GAO Assails Wilson’s Proposal on Medi-Cal : Health: Federal agency says problems could be escalated by mandatory enrollment. State officials say study’s release may be linked to partisan politics.

Gov. Pete Wilson’s plan to force another 3 million Medi-Cal recipients into managed care plans is inadequate, according to a critical study of California’s proposal by the federal General Accounting Office.

Current problems, such as loose management of health plans, “could be significantly magnified in a much larger program with mandatory enrollment,” the congressional watchdog agency said in a report released Friday.

The GAO, which performed the study at the request of Rep. Henry A. Waxman (D-Los Angeles), said the Wilson Administration has been deficient in monitoring such things as its highly touted preventive health care plan for children. It also cited concerns that financial incentives to physicians could lead to withholding or denying medical care to plan members.

One of the continuing problems the study found was that the state “could not ensure that all children referred for diagnosis and treatment actually received it.”

Waxman, the ranking Democrat on the House subcommittee on health and the environment, responded with a letter sent Friday to Donna Shalala, the secretary of health and human services, asking her to deny approval of the waiver needed to implement the ambitious managed care plan until the Wilson Administration corrects the problems outlined in the report.

“I don’t think the state has done its job of living up to its obligations of providing health care services to low-income people enrolled in these plans, particularly children,” Waxman said from Washington.

The congressman said he feared a repeat of Medi-Cal scandals of the early 1970s, “when a lot of charlatans tricked a lot of people to sign up in managed care plans that weren’t available when those people got sick and needed them.”

Wilson Administration officials expressed surprise at the tone of the report, as well as its sudden release.

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Although various elements of the state managed plan have been criticized before, this was the hardest hit on one of Wilson’s health policy initiatives since the governor announced that he was running for President, and one official openly suggested that partisan politics might be involved.

“Some of us think it’s kind of curious why (the GAO study) is suddenly released,” said Joseph A. Kelly, chief of Medi-Cal managed care plans for the state Department of Health Services.

The state agency released a letter sent to the GAO in January by John Rodriguez, the state’s top Medi-Cal administrator, saying he believes the state “has addressed, or is addressing, these concerns.”

Adding political overtones to the release of the report was a visit to Los Angeles on Thursday by Dr. Rodney Armstead, director of the office of managed care for the Health Care Financing Administration.

Sometimes described as President Clinton’s “Medicaid managed care guru,” Armstead wondered aloud during an interview with Times reporters whether Wilson health administrators “will be able to deliver” a sound program. He pointed out that California now puts so comparatively few dollars into the the Medi-Cal program that it ranks almost dead last in per-capita funding among states.

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Armstead, who will rule on California’s request for a waiver, said concerns about the state’s ability to handle a massive increase in its managed care program may lead the Health Care Financing Administration to impose implementation on a county-by-county basis. This would almost certainly delay statewide implementation plans and embarrass the Wilson Administration. When informed of Armstead’s comments about piecemeal implementation, Kelly said: “He has not told us that.” Kelly said he hopes that the problems cited by the GAO will be cleared up by then.

Medi-Cal is California’s version of the federal Medicaid program, a $17-billion annual program covering 5.5 million low-income Californians. Traditionally, a fee-for-service plan, it now allows Medi-Cal recipients to receive medical care at no cost from participating doctors and hospitals. The health care providers in turn bill the state for the medical services they provide.

But Wilson and his health care advisers believe managed care plans patterned after those used by the majority of privately insured Californians are a better and more cost-effective way of delivering care. Under managed care, the state contracts with medical plans that take full responsibility for a member’s health care for a fixed monthly fee, in contrast to payments based on services.

So far, on a voluntary basis, the state has enrolled 980,000 Medi-Cal members in managed care plans. But administrators want to make managed care mandatory for all but the aged, blind and disabled. The waivers would apply to 12 counties, including Los Angeles, and if approved, would push managed care enrollments to 3.5 million by the end of 1996.

The GAO study said analysts were concerned about the state’s ability to handle such a huge surge in enrollments, as well as some fundamental features of the state’s plan. One such concern is over an incentive system set up to encourage providers to control health costs.

The study cited concerns about one California plan that pays bonuses of up to 20% of a doctor’s salary to its primary care physicians on the basis of how many referrals to hospitals and specialists the physician makes.

“Ideally, financial incentives operate to reduce unnecessary medical procedures, but they also have the potential to deny patients beneficial and necessary services,” the report said. “Although (the state) reviews financial incentive arrangements, officials told us they have no criteria or guidelines regarding the types of financial incentives that are acceptable.”