Prepaid Health Plan Unveiled for Medi-Cal

In a move toward overhauling the state’s public health care delivery system, State Health Director Molly Joel Coye unveiled a plan Wednesday to impose a managed health care plan for the state’s 5 million Medi-Cal recipients.

Coye, whose first efforts at imposing a managed health care plan triggered a nasty fight between public and private health providers, outlined the proposal to an overflow crowd of 300 county health officials, lobbyists and executives representing nearly every major player in the state health Establishment. She seemed to appease critics of the earlier plan, but only slightly.

Coye said the new plan, if it is implemented, would end the current fee-for-service system now in place for the state’s Medi-Cal recipients, about 70% of whom are welfare recipients, by early next year.

Once in place, the managed care program, pioneered in the private sector, would dramatically change the way health care is delivered to poor patients. Currently, about 600,000 of the state’s Medi-Cal recipients are enrolled in managed care programs.

Under fee-for-service, patients are free to seek out doctors, hospitals and clinics on their own, and the state is billed by the providers on the basis of whatever treatment, tests of other work is done. Under the system being advocated by Coye, with strong backing from Republican Gov. Pete Wilson, patients would be steered to Health Maintenance Organizations (HMOs) and other prepaid health plans, where their choices on care would be more limited and the scope of care tightly managed.

Critics of the plan complain that patients would not receive the same level of care under the new system. Those critics, who include physicians groups, pharmacists and others operating under the fee-for-service system, argue that prepaid health plans, which receive a monthly fee for each patient, make their profits by limiting care. They also argue that the freedom of choice on the part of patients is an important part of health care and should be protected.

Supporters counter that managed care programs offer the poor an improved level of care. They say the plans offer better access to doctors at conveniently located community clinics. They note that because of the cumbersome paperwork and low reimbursement rates by the state, Medi-Cal recipients often find it difficult to find private physicians who will accept them.

Coye said the Wilson Administration remains firmly committed to managed care. “We feel patients are better served when they are in an organized health care system. We can make sure they’ve got a doctor,” Coye said, adding that by treating patients early the state hopes to reduce hospital visits later.

At stake for the doctors, hospitals, community clinics, pharmacies, HMOs and others is a major share of the annual Medi-Cal budget, which is $14 billion a year and growing.

Last year, Coye and the state Department of Health Services, spurred by Wilson and the Legislature, accelerated the Administration’s push for managed care, offering financial incentives to commercial HMOs and clinic operations if they would treat Medi-Cal patients for a set monthly fee.

The prepaid health plans, using aggressive marketing campaigns and door-to-door sales efforts in low-income neighborhoods, were so successful that they touched off a political furor and war within the medical industry over Medi-Cal recipients. Traditional Medi-Cal providers who depend on state money to keep their hospitals and clinics open complained that they faced the loss of so much state money to commercial firms that the “safety net” system faced collapse.

The fight got so hot that the Wilson Administration declared a moratorium Dec. 1 against further expansion of its program, and Coye and other state health officials promised to go back to the drawing board.

What emerged in rough outline Wednesday was a complicated, multilayered plan that will give county health departments and other safety net providers in 11 of the state’s largest counties first crack at creating managed care systems within their jurisdictions. In Southern California, participants will be Los Angeles, Kern, Riverside, San Diego, and San Bernardino counties.

Traditional providers of medical care to the poor thus would have first crack at administering the Medi-Cal program, which would allow them to protect their interests.

But there are strings attached. Coye said that after a series of public hearings later this month, the moratorium will be lifted and county boards of supervisors will have 45 days to decide whether they want to participate as principal players.

After that, they will have 60 days to put together a consortium of health care providers, which would include county hospitals and other traditional health care providers. And the new managed care system would have to be in operation 12 months later. If counties decide not to participate, then the state will control the competition much the way it did before the moratorium.

One catch in the new plan is that counties and “safety net” providers--university hospitals, children’s hospitals and large urban hospitals in low-income neighborhoods--would have to drop all lawsuits they have filed against the state stemming from disputes over Medi-Cal payment rates. Hundreds of millions of dollars are involved.

Robert C. Gates, Los Angeles County health director, said after the briefing that he thought the outline of the plan, which will be fleshed out later after public hearings and further discussions with county officials, was a good start. “I like the concept of local controls that’s been built into it. It solves a lot of the concerns we had,” Gates said, although he, along with most other county and health care officials, said the Administration’s timetable might be impossible to meet.