8 Private HMOs Join to Vie for Medi-Cal Clients

For the first time, private health maintenance organizations have formed an alliance to compete with public and nonprofit agencies for state Medi-Cal patients, sources confirmed Tuesday.

Called the Los Angeles Health Advantage, the business alliance is made up of eight longtime players in private managed care, including Kaiser Permanente, Cigna Healthplan and FHP Inc. It also includes some HMOs that have traditionally refused Medi-Cal patients--such as the “blues,” Blue Cross and Blue Shield--on the grounds that state reimbursements were so low and treatment requirements so broad that they could not afford to treat them profitably. The other HMOs in the alliance are United Health Plan, Maxicare and PruCare.

The HMOs will compete for up to 39% of the Medi-Cal recipients under a plan pushed for years by the Wilson Administration and the state Department of Health Services to get Medi-Cal patients into mainstream managed-care plans.

The state government on Monday released its tentative plan for soliciting the contracts, the first legal step that will result in actual contracts being awarded.

The HMOs would offer welfare recipients and other poor Californians who receive taxpayer-financed Medi-Cal benefits the same benefits as those received by private clients.

“Medi-Cal patients would be free to choose from the eight plans, and then would receive full rights under whichever HMO they choose. There would be absolutely no discrimination based on financial status,” said Jonathan C. Lewis, who is heading up the alliance of HMOs.

But others expressed concern.

“We are bringing into the market commercial HMOs with limited or in some cases no experience in treating Medi-Cal clients,” said Toni Saenz Yaffee, chief of staff to the Managed Care Planning Council of Los Angeles County. “We are worried that they will cherry-pick the healthiest clients, leaving us with the responsibility for caring for the indigent without the money to pay for it.”