‘Show Me The Money’

Imagine taking a job without knowing how much you’ll be paid. Or having your car fixed without knowing the cost.

That’s how state health insurers and our most vulnerable patients – the old, sick, and poor – feel about California’s latest plan to squeeze them into a new managed care program that may be woefully unprepared for a transition scheduled for the fall.

Officially announced in March and dubbed the Cal MediConnect program, the initiative targets patients who are eligible for both Medicare because they are either elderly or disabled and Medi-Cal because they are also low-income. The government calls these people “dual eligibles” because they qualify for both health programs.

The highly optimistic kickoff is slated for October 1st.

The goal? Give these patients better service, coordinated by the health plans to streamline fragmented medical care and social supports that historically have been managed separately by the two programs.

The problem? Money.

A month after the announcment, public and private health insurers in eight California counties that will pilot the project are awaiting answers to this simple question: “How much are we getting paid?”

“That’s the million dollar question,” says Wendy Peterson, director of the Senior Services Coalition of Alameda County. “And we’re baffled by it. It seems a little bit backwards.”

Perhaps even more backwards than similar transitions.

In 2012, California went through a chaotic transition when it tried to slim down the state’s adult day health care program by converting it to managed care and shedding some clients. Overseen by the state’s Department of Health Care Serives (DHCS), that transition affected just 35,000 people – about 80% of whom survived the patient purge.

This year, the department is back with another conversion to managed care, yet the stakes are much higher.

There are a whopping 1.1 million “dual eligible” Californians, although the three-year project affects only about half that number in its eight pilot counties. A little more than 400,000 are expected to participate in the voluntary program.

The state eventually hopes to save a billion dollars annually when all dual eligibles participate.

Yet health insurers were burned badly over the last two years when forced to manage the state’s program known as Seniors and People with Disabilities.

“The plans lost their shirts,” says Peter Szutu, president and CEO of the Center for Elders’ Independence.

So why would the health plans take on yet another vulnerable population and lose even more money?

“We said essentially the same thing to the state,” says Howard Kahn, CEO for L.A. Care Health Plan. “You have to fix the SPD rate situation before we can start this dual demonstrations project.”

“The rates are key to the success of the demonstration,” agrees Abbie Totten, director of state progreams for the California Association of Health Planas.

Yet other questions remain. Lots of them.

When will the three-way contracts among the health plans, the state, and the federal government be inked? How can understaffed, financially battered counties prepare for the complex transition? What creative solutions can the plans invent without knowing their budget?

All that’s known today is that reimbursements decrease as the three-year pilot project continues – economic arm-twisting designed to force coordinated care and lower costs. Many patients fear that managed care is really code for cutting services to those who need them.

“It’s not about saying no to the right services,” counters Abbie Totten of the health plan trade group. “It’s about utilizing the right services at the right time and not overutilizing services.”

Still, many aging experts warn that coordinated care may actually be more expensive.

“Theoretically, this model will save money,” says Szutu. “But the rates that are being offered may not give the plans enough of a cushion so they can complete that learning cycle and get efficient and improve quality. They may still ration and cap benefits as they have throughout the years.”

Critical to the discussion are the two types of health plans in the counties: smaller, community-based plans that work almost solely with impoverished patients; and the much larger commercial plans that are typically for-profit enterprises and have less experience serving the poor.

“We have a greater amount of our existence at risk,” admits Kahn of his community-based operation. “Health Net’s a national corporation and we’re a local plan.”

Indeed, a look under the hood of the duals project reveals very different motivations. For humanists and optimists… coordinated care for the vulnerable. For the cynical… a loss leader that will help keep existing state contracts and lead to eventual growth in others.

“It’s really about capturing this revenue and this line of business,” said one observer close to the situtation. “The big private plans are confident they can make money.”

Revenue? Line of business? Indeed, last year, the global banking giant Barclays summarized the duals demonstration project this way: “We estimate the size of the overall opportunity in California to be approaching $17 billion in revenues in 2013, and more than $32 billion in revenue in 2015.”

Should California’s most vulnerable citizens – the old, disabled and poor – fear they’re being reduced to a medical spreadsheet?

“The state does have a bottom line they want to look at,” says Peterson.

“It’s a poker game between the providers and the state,” says Gary Passmore, vice president, Congress of California Seniors.

Despite the looming start date, some plans say they are standing firmly for quality over profits – and won’t be rushed into a haphazard launch.

“We’ve decided we have to do well by our members at the beginning of the program,” says Kahn. “If the rates come in and we can’t do a good job for our members, we won’t do the program.”

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