Moving Medi-Cal Forward

California is a national leader in extending Medicaid to low-income people. But the program has not kept pace with dramatic changes in the Medi-Cal population, according to a report by the California Health Care Foundation (CHCF). Medi-Cal is now the largest single source of health insurance in the state. But Medi-Cal has also become a complex patchwork due to the its relationship with the counties, how care is delivered and financed, marketplace developments, and multiple initiatives that have been adopted throughout the years. This patchwork has had mixed results in quality of care, access to care, care coordination, and patient satisfaction. California is looking to reforms to drive timely access to high quality, coordinated, and cost effective care. The Affordable Care Act (ACA) has triggered a shift toward value-based purchasing in the commercial marketplace as well as in Medicare and Medicaid. These reforms are challenging in any environment, but the structural underpinnings of California’s Medicaid program make such changes all the more difficult to address.

Medi-Cal has accomplished a great deal in a short time, including a significant expansion of coverage, and important delivery system innovations in communities throughout the state. With Medi-Cal’s expanded role and the new Medi-Cal 2020 waiver recently launched, there is an extraordinary opportunity to reform the delivery system. To do so, California needs a plan to deliver better care and promote better health. The California Health Care Foundation (CHCF) retained Manatt Health to consider the current state of the Medi-Cal program and delivery reform, focusing particularly on Medi-Cal managed care.

Many states are developing ways to reform their Medicaid care delivery systems. For example, Oregon established locally driven regional coordinated care organizations, which bear full risk and are considered managed care organizations under federal rules. They have flexibility in designing their systems of care and, to some degree, choosing the services they will provide while meeting statewide quality and cost metrics. Massachusetts and New York are moving to require health plans to contract with accountable-care organizations or adopt alternative payment methods with a large portion of their providers. Colorado does not rely on managed care plans, but contracts directly with accountable care organizations. To get the report, “Moving Medi-Cal Forward on the Path to Delivery System,” visit

Insurance Regulation Shifting Toward Managed Care Agency


by David Gorn
The regulation of health insurance in California is shifting dramatically toward the Department of Managed Health Care, whose share of the commercial market has mushroomed in recent years. The change has come at the expense of the other agency in the state’s unusual bifurcated system, the California Department of Insurance, whose authority over commercial health plans plummeted from 20% of the market to about 12% between 2012 and 2014 — the most recent data available.

For a variety of reasons, the shrinking of the insurance department’s responsibilities is likely to continue, according to Katherine Wilson, CEO of Wilson Analytics, a health care consulting firm based in San Francisco. “It’s a huge shift, particularly in the individual market,” Wilson said. “And the change in the small-group market is huge too, just not as big.” In 2012, the insurance department regulated 71% of the individual market; by the end of 2014, that figure had plunged to just 18%. California is the only state in the U.S. with dual health insurance regulators.

Critics of the state’s divided approach note that it dilutes regulatory power by giving the insurance companies a wedge between the two agencies and creating needless inefficiencies in health care and how it’s paid for become increasingly complex.

“This dual structure contributes to consumer confusion, government and insurance carrier administrative burdens, and difficulty in monitoring what is being bought and sold in the insurance marketplace,” according to a 2011 paper by the Kelch Policy Group, published by the California Health Care Foundation. It also complicates the taxation of insurance companies: taxes on health plans regulated by the managed care agency are lower in many cases than they’d be if the same health plans were governed by the insurance department — an issue that is wending its way through state courts.

The Department of Insurance, led by Commissioner Dave Jones, has authority over old-fashioned indemnity plans and some PPOs. The managed care agency traditionally regulates HMOs, but recently it has picked up some types of PPOs. That has blurred the regulatory line between the two agencies. Perhaps more important, it has allowed some insurance companies the flexibility to essentially choose their regulator in many cases. That is a contributing factor in the shift of health plan supervision away from the insurance department.

Health insurers have said that consolidating policies under DMHC’s jurisdiction is more about achieving operational efficiencies and that the regulatory requirements are just as rigorous as insurance department rules.

But it’s also the case that some insurers feel uncomfortable with Jones, who is an elected politician with ambitions for higher office and does not shy away from public confrontation with the industry -– though as the data show, his influence over insurance companies is contracting.

Shelley Rouillard, appointed by Gov. Jerry Brown, has been director of the managed-care agency since December 2013. She has pursued several high-profile enforcement cases against health plans, including the failure to provide adequate mental-health treatment and giving patients inaccurate provider directories.

Neither agency, however, has the power to stop insurers from raising premiums, no matter how large the increases. Legislative efforts have been made to change the regulatory structure. Last session, for example, Assembly member Kevin McCarty introduced a bill that would have put all PPO insurance products under purview of the Department of Insurance. That proposal went nowhere, but it is a two-year bill so it could return during the legislative session. More likely, the Department of Managed Health Care will continue to assume a growing regulatory role, Wilson said. Over the years, there have been calls to end California’s bifurcated health insurance regulation, but if the trend continues it may resolve itself, she said. “It would be sort of a de facto single regulator.”

How Major Players Are Driving Regional Networks

healthcare copyFollowing implementation of the Affordable Care Act, large players are consolidating the control of hospitals and physician organizations in the San Francisco Bay area, according to a recent report by the California HealthCare Foundation (CHCF).

In a region with many segmented submarkets, major providers are expanding to manage care efficiently, serve more patients, and compete with Kaiser Permanente. The number of independent hospitals is shrinking as financial problems mount. Independent practice associations are seeking to diversify, raise capital, and keep private practice viable, especially for primary care physicians. Though none of the region’s remaining private safety-net hospitals appear threatened by imminent closure, several face an uncertain future. The safety net is strong, but faces capacity and access challenges resulting from Medi-Cal expansion. Safety net providers are particularly hampered by their limited ability to recruit and retain clinicians. For more information, visit

Premium Growth Slows in California’s Individual Market Following ACA Implementation

Premium Growth Slows in California's Individual Market Following ACA Implementation

Premium rate growth for health plans sold in California’s individual market has slowed since the Affordable Care Act (ACA) and Covered California, according to a report by the California HealthCare Foundation (CHCF). The report is based on a review of insurers’ rate renewal filings from 2011 to 2016. With CHCF’s new interactive tool, users can see how premium rate increases in the individual market have changed over time. The following are key findings:

  • The median rate increase was 6% in 2015 and 3.8% in 2016, lower than the median increases of 8.2% to 10% from 2011 to 2013.
  • A similar trend was also found among increases for filings affecting 25,000 enrollees or more.
  • Three-quarters of enrollees in 2015 and 2016 were in plans that filed increases of 6% or less compared to 9% or less in 2012 and 19.4% or less in 2013.

The Impact of Health Reform in California

A survey by The California HealthCare Foundation (CHCF) finds improvements in access to care in California. The uninsured rate is at a new low, and fewer Californians are delaying or skipping necessary medical care. The number of Californians under 65 without insurance dropped 12%, falling from 16% of the population in 2013 to 14% in 2014. Uninsured rates declined notably among people living below 138% of poverty line and among African Americans. The share of the California population 18 to 64 enrolled in Medi-Cal rose 52%. The proportion of uninsured Californians reporting cost as the reason for lacking coverage fell from 53% to 43%, though lack of affordability remains the most common reason cited for going without insurance.

Medi-Cal Is Bracing for an Enrollment Boom

By the end of 2015, the Affordable Care Act will add more than two million enrollees to Medi-Cal, according to a report by the California Health Care Foundation. However, Californians are likely to have a hard time getting health care through Medi-Cal unless the number of participating physicians grows or California finds other ways to deliver services. Medi-Cal enrollees face significant challenges due to statewide variations in physician availability. The survey also finds the following:

• Their are 35 to 49 Medi-Cal primary care doctors to 100,000 enrollees, which is well short of the 60 to 80 that the federal government says are needed. There are 68 to 102  non-primary physicians Medi-Cal to 100,000 enrollees, which is within the federal estimate of need (85 to 105 per 100,000).
• 69% of all physicians have Medi-Cal patients; 77% have Medicare patients; and 92% have privately insured patients.
• Physicians in community health centers and public clinics have the highest rate of Medi-Cal participation at 92%, and those in solo practice have the lowest at 54%.

To get the report, visit

CHCF Explains Medi-Cal Estate Recovery

The California Health Care Foundation issued a brief explaining estate recovery rules for people with traditional Medi-Cal and people with expansion Medi-Cal under the Affordable Care Act (ACA). The tables below provide an overview:

Estate recovery for people under 55
• Under expansion Medi-Cal, never.
• Under traditional Medi-Cal, yes for all Medi-Cal costs if the beneficiary institutionalized and not expected to return home.

Estate recovery for people over 55
• Under expansion Medi-Cal, yes for all Medi-Cal costs except personal care services provided under the In-Home Supportive Services program (IHSS).
• Under Traditional Medi-Cal, yes for all Medi-Cal costs except personal care services provided under IHSS.

Home Liens During the Life of the Beneficiary
• Under Expansion Med-Cal, never.
• Under Traditional Medi-Cal, yes for all Medi-Cal costs if the beneficiary is institutionalized and not expected to return home.

Most Medi-Cal beneficiaries get care through Medi-Cal managed care, with the state paying a capitated payment to a health plan. California calculates recovery amounts based on the state’s capitation payments for those in traditional or expansion Medi-Cal. In most cases, the actual costs of services are not part of the calculation. So a person who rarely visits a doctor would be liable for the capitation amount for all months of Medi-Cal enrollment.

State and federal policymakers are reviewing the rules due to concerns that estate recovery is hindering expansion Medicaid enrollment. What is is unlikely to change soon is the federal requirement that states must attempt to recover Long-term Support Service costs for people 55 and older . However, CMS has signaled its desire stop allowing states to recoup all Medicaid expenses for this population, not just those for Long-term Support Service costs. In the meantime, the agency is encouraging states like California to consider collecting only Long-term Support Service costs for the newly eligible population. Washington and Oregon have already agreed to do so. California Senate Bill 1124 proposes to limit estate recovery for expansion Medi-Cal and traditional Medi-Cal to Long-term Support Service costs. The measure also would require California to collect the lesser of the managed care capitation payment or actual costs of services and would prohibit any recovery from the estate of a surviving spouse, even after the surviving spouse’s death. For more information, visit

Health Care Economies: San Francisco and Fresno

California’s large and diverse population is spread across a vast area, occupying health care regions that vary greatly in affordability, access, and quality of care. In a continuing effort to capture these differences, the California HealthCare Foundation (CHCF) published reports on the San Francisco Bay Area and Fresno regions as part of six market analyses that examine how health care is delivered and financed across the state.

CHFC reports that Bay Area providers and health plans are aligning aggressively. Health plans and providers formed narrow-network accountable care organizations (ACOs) in 2011. Safety-net providers are coordinating care through the medical home model while a surge of physicians and hospitals have collaborated to expand geographic reach.

HMOs have a weak presence in Fresno, with PPOs as the dominant model. Most Fresno hospitals survived the poor economy, but face mounting financial pressures from rising Medi-Cal enrollment and high rates of the uninsured, which have strained provider capacity. Fresno hospitals face strong competition for physicians with federally qualified health centers and hospital-operated rural health clinics, which remain rooted in independent practices and show little interest in alignment.

CHCF recently released regional analyses on Riverside/San Bernardino and Sacramento. In the coming months, the organization will report on Los Angeles and San Diego. For more information, visit

Guide to Tracking ACA Implementation in California

The California HealthCare Foundation has created a guide to track progress toward the January 2014 launch of the central provisions of the Act. “With California hard at work creating new private and public insurance options, among other ACA requirements, this guide will help the public, members of the media, and stakeholders keep a close eye on implementation activities,” said Marian Mulkey, director of CHCF’s Health Reform and Public Programs Initiative. To get the guide, visit

Changes Are Coming to Regional Health Care Markets

In some markets, California hospitals will face increased pressure to contain costs. There is also growing concern about physician shortages and strained safety nets, according to local health care leaders surveyed by the Center for Studying Health System Change (HSC). The report looks at Sacramento and Riverside/San Bernardino. In the coming months, the California HealthCare Foundation (CHCF) will publish studies of the San Francisco Bay Area, Fresno, Los Angeles, and San Diego.


Hospitals and physicians in the Sacramento region have weathered the economic downturn fairly well, but the following trends have posed challenges:

1. More pressure on hospitals to contain costs – Hospitals face deteriorating payer mixes because of declining commercial coverage, an increase in public coverage, smaller rate increases for commercial payments, and rising numbers of uninsured patients. Despite these pressures, most hospitals still have strong financial performance.

2. Increased use of narrow-networks – New health plan-provider collaborations are developing including accountable-care organizations and narrow provider networks that accept lower payment rates in exchange for exclusivity.

3. An inadequate supply of physicians in the future, especially primary care physicians – In the words of one respondent, “The coverage expansions under health reform will result in a tsunami of unmet need among privately and publicly insured people.”

4. Increased dominance of Kaiser Permanente Health Plan – Kaiser has become an even more formidable competitor, especially given the perception of Kaiser as a lower-cost option.

5. Increased pressure on outpatient capacity at safety net providers – With the economic downturn driving up the number of uninsured, the fragmented safety net of outpatient centers can’t keep pace with demand. This is despite considerable growth in community health centers.

The Sacramento report is available at

Last Updated 08/10/2022

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