California Shifts to Managed Care for Medicaid

Published June 24, 2011


The California version of Medicaid, called Medi-Cal, will mandate the enrollment of about 400,000 of its patients in a state-sponsored managed-care plan over the next year.

The plan, designed to help the state cope with rising Medicaid costs, will effect Medi-Cal patients in San Francisco and fifteen other counties. California obtained a waiver from the U.S. Department of Health and Human Services in November 2010 to make the move, which local officials say will save the state approximately $365 million a year.


Other States Consider Managed Care

John Graham, director of health care policy studies at the Pacific Research Institute, said managed care in Medicaid is one method states are considering in order to save costs while increasing access.

“It’s a good idea. Traditional Medicaid fee for service is ineffective, because rates are too low, and the government bureaucrats—federal, state, and county—are not capable of determining the correct price or fee to pay for service,” Graham said. “So we are seeing decreasing access to doctors and medical services for Medicaid recipients.”

Graham says managed care solves some problems within Medicaid, but hardly all of them.

“The advantage to managed care is that the government gets out of price-fixing. Now the devil is in the details, so states are going to have to be sure they have a contract with a managed care provider in a transparent way so that the taxpayers can see who bears what degree of risk in that contract,” Graham said.


Could Improve Care

Managed care could hold promise for improving Medicaid’s outcomes, which lag far behind those of Medicare and private insurance. Research conducted by the American Action Forum’s Michael Ramlet and Carey Laferty found California’s limited experience with managed care in the past decreased hospital admissions for Medicaid enrollees with asthma, and increased the number of diabetics obtaining recommended eye exams over a five-year period.

Graham suggests more consumer-focused solutions could improve these outcomes even further.

“One thing we’re not seeing enough of in Medicaid managed care is consumer-directed care. There are no grounds to say that we should not have a managed care piece for chronically ill people, but you should also have a consumer-directed piece by which the consumer controls some of his own money, and decides how and where to spend that money,” Graham said.

“Medicaid managed care is not a panacea, but if you can get the contract negotiated so the risk-bearing is fair, and if you give some money to the individual, then you can get some leverage,” he added.


Loren Heal ([email protected]) writes from Neoga, Illinois.