State Auditor: O.C.’s Medi-Cal insurer made slow progress improving access while gathering $1.2B surplus

CalOptima, the only health insurer covering Orange County’s nearly 1 million Medi-Cal beneficiaries, has too much money, according to a report from the California State Auditor released Tuesday.

As of June 2022, CalOptima had amassed $1.2 billion in “unrestricted funds,” more than double the $570 million auditors felt were prudent to keep in reserve, according to the report. State officials say that money might have been used to better care for the agency’s mostly low income and elderly beneficiaries as well as the uninsured.

The agency’s “primary care and specialty providers did not meet CalOptima’s standard for timely access to routine or urgent appointments,” according to the report. State Auditor Grant Parks also found that the publicly funded health insurer had fallen short of its commitment to improve access to care for Orange County’s residents, especially the homeless population.

CalOptima’s board of directors had pledged to spend $100 million between 2020 and 2022 on health initiatives to aid people living on the street. As of June 2022, only $60 million had been allocated toward those efforts, and only $34 million had actually been spent, according to the report.

The publicly funded insurer obtained a large portion of federal money through intergovernmental transfers (IGT) a process Medi-Cal managed care plans like CalOptima can apply for in which funding parties agree to pay the maximum allowable rate for coverage.

The money is then used to pay for not only the medical services performed by providers but broader initiatives to improve the quality and accessibility of care. Each insurer makes an agreement with its providers regarding what portion of IGT funds it will retain.

Other publicly funded insurers keep between 0% and 10% of their allotted IGT funds. CalOptima had been holding on to about 30% up until 2022.

That amounts to roughly $233 million out of the roughly $815 million in IGT funds CalOptima had been awarded since 2012. As of June 2022, about $90 million of that remained unused.

CalOptima officials note that 93% of all the money the agency has spent has been used directly on medical services and cited complications due to the pandemic for hampering progress on initiatives. The agency also pointed to a high turnover rate among executive staff.

“The reasons CalOptima gave us for not spending these funds more rapidly were not compelling,” Parks wrote.

His report also found a lack of oversight over many of the programs that were launched using IGT funds. Many analyzed by state officials were deemed lacking of any stated metric for success or measurable indicators of progress.

A range of fixes to improve accountability over programs and better plan spending were put forth in the auditor’s report. Officials also recommended dramatically lowering the portion of IGT funds CalOptima retains. As of August, it has altered its policy to only keep 2%.

“Many of the recommended reform measures have been implemented by CalOptima Health since June 2022 or are currently underway,” CalOptima officials wrote in a statement.

“In addition, there were no recommendations regarding timely access or quality of care for members,” they added.