Auditor's Report Shows 'Symbiotic Relationship' in Medi-Cal Managed Care

The seeming reluctance by state officials to closely monitor Medi-Cal managed care plans is troubling, said Gerald Kominski, director of the UCLA Center for Health Policy Research.
Reacting to a June report from the California State Auditor’s office that criticized the Department of Health Care Services for lax oversight of Medi-Cal managed care plans, Kominski said the report illustrates an interesting dynamic between the private managed care insurers and the public agency officials who depend on those plans to care for most of the 12.3 million Californians on Medi-Cal.
“The dynamic is that, in this market, there’s an implicit understanding that the state isn’t going to be too demanding in terms of data reporting, because they don’t want to alienate the relatively small number of players in the market,” he said.
The state needs costs contained, Kominski said, and that may sometimes be at odds with the public directive to ensure timely access to high-quality care.
“There may be a recognition that you won’t pressure us too much on performance and we won’t pressure you too much on price,” Kominski said. “It’s a symbiotic relationship.”
The audit found multiple inaccuracies in provider directories and said DHCS can’t actually determine if provider networks are adequate because it hasn’t verified plan data. Patient access to care may be compromised by a lack of monitoring, the audit said, and complaints haven’t been handled properly.
Department officials acknowledged the discrepancies and agreed with most of the audit’s recommendations. Some of the issues raised had already been targeted internally for review by the department’s new director.
The state’s move to Medi-Cal managed care is nearing completion. About 10 million of the state’s 12.3 million Medi-Cal recipients now are in managed care. Overall, about one-third of the state’s population is receiving Medi-Cal benefits, including half of California’s children.

‘Still a Mystery What’s Going On’

Because it coincided with the announcement of a deal on the state budget, some legislators may have missed the release of the Medi-Cal managed care audit, said Wendy Lazarus, co-president of The Children’s Partnership, a national children’s health advocacy group based in Santa Monica. The audit findings came out on June 16, the same day the 2015-16 budget agreement was reached between the Legislature and the governor.
That doesn’t make it any less important, she said.
“The audit is a loud cry out that it’s still a mystery what’s going on in Medi-Cal managed care in terms of availability of providers,” Lazarus said. “And that’s just unacceptable, when half of California’s kids are on Medi-Cal.”
Jennifer Kent, who became director of the Department of Health Care Services at the start of 2015, said in an email that she agreed with much of what was in the auditor’s report, that it was in line with many efforts already underway to sharpen monitoring and accuracy of data.
“[The department] agrees with many of the state auditor’s recommendations, and we have already begun work to implement new processes that enhance our monitoring and certification processes,” Kent wrote. “The input from the California State Auditor will supplement the oversight actions we currently apply…. The CSA audit, however, targeted only a small portion of the department’s comprehensive efforts to certify and monitor health plans.”
Lazarus said Kent’s approach is heartening and hopeful.
“It is refreshing to see the new director is taking these findings seriously and getting to the bottom of it and doing something about it. Aggressive responses are certainly what this audit calls for,” Lazarus said.

Auditor’s Findings

Specifically, the state auditor found that:

  • DHCS officials have not verified health plan data and can’t determine whether adequate provider networks exist;
  • DHCS hasn’t verified the accuracy of the provider network data it gets from Medi-Cal managed care plans, even though it passes that information to the Department of Managed Health Care for the state’s network adequacy assessments;
  • Provider directories were inaccurate and the department’s review of those directories is inadequate and inconsistent;
  • The department’s ombudsman office, which handles Medi-Cal managed care complaints, is not equipped to handle the calls it receives;
  • The department has not adequately monitored health plans to make sure Medi-Cal patients’ needs are being met;
  • DHCS did not perform annual medical audits before 2012 and performed audits on less than half of the health plans in fiscal year 2013-14;
  • The department failed to get quarterly assessments from the DMHC on provider networks; and
  • Neither DHCS nor DMHC collaborate enough on overlapping work efforts.

“The audit was quite critical, and appropriately critical,” Kominski said. “You want these programs to have accountability and transparency. You have to make sure plans are doing a good job. If they take the money and don’t report back adequate data, I find that troubling.”
Kent generally agreed with the audit recommendations, save the one to increase oversight of DMHC’s quarterly assessments. Network monitoring, Kent said, is a vital component of the state’s move to managed care.
“Our processes also include network monitoring through secret shopping, network validation through analysis of data on providers, capturing data to verify timely access and continuity of care, access to appeals and State Fair Hearings, monitoring of transitions of members into care and when they change plans and others,” Kent said. “The results of many of these monitoring efforts are published in our quarterly Medi-Cal Managed Care Performance Dashboard.”
She said the department also intervenes and helps health plans remain compliant when a plan’s network drops below the proper provider-to-member ratios.
“We are committed to strong monitoring and oversight of our managed care health plans to ensure health plan network adequacy,” Kent said. “The expansion of Medi-Cal through the Affordable Care Act makes it more important than ever that we constantly evaluate our processes and our performance so that the millions of members enrolled in Medi-Cal managed care health plans can receive the services they need and deserve.”

Public/Private Dynamic

Keeping costs down is not a bad thing, Kominski said. It’s clearly not a direct goal of DHCS officials, who are charged with providing care for a large chunk of California’s population. The cost concerns likely come from the Legislature and the governor — and ultimately from taxpayers, Kominski said.
“It’s understandable taxpayers might be less concerned about health plans’ performance indicators [under Medi-Cal managed care] and more concerned about how much it costs,” Kominski said. “With this administration, it does feel like the focus has been on keeping expenditures under control.”
The real concern, he said, is that the lack of transparency and plan accountability might be a trend. He pointed out that health plans have the performance and access data, they just need to release it.
“This isn’t brain surgery. This isn’t rocket science,” Kominski said. “It’s simple bookkeeping.”
The political policy term for this dynamic, he said, is “regulatory capture.”
“It’s when an agency is serving the industry they’re supposed to regulate,” Kominski said. “The question is, do they exert that [regulatory power]? Are they keeping [health plans] in line? Or are they constantly backing off?”
In the Medi-Cal managed care model, he said, “The basic economics are, you have a single buyer and a few large suppliers. So in terms of market power, the state should have the edge.”
The trouble is, the state has historically tried to keep Medi-Cal enrollment broad and inclusive, Kominski said, and with that many people getting services from the state, the cost just keeps rising. And even though the sheer number of beneficiaries is appealing to insurers, the Medi-Cal population comes with a large share of problems.
“Firms aren’t killing to grab a share of that market,” Kominski said. “At the low end, it’s a difficult population to serve. So the fact there’s a network at all to serve this low-income population, the state may have an implicit agreement to not hold them to too high a standard.”