Assembly Budget Subcommittee No. 1 on Health and Human Services Informational Hearing: State and Community Perspectives on Gaps and Opportunities in Health and Human Services

The Assembly Budget Subcommittee No. 1 held its first informational hearing on “State and Community Perspectives on Gaps and Opportunities in Health and Human Services” on February 16, 2015. Assemblymember Tony Thurmond, the new Chair of the Subcommittee, convened the hearing to discuss issues that are likely to receive a lot of attention in this year’s budget process. They include developmental disabilities, health, and child welfare.

Dr. George Flores, the California Endowment’s Program Manager for Prevention, testified about investing in prevention as both an opportunity and gap in health care policy. Americans, compared with other countries, spend far more for health care and have poorer health outcomes. To be healthier and reduce spending, we need to expand our focus and address how to stay healthy in the first place. Our greatest opportunity is to invest in prevention, particularly the prevention of noncommunicable, preventable, chronic health conditions that comprise the greatest share of healthcare spending. For example, reducing and limiting smoking in California has led us to save money and save lives.

Because our health largely depends on conditions where we live, learn, work and play and not just on the medical treatment we receive, investing in prevention means addressing disadvantages and social determinants of health. We should focus our resources on prevention, which includes investments in our safety net and infrastructure. Dr. Flores emphasized that we need a collaborative approach to improving the health of all people by incorporating health considerations into decisionmaking. This effort will require collaboration by people across different sectors – government, businesses, community organizations, and individuals—to consider how decisions can affect health. We need to view our decisions affecting education, environment, and communities through a health lens. Investing resources in creating greater social and economic equity will lead to better health.

Jennifer Kent, Director of the Department of Health Care Services (DHCS), shared her thoughts on the opportunities and gaps in Medi-Cal program. She sees 2015 as the year we take a “deep breath” after everything we did to implement the basic provisions of the ACA. Kent said California is a state that has “leaned in” to the ACA, went into it “with our whole heart.” Our Medi-Cal program now supports 12 million Californians and covers half of the births in California. The system provides mothers and children with quality care and check-ups.

Kent said the renewal of the California’s 1115 waiver is a big opportunity in health policy, and it’s the story that we (the state) tell the federal government: “Let California flex and bend the rules, we’d like to do something different, and here’s what we’d like to do.” The previous 1115 waiver gave us $10B to help us get ready to implement the ACA. The new waiver, Kent said, will take us to the next frontier. Individuals that utilize multiple systems should not be treated in a silo, and the waiver will test new approaches to invest in and demonstrate new and exciting ways to pay for and deliver care.

Kent identified the Managed Care Organization (MCO) tax as a gap that needs to be addressed. The MCO tax draws down critical federal dollars to support the Medi-Cal program. The Governor’s budget includes a proposal that conforms with federal requirements to make the tax more broad-based. The Department plans to work with health plans on this issue, which will create a big gap in the budget and the program if it is not resolved.

DHCS will continue monitoring Medi-Cal managed care to make sure beneficiaries are getting access to care at the right time and the right place. This includes ensuring there are enough providers to serve beneficiaries and meet timely access requirements. DHCS is also implementing Medi-Cal quality monitoring measures, and Kent believes what we’re doing today will make California a national leader because no other state is doing what we’re doing. DHCS will continue working with its county partners to improve systems and automation issues for Medi-Cal enrollment. The IT system we have now, Kent said, “is not perfect” and there are refinements that need to be made to make the state and county systems work better (CalHEERS).

After the formal presentation, there was discussion about a couple issues on the minds of legislators:

Public hospitals: Assemblymember Thurmond expressed concerned about hospitals facing financial trouble, particularly Doctors’ Hospital in his district.

Director Kent stated the 1115 waiver will help us to work with hospitals to move from a cost-based payment approach to a payment mechanism that encourages hospitals to do things that encourage better behaviors, improve health and require fewer medical interventions.

Medi-Cal Provider Reimbursement Rates: Assemblymember Bonta expressed hope that we will make some progress on rates this year. He asked Director Kent what are the hurdles and obstacles to increasing provider rates? Kent explained that we have two systems in Medi-Cal: managed care and fee for service (FFS). 75 percent of Medi-Cal beneficiaries are served in managed care, and rates in managed care, which are actuarially sound, are not tied to the FFS structure.

With regard to FFS provider rates, Kent said the Department can provide technical assistance to the Legislature and the Governor’s office and help folks understand needs to be incentivized or what access problems might need to be addressed. Kent said any increase in Medi-Cal, given the 3 million people in FFS, will build onto the base on an-going basis and add up quickly.

Assemblymember Bonta then asked if there is an informal connection between FFS rates and managed care rates? Would financial models change if the FFS rates increased? Kent said if FFS rates were dramatically increased for a provider (like non-emergency medical transportation), then you might have an indirect effect where providers might ask managed care plans to increase their rates. But that scenario would only occur if the FFS rate increase is significant enough to create the cost pressure.

Assemblymember Bonta then asked what tangible steps could be taken to increase access to Medi-Cal. Director Kent said the fundamental problem with a FFS system is there is no way to examine data and problems. The system shows a payment was made, but doesn’t tell you how many patients the physician sees, and whether they produced quality outcomes. On the managed care side, we have information about encounter data and quality measures, which helps us know whether there is adequate access.

Dr. Flores said we need to test payment reform models to show us whether there are other things we can do other than FFS. With payment reform, we can make payment for value, not payment for individual service. One model is a health home where a team approach is used to help patients get well and stay well. Another model is accountable communities for health, where community providers and members are engaged to bolster health and wellness around the patients. Dr. Flores said these different payment arrangements are what will make a difference in the long run, not FFS rates.

The Budget Subcommittees begin formal hearings on the budget next week. Health Access will provide updates on this blog.