California Is Investigating The Corporation That Took Over Its Medicaid Drug Program

California handed its Medicaid drug program to one company. Then came a  corporate takeover. | Modern Healthcare

Source: Kaiser Health News, by Samantha Young

Prescription drug costs for California’s massive Medicaid program were draining the state budget, so in 2019 Gov. Gavin Newsom asked the private sector for help.

The new Medicaid drug program debuted this January, with a private company in charge. But it was woefully unprepared, and thousands of low-income Californians were left without critical medications for weeks, some waiting on hold for hours when they called to get help.

What happened in the two years between the contract award and the start of the program is a case study in what can go wrong when government outsources core functions to the private sector.

California awarded the Medi-Cal Rx program to a unit of Magellan Health, a company with expertise in pharmacy benefits and mental health. But Magellan was then gobbled up by industry giant Centene, worth roughly $50 billion, which was looking to expand its mental health portfolio.

Centene was already a big player in state Medicaid drug programs — but one with a questionable record. The company was accused by six states of overbilling their Medicaid programs for prescription drugs and pharmacy services and settled to the tune of $264.4 million. Three other states made similar allegations and have settled with the company, but the amounts have not been disclosed. Centene, in resolving the civil actions, denied any wrongdoing.

KHN has learned California health officials also are investigating Centene.

Handing Over Control

In his 2019 inauguration speech, Newsom vowed to use California’s “market power and our moral power to demand fairer prices” from the “drug companies that gouge Californians with sky-high prices.”

Drug spending by the state for its Medicaid, prison, state hospital, and other programs had been climbing 20% a year since 2012, so the first-term Democrat issued an executive order requiring California to make its own generic drugs and forge partnerships with counties and other states to buy drugs in bulk. He also directed the state to buy prescription drugs for Californians enrolled in Medi-Cal, the state’s Medicaid program, which covers roughly 14 million people.

Newsom no longer wanted to allow the state’s two dozen Medi-Cal managed-care health plans to provide prescription drug coverage to their enrollees, arguing the state would get a better deal from drug companies by harnessing its purchasing power.

That December, California awarded a competitive $302-million contract to Magellan Medicaid Administration, a subsidiary of Magellan Health, to make sure Medi-Cal enrollees get the medications that California would buy in bulk. Magellan provides pharmacy services to public health plans in 28 states and the District of Columbia.

Even though Magellan’s biggest money maker is mental health insurance, it met a key requirement of the state’s call for bids: It didn’t provide health insurance to any Medicaid enrollees in California.

Magellan was supposed to take over the drug program in April 2021. But on Jan. 4 of that year, Centene — which was seeking a greater role in the lucrative behavioral health market — announced plans to buy Magellan.

St. Louis-based Centene, however, is one of the largest Medi-Cal insurers in the state, a factor that would have disqualified it from bidding for the original contract. Centene provides health coverage for about 1.7 million low-income Californians in 26 counties through its subsidiaries Health Net and California Health & Wellness. It earned 11% of its revenue from California businesses in 2019, according to its 2021 annual report to the U.S. Securities and Exchange Commission.

But the state bent over backward to make it work, delaying implementation of the program while Magellan set up firewalls, sectioned off its business operations from Centene, and paid for a third-party monitor.

State regulators reviewed the merger in a 30-minute public hearing in October 2021. They didn’t mention Centene’s legal settlements with other states.

The state Department of Managed Health Care approved the merger Dec. 30. Two days later, the state launched its new prescription drug program with Magellan at the controls.

Centene’s Legal Troubles

In the past 10 months, Centene has settled with nine states over accusations that it and its pharmacy business, Envolve, overbilled their Medicaid programs for prescription drugs and services: It settled with Arkansas, Illinois, Kansas, Mississippi, New Hampshire, and Ohio, according to news releases from attorneys general in those states. The three other states have not been identified by Centene or the states themselves.

The company has set aside $1.25 billion for those settlements and future lawsuits, according to its 2021 report to the SEC.

Centene, which has denied wrongdoing in public statements, did not respond to multiple requests by KHN for interviews, nor did it respond to emailed questions. Magellan also did not respond to interview requests.

From the start, other California health insurers opposed the state takeover of the Medi-Cal drug program, partly because it took away a line of business. They were even more furious when the state allowed one of their biggest competitors to seize the reins — especially given its legal entanglements.

The state Department of Health Care Services, which administers Medi-Cal, acknowledged to KHN in March that it’s investigating the company but declined to provide specifics. The state is investigating Centene’s role in providing pharmacy benefits before the state took the job from managed-care insurers.

“DHCS takes all allegations of fraud, waste, and abuse seriously and investigates allegations when warranted,” department spokesperson Anthony Cava said in a statement.

A Sale in the Offing?

When Medi-Cal Rx debuted Jan. 1, thousands of Californians couldn’t refill critical — sometimes lifesaving — medications for days or weeks. Doctors, pharmacists, and patients calling for help often languished on hold for as many as eight hours.

Magellan blamed the problems on staff shortages during the COVID-19 Omicron surge and missing patient data from insurance plans. State health officials went to great lengths to fix the problems and appeared before legislative committees to provide lawmakers with assurances that the contractor wouldn’t be paid in full.

But Medi-Cal patients still face uncertainty.

Not long after Magellan took over California’s Medi-Cal drug program, reports surfaced in Axios and other publications that Centene might sell Magellan’s pharmacy business.

Centene officials have not confirmed a sale. But it would align with the company’s recent moves to restructure its pharmacy operations in the face of state investigations — such as seeking an outside company to begin managing its drug spending.

“Once you tell a PBM they actually have to behave, that’s when there’s no more money in it. It’s time to go,” said Antonio Ciaccia, president of drug-pricing watchdog 3 Axis Advisors, referring to businesses known as pharmacy benefit managers.

Yet another ownership change in California’s drug program could bring more disruption to the state’s most vulnerable residents, some of whom are still having trouble getting their drugs and specialty medical supplies after Magellan’s rocky takeover.

“I don’t know what kind of instability that creates internally when there’s a change of this magnitude,” said Linnea Koopmans, chief executive of Local Health Plans of California, which represents the state’s publicly run Medicaid insurers that compete against Centene. “It’s just an open question.”

Koopmans and other Centene critics acknowledge that California has long relied on private insurance plans to offer medical and prescription drug coverage to Medi-Cal enrollees and that the state shouldn’t be surprised by ownership changes that come with consolidation in the healthcare industry. For example, Centene has a history of taking over California contracts after an acquisition — it did so when it purchased Health Net in 2016.

But consumer advocates say the Centene fiasco makes it clear that the state must improve oversight of corporate mergers if it chooses to hand over responsibility for public programs.

“In an ideal world, this is all backroom machinations that people don’t notice — until they do, until there is a problem,” said Anthony Wright, executive director of Health Access California, a consumer advocacy group. “It just increases the need to make sure that that oversight is there, that accountability is there.”

This story was produced by KHN (Kaiser Health News), one of the three major operating programs at KFF (Kaiser Family Foundation).

Record Fines Might Mean California Is Finally Serious About Improving Medi-Cal

Record Fines Might Mean California Is Finally Serious About Improving Medi- Cal | California HealthlineSource: Kaiser Health News, by Bernard J. Wolfson

Is California getting tougher on health plans that participate in Medi-Cal, the state’s insurance program for low-income residents?

A few weeks ago, state regulators imposed record $55 million in fines on L.A. Care, California’s largest Medi-Cal managed-care plan, for failing to ensure adequate care and allowing treatment delays that threatened enrollees’ health. Patient advocates hope the move signals stricter enforcement against other Medi-Cal insurers, which have many of the same shortcomings for which the regulators just fined L.A. Care.

Twenty-five managed-care plans across the state provide care for nearly 12 million of the more than 14 million Californians enrolled in Medi-Cal, and the state is often accused of failing to hold the plans accountable for subpar care. Medi-Cal members are among the state’s most vulnerable people: They can face language and cultural barriers and have disproportionately high rates of chronic illness.

The state Department of Health Care Services, which runs Medi-Cal, is drafting a new managed-care contract, scheduled to take effect in 2024, that officials say will improve care by holding participating health plans to higher standards. The state hopes to reduce health disparities and improve health outcomes by tightening surveillance and enforcement.

“They are trying to do more, and that’s really positive,” says Abbi Coursolle, senior attorney at the National Health Law Program in Los Angeles. “Obviously, they have a lot more to do.”

DHCS and the state Department of Managed Health Care, which also regulates Medi-Cal managed-care plans, launched coordinated investigations of L.A. Care, based in part on a 2020 Los Angeles Times report that highlighted long, sometimes deadly, delays in care at facilities run by the Los Angeles County Department of Health Services. That agency operates the county’s public safety-net system and contracts with L.A. Care to provide care for hundreds of thousands of the health plan’s members. In their investigations, state regulators also relied on information that L.A. Care reported to them.

That they relied on these sources, Coursolle says, raises questions about the effectiveness of their own surveillance and auditing.

On March 4, the Department of Managed Health Care hit L.A. Care with a $35 million penalty — more than triple its highest previous fine. The Department of Health Care Services levied $20 million, nearly eight times its earlier record.

The state cited L.A. Care for more than 100,000 violations, including late responses to patient complaints and appeals, delayed or denied authorizations for necessary medical care, and failure to ensure the county health services agency complied with patient care regulations. The California Department of Public Health, which regulates hospitals and other health care institutions, didn’t respond to a question about whether it’s investigating any of the county’s medical facilities.

In announcing the fines, state agency directors said: “The magnitude of L.A. Care’s violations, which has resulted in harm to its members, requires immediate action.” The health plan has 2.4 million Medi-Cal enrollees.

“The recent enforcement action against L.A. Care signals that DHCS intends to exercise our authorities to protect our Medi-Cal enrollees,” department spokesperson Anthony Cava told me in an email.

L.A. Care’s CEO, John Baackes, says the plan is not contesting the findings. “What we are contesting is the amount of the fines, which we believe are unreasonable,” Baackes said. The dispute could take months, or even years, to settle.

In a statement released after the fines were announced, L.A. Care noted Medi-Cal’s notoriously low payments to providers and said the penalties create “yet another financial hurdle for a public health plan that is a crucial part of the health care safety net.”

Although L.A. Care has generated millions of dollars in profits in recent years, it reported a loss of $132 million in fiscal year 2020. But the plan can weather the fines. At the end of last year, its tangible net equity — a key measure of solvency — was seven times as high as the minimum required by law.

The violations described by regulators are painfully familiar to Theresa Grant, a Culver City resident I wrote about late last year who has struggled to find relief from a debilitating pain in her rib cage. The violations are “horrific,” she says, “and I think it’s very true.”

But she believes the specialist physicians who have been unable or unwilling to help her deserve a big share of the blame. “You know how long I’ve been dealing with my problem,” she told me. “It’s been over a year now, and not a damn thing is being done.”

Despite the significant penalties levied on L.A. Care, consumer advocates and some state lawmakers think California needs the authority to levy even larger ones.

A bill sponsored by the consumer advocacy group Health Access would increase many of the fines that state health plan regulators can impose at least tenfold. Supporters say the legislation, SB 858, is needed because the amount the department can legally levy on health plans hasn’t been raised in some cases since 1975.

“We want to make sure that insurance companies do not view these fines as just the cost of doing business,” says the bill’s author, state Sen. Scott Wiener (D-San Francisco). “By raising them, they become less a cost of business and more an actual incentive to follow the law.”

The fines imposed on L.A. Care are outliers because of their size, which was determined in part by the sheer number of violations. “For every fine like that, there are many that are dramatically lower,” Wiener says. “I wouldn’t want to rely on one case and say, ‘Oh, no problem, because they got a big fine.’”

Another important factor in holding health plans’ feet to the fire, Wiener says, is consumer complaints, which can help bring problems to the attention of regulators — and to the plans themselves.

But a report last year by KFF showed that consumer appeals of denied care are exceedingly rare.

If you have a problem with your health plan or want to appeal a delay or denial of coverage, a good place to start is the Department of Managed Health Care (888-466-2219 or HealthHelp.ca.gov).

The state also has an ombudsman for Medi-Cal managed care (888-452-8609 or MMCDOmbudsmanOffice@dhcs.ca.gov).

You can also try the Health Consumer Alliance (888-804-3536 or www.healthconsumer.org), which assists people in public and private health plans. It offers free advice, provides legal services, and can help you get your documents in order for an appeal.

Regulators and health plans alike frequently say they are working on behalf of the patient. So if you’re not getting the care you need, stand up and be part of the solution.

Older Americans Oppose Approval Process for Home Care Services

Eighty-three percent of seniors oppose a Medicare policy that requires a government contractor to approve claims for physician-prescribed home health care, according to a poll sponsored by Bring The Vote Home. The Centers for Medicare & Medicaid Services (CMS) recently implemented a pre-claim review demonstration that imposes documentation requirements on home health agencies and referring physicians. Doctors have to provide a broad array of eligibility-related documentation and clinical support for review by government contractors. Home health leaders warn that the new requirements could delay care and increase healthcare costs. Seniors say that requiring a government contractor to approve home heath care will have the following results:

  • 80% say it will delay care.
  • 77% say it will increase Medicare costs.
  • 75% say that will increase out-of- pocket costs.
  • 45% say it will decrease fraudulent home health claims.

For more information, visit bringthevotehome.org.

Employer Sponsored Insurance Rate Remains Stable

Since 2009, employer-sponsored insurance has been on the decline in California. A key question around the Affordable Care Act (ACA) was whether the reforms would further erode employer-sponsored insurance coverage. A recent survey by the California HealthCare Foundation finds that employer-sponsored insurance in the state has remained stable from 2013 to 2015. Worker eligibility for employer-sponsored insurance also remained stable, and even increased among some groups. However, the percentage of eligible workers who chose to enroll in employer-sponsored insurance declined from 86.4% in 2013 to 80.2% in 2015, bringing California closer to the national average take-up rate of 79%. This decline could be caused by the availability of alternative coverage options through Medi-Cal and Covered California.

Trump v. Clinton: How They Line Up On Health

The Philadelphia Inquirer offers an analysis on the Candidate’s Position on health care. The following is a summary the article:

Health insurance

  • Clinton: Wants to improve the Affordable Care Act. She wants to reduce the cost of health insurance purchased on exchanges and provide a tax credit of up to $5,000 a family to offset out-of-pocket costs and premiums above 5% of household income. She would expand tax credits and cap the cost of premiums at 8.5% of family income. She calls for fixing the “family glitch” so families can access coverage in the exchanges when their employer’s family plan is not affordable. She would allow undocumented immigrants to buy insurance through the exchanges. In what is seen as a nod to Bernie Sanders’ supporters, she is affirming support for a public option that would allow people as young as 55 to buy health insurance through Medicare.
  • Trump: Opposes requiring people to buy health insurance. He wants to repeal the Affordable Care Act. He proposes to make coverage more affordable by allowing sales of health insurance across state lines and permitting people to deduct health insurance premium payments from their taxes. He would emphasize tax-deductible health savings accounts (HSA) where funds could accumulate if they are not used. He wants to require price transparency by health-care providers so that people can shop around for the best prices. He also wants would-be immigrants to certify that they can pay for their own health care.

Prescription drugs

  • Clinton: Wants to eliminate tax breaks that pharmaceutical companies get for direct-to-consumer advertising, and require those that benefit from federal research spending to reinvest profits into research. She would ban legal settlements in which pharma companies pay competitors so they will hold off on introducing generics and would allow consumers to import cheaper drugs from countries such as Canada. She supports allowing Medicare to negotiate lower drug prices and would cap out-of-pocket costs for people with chronic health problems.
  • Trump: Calls for a free market for prescription drugs, including allowing consumers to import them from countries that regulate prices. This practice is now illegal, though the law is not firmly enforced.

Medicaid

  • Clinton: Supports president Obama’s proposal to let states that sign up for Medicaid expansion to get a 100% match for the first three years. She would expand access to Medicaid and children’s health insurance.
  • Trump: Wants states to get federal Medicaid funding through block grants, which could mean fewer dollars for many states, but would give local officials more authority over expenditures.

Medicare

  • Clinton: Has vowed to fight proposals to privatize or phase out Medicare, and would give Medicare the power to negotiate lower drug costs.
  • Trump: Is against abolishing Medicare.

Social Security

  • Clinton: Opposes privatizing Social Security, reducing annual cost-of-living adjustments, and raising the retirement age. Clinton would expand Social Security for some, such as widows and caregivers, and help to fund the benefit through a wealth tax.
  • Trump: Has voiced support for Social Security and called it “honoring a deal.” He has said that Republicans cannot win elections if they seek to change it substantially.

Veterans Administration

  • Clinton: Says she would ensure more timely benefits, block privatization efforts, and strengthen services for military families and employment programs for veterans.
  • Trump: Has vowed to reform the agency and make it more efficient in delivering service and employment assistance.

Abortion

  • Clinton: Wants to protect access to safe and legal abortion.
  • Trump: Back in 1999, he told Meet the Press that, despite his personal dislike of abortion, “I’m very pro-choice.” More recently, he announced, “I am pro-life.” This year, Trump he said on MSNBC that if abortion were banned, women who violated the law would have to be punished. Soon after, his campaign released a statement saying that providers, not patients, should be held liable. His running mate, Indiana Gov. Mike Pence, has backed some of the nation’s toughest abortion restrictions.

HIV/AIDS

  • Clinton: Her proposals include funding research to seek a cure; finding more affordable treatment, including capping prescription costs; urging all states to extend Medicaid coverage for people living with HIV; and increasing use of HIV prevention medication.
  • Trump: Has not issued a policy on HIV and AIDS, though some in the advocacy media say his goals of lowering prescription drug costs and increasing transparency about health care pricing could be beneficial.

Medical research funding

  • Clinton: Advocates increasing funding for Alzheimer’s research to $2 billion a year, paying for care-planning services through Medicare, and funding a federal program to help locate Alzheimer’s patients who wander.
  • Trump: Has called funding for Alzheimer’s research “a total top priority,” but he has not offered many specifics about policies he would pursue. He has alarmed the research community with scientifically unfounded statements about Ebola, autism, and climate change.

Autism

  • Clinton: Has called for a nationwide early-screening campaign. She wants to push all states to require health insurance coverage for autism services, help get adults on the autism spectrum connected to employment opportunities, and fund more research.
  • Trump: In tweets and during a presidential debate, Trump has linked autism to some vaccinations, a tie that has been widely debunked by international medical authorities and advocates, such as Autism Speaks, a group that Trump has supported.

Addiction and drugs

  • Clinton: Would increase funds for addiction treatment and prevention, and emphasize rehabilitation over prison for low-level and non-violent drug offenses. She wants more preventive services for adolescents, opioid antidotes for all first responders, and more training for drug prescribers.
  • Trump: In New Hampshire, Trump vowed to fight addiction on two fronts saying, “First, we have to support locally based and locally run clinics, and we have got to close the border. That’s where the drugs are coming from.”

Medical marijuana

  • Clinton: Supports the use of medical marijuana.
  • Trump:.Supports the use of medical marijuana.

Family and medical leave

  • Clinton: Advocates a paid family and medical leave of up to 12 weeks with at least a two-thirds wage replacement rate. She proposes paying for the plan with taxes on the wealthy.
  • Trump: He told Stuart Varney on Fox News last year, “Well, it’s something that’s being discussed. I think we have to keep our country very competitive, so you have to be careful of it.”

Federal funding of Planned Parenthood

Clinton: Supports federal funding of Planned Parenthood.
Trump: At a news conference on Super Tuesday, Trump said he would not give federal funds to Planned Parenthood because the organization performs abortions. But he praised the health care it provides, saying, “millions and millions of women – cervical cancer, breast cancer – are helped by Planned Parenthood.”

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 chcf.org.

A Profile of Uninsured Men

At the start of 2015, there were over 27 million uninsured non-elderly adults in the U.S. Over half were non-elderly men, according to a report by the Kaiser Family Foundation. Men are more likely to be uninsured than are women and less likely to have Medicaid or other public coverage. Many men were not eligible for Medicaid before the ACA since the program excluded non-disabled adults without dependent children. Seventy-six percent of non-elderly uninsured men live in a household with at least one full-time worker, but more than half are low-income. Thirty-two percent of non-elderly uninsured men said they were having trouble paying medical bills in 2014.

Forty-four percent of non-elderly uninsured men are eligible for financial assistance under the ACA. In Medicaid expansion states, 55% of men are eligible for assistance, including 35% who are eligible for Medicaid. In non-expansion states, 33% are eligible for assistance, including just 2% who are eligible for Medicaid while 20% fall into the coverage gap.

A man’s likelihood of being uninsured varies based on where he lives. The uninsured rate for men ranged from a high of 25% in Texas to a low of 6% in Massachusetts. The following factors raise the risk for men to be uninsured: they have family incomes below 100% of the federal poverty level; they have less than a high school education; they are Black, Hispanic, and/or non-citizen immigrants. The uninsured rate for White men was 11%.

Only 36% of non-elderly uninsured men have a usual source of care compared to 67% of those with Medicaid and 77% of those with private coverage. Non-elderly men with health coverage are more than two times as likely to get preventive care compared the uninsured. Non-elderly uninsured men are more likely (32%) than non-elderly men with Medicaid (15%) or non-elderly men with private coverage (10%) to have had trouble paying medical bills in 2014. Men without coverage are more likely to have serious financial strain due to medical bills. In 2014, 27% of non-elderly uninsured men said that medical bills caused them to use up all or most of their savings, have difficulties paying for basic necessities, borrow money, or be contacted by a collection agency. In contrast, only 9% of non-elderly men with Medicaid and 7% of non-elderly men with private coverage experienced this kind of financial strain due to medical bills.

Since many uninsured men are in working families, small businesses and job placement offices may be effective outreach sites for information on health coverage. Identifying trusted contacts will be key to increasing enrollment. For example, low-income fathers may be connected to father’s organizations that could connect them to health coverage options. Other community-based organizations and agencies that serve men may also be effective including workforce development programs, child support agencies, and justice-system agencies.

People learn about health coverage options through multiple avenues, including word-of-mouth, mass media, and healthcare providers. Broad-based messages are effective in educating people about coverage while targeted messages are important in enrolling hard-to-reach groups, including low-income men and fathers. Some messages have been found to be effective, including discussing the importance of coverage for maintaining good health, the value of getting screenings and preventive care; the affordability of coverage options, the availability of financial help, and the financial protections of having coverage; and how coverage helps them be an effective provider for the family. Messaging about free in-person enrollment assistance has also been particularly useful. Findings also suggest that talking with fathers about their children’s health and health care coverage can be an effective entry point for discussing their own health and health coverage

Low Income Consumers Give Their Take on Reducing Health Care Costs

The California Healthcare foundation (CHFC) asked consumers what are the most acceptable ways to reduce harmful and wasteful medical care. They interviewed lower- to middle-income health plan members from Covered California and CalPERS and people with Medi-Cal. Participants got background information about the overuse of three common medical services — antibiotics for adult bronchitis, c-sections for first-time normal deliveries, and MRIs for common low back pain. These are their reactions:

  • 57% support oversight of physicians. This approach would change physician behavior through external approval, internal monitoring, or stricter rules about when the intervention will be covered.
  • 21% support patient cost sharing. A minority say that the patients should pay a higher copayment or pay the extra cost of care if they insist on an ineffective medical intervention.
  • 13% support physician payments to encourage appropriate and cost-effective care. A much smaller percentage support penalties or nonpayment to physicians.
  • 9% support taking no action. Fewer than one in 10 agree with leaving the decision entirely to individual doctors and patients.

Merger Improves Health Net’s Financial Strength

A.M. Best has improved its outlook for Health Net, giving the company a financial strength rating of B++ (Good) This follows Centene’s acquisition of Health Net on March 24. Health Net is now a wholly owned subsidiary of Centene, and is no longer a publicly traded company. The combined company will be headquartered in St. Louis. The acquisition has created a leading diversified multi-national health care organization with more than 10 million members throughout the United States.

A.M. Best says that the combined company will have a strong presence in the California Medicaid program and will be one of the largest Medicaid managed organizations in the country. it also provides growth opportunities in government programs including TRICARE, the Dept. of Veterans Affairs, and exchange products in multiple states. Also, the new company may save a lot by integrating specialty services and improving capabilities in information technology and process management. Over the past eight months, Centene and Health Net teams have been developing an integration plan that uses the talents and expertise of companies.

Health Net’s 2015 fiscal year end operating showed increased revenue and earnings. Also, the company reported higher shareholder’s equity for the year. The growth trends have been supported primarily by higher membership in Medicaid programs. However, some of Health Net’s core subsidiaries have reported a significant decline in earnings due to the costs of participating in the exchange and other fees related to the Affordable Care Act. Also, during 2015, a number of capital infusions from the holding company were made to several of its insurance subsidiaries to maintain risk-adjusted capital levels. A.M. Best expects that the parent company to continue to provide capital support when needed. Health Net shareholders received 0.622 shares of Centene common stock and $28.25 in cash for each share of Health Net common stock held at closing, for a total transaction value of about $6 billion, including the assumption of debt.

Costs and Eligibility Are the Biggest Barriers for the Uninsured

Two-thirds of uninsured Californians were eligible for coverage in 2014, but most said they did not enroll because of the cost. The remaining third were ineligible for coverage under the Affordable Care Act due to their immigration status, according to a study by Berkeley’s Center for Labor Research and Education and the UCLA Center for Health Policy Research. The study finds uninsured Californians fall into four groups:

  1. Undocumented residents 32%: Residents who don’t qualify for health coverage under the Affordable Care Act are predominantly low-income, Latino, and have limited English proficiency.
  2. Those eligible for Medi-Cal 28%: Adult citizens and legal immigrants with incomes at or below 138% of the federal poverty level and children at 266% of the poverty level.
  3. Those eligible to buy health coverage through Covered California with a federal subsidy 31%: Citizens and legal immigrants with incomes from 139% to 400% of the poverty level.
  4. Those eligible to buy health coverage through Covered California without a federal subsidy 9%: Citizens and legal immigrants with incomes above 400% of the poverty level, which disqualifies them from federal subsidies.

The largest percentage of citizens and legal immigrants (46%) cited cost as the main reason for being uninsured. Miranda Dietz, a researcher at UC Berkeley said, “We’re a relatively high cost-of-living state. It’s no wonder that some Californians, who may be unaware they qualify for health subsidies and other programs, still find the cost of health insurance out of reach.”

California has more than 1 million undocumented immigrants who don’t benefit from the Affordable Care Act. Nadereh Pourat, director of research for the UCLA center said, “Hundreds of thousands of men, women and children, not to mention the workers who power California’s economy, are one health emergency away from potential financial ruin because they lack insurance. From an economic perspective, it’s bad business to rely on workers and then not offer them equal health protection. And from a humanitarian perspective, it’s just wrong.”

UCLA and UC Berkeley also collaborated on a related on Medi-Cal study. About one-third of those who were uninsured, but eligible for Medi-Cal thought they were ineligible or didn’t know if they were eligible. Another 20% said they were getting insurance, reflecting a major backlog during the first year of processing applications, which has largely been resolved since then. Both studies were funded by the Blue Shield of California Foundation. The study notes that many previously uninsured Californians have enrolled for coverage, but fully covering those still uninsured will require changes in policy to improve affordability and expand eligibility.

Last Updated 05/25/2022

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12312 Pentagon Street - Garden Grove, CA 92841-3327 - Tel: 714.638.0853 - 800.731.2590
Email:
Jay@ArchApple.com
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