

Times Staff Writer

If the state’s experimental Medi-Cal program, called Expanded Choice, were to be given a proper burial, the date of death on the tombstone would read June 8, 1986.

The proposed health delivery plan officially died that Sunday afternoon after six legislators, who had been bombarded with hundreds of telegrams, letters and phone calls from opponents, voted to kill the project during a budget conference committee meeting.

The plug was pulled about a year after the state’s California Medical Assistance Commission proudly unveiled Expanded Choice, which would have drastically altered the way 250,000 Medi-Cal recipients in the San Fernando Valley and San Diego County receive their health care. At that time, John Silberman, then the commission’s chairman, boasted that the proposed Medi-Cal system would become a “model for the nation.”

Expanded Choice would have required most Medi-Cal recipients to receive their medical care from health maintenance organizations.


In January, the Valley’s experiment was postponed until at least 1987 after its creators decided to wait and see whether the San Diego prototype would work. But the San Diego experiment never got off the ground.

Prospects Seem Bleak

While the state remains committed to seeking ways to lower Medi-Cal costs, the prospects of a comeback for the controversial pilot project seem bleak.

“Once programs like this are killed, they can’t come back quickly,” lamented commissioner Silberman, who is also a San Diego businessman.


The participating health plans, which lost millions of dollars in start-up capital, are angry and incredulous regarding the state’s future commitment.

“There is profound disillusionment that the state would lead us down the path and then abandon us,” said Norman Greene, spokesman for Mercy Hospital and Medical Center in San Diego, which formed a health plan.

“I would find it very hard to believe that all 10 (San Diego) plans that worked so hard to meet the state’s rigid requirements . . . would be willing to do it again without ironclad assurances and funds to pay for the incurred expenses,” Greene added.

Assemblyman Burt Margolin (D-Los Angeles), who heads the Joint Committee on Medi-Cal Oversight, has promised that any attempt to revive Expanded Choice in any form will be rigorously scrutinized by the Legislature.


The Legislature gave the state authority to devise an experiment like Expanded Choice in 1982 when lawmakers, facing a fiscal crisis, were eager to find a cheaper way to provide health care to the poor, elderly and disabled. When officials with the medical assistance commission and the Department of Health Services concluded that they had devised a plan to cut costs by 5% and provide better physician access to patients, the most enthusiastic cheerleaders were Gov. George Deukmejian and David B. Swope, then health and welfare secretary.

So what happened?

In the final analysis, the Valley and San Diego experiments failed for dramatically different reasons. One was the victim of politics; the other failed because of a lack of cooperation in the medical community.

Valley Lacked Providers


“The biggest problem in the Valley was that we didn’t have all the providers we needed,” said John Rodriquez, the health services department’s deputy director of medical care services, who is in charge of the state’s Medi-Cal programs. “A lot of people we needed to make this work wouldn’t join.”

The 950 Valley physicians who now treat Medi-Cal beneficiaries would have had to subcontract with a participating HMO if they wanted to continue seeing their patients. Many physicians balked at this.

In addition, most of the established HMOs operating in the Valley chose not to get involved with the pilot project. Of the well-known HMOs, only Kaiser Foundation Health Plan agreed to participate, but it planned to accept only 3,000 of the 87,000 Medi-Cal patients in the Valley.

The prospect of starting the program with fledgling health plans, many without track records, frightened community activists, who orchestrated a massive and effective protest effort against the pilot project.


State Officials Shocked

State officials were shocked by the savvy grass-roots opposition they encountered in the Valley, which never materialized to the same degree in San Diego. Activists representing the developmentally disabled, the deaf, the elderly, the speech impaired, the brain damaged and others formed a coalition to kill the experiment. At public hearings, the coalition made sure that there were always plenty of Medi-Cal recipients, including some in wheelchairs and on crutches, present to testify.

Democratic and Republican lawmakers in the Valley, initially caught unaware by the experiment, responded to the outcry and eventually united last year to oppose Expanded Choice.

After the Valley experiment was postponed, Valley legislators took steps to make sure the state would never implement Expanded Choice.


Assemblyman Richard Katz (D-Sepulveda) and state Sen. Alan Robbins (D-Van Nuys) got language inserted in the governor’s 1986-1987 budget that would have prevented the medical assistance commission from using any of its funds to start the program in the Valley. And Assemblyman Tom Bane (D-Tarzana) introduced a bill that would have prevented the state from forcing the disabled, elderly and blind in the Valley and San Diego into the program.

San Diego Chances Better

The chances of success were considered much better in San Diego. Many of the largest HMOs, including the Greater San Diego Health Plan, Kaiser Foundation Health Plan and Ross-Loos Health Plan of Southern California, had agreed to participate, and 70% of the doctors now treating Medi-Cal patients had signed up.

The 10 participating HMOs had invested at least $3 million in the program and were preparing to accept their new patients next October. Last week, notices were to have gone out notifying recipients that they had three months to choose one of the HMOs.


Apparently last-minute developments in Sacramento, however, doomed the project.

Perhaps most important of these was that the powerful California Medical Assn., which rarely loses a battle in the Legislature, ultimately made the elimination of Expanded Choice one of its top priorities. San Diego pharmacists and their national association also vigorously lobbied against it.

Deluged by Communications

In the week before the conference committee’s vote, committee members were deluged with telegrams, letters and phone calls opposing Expanded Choice. With callers jamming the telephone lines, the secretaries of some of the lawmakers pleaded with those in opposition to mail their messages instead.


Dr. Joseph W. Joyner Sr., a San Diego pediatrician with several thousand Medi-Cal patients, encouraged his patients’ mothers to contact the legislators. Other doctors did the same. And members of the Valley coalition, who had been advising San Diego opponents all along, also pitched in.

A second important development was that state health officials privately said that the governor no longer viewed Expanded Choice as a priority. Some suggested that the governor did not want to alienate the California Medical Assn., particularly in an election year. Even then, the experiment might have been saved if Swope, who left his health post to become a lobbyist, had stayed and fought for it, they said.

“In the last couple of months, when the pressure from doctors built up and there was no (health and welfare) secretary, the budget process gave them a way to take a dive without offending anyone,” one health official said of the Administration.

Aide Denies Change


Calls to the governor’s office were directed to Lois Wallace, an assistant director of the Finance Department, who denied that the governor abandoned the experiment.

“I can’t imagine anyone would tell you the governor is not supportive of it,” she said.

But lawmakers say the conference committee’s vote could have been different if the governor had interceded.

Sen. John Seymour (R-Anaheim), a committee member, observed, “The Administration did not lobby real hard. They did not say it was a must. . . . Had they really put the full-court press on it, I certainly would have sat down and taken another look at the data.”


Critics of Expanded Choice also have always maintained that the program should be voluntary because HMOs are not suited for everyone. HMOs, which are known for their emphasis on preventive health care, are fine for the able-bodied, opponents suggested, but they are not set up to deal with the crush of Medi-Cal recipients suffering from complicated medical problems.

Acknowledging that problem, the state had eventually exempted some groups from the experiment, including the developmentally disabled.

Argument Countered

Proponents had countered that Medi-Cal recipients would be better off with the new system because so many physicians refuse to accept Medi-Cal patients. Only a quarter of the physicians in the Valley, for instance, treat state-subsidized patients.


After the San Diego experiment was canceled, not all the skeptics were overjoyed.

“We have mixed feelings,” said Rosemary Bishop, staff attorney of Legal Aid of San Diego, who complimented the state for trying to address their concerns over the months.

Because an increasing number of states are looking to HMOs to help reduce health costs for the poor, Bishop and others who had reservations felt the San Diego program might help answer whether this trend is a good one.

Now, she said, “We really can’t say in the balance which would be better.”