Medicaid Managed Care: Delays and Difficulties in Implementing
California's New Mandatory Program (Letter Report, 10/01/97,
GAO/HEHS-98-2).
Pursuant to a congressional request, GAO reviewed California's Medicaid
Program, Medi-Cal, focusing on: (1) the implementation status of
California's managed care expansion, including identifying the primary
causes of delays; (2) the degree to which state efforts to educate
beneficiaries about their managed care options and enroll them in
managed care have encouraged beneficiaries to choose a plan; (3) the
management of the state's education and enrollment process for the new
program, including state and federal oversight of enrollment brokers
that the state contracted with to carry out these functions; and (4) the
impact of the managed care expansion on current safety-net providers,
such as community health centers, that serve low-income beneficiaries.
GAO noted that: (1) despite California's extensive planning and managed
care experience, implementation of its 12-county expansion program is
more than 2 years behind its initial schedule and is still incomplete;
(2) California originally had planned to implement the program
simultaneously in all affected counties by March 1995; (3) however, as a
number of unforeseen difficulties arose, the state began to stagger
implementation as it became clear that some counties would be ready
before others; (4) still, as of July 1997, the program had been fully
implemented in only seven counties; (5) the most recent schedule
estimated complete implementation in all 12 counties by December 1997,
at the earliest; (6) the state's efforts to encourage beneficiaries to
choose a health plan have been undermined by problems in the process for
educating and enrolling beneficiaries; (7) according to the Health Care
Financing Administration (HCFA), beneficiary and provider advocates, and
managed care plans, a number of problems contributed to confusion for
many beneficiaries, including incorrect or unclear information about the
mandatory Medi-Cal program and participating plans as well as erroneous
assignments of beneficiaries to plans; (8) available data show that, on
average, almost half of affected beneficiaries have not actively chosen
their own plan but instead have been automatically assigned to one by
the state; (9) other problems were evident in California's Department of
Health Services' (DHS) management of the program, including insufficient
performance standards for enrollment brokers and poor internal
communication and weak ties with advocacy and community-based
organizations; (10) California has taken a number of actions to improve
the implementation and administration of its mandatory expansion
program; (11) DHS also has taken steps to work more closely with
community-based organizations to improve outreach efforts; (12) however,
these actions were taken too late to benefit the many beneficiaries who
have already enrolled in the seven counties where full program
implementation has been completed; (13) HCFA is in the process of
developing federal guidelines on designing and implementing an education
and enrollment program; and (14) despite the fact that the state's
12-county expansion program was designed to help ensure that federally
qualified health centers, community and rural health centers, and other
safety-net providers participate in the provider networks, some
safety-net providers have reported difficulty maintaining their patient
base.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-98-2
TITLE: Medicaid Managed Care: Delays and Difficulties in
Implementing California's New Mandatory Program
DATE: 10/01/97
SUBJECT: Health care programs
Managed health care
State-administered programs
State/local relations
Health care services
Community health services
Privatization
Beneficiaries
Disadvantaged persons
IDENTIFIER: California Medi-Cal Program
Medicaid Program
California Health Care Options Program
Los Angeles County (CA)
Alameda County (CA)
Kern County (CA)
Fresno County (CA)
San Francisco County (CA)
Santa Clara County (CA)
San Joaquin County (CA)
Contra Costa County (CA)
San Bernardino County (CA)
Riverside County (CA)
Stanislaus County (CA)
Tulare County (CA)
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Cover
================================================================ COVER
Report to the Ranking Minority Member, Committee on Government Reform
and Oversight, House of Representatives
October 1997
MEDICAID MANAGED CARE - DELAYS AND
DIFFICULTIES IN IMPLEMENTING
CALIFORNIA'S NEW MANDATORY PROGRAM
GAO/HEHS-98-2
California's Managed Care Expansion
(101533)
Abbreviations
=============================================================== ABBREV
AFDC - Aid to Families With Dependent Children
COHS - County Organized Health System
DHS - Department of Health Services
GMC - Geographic Managed Care
HCFA - Health Care Financing Administration
HCO - Health Care Options
PCCM - Primary Care Case Management
PHP - prepaid health plan
SSI - Supplemental Security Income
TANF - Temporary Assistance for Needy Families
Letter
=============================================================== LETTER
B-276078
October 1, 1997
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
and Oversight
House of Representatives
Dear Mr. Waxman:
California's Medicaid program, Medi-Cal, served 5.2 million
beneficiaries--almost one-seventh of Medicaid beneficiaries
nationwide--at a cost of nearly $18 billion in federal, state, and
local Medicaid funds in fiscal year 1996. Over the past 2 decades,
Medi-Cal has increasingly relied on managed care delivery systems
with the aim of improving beneficiary access to quality care while
reducing the rate of program cost growth. In 1992, California began
planning a major expansion of its Medi-Cal managed care program--one
that would eventually require more than 2.2 million beneficiaries in
12 counties to enroll in one of two managed care plans participating
in each county.
In a 1995 report, we expressed concern about California's ability to
successfully carry out such an expansion because of several
weaknesses that we identified in the Medi-Cal managed care program,
including the state's potential inability to effectively monitor its
contracts with managed care plans and to ensure that the services
that plans were contracted to provide were actually provided.\1 Now,
nearly 5 years after planning began, the state has repeatedly delayed
its completion date for full implementation of the expansion.
In light of these delays and the magnitude of the state's Medicaid
program, you asked us to follow up on our earlier report and (1)
determine the implementation status of California's managed care
expansion, including identifying the primary causes of delays; (2)
assess the degree to which state efforts to educate beneficiaries
about their managed care options and enroll them in managed care have
encouraged beneficiaries to choose a plan; (3) evaluate the
management of the state's education and enrollment process for the
new program, including state and federal oversight of enrollment
brokers that the state contracted with to carry out these functions;
and (4) make an initial assessment of the impact of the managed care
expansion on current safety-net providers, such as community health
centers, that serve low-income beneficiaries.
To conduct our work, we interviewed officials from California's
Department of Health Services (DHS); DHS' former and current
enrollment brokers; selected managed care plans and advocacy groups;
and the Department of Health and Human Services' Health Care
Financing Administration (HCFA), which oversees the Medicaid program.
We also reviewed relevant state statutes and regulations and DHS
policies and procedures on the education and enrollment process, as
well as the enrollment broker contracts. For more detailed
information on our scope and methodology, see the appendix.
--------------------
\1 Medicaid Managed Care: More Competition and Oversight Would
Improve California's Expansion Plan (GAO/HEHS-95-87, Apr. 28, 1995).
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Despite California's extensive planning and managed care experience,
implementation of its 12-county expansion program is more than 2
years behind its initial schedule and is still incomplete.
California originally had planned to implement the program
simultaneously in all affected counties by March 1995. However, as a
number of unforeseen difficulties arose, such as in contracting with
and developing managed care plans, the state began to stagger
implementation as it became clear that some counties would be ready
before others. Still, as of July 1997, the program had been fully
implemented in only seven counties. The most recent schedule
estimated complete implementation in all 12 counties by December
1997, at the earliest.
The state's efforts to encourage beneficiaries to choose a health
plan have been undermined by problems in the process for educating
and enrolling beneficiaries. According to HCFA, beneficiary and
provider advocates, and managed care plans, a number of problems
contributed to confusion for many beneficiaries, including incorrect
or unclear information about the mandatory Medi-Cal program and
participating plans as well as erroneous assignments of beneficiaries
to plans. Officials from one plan said that beneficiaries did not
understand the changes in their health care coverage, and some
beneficiaries thought that they were losing Medi-Cal benefits
altogether. Available data show that, on average, almost half of
affected beneficiaries have not actively chosen their own plan but
instead have been automatically assigned to one by the state.
Other problems were evident in DHS' management of the program, such
as insufficient performance standards for the enrollment brokers that
DHS had contracted with to provide information to beneficiaries about
their managed care options and enroll them in the Medi-Cal program.
The enrollment brokers also believed that difficult operating
conditions--such as continual changes in state program and policy
directives--contributed to the implementation problems. Poor
internal communication and weak ties with advocacy and
community-based organizations further exacerbated the difficulties
DHS encountered in implementing its mandatory managed care program.
California has taken a number of actions to improve the
implementation and administration of its mandatory expansion program.
For example, DHS has begun translating into a number of different
languages and redesigning the enrollment materials to make them more
comprehensible and has instituted on-site monitoring of the
enrollment broker's processes for enrolling beneficiaries. DHS also
has taken steps to work more closely with community-based
organizations to improve outreach efforts. However, these actions
were taken too late to benefit the many beneficiaries who have
already enrolled in the seven counties where full program
implementation has been completed. And problems persist--some
serious enough to have prompted HCFA to delay full implementation of
the program in several counties earlier this year. HCFA is in the
process of developing federal guidelines on designing and
implementing an education and enrollment program. But these
guidelines are not expected to be available before October 1997--too
late to help influence design and early implementation issues for
California's program.
Despite the fact that the state's 12-county expansion program was
designed to help ensure that federally qualified health centers,
community and rural health centers, and other safety-net providers
participate in the provider networks, some safety-net providers have
reported difficulty maintaining their patient base. Though the new
mandatory program provides some assurances that health plans assign
beneficiaries to safety-net providers, it does not guarantee these
providers any specified level of enrollments. Many beneficiaries who
have chosen a primary care physician have opted to select a provider
other than a participating safety-net provider.
BACKGROUND
------------------------------------------------------------ Letter :2
Medi-Cal was implemented in 1965, the year the Medicaid statute was
enacted.\2
Administered by the California DHS,\3 in fiscal year 1996, Medi-Cal
provided a wide range of services to approximately 5.2 million
low-income individuals at an estimated cost of about $17.7
billion--about 11 percent of national Medicaid expenditures.
Medi-Cal managed care, which is composed of several programs,
including the 12-county expansion program, is expected to serve over
3 million Medi-Cal beneficiaries once fully implemented.
Since 1968, the state has contracted with prepaid health plans
(PHP)--California's equivalent of the federal definition of "health
maintenance organizations"--to provide, on a capitated basis,
preventive and acute-care Medicaid services, as well as case
management. In the 1980s, the state established three additional
managed care programs: Primary Care Case Management (PCCM), County
Organized Health System (COHS), and Geographic Managed Care (GMC).\4
In early 1993, the state completed conceptual development of its most
ambitious program to date: the "two-plan model," which requires more
than 2.2 million Medi-Cal beneficiaries to enroll with one of two
health plans participating in each of 12 counties.\5
--------------------
\2 Established under title XIX of the Social Security Act, Medicaid
finances health care for about 37 million low-income families, and
aged, blind, and disabled individuals nationwide. Jointly funded by
the federal government and the states, Medicaid is administered by
states within broad federal guidance.
\3 DHS determines policy, establishes fiscal and management controls,
contracts with managed care plans, and reviews program activities.
\4 PCCMs, operated primarily by physicians and physician groups,
contract with the state to provide certain outpatient health care
services for a capitated fee. Services not capitated are available
to beneficiaries on a fee-for-service basis. COHSs--which operate in
San Mateo, Santa Barbara, Solano, Orange, and Santa Cruz
counties--are local entities that contract with DHS to administer a
capitated, comprehensive, case-managed health care delivery system.
Under the GMC model--currently operating in Sacramento County and
planned for San Diego County--the state contracts directly with
several managed care plans to provide covered services to
beneficiaries on a capitated basis. PCCM enrollment is voluntary;
COHS enrollment is mandatory for all Medicaid-eligible populations;
and GMC enrollment is mandatory for Aid to Families With Dependent
Children (AFDC) and AFDC-related beneficiaries. As of April 1997,
about 1.2 million beneficiaries were enrolled in the PHP, PCCM, COHS,
and GMC programs.
\5 In January 1996, HCFA approved California's request under section
1915(b) of the Social Security Act to waive three sections of the
act. Section 1902(a), which requires a Medicaid program to be
available throughout the state, was waived, enabling the state to
implement the two-plan model in selected counties only. Section
1902(a)(10)(B), comparability of services, was waived, enabling the
state to offer additional benefits not available to Medi-Cal
beneficiaries not enrolled in the two-plan model. And section
1902(a)(23), freedom of choice, was waived, enabling the state to
restrict beneficiary choice of providers under the two-plan model and
to require certain beneficiaries to enroll. The 2-year, renewable
waiver expires January 22, 1998.
THE TWO-PLAN MODEL
---------------------------------------------------------- Letter :2.1
California's managed care expansion program--often referred to as the
two-plan model--was designed to ensure that each of the two managed
care plans operating in each county could achieve an enrollment level
sufficient to spread risk and that beneficiaries could obtain care
from health plans that also served privately insured individuals. In
addition, the model was developed to make the most of limited state
resources by restricting the number of plans the state would need to
monitor.
Selection of the 12 counties to use the two-plan model was made on
the basis of two criteria.\6 First, the counties must have had a
minimum of 45,000 Medicaid beneficiaries eligible to participate in
managed care,\7 and, second, the counties must have had an interest
in the program or a significant managed care presence already
established in the county. (See table 1 for the number of eligibles
and current enrollees by county and plan.)
Table 1
Medi-Cal Eligibles and Enrollees by
County and Plan
Eligibles as of April
1997 Health plans
---------------------- --------------------------------------------------
Enrollee
s as of Dates of
Two-plan Mandator July initial
counties y Nonmandatory 1997 Names of plans operation
------------ -------- ------------ -------- -------------------------- ------------
Alameda 116,934 61,105 73,535 Alameda Alliance for 1/1/96
25,440 Health 7/1/96
Blue Cross of California
Contra Costa 55,431 27,734 42,706 Contra Costa Health Plan 2/1/97
3,392 Foundation Health Systems 3/1/97
Fresno 145,558 44,352 105,015 Blue Cross of California 11/1/96
17,429 Foundation Health Systems 1/1/97
Kern 102,639 30,606 53,212 Kern Family Health Care 7/1/96
23,195 Blue Cross of California 9/1/96
Los Angeles 1,119,12 435,208 191,964 LA Care 4/1/97
0 256,812 Foundation Health Systems 7/1/97
Riverside 368,588 106,249 130,624 Inland Empire Health Plan 9/1/96
and San N/A Molina Medical Centers Unknown
Bernardino
San 44,155 58,408 23,079 San Francisco Health Plan 1/1/97
Francisco 15,585 Blue Cross of California 7/1/96
San Joaquin 84,383 29,427 59,199 Health Plan of San 2/1/96
11,329 Joaquin 2/1/97
OMNI
Santa Clara 97,815 51,029 42,917 Santa Clara Health 2/1/97
34,466 Authority Blue Cross of 10/1/96
California
Stanislaus 63,901 21,410 N/A Blue Cross of California 10/1/97
(as local initiative)
9,145 OMNI 2/1/97
Tulare 71,608 19,945 N/A MediCo 4th quarter
N/A Foundation Health Systems 1997
4th quarter
1997
========================================================================================
Total 2,270,13 885,473 1,119,04
2 4
----------------------------------------------------------------------------------------
Note: N/A = not applicable.
In each county, beneficiaries are required to enroll in either the
"local initiative"--a publicly sponsored health plan cooperatively
developed by local government, clinics, hospitals, and other
providers--or the commercial plan, under contract in a beneficiary's
county of residence.\8 The local initiative concept was developed to
support health care safety-nets--those providers, such as community
health centers and federally qualified health centers, that provide
health care services to the indigent. Minimum enrollment levels were
set for both the commercial and local initiative plans to ensure
their financial viability. A maximum enrollment level was also set
for each commercial plan to further protect local initiatives and
their subcontracted safety-net providers. The state contracted with
the local initiatives on a sole-source basis, while the commercial
plan contracts were awarded on a competitive basis.
The situation in Los Angeles County, however, is unique. While
California contracted with a local initiative and a commercial plan
in Los Angeles County, the county has, in essence, 10 plans because
the local initiative plan subcontracted with 7 plans, and the
commercial plan subcontracted with 2 plans.\9 Beneficiaries can
choose a primary care physician from any one of the 10 plans.
--------------------
\6 The 12 counties are Alameda, Contra Costa, Fresno, Kern, Los
Angeles, Riverside, San Bernardino, San Francisco, San Joaquin, Santa
Clara, Stanislaus, and Tulare.
\7 Former AFDC and AFDC-related beneficiaries are required to enroll
in the two-plan model. Supplemental Security Income (SSI) and
SSI-related beneficiaries may enroll in managed care plans on a
voluntary basis. California will continue to use this eligibility
criteria until the Governor and state legislature agree on an
approach to determining eligibility under the new Temporary
Assistance for Needy Families (TANF) program, which replaced AFDC.
\8 Fresno County did not develop a local initiative, so Fresno has
two commercial plans.
\9 The plan partners in the local initiative--LA Care--are Blue
Cross, Care 1st, LA Community Health Plan, Maxicare, United Health
Plan, Tower, and Kaiser Foundation Health Plan. The plan partners in
the commercial plan--Foundation Health Systems--are Universal Care
and Molina Medical Centers. Unlike Foundation Health Systems, LA
Care does not directly provide health care services.
HEALTH CARE OPTIONS PROGRAM
EDUCATES AND ENROLLS
BENEFICIARIES
---------------------------------------------------------- Letter :2.2
Medi-Cal beneficiaries required to enroll in the two-plan expansion
program are informed about managed care and their choices of health
care plans through DHS' Health Care Options (HCO) program. HCO also
enrolls and disenrolls beneficiaries in managed care plans.\10 The
state contracts with an enrollment broker to conduct HCO program
activities.
Beneficiaries are informed about the mandatory expansion program and
their available choices primarily through an enrollment packet that
they receive through the mail. The enrollment packet includes
information on managed care, how to join a health plan, available
plans and participating providers, phone numbers to call for
assistance, and an enrollment form. The packet also includes the
first of three standard notices that inform beneficiaries of the
30-day time frame in which they have to choose a plan and the plan to
which they will be automatically assigned if they do not return an
enrollment form.\11
Beneficiaries also can learn about the two-plan model and their plan
options at HCO presentations, which are often held daily at county
social service offices. At these face-to-face presentations, HCO
counselors provide information on managed care, plans available in
the county, how to fill out the enrollment form, beneficiary rights
and responsibilities, how to resolve problems with plans, and who to
contact for more information. Enrollment materials are available at
the presentations. Beneficiaries also can contact HCO's toll-free
call center to obtain enrollment packets and to have
enrollment-related questions or concerns addressed.
Since 1984, DHS has contracted with an enrollment broker to provide
certain education and enrollment services.\12 Initially, enrollment
broker responsibilities consisted primarily of conducting HCO
presentations in selected counties and helping beneficiaries complete
enrollment forms. With the expansion of Medi-Cal's mandatory
program, broker responsibilities increased. In addition to
distributing enrollment packets and providing HCO presentations, the
broker was tasked with processing beneficiary enrollments and
disenrollments in 18 counties with managed care and operating a call
center to assist beneficiaries.
--------------------
\10 DHS' Medi-Cal Managed Care and Payment Systems divisions share
responsibility for the HCO program. The Medi-Cal Managed Care
Division makes all policy decisions regarding the program, while the
Payment Systems Division implements and manages the HCO program and
monitors HCO activities, which are contracted to an enrollment
broker. The Payment Systems Division assumed this responsibility
from the Medi-Cal Managed Care Division in March 1997.
\11 The state assigns beneficiaries according to an established
methodology, which generally stipulates that once the local
initiative reaches a minimum number of enrollments, the state would
assign every other beneficiary who did not choose a plan to the
commercial plan. Beneficiaries who were already enrolled in one of
the plans operating under the two-plan model are not re-assigned by
the state. Beneficiaries have the option to change plans at any
time.
\12 Between October 1991 and December 1996, Medi-Cal contracted with
an Oregon-based enrollment broker, Benova, formerly HealthChoice,
Inc. In 1995, the enrollment broker contract was re-bid and awarded
to Virginia-based Maximus, which began operations January 1, 1997.
IMPLEMENTATION OF EXPANSION
PROGRAM IS MORE THAN 2 YEARS
BEHIND INITIAL SCHEDULE
------------------------------------------------------------ Letter :3
Full implementation of Medi-Cal's mandatory expansion program is more
than 2 years behind its initial implementation schedule. Originally,
local initiatives and commercial plans in each of the 12 affected
counties were to become simultaneously operational in March 1995.
However, repeated delays in the awarding of contracts and the
development of plans made it clear that some counties would be ready
for implementation before others. Implementation therefore took
place county by county. As of July 1997, plans in 7 of the 12
affected counties had been fully implemented, and full implementation
in all counties was scheduled for the end of 1997 at the earliest.
Figure 1 shows the 12 counties and their stages of implementation.
As of July 1997, over 1.1 million beneficiaries were enrolled in the
12-county expansion program.
Figure 1: 12 Counties
Participating in the Expansion
Program and Their Stages of
Implementation as of July 1997
(See figure in printed
edition.)
Overly optimistic time frames and unanticipated difficulties resulted
in a number of delays throughout the state's planning and awarding of
managed care contracts. Developing a Request for Applications for
commercial plans and a Detailed Design Application for local
initiatives took several months longer than expected. Once
applications were submitted, the state did not at first meet its
90-day turnaround goal for approving submissions. Some plans
protested the contract awards, further delaying the contracting
process 6 to 8 months. In addition, the state unexpectedly had to
obtain--at the request of the developers of the local
initiatives--additional state legislative authority, such as
exemptions from regulations on public meetings that would enable the
local initiatives to hold closed-door sessions to negotiate rates
with providers.
There also were delays in establishing local initiatives and
commercial plans. Some local initiatives took 3 years to develop,
instead of the expected 2 years. Unlike commercial plans, local
initiatives had to develop health care plans from scratch and, as
public entities, they had to interact with community stakeholders.
In Fresno County, consensus on whether or not to develop a local
initiative could not be reached. As a result, no local initiative
was developed, and the state awarded a second commercial contract.
The local government in Stanislaus County also had difficulty
establishing a local initiative. Consequently, the local initiative
contract was awarded to a commercial plan, which will operate in
informal partnership with the county. It also took longer than
expected for some commercial plans to begin operating under the
two-plan model. In addition to obtaining approval of material
modifications to their operating licenses, commercial plans had to
develop provider networks in counties where the plans were not
already operating.
Even after implementation of the expansion program began--with
Alameda County in January 1996--the state and HCFA took actions that
further delayed implementation. For example, DHS delayed full
implementation of the program in Fresno, Contra Costa, San Joaquin,
and Santa Clara counties to allow the new enrollment broker to fully
test its automated systems and capacity to handle all of the
enrollment and disenrollment functions. Because of concerns about
the education and enrollment process in Santa Clara, San Joaquin, and
Los Angeles counties, HCFA temporarily prohibited the automatic
assignment of beneficiaries who did not choose a plan and required
DHS instead to maintain them in the fee-for-service system. As a
result, the pace of enrollment was slowed in these counties, even
though plans were allowed to receive voluntary enrollments.
As of July 1997, the expansion program had been fully implemented in
seven counties--Alameda, Kern, Fresno, San Francisco, Santa Clara,
San Joaquin, and Contra Costa--with beneficiaries required to enroll
in either the local initiative or the commercial plan. In four of
the remaining counties--San Bernardino, Riverside, Stanislaus, and
Los Angeles--the program was partially implemented, with only one
plan operating in San Bernardino, Riverside, and Stanislaus counties.
Although Los Angeles County had both plans operating, the program was
in effect only partially implemented because HCFA had delayed
automatic assignment and the state had prohibited additional
enrollment in the commercial plan until some remaining contract
issues were resolved. In Tulare County, neither plan was operating.
The December 1997 target date for full implementation may not be met
since some of the plans in counties where the program has yet to be
fully implemented have had difficulty developing and complying with
regulations. For example, although both plans in Tulare County were
tentatively scheduled to become operational by the end of the year,
the plans were having difficulty organizing provider networks;
implementation target dates have already been moved from spring 1997
to the end of the year. In San Bernardino and Riverside counties,
the local initiative began operating in September 1996, but the
commercial plan's operation was delayed because it had not complied
with the federal Medicaid requirement that effectively prohibited
plan enrollment of Medicaid beneficiaries from reaching 75
percent.\13 This requirement was repealed in August 1997; however,
because of concerns the state has with other aspects of the plan's
operations, it is still not clear when this plan will begin operating
under the two-plan model.
--------------------
\13 Specifically, the commercial plan was in violation of Medicaid's
"75/25" restriction, which provides that a plan's Medicaid (and
Medicare, if any) enrollment must be less than 75 percent of its
total enrollment. Under its current PHP contract, the commercial
plan that serves both San Bernardino and Riverside counties had not
complied with the requirement. The Balanced Budget Act of 1997,
section 4703, repealed the requirement.
EDUCATION AND ENROLLMENT
PROBLEMS CONTRIBUTED TO LOW
BENEFICIARY CHOICE RATE AND
CONFUSION
------------------------------------------------------------ Letter :4
Despite California's efforts to encourage beneficiaries to choose a
health plan, many beneficiaries have been assigned to a plan by the
state. Long-standing problems with California's HCO program, which
provides beneficiaries with information about their managed care
options and enrolls them in a plan, may have contributed to this and
to widespread confusion among beneficiaries. While many agree that
the HCO program is running smoother now than in the past,
deficiencies persist--some serious enough to have prompted HCFA to
delay full implementation in several counties earlier this year.
STATE'S EDUCATION PROCESS
HAS NOT RESULTED IN
BENEFICIARY SELECTION OF
PLAN
---------------------------------------------------------- Letter :4.1
To encourage Medi-Cal beneficiaries to choose their own managed care
plan, California's HCO program provides them information on managed
care and their available health plan options. Plans, advocates, and
researchers agree that beneficiaries who are well informed about
managed care--and how it differs from fee-for-service--are more
likely to choose a health plan, and those who choose a health plan
are more likely to stay with that plan. Experts also believe that
well-informed beneficiaries are more likely to use health services
appropriately, such as relying more on a primary care physician and
less on inappropriate use of emergency room services.
Despite its efforts, the state estimated in January 1997 that the
majority of enrollments had been the result of automatic assignments
by the state. The automatic assignment rate for Alameda County at
the beginning of implementation was estimated as high as 80 percent.
Although automatic assignment rates have declined--the automatic
assignment rate for two-plan counties averaged 45 percent from March
to June 1997--the rates ranged widely from county to county. For
example, the automatic assignment rate in Contra Costa County in
April 1997 was 72 percent, while in Santa Clara County it was 32
percent.\14 Unlike other states, California has not established a
numeric goal for automatic assignments. Regardless, California's
automatic assignment rates have varied enough across counties to
indicate potential problems with HCO's program.
HCFA, advocates, and managed care plans have expressed concerns about
the adequacy of the state's efforts to inform beneficiaries about
their Medi-Cal managed care options. According to these groups,
information in the enrollment packet was complex, lengthy, and
written at too high a grade level.\15 In some cases, the information
was incorrect. For example, enrollment packets sent to some
beneficiaries in San Bernardino and Riverside counties stated that
automatic assignments would be made to Molina Medical Centers--a plan
not contracted to serve beneficiaries in the expanded program in
these counties at that time. Information in the enrollment packets
could also be confusing. In anticipation of the Los Angeles County
local initiative's beginning operations in April 1997, thousands of
beneficiaries in Los Angeles County received packets with cover
letters dated January 8, 1997, that instructed them to respond by
January 18, 1997--which did not allow beneficiaries the required 30
days to respond. DHS remailed the letters and provided additional
time for beneficiaries to respond. And it has only been
recently--more than a year after full implementation of the mandatory
program in the first county--that many of the enrollment materials
have begun to be translated into all of the state's "threshold"
languages.\16 Although DHS has established a work group to address
problems associated with the enrollment packet, all planned changes
are not expected until November 1997, at which time many
beneficiaries will have already been enrolled.\17
Initially, there also were a number of problems with the toll-free
call center, which was set up to provide beneficiaries access to
additional information about how health plans operate and how to use
them. The call center, however, often was a source of frustration
and confusion because callers could not get through, messages went
unanswered, voicemail boxes were full, or counselors provided
incorrect information. However, a review of HCO's recently
instituted "problem log" revealed that the problems have largely
disappeared under the current enrollment broker, Maximus, which
expanded the call-center operation.
There also have been problems with the HCO presentations. Through
county-by-county preimplementation reviews, HCFA often found that the
presentations were confusing, not conducted in the appropriate
language, not accurate or performed as scripted or scheduled, or not
sufficiently informative. In addition, beneficiary attendance has
been low. State officials recognize that the limited number of
presentation sites may make it difficult for beneficiaries to attend.
For example, in June 1997, Los Angeles County--which comprises 88
cities and 136 unincorporated areas and covers over 4,000 square
miles--had 35 presentation sites.
Officials from one managed care plan we contacted believed that poor
attendance at the HCO presentations was due in part to limitations in
the state's outreach to beneficiaries. The officials believed that
by working closely with community-based organizations that
beneficiaries know and trust, such as churches and legal aid
services, more beneficiaries could be reached; in addition, these
organizations could provide outreach services and thereby supplement
HCO presentations. HCFA, advocates, and managed care plans have long
called for increased outreach efforts--not only to beneficiaries, who
can be difficult to reach, but to providers and others in the
community as well. Some plans and advocates have, at their own
expense, conducted outreach activities to fill the perceived gap in
the state's efforts.
Yet even with high automatic assignment rates and poor attendance at
the HCO presentations, it was not until October 1996 that DHS began
development of an outreach campaign that was implemented in selected
counties in March 1997. The campaign consisted of bus billboards and
posters sent to HCO presentation sites, managed care plans, and
community-based organizations. Brochures, a video, and radio
announcements were also recently added.
DHS has recently begun to explore additional ways to improve outreach
and involve community-based organizations in HCO activities, such as
participating in DHS-sponsored work groups. DHS asked
community-based organizations to identify additional HCO presentation
sites in Los Angeles County and plans to require Maximus to contract
with a number of community-based organizations to provide HCO
presentations to their clients. Recognizing that provider education
could also be improved, DHS has begun to better disseminate
information to participating providers on managed care programs, such
as DHS provider bulletins that give HCO program updates. In
addition, DHS created the HCO Education and Outreach Unit in June
1997 to develop and implement strategies to ensure beneficiaries,
providers, legislators, advocates, and other interested parties are
well informed and educated about the expansion program.
--------------------
\14 DHS believes that the default rate is high because many
beneficiaries do not prefer one plan over the other or because they
agree with the assignment that the state intends to make.
\15 HCFA first identified problems with the content of the enrollment
materials with the implementation of the GMC program in Sacramento in
1994.
\16 The state requires the enrollment broker to provide
linguistically appropriate services to a population group of
mandatory Medi-Cal eligibles residing in a proposed service area
whose primary language is not English if these eligibles meet a
specific numeric "threshold" in a proposed service area. For
example, in Alameda County, the first county in which the program was
implemented, the number of eligibles whose primary language was not
English exceeded the threshold for Spanish, Cantonese, Vietnamese,
and Farsi. The state's threshold languages are Cambodian, Cantonese,
Farsi, Hmong, Lao, Russian, Spanish, Vietnamese, and Armenian.
\17 A number of changes have already been completed, such as
translation of some of the enrollment materials, including the
enrollment exemption form and the list of important telephone
numbers.
ENROLLMENT PROCESSING
IMPROVED, BUT PROBLEMS STILL
PERSIST
---------------------------------------------------------- Letter :4.2
Some of the problems with enrolling beneficiaries persisted
throughout the state's first year of implementation of its new
mandatory program and were exacerbated by the timing of the
changeover between enrollment brokers. While many agree that
enrollment processing is functioning much smoother now, there was
enough lingering concern to have prompted HCFA to slow the pace of
enrollment in several counties earlier this year.
During the first year of implementation, the volume of enrollments
may have overwhelmed Benova, the former enrollment broker.
Enrollment materials were not always sent on time, and, in one
county, it could not be determined whether they were sent at all.
Enrollment data were not accurately or completely entered into the
enrollment information system, and some beneficiaries were enrolled
in a plan other than the one they chose or were assigned to a plan
that was not an option for them. State assignments of beneficiaries
who did not choose a plan were not always timely, which meant that
plans lost capitation revenue. The situation worsened when Benova
lost its bid for the enrollment broker contract and began losing
significant numbers of staff.
HCFA and managed care plans agree that Medi-Cal's enrollment process
has begun to function more smoothly. Maximus has more resources to
process and track enrollments, and the state has begun to implement
long-needed fixes, such as improved monitoring of the enrollment
broker. However, problems have continued to occur. For example, in
April 1997, thousands of beneficiaries in Riverside County were sent
letters with dates that implied beneficiaries had already been
assigned to a plan. The state remailed the letters with corrected
dates.
Because of continuing concerns, HCFA slowed enrollment in several
counties earlier this year. According to HCFA, it would not approve
the February 1997 full implementation in Santa Clara and San Joaquin
counties because it had found, during its preimplementation reviews,
deficiencies in the education process that "grossly violated" the HCO
process and the conditions of California's waiver. For example,
enrollment packets sent to beneficiaries were incomplete, and the
state could not verify whether a subsequent mailing was sent.
At the end of March 1997, HCFA decided to slow enrollment in Los
Angeles County, prior to full implementation. HCFA took this action,
in part, because the enrollment broker had not yet demonstrated an
ability to send timely or accurate mailings to beneficiaries or to
properly train HCO counselors to make accurate and informative
presentations to beneficiaries. Adequately educating beneficiaries
in Los Angeles about their plan options is especially difficult,
since there are multiple plans from which beneficiaries can choose.
Furthermore, with over 1 million beneficiaries who will be
mandatorily enrolled, and another 400,000 voluntarily eligible, the
consequences of enrollment errors in Los Angeles County could be
significant.
POTENTIAL IMPACT OF
EDUCATION AND ENROLLMENT
PROBLEMS ON BENEFICIARIES
AND PLANS
---------------------------------------------------------- Letter :4.3
Based on anecdotal evidence from HCFA, advocates, and managed care
plans, the problems with the education and enrollment processes
throughout the implementation of the two-plan model have affected
beneficiaries and plans alike. Officials from one plan said that
beneficiaries were not only confused but concerned because they did
not understand what was happening to their health care coverage--some
beneficiaries thought they were losing Medi-Cal benefits altogether.
According to some plans, enrollment problems have resulted in
significant financial loss due to lost capitation revenue and
unanticipated operating and administrative costs. For example, if
enrollment was delayed, some plans not only lost revenue but may have
unnecessarily expended funds for staffing, facilities, and
advertising. Officials at one local initiative claimed gross revenue
losses of almost $2 million due to a 25-day delay in the mailing of
enrollment materials. The lost capitation revenue required the plan
to draw upon an existing line of credit--with interest--from the
county.
Because of long-standing problems and concerns over the
implementation of the two-plan model, some groups wanted
implementation either stopped or further delayed. Yet, some plans
urged the state and HCFA not to delay implementation and enrollment
further because of the financial repercussions. HCFA officials
agreed that long delays in implementation could present financial
hardship for some plans.
WEAKNESSES IN STATE MANAGEMENT
OF THE HCO PROGRAM CONTRIBUTED
TO IMPLEMENTATION DIFFICULTIES
------------------------------------------------------------ Letter :5
Over the past several years, California has been criticized for a
number of weaknesses in the management of its Medi-Cal managed care
program. In a 1993 report, HCFA questioned whether DHS, with its
existing staffing and processes, could effectively monitor the
state's contracts with Medi-Cal managed care plans.\18 Two years
later, we echoed similar concerns. In 1994, HCFA also cited a number
of weaknesses in the implementation of Sacramento's GMC program,
including the need for early and ongoing local input into the
planning process and deficiencies in the education and enrollment
process.\19 More recently, Mathematica Policy Research, Inc., in its
1996 report on Medi-Cal managed care, cited limited time and
resources as the cause of initial enrollment problems experienced by
beneficiaries in Sacramento's GMC program.\20
These and other management weaknesses--such as insufficient contract
performance requirements for enrollment brokers, inadequate
monitoring of the HCO program, and poor communication with and
involvement of outside groups--contributed to the problems the state
encountered in implementing its two-plan model.\21 Benova and Maximus
also cited reasons that made it difficult for them to perform as
efficiently as possible. The state has taken a number of long-needed
actions aimed at improving various aspects of the HCO program.
However, the effect of some of these actions remains to be seen.
Federal guidance on designing and implementing a mandatory managed
care program, especially when education and enrollment functions are
contracted to an enrollment broker, may have assisted the state in
improving its program implementation in its earlier stages. Although
HCFA is currently developing such guidance, HCFA's oversight of
California's program has consisted primarily of approving the waiver
application and conducting preimplementation reviews of each county
prior to full implementation.\22
--------------------
\18 HCFA region IX, "Review of California's Administration of Its
Managed Care Program" (internal document, fiscal year 1993).
\19 According to HCFA, there were a number of lessons learned from
the GMC implementation experience, including the critical need for a
well-informed provider and beneficiary population and the importance
of an effective monitoring system, such as key performance indicators
like disenrollment rates.
\20 Specifically, the Mathematica report said the initial enrollment
process was "chaotic," partially due to enrollment materials that
were incomplete, confusing, and sometimes misleading and a call
center that was overwhelmed with the volume of calls. Because of the
magnitude and frequency of problems, the state provided beneficiaries
additional time in which to choose. Mathematica Policy Research,
Inc., Managed Care and Low-Income Populations: A Case Study of
Managed Care in California (Washington, D.C.: Mathematica Policy
Research, Inc., May 1996).
\21 According to DHS, understaffing has also plagued the program.
For fiscal year 1996, the Medi-Cal Managed Care Division requested an
additional 126 staff to operate its managed care program. However,
the state legislature approved somewhat less than two-thirds of these
positions. The Payment Systems Division is currently seeking an
additional 26 staff positions for the HCO program. Officials say
that they need to request more staffing but have been unable to
devote the resources needed to prepare the justification.
\22 HCFA's approval of California's waiver was contingent upon
several factors, including agreement that full implementation of the
two-plan model would not commence in a county until HCFA had
conducted a satisfactory on-site, preimplementation review that
focused on policies and procedures regarding enrollment, beneficiary
access, quality of care, and plans' financial solvency. The waiver
also included a requirement that the state demonstrate that it had
allocated sufficient and appropriate staff to all areas of
responsibility, particularly with regard to setting up and monitoring
such a large and complex program.
CONTRACTS INSUFFICIENT TO
HOLD ENROLLMENT BROKERS
ACCOUNTABLE
---------------------------------------------------------- Letter :5.1
DHS' contract with Benova, the former enrollment broker, contained no
specific performance standards. Performance standards should make
clear the level of service expected of the broker and enable a state
to gauge the sufficiency of the broker's operations. When tied to
payment, performance standards can provide incentives for the
enrollment broker to provide the services required and penalties for
nonperformance.
DHS' contract with Maximus, the current enrollment broker, contained
several performance standards; however, few were tied to payment.
For example, although call-center staff were required to answer
phones within three rings and process enrollment forms within 2 days,
there was no penalty for noncompliance. More importantly, no
performance standards that were tied to payment related to potential
quality indicators, such as the rate of automatic assignment,
beneficiary satisfaction with the education and enrollment process,
or the rate of beneficiary disenrollment.\23
California is planning to amend Maximus' contract to include
additional performance standards and to increase the number of
standards that are tied to payment, which should help strengthen the
contract and make it more enforceable.
--------------------
\23 DHS does not believe that it would be fair to tie performance
standards on these indicators to payment because the enrollment
broker contract does not provide the broker with much flexibility in
how to conduct the HCO program.
HCO PROGRAM POORLY MONITORED
---------------------------------------------------------- Letter :5.2
According to HCFA, many of the problems with the state's process for
educating and enrolling beneficiaries were the result of inadequate
monitoring of the HCO program. Until recently, DHS did not conduct
on-site monitoring of enrollment broker activities nor did it have
staff with the expertise to monitor the broker's automated systems.
In addition, HCO's management information and reports were not
adequate to effectively monitor the program.
According to DHS, regular, on-site monitoring of Benova was difficult
since Benova's operations were about 80 miles from DHS headquarters
in Sacramento. Without on-site monitoring, however, DHS could not
guarantee that critical broker responsibilities, such as the mailing
of enrollment packets, were carried out. For example, it was not
until enrollment broker operations were transitioning to Maximus that
DHS found that thousands of beneficiary enrollment packets had not
been sent from a Benova mail facility. To help ensure this does not
recur, as a condition of its contract, Maximus operations are located
in or near Sacramento. DHS also has dedicated five full-time Payment
Systems Division staff, four of whom have automated systems
expertise, to conduct on-site monitoring at Maximus' various
locations. To help ensure Maximus complies with the terms of its
contract, DHS staff observe the broker's operations and test the
automated systems. Staff also observe mail facility operations to
ensure the timeliness, completeness, and accuracy of the enrollment
materials mailed to beneficiaries.
Until recently, HCO program staff did not have the expertise to
evaluate automated systems operations and ensure that their outputs
were valid. Without such expertise, the state could not determine if
beneficiaries had been assigned to plans as intended. Moving
day-to-day HCO program operations from the Medi-Cal Managed Care
Division to the Payment Systems Division provided the program with
the expertise required to make such determinations. In addition, in
March 1997, DHS contracted with a systems consultant, Logicon, to
test Maximus' automated systems and validate its output by July 1997.
According to a DHS official, the testing and validation process will
allow DHS to better understand the enrollment broker's system and
thus have greater confidence in its output. Validating system output
will likely enhance the reliability of the information that the
system generates, such as enrollment and disenrollment data. As of
the end of August 1997, however, Logicon had yet to complete its
contract. As a result, according to HCFA, there remains no external
verification that the enrollment broker can effectively handle the
increased volumes of enrollment that will result when plans in the
remaining counties, like Los Angeles, become fully implemented.
Management information and reporting also were not sufficient to
effectively monitor the HCO program. According to one DHS official,
HCO reports were not managerially useful. For example, while data
were provided on the number of beneficiaries who chose a plan, the
number who were automatically assigned to a plan,\24 and the number
who disenrolled from a plan, the reports did not include trend
analyses. And while an automatic assignment rate was calculated, a
disenrollment rate was not, which can serve as an important indicator
of beneficiary satisfaction with plans.\25 In addition, certain key
terms, such as "disenrollment," have yet to be defined, and the data
have yet to be verified, which provides little confidence in its
meaning or accuracy.\26 As part of its contract, Logicon is required
to ensure that numbers across reports are consistent and reconcilable
and to identify reports that are needed for the state to effectively
monitor enrollment broker activities.
Finally, DHS initially had no system to determine whether problems
reported to DHS were recorded or addressed. Although DHS began
keeping an HCO "problem log" in January 1997 to capture and track the
status of problems and complaints reported to either DHS, the
enrollment broker, or the Medi-Cal managed care ombudsman,\27 DHS had
not summarized or systematically analyzed the information collected
at the time of our review.
--------------------
\24 Prior to January 1997, DHS did not publish data on automatic
assignments.
\25 While DHS requires plans to conduct annual enrollee satisfaction
surveys, there is no requirement to distinguish between beneficiaries
who chose the plan and those who were automatically assigned.
\26 For example, disenrollment can be involuntary due to loss of
Medicaid eligibility. Voluntary disenrollments can be due to moving
outside the plan service area or dissatisfaction with the plan or
provider services. Analyzing reasons for disenrollment can provide
valuable information about a plan's performance.
\27 The Office of the Ombudsman began operating July 1996. Its
purpose, in part, is to investigate and resolve complaints about
Medi-Cal managed care and to provide information to and assist
Medi-Cal beneficiaries by mediating on their behalf and verifying the
resolution of complaints.
INSUFFICIENT COMMUNICATION
AND INVOLVEMENT OF OUTSIDE
GROUPS
---------------------------------------------------------- Letter :5.3
HCFA, managed care plans, and advocates have long expressed concern
over a lack of effective state internal communication and timely
communication with and involvement of outside groups in planning and
decision-making. We found, for example, that until recently, HCO
policy decisions often were not officially documented or disseminated
to the appropriate state staff. DHS has taken some steps to improve
its internal communications, such as requiring HCO's policy unit to
provide written documentation of all HCO policy decisions to the
chief of the Headquarters Management Branch, Payment Systems
Division, for review and systematic dissemination.
DHS has also increased its communication efforts with outside groups.
To provide a forum to discuss and address issues and concerns, the
state has convened or participates in several work groups. For
example, the Policy Workgroup was formed in January 1997 to improve
the education and enrollment process, such as by redesigning and
translating the enrollment materials. The group includes
representatives from DHS, HCFA, health plans, advocacy groups, and
Maximus. The state also convened in June 1997 a Stakeholder Advisory
Group to provide policy advice on and oversight of program
implementation in Los Angeles County. The group is composed of
advocates, provider representatives, DHS, Maximus, and the Los
Angeles commercial plan and local initiative. It plans to meet
monthly.
ENROLLMENT BROKERS CITE
OPERATING CONDITIONS THAT
AFFECTED THEIR PERFORMANCE
---------------------------------------------------------- Letter :5.4
Benova and Maximus, the two enrollment brokers DHS has contracted
with, also cited a number of factors that they believed adversely
affected their performance. According to these brokers, DHS made
frequent policy and program changes and often provided little lead
time to appropriately implement these changes. According to Maximus,
during the first 7 weeks of its contract period--which began January
1997--DHS made about 300 policy changes, sometimes giving Maximus
little time to implement them. To comply with DHS' time frames,
Maximus believed it necessary to sometimes bypass quality assurance
measures that it had established to ensure that such system changes
did not have unintended consequences. In one instance, changes made
to the mailing dates in one county caused Maximus to inadvertently
halt mailings to another county.
Benova believed that its performance as Medi-Cal's enrollment broker
suffered because of DHS' often-changing directions and its lack of
responsiveness. For example, DHS denied Benova's request to transfer
calls during peak times to call centers in other states--an
arrangement Benova believed would have improved service. According
to Benova, DHS also denied its request for cost-reimbursement for
additional equipment needed to handle increasing volumes of
enrollment.
Benova and Maximus officials also stated that, relative to their
experience with other states, California limited their contact with
plans, advocacy groups, and community-based organizations. DHS was
concerned about remaining informed about program operations and not
burdening limited contractor staff with additional responsibilities.
DHS recently has relaxed its policy and begun to allow the enrollment
broker to participate in community meetings.
LIMITED FEDERAL GUIDANCE ON
EDUCATION AND ENROLLMENT
FUNCTIONS
---------------------------------------------------------- Letter :5.5
HCFA's oversight of California's education and enrollment functions
has consisted primarily of reviewing and approving the state's waiver
application to implement its mandatory managed care program and
conducting preimplementation reviews in each county. As of August
1997, few federal guidelines existed for states to use for their
process of educating Medicaid beneficiaries and enrolling them in
mandatory managed care programs--two relatively new functions for
states.\28 In addition, guidelines did not exist for contracting out
these functions. With such guidance, some of the problems that
California experienced in expanding its Medi-Cal managed care program
might have been avoided.
HCFA is in the process of developing guidelines to assist states with
designing and implementing an effective education and enrollment
program, including contracting with enrollment brokers--an increasing
trend. Earliest issuance of these guidelines was projected for
October 1997.\29
--------------------
\28 HCFA has issued guidelines to assist states in developing
Medicaid managed care marketing standards, which could be applied
broadly to the education process. Specifically, federal regulations
require that states' contracts with health plans specify the methods
by which the plans will ensure that marketing plans, procedures, and
materials are accurate and do not mislead, confuse, or defraud
beneficiaries or the state.
\29 HCFA developed the guidelines with input from selected states; an
expert researcher; a review of reports from the National Academy for
State Health Policy and GAO; review of states' requests for proposals
and contracts; and information from advocacy groups, trade
organizations, and the managed care industry.
SOME SAFETY-NET PROVIDERS ARE
ENCOUNTERING DIFFICULTIES
------------------------------------------------------------ Letter :6
An expressed objective of the two-plan model was to protect existing
health care safety nets in the new competitive environment of managed
care. Safety-net providers--such as federally qualified health
centers, and community and rural health centers--provide health care
services to the medically indigent. However, while the two-plan
model provides some assurances that plans will assign beneficiaries
to safety-net providers, it does not guarantee that these providers
will receive a specified level of enrollment, nor can it guarantee
that they will maintain their enrollments. Some providers have
reported that they are having difficulty operating under the two-plan
model, especially in maintaining their former patient base.
The two-plan model has several provisions and incentives aimed at
protecting safety-net providers. The model's local initiative
arrangement enables counties to develop a plan that reflects local
needs and priorities and includes county-operated health facilities.
Once developed, the local initiative must contract with any
safety-net provider that complies with the local initiative's
specific requirements and standards and accepts the rates offered.
Although commercial plans are not required to contract with
safety-net providers, they were awarded extra points during the
evaluation process for the extent to which their networks included
safety-net providers. The model also requires that automatic
assignments be made to the local initiative until preestablished
minimum enrollment levels are reached. In addition, the local
initiatives and commercial plans are required to ensure--to the
maximum extent possible--that existing patient-physician
relationships are maintained. Furthermore, the local initiative must
develop a process that "equitably assigns" to safety-net providers
those beneficiaries who do not choose a primary care provider;
similarly, the commercial plan must develop a process that
"proportionately" assigns such beneficiaries.\30 According to DHS, it
did not require plans to assign a specific number of beneficiaries to
safety-net providers because federal law requires states to ensure
that beneficiaries have a choice of providers.
Despite these protections, an initial assessment of the two-plan
model's impact on safety-net providers suggests that some are
experiencing difficulties, especially in maintaining their levels of
enrollment. According to the state and HCFA, a couple of factors
have affected safety-net providers' enrollment bases. Beneficiaries
in managed care are required to designate only one provider as their
primary care physician, although they may have visited more than one
provider in fee-for-service care. Consequently, some safety-net
providers say that they have seen fewer beneficiaries under the
two-plan model. However, many beneficiaries who choose a provider
are not choosing safety-net providers, and many who are assigned to
these providers disenroll. HCFA has reported that in Los Angeles
County, 12,600 beneficiaries--or 70 percent--who had been assigned to
a safety-net provider chose to disenroll within 5 days.
The two-plan model does not prescribe, other than in general terms,
how plans are to assign beneficiaries to individual providers.
However, a number of plans favor safety-net providers in their
assignment methodology. One plan had designed a four-tier assignment
methodology that gives priority to contracted safety-net providers
and other providers that have at least a 50-percent Medi-Cal
enrollment base. Another plan seeks to maintain a 60/40 assignment
ratio, with approximately 60 percent of beneficiaries assigned to
private providers and the remaining 40 percent assigned to county and
community clinics.\31
--------------------
\30 "Proportionately" means that the number of enrollees assigned
should approximate the proportion that the providers represent in the
network. For example, if the safety-net providers represent 20
percent of a plan's network, they should receive approximately 20
percent of beneficiaries.
\31 According to a plan representative, the actual assignment ratio
is closer to 70/30, since an average of 80 percent choose their
provider, leaving few beneficiaries for the plan to assign--only
1,500 over the last 5 months.
STATE ASSESSING SAFETY-NET
ISSUE AND TAKING SOME STEPS
TO ASSIST PROVIDERS
---------------------------------------------------------- Letter :6.1
The state has begun to assess measures that could be taken to assist
safety-net providers and has taken action in one county. To reduce
the number of beneficiaries assigned by plans away from their
safety-net providers, the state planned to provide information on
beneficiaries' last provider of record to plans beginning August
1997. With this information, plans could assign the beneficiary to
that provider if the provider was part of the plan's network.
Safety-net providers in Fresno County were particularly concerned
about their viability since the county's two-plan model did not
include a local initiative. An agreement was reached between the
state, providers, and the two commercial plans that addressed some of
the short- and long-term concerns of these safety-net providers. For
example, the two plans agreed to assign all state-assigned
beneficiaries who had not designated a primary care physician to a
safety-net provider. Over the longer term, a special team composed
of state, plan, and provider representatives will be established to
oversee the implementation of managed care in Fresno County.
CONCLUSIONS
------------------------------------------------------------ Letter :7
California's expansion of its Medi-Cal managed care program is
currently the largest effort of its kind in the nation in terms of
the number of beneficiaries involved. Although California invested
nearly 5 years in both conceptual and implementation planning of its
two-plan mandatory program, implementation has not been smooth. Many
of the circumstances that contributed to implementation problems were
within the state's control, while others were not. For example, the
timing of the transition from one enrollment broker to another
undoubtedly contributed to the implementation delays and
difficulties. Had the transition not occurred in the midst of the
two-plan implementation in several counties, some problems might have
been less severe.
Many of the problems that occurred in implementing the new mandatory
program were foreshadowed by the state's earlier efforts to implement
managed care. These earlier problems--documented in prior
evaluations by other organizations--should have convinced the state
that many of its policies and procedures needed retooling. The state
is now taking certain actions to improve the program, but many are
too late to benefit those beneficiaries already enrolled in the seven
counties where implementation has been completed.
HCFA's preimplementation reviews enabled HCFA to identify problem
areas in California's implementation of its two-plan model; the
reviews did not, however, always result in immediate improvements.
At the same time that DHS was attempting to address these problems,
managed care plans were exerting pressure to push ahead with program
implementation since their large investments--and financial
viability--were dependent on receiving enrollments and associated
revenues according to set time frames. As a result, while HCFA
identified the need for significant improvements, it did not halt
program implementation to effect such changes. HCFA also did not
have sufficient written guidance in place to assist the state in
developing and implementing its program.
Despite these delays and difficulties, California's experience can be
instructive for other states as they develop, expand, or adapt their
mandatory Medicaid managed care programs. Specifically, California's
experience points to several potential lessons learned:
-- Incremental implementation allows for adjustments and
improvement. Simultaneous or quick-succession implementation in
multiple areas does not give sufficient time for program
modifications when unforeseen problems arise.
-- Sufficient staff--including individuals who have expertise in
managed care program design and implementation--are needed to
conduct program activities. Of particular importance are
systems analysts and contract specialists.
-- Stakeholder and community input and involvement, sought early
and often, can contribute significantly to effective education
and enrollment processes and problem resolution.
-- Effective monitoring systems, including adequate management
information and reporting, can ensure accountability for program
operations--especially if there is heavy reliance on a
contractor for integral parts of the program. Including
performance standards for key areas of operation in enrollment
broker contracts and tying these standards directly to broker
payment might help to ensure maximum contractor performance.
RECOMMENDATION
------------------------------------------------------------ Letter :8
To help states design and implement Medicaid managed care programs
that ensure beneficiaries who enroll--especially those who are
mandated to do so--are able to make an informed choice in selecting a
plan, we recommend that the Secretary of Health and Human Services
direct HCFA to promptly finalize guidelines for developing and
operating an education and enrollment program. To help ensure
accountability, these guidelines should include considerations
regarding appropriate performance standards and measures and
monitoring mechanisms, especially when a state contracts out these
functions to an enrollment broker.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :9
We provided a draft of this report to the Administrator, HCFA;
Director, California DHS; and officials of Benova and Maximus, the
former and current enrollment brokers. Each entity provided
technical or clarifying comments, which we incorporated as
appropriate.
HCFA concurred with our recommendation and stated it is working to
finalize its education and enrollment guidelines. For example, it
sponsored a joint industry and Medicaid managed care meeting in
September to discuss the draft guidelines. HCFA did not, however,
indicate a target date for finalizing the guidelines. HCFA's
Administrator stated that, because the guidelines are not
requirements, it is important to take the necessary time to reach
consensus on them in order to obtain necessary buy-in and endorsement
from those affected in order to give the guidelines credibility and
acceptability.
DHS agreed with our conclusions and recommendation, saying that the
state has already adopted or is working toward implementing the
lessons learned that were outlined in the conclusions. It
acknowledged that there have been problems associated with
California's transition to managed care for its Medi-Cal population
and emphasized its efforts to address these problems in partnership
with HCFA, plan partners, medical providers, and advocacy groups;
however, the state was concerned that the report did not sufficiently
acknowledge its efforts in this regard. DHS provided to us
additional information on its efforts to be responsive to identified
problems, which we incorporated where appropriate. In terms of the
evidence and findings presented in the report, DHS questioned the
objectivity of information obtained from some sources, such as some
contracted health plans and the former enrollment broker, with whom
the state is involved in formal contract disputes or litigation.
Being aware of these ongoing disputes and litigation during the
course of our work, we were sensitive to the use of information
obtained from all affected parties. In this regard, we either
corroborated the testimonial evidence we obtained with independent
sources or clearly attributed the information to its source in the
report.
Both Benova and Maximus generally concurred with our findings.
Benova provided additional information on several findings in order
to more fully explain its relationship with the state and the
resulting impact on Benova's performance. For example, Benova
contends that its contract was not adequately funded to fulfill the
enrollment contract functions. We chose, however, not to include
these additional details because of ongoing litigation between the
two parties. Maximus generally agreed with our assessment of the
program and implementation issues. Despite the difficulties cited in
the report, Maximus believed that it has gained sound administrative
control of the basic enrollment processes, such as the call center
operations, the enrollment process, and the computer system
operations. While Maximus endorsed holding all program participants
accountable, it emphasized that establishing standards for functions
that are not entirely within its control can be
problematic--especially when these functions are tied to payment.
Maximus added that the California experience has served as an
important learning opportunity in its role as enrollment broker in
other states.
---------------------------------------------------------- Letter :9.1
As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this report until 30 days
after its issuance date. At that time, we will send copies to the
Secretary of Health and Human Services; the Administrator, HCFA; the
Director, California DHS; and interested congressional committees.
Copies of this report will also be made available to others upon
request.
If you or your staff have any questions about the information in this
report, please call me or Kathryn G. Allen, Acting Associate
Director, at (202) 512-7114. Other contributors were Aleta Hancock,
Carla Brown, and Karen Sloan.
Sincerely yours,
William J. Scanlon
Director, Health Financing and
Systems Issues
SCOPE AND METHODOLOGY
==================================================== Appendix Appendix
To determine the status of California's expansion of its Medi-Cal
managed care program and identify potential reasons for delays in
implementing the two-plan model, we interviewed officials from the
California Department of Health Services (DHS) and reviewed their
implementation schedules--the initial schedule and subsequent
updates--for the two-plan model. We also interviewed Medicaid
officials in HCFA's region IX office in San Francisco and examined
their preimplementation reviews, which are conducted in each affected
county to determine the state's readiness to implement the two-plan
model in that county.
To identify the state's efforts to educate Medi-Cal beneficiaries
about managed care and enroll them into one of the state-contracted
plans, and to evaluate its management of the education and enrollment
process, we interviewed DHS and HCFA region IX officials and obtained
and reviewed relevant state law, regulations, policies, and
procedures; the state's strategic plan for expanding its Medi-Cal
managed care program; the state's two-plan model waiver application
submitted to HCFA; Health Care Options (HCO) program documents,
including enrollment materials; minutes from DHS' Policy and
Transition Workgroup meetings; HCO's problem log; enrollment broker
contracts and the 1995 Request for Proposal; HCO management reports,
including monthly enrollment summaries; and HCFA's preimplementation
reviews. We also interviewed officials from two commercial and four
local-initiative health plans that served 11 of the 12 two-plan
counties; Benova, Medi-Cal's previous enrollment broker, and Maximus,
its current enrollment broker; and advocacy and consumer groups. We
reviewed documents obtained from these officials, including minutes
from the California Alliance of Local Health Plan Enrollment
Workgroup meetings and written testimony of some stakeholders on the
implementation of the two-plan model provided in February 1997 before
the California state legislature. We also reviewed reports by
Mathematica Policy Research, Inc., and the Medi-Cal Community
Assistance Project that discussed issues and concerns about DHS'
expanded program.
To evaluate the state and federal oversight of California's
enrollment broker, we obtained and analyzed California's past and
current enrollment brokers' contracts and amendments. To obtain
detailed information on specific DHS activities to monitor enrollment
broker performance, we interviewed DHS and HCFA region IX officials.
We also visited Maximus' administrative office, which houses its
systems operations and call center, and one of the subcontracted mail
facilities to observe broker operations. At these facilities, we met
with DHS and Maximus officials to discuss oversight activities and
broker operations. We also reviewed program information generated by
Maximus. To identify federal monitoring of contracted enrollment
broker functions and guidance for states to use in monitoring
contracted enrollment broker activities, we met with officials in
HCFA's Baltimore Office of Managed Care and region IX Medicaid
officials. In addition to reviewing HCFA's guidelines for state
compliance with federal regulations on Medicaid managed care
marketing, we obtained and reviewed HCFA's "Managed Care
Pre-Implementation Review Guide" and its draft guidelines to states
for enrolling beneficiaries in managed care programs.
To make an initial assessment of the two-plan model's impact on
safety-net providers, we interviewed officials from DHS, HCFA, and
two commercial and two local initiative plans. We also reviewed the
state's strategic plan, which discusses how safety-net providers
would be included under the two-plan model; state requirements for
assigning beneficiaries to plans; and selected plan assignment
methodologies. In addition, we reviewed reports by the Medi-Cal
Community Assistance Project and Mathematica, which examined the
experiences of some safety-net providers.
We performed our work between January and August 1997 in accordance
with generally accepted government auditing standards.
*** End of document. ***