Major Medi-Cal changes raise questions

Changes include more seniors being routed to managed care programs, a reinvention of how hospitals are paid and the collapse of two state agencies that currently serve beneficiaries.

On Friday, the nonpartisan Legislative Analyst's Office cautioned against Gov. Jerry Brown's plan to rapidly expand a pilot project that places patients who rely on Medi-Cal and Medicare into managed care programs. The pilot also would affect Medi-Cal beneficiaries with disabilities. Both groups include about 1.9 million people, the analyst's office estimates.

The governor's office estimates that the change would improve care and save the state $679 million this year. It estimates the savings would total $1 billion in future years.

The analyst's office urged lawmakers to reject a "premature" statewide expansion of a four-county pilot project that puts high-needs patients in managed care.

"We recommend the Legislature reject the governor's proposal to expand the demonstration statewide before the results from the demonstration have been properly evaluated, but proceed instead with the four-county demonstration," the legislative adviser said.

During a legislative hearing on another matter yesterday, lawmakers heard testimony about plans to collapse most functions of state mental health and alcohol and drug departments into the Department of Health Care Services, the agency that oversees Medi-Cal.

Toby Douglas, director of the Department of Health Care Services, said the change would be a great opportunity. He said it would eliminate a "silo" approach and integrate physical, mental and drug rehabilitation treatments.

Douglas said the change also would bring California in line with the goals of federal health reform, which aims to encourage health providers to approach patients with physical and mental health needs in mind.

Some patient advocates who testified during the hearing criticized the plan as one that simply moves deck chairs around without cutting state costs. Others said it reduces the visibility and accountability of mental health and substance abuse treatment.

Dr. David Pating, co-chairman of the California Coalition for Whole Health, which coordinates several trade and advocacy groups, said the proposal was based on good ideas, but is coming at a time when too many other major changes require scrutiny.

Rose King, a former legislative aide and mental health advocate, pointed out that oversight of the Proposition 63 "millionaire's tax" ballot initiative meant to fund mental health has not been properly overseen.

King said the proposed changes would not help matters and urged lawmakers to review the ballot initiative that voters approved in 2004, saying lawmakers "still have

an obligation to meet what was voted for."

On Friday, a joint hearing of the Senate and Assembly health committees will convene in Los Angeles to hear testimony about another major change the Medi-Cal program faces.

A law passed in 2010, SB 853, transforms the way [PDF] hospitals will be paid for treating Medi-Cal beneficiaries. Currently, hospitals negotiate flat daily rates with the California Medical Assistance Commission or, if they don't have a contract, are paid through formulas.

The new system would be modeled after the way Medicare pays hospitals based on how sick patients are. The system is called a DRG, or diagnosis-related group, payment system.

California Watch has reported extensively about billing practices by Prime Healthcare Services, a Southern California-based hospital system, under Medicare's DRG system. The chain has reported seeing high rates of rare and dire conditions that also generate lucrative bonus payments.

Prime has said its billing is appropriate. Michael Sarrao, Prime's vice president and general counsel, is expected to testify.

Story courtesy of our media partners at California Watch (A Project of the Center for Investigative Reporting)

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