The California Performance Review: Health Care Proposals

Summary and Initial Comment for Health Advocates

August 3rd, 2004
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To great fanfare and apprehension, the California Performance Review (CPR) unveiled its recommendations to restructure state government. The report comes out of the work of 275 state workers from various agencies, and others, to suggest changes to state government, under the direction of Governor Schwarzenegger to “blow up” boxes in bureaucracy. The report is at the Review’s web site, at: http://cpr.ca.gov/

The Process: The proposal was formally presented to the Governor and the CPR Commission’s co-chairs, Joanne Kozberg and Bill Hauck, who will hear the report with the at five statewide hearings on upcoming Fridays: August 13 th ( Riverside), 20 th ( San Diego), 27 th ( San Jose), and September 10 th and 17 th. Of interest to health advocates, the August 20 th hearing in San Diego will cover the proposed changes in Health and Human Services , as well as in the areas of training and volunteerism. (The Riverside hearing will focus on environmental issues, while the San Jose hearing will focus on general government; information technology, performance–based management, procurement and personnel.) The testimony of witnesses will focus on specific topics, but the Commission’s 21 members will take public comment at the end on any issue in the report.

Some proposals could be enacted by executive order, and other proposals by individual bills this year and next, in next year’s budget, or through a ballot initiative. Legislative leaders have indicated that they didn’t see the legislature approving the full report as a package in its entirety this year. Governor Schwarzenegger is not expected to propose a full and final version of his plan to the Legislature until next year. He is expected to accept some proposals, and possibly reject others. “While the CPR’s work has ended, ours has just begun. It is not incumbent upon the California Health and Human Services Agency to evaluate the proposals related to our agency and provide recommendations to the Governor,” wrote Secretary Kim Belshe when soliciting comment on the report.

The Proposal: The over 2,500-page proposal is really two parts: a restructuring that suggests that California move from the current set of many smaller departments within large agencies (11 agencies, 79 departments, over 300 boards and commissions) to a small number (11) of very large departments, with realigned and additional responsibilities, eliminating over 100 boards and commissions.

In addition to restructuring, the CPR makes over 1,000 recommendations for the Governor’s consideration in 280 issue areas. Some suggested changes are government-wide, toward overall goals such as instituting customer service goals, changing the personnel system, finding savings (through efficiencies, tax enforcement, and federal matching funds), instituting accountability measures, improving management systems, and better using information technology.

In health and human services , the stated goal is to “improve the delivery of health and human services efficiency and effectiveness at both the state and county government levels.” This includes:

OVERALL COMMENT : It is a laudable goal to reform government, especially to make it work better and be more responsive for those that it serves. This report does not contain specific legislation toward that goal, but has a series of often-disjointed concept papers on a range of often-unrelated areas. So many of the ideas are just that, and at least to date have not been fully fleshed out. Some proposals conflict with one another. The proposals should be seen as several choices on a menu, rather than a coordinated plan. While some of the ideas are of interest (such as self-certification for the Medi-Cal asset test), others pose serious concern to advocates. Some of the biggest concerns by health advocates include:

The California Performance Review recommendations would create a single new Department of Health and Human Services that would take the functions of dozens of existing agencies, boards, and other government entities. Under this plan, agencies familiar to advocates from the Managed Risk Medical Insurance Board (MRMIB) to the Department of Health Services (DHS) to the Department of Managed Health Care (DMHC) would no longer exist. Within this new department would be six divisions, or centers, each with an undersecretary, focused on health purchasing, public health, quality assurance, behavioral health, services to disabled, and social services.

The Office of the Secretary would house offices of policy analysis, client advocacy, health and human services information, communications and public information, as well as those of chief counsel and chief fiscal officer. The Secretary’s office would get authority now placed in other entities, including the health professions licensing boards (which are now within the Department of Consumer Affairs), the Medical Assistance Commission, and the Department of Managed Health Care (now within the Business, Transportation and Housing Agency).

The Center for Health Purchasing would be charged to “maintain and improve the system of health care and insurance support for Californians,” to maximize “California’s purchasing power to achieve the best price and the best service in the delivery of health services,” and “to bring together health delivery and health purchasing programs into one organization.” The Center would house the following programs now housed at both DHS and MRMIB: Medi-Cal, California Children’s Services, Child Health and Disability Prevention, Genetically Handicapped Persons, County Medical Services, and In-Home Support Services, Managed Risk Medical Insurance Program, Access for Infants and Mothers, and Healthy Families.

The Center for Public Health ’s goal is to “prevent disease and premature death,” and should “consolidate the core public health functions of the state into one organization.” This includes “vital records, health manpower activities, communicable disease programs, health information and promotion programs, and public health laboratories.” This would include the functions of Office of Environmental Health Hazards Assessment, and the Office of Statewide Health Planning and Development (OSHPD).

The Center for Quality Assurance would “provide licensing and oversight for businesses and consumers for health and human services,” with a “consistent approach to regulation” in this area. It would “consolidate the licensing functions for health facilities, community care facilities, and health professions.” This would take the authority that now exists in the Department of Health Services, the Department of Social Services, the Department of Consumer Affairs, and the Department of Managed Health Care.

As stated above, the Department would also house a Center of Behavioral Health, that includes mental health and drug and alcohol programs, a Center of Disabled Services, which would provide a “high quality continuum of care to the developmentally and physically disabled,” and a Center of Social Services, that would consolidate “income support” programs, from Services to the Aging to CalWORKs to food stamps to SSI to low-income energy grants.

Comment: Health care consumers are not likely to be affected by the name of the agency with which they deal, nor the overall department that the person that they talked to happens to be located in. Some of the re-shuffling makes logical sense on paper; it is unclear whether one big agency is more responsive or accountable than a handful of smaller agencies. Health care advocates should be concerned with how proposed restructuring would change the function and focus of government.

Despite its size, the report is vague about the explicit responsibilities of the new department and its divisions. It is unclear if all the functions of the Department of Managed Health Care (DMHC), or the Office of Statewide Health Planning and Development (OSHPD), are preserved in the new Department of Health and Human Services. There are real concerns that key functions will get lost in the shuffle.

This is not an idle concern. The philosophy of many of the recommendations throughout the report is to let state government defer to other entities—from the federal government to private accreditation agencies—to accomplish its oversight and regulatory roles. Especially when the state government has set a higher standard than the federal government, this shift can have serious consequences.

Another concern is focus . For example, the elimination of the DMHC means that there will no longer be an appointed “HMO czar” with the specific task of protecting managed care patients. Instead there would be a mammoth department responsible from everything from licensing doctors to administering child care claims. Whoever oversees health plan regulation will be under the undersecretary of the quality assurance division. A bureaucrat in that role would not have the authority and the tools required to proactively ensure that patients are getting the care they need.

How many different layers would a regulator need to get approval for needed action? Will they have the tools and be empowered to take action to protect consumers? So even if the Department retains the legal ability to sanction fines on health plans, or conduct an internal audit of quality after getting complaints, or takeover a plan in financial distress, the proposed format would prevent the regulators from having the most essential tool, the political will.

Here are selected proposals by the California Performance Review and some general comments. This document will be updated as more information about these proposal become available.

Transform Eligibility Processing

The CPR proposes:

After fully implemented, the proposal is estimated to save the state general fund $453 million a year, and counties $134 million a year. It would result in reducing county workforce by almost 17,000 eligibility workers. Over five years, CPR projects a $4 billion savings, although only $1.5 billion is state general fund money.

Comment: While the current process of enrolling people into Medi-Cal and other health and human services programs clearly needs to be reformed, health advocates should be very concerned about this proposal. Whether on paper or on the Internet, these applications require assistance, and this proposal seeks to eliminate 17,000 county workers, many of whose jobs are to help people fin out about these program, go through the application process, and successfully get enrolled and use needed services. We replace them with one private contractor to the state to administer an online application, and the private and already-overwhelmed efforts of nonprofits and others funded only by the $50 assistance fee.

Even the best models of child enrollment learned in the Healthy Families program suggest that you need a much more developed infrastructure to properly enroll all those that are eligible for a program. That includes not just an application assistance fee, but city and county efforts, school and community based enrollment efforts, and the funding and coordination to pull it off. That infrastructure also includes an effective appeals process, which would seem not to exist under this proposal.

The reliance of Healthy Families as the model neglects that Healthy Families is a different program, for a different population than is served by Medi-Cal, much less CalWORKs and Food Stamps. The reliance on the Internet as the main way to enroll is troubling, and combined with other issues may result in many more children and families not getting services for which they are eligible.

The consolidation of the eligibility process of these programs raises concerns . As the CPR report says, over half of Medi-Cal recipients—3.9 million—are not eligible for CalWORKs or Food Stamps, and should not have to be burdened with additional questions or application procedures that might become a barrier to getting coverage.

We are heartened by the interest in streamlining the Medi-Cal application, and specifically to remove the administrative burden of the assets test by moving to self-certification. The vast majority of applicants are clearly under the threshold for the asset test yet have the paperwork burden of proving it, discouraging enrollment and costing administrative dollars. However, there are other reforms to streamline the application that should be considered. And even with the asset test, it would be further the streamlining effort to raise the thresholds for Medi-Cal applicants. The thresholds are so low that a family is not allowed to have three months’ rent or other savings for an emergency, or to have a car for a second commuter in the household. If the threshold was higher, it would make it easier for the vast majority of folks to self-certify under penalty of perjury, while maintaining the policy goal of preventing somebody with substantial assets on the program.

The CPR proposes to realign Medically Indigent Adults (MIA), In-Home Supportive Services (IHSS), Community Medi-Cal Mental Health, and Child Welfare Services (CWS), which are now a combination of state and county responsibility, both in funding and in administration. The proposal would transfer full responsibility for indigent health care, MIA and IHSS to the state, while full responsibility for all remaining state-administered and funded mental health services, and CWS, would be transferred to the counties. No specific savings is booked. On health care, the specific proposal is to:

Comment: The CPR report is correct that counties are wildly uneven in their responsibilities in taking care of the uninsured population. Some have extensive public health care systems, including public hospitals. A consortium of 34 smaller counties use the County Medical Services Program to serve medically indigent adults, those that are under the poverty level but do not qualify for Medi-Cal health coverage. The question is why we would reward counties that have done a poor job in addressing the needs of their uninsured by simply taking them off the hook completely, without any similar advantage to counties that have met their responsibilities. This may encourage some counties to dismantle the good programs and services that they have been providing. And the report appears to eliminate the county’s existing obligation to serve as providers of last resort for the uninsured, leaving them with possibly no place to go but private hospitals, which are not required to provide anything but truly emergent care.

The report says that “a single eligibility standard would be created” without recommending what that standard would be. There is a real possibility that the statewide standard would be lower than what some counties now provide, which might be due to a higher cost-of-living or other factors. A statewide standard would be of interest if it raises the level of access to care to the uninsured across the board, and not if it lowers it in some regions.

The report suggests that it could “design the program in such a way as to open up opportunities for federal financial participation by including the MIA population in Medi-Cal.” But that could be done now, without absolving the counties from key responsibilities or the state from serving those uninsured adults that will inevitable fall through the cracks and not be eligible for coverage.

The CPR recommends legislation to consolidate “licensing and certification functions affecting delivery of health care services.” This includes the licensing of public and private health facilities and clinics, as well as facilities and personnel providing social services in a residential setting. It would include the various health care professionals, now certified by over 16 boards, including the Medical Board of California (licensing over 115,000 physicians) and the Board of Registered Nursing (licensing 300,000 registered nurses). The savings is estimated to $4.6 million a year for the state general fund.

Comment and Analysis: The CPR report makes the case for some synergy, but it is equally as likely that placing these boards in a bigger bureaucracy can make for a more cumbersome, less consumer-friendly experience. Eliminating the licensing boards could mean that doctors would no longer oversee licensing of physicians and that nurses would not review nursing school; rather, these tasks would be done by state employees responsible for lots of occupations, raising concerns about consumer safety.

The CPR proposes to:

Comment: This proposal is not put forward to save the state money, but at the behest of health insurance plans that seek to file less information with the state. Even the savings to the health plans is minor, ranging from $50,000 to $250,000.

The report states, “the state could save or redirect valuable resources by accepting NCQA accreditation in lieu of regular surveys or audits…” But the power to audit is a key function of the power of a regulator. The state needs to have access to the books, and to act if enforcement is needed. If the state becomes aware of a problem, they need to be able to send investigators immediately.

California has many standards and requirements that are better than the NCQA, the private accrediting body, in areas such as cultural and linguistic competency, contraceptive coverage, diabetes supplies, mental health parity, etc. California requires that grievances are handled in 30 days, rather than the 60 days that is the NCQA rule. Relying on a private accrediting body may mean that these California standards remain on the books but no health plan is ever held accountable for complying.

Even if the state is able to convince NCQA to audit for California standards (which it has no authority to order), this would mean that the California regulators would lose their in-house experience and expertise in regulating and tracking health plans. The regulator would have no authority to ask an accrediting agency to come to do an emergency audit, or do other analysis. Since its inception five years ago, the DMHC has three times had to take over health plans in order to preserve care for patients, and not having the experienced auditors to go in would have prevented those life-and-health saving decisions from being made.

With regard to the DMHC and DHS duplication, the solution may be bigger than the problem. Of 45 health plans in the state, less than half (22) are regulated by both the Department of Managed Health Care (providing private coverage) and the Department of Health Services (serving Medi-Cal patients). For these plans, the departments have already created a joint medical survey/audit that is used by both. So right now, only the four biggest plans are still subject to two audits, “due to differences in scope,” and logistical issues: Kaiser Permanente, Blue Cross, Health Net, and Universal Care.

The CPR proposes to contract with a specific contractor, EDS, to shift certain Medi-Cal recipients into Medicare, where the federal government can pick up their cost. The eligible Medi-Cal beneficiaries include those with a diagnosis of End Stage renal disease (kidney disease) or Amyotrophic Lateral Sclerosis (ALS). Other beneficiaries with Muscular Dystrophy or MS may be eligible for the SSA Title II disability program. (They would be eligible for Medicare after two years, and in some cases sooner.) The proposal would:

Comment: This is a relatively small population (around 10,000 total), but the patients have significant health care costs. Still the overall savings is small, totaling around $18 million over five years. Questions would need to be answered about how coverage would be impacted for these patients, if at all, and the specifics of the work and contract with EDS.

Medi-Cal is intended to be the payer of last resort, after Medicare and private health coverage. Medi-Cal can be used to bill for services that other health coverage (OHC) will not pay for, such as drugs or obstetrics. Now, OHC is recorded manually. The CPR report proposes to:

The savings is estimated to be $27 million a year to the state general fund.

Comments: Safeguards would need to be in place to ensure that those with Other Health Coverage continue to get Medi-Cal coverage as secondary coverage, to cover treatments and procedures that the primary coverage doesn’t cover.

The CPR proposes to issue “smart cards” to Medi-Cal beneficiaries to prevent fraud. Those in Medi-Cal are issued smart cards, that include name, birth date, and other identifying information, including finger image information, which would then be checked each time the Medi-Cal patient seeks services, validating both check-in and check-out time. Smart cards would be also be required for Medi-Cal providers. The CPR proposes:

Comments: The reports says: “beneficiary advocacy groups may still object to the fingerprinting component of the smart card process because Medi-Cal beneficiaries would have their prints validated on every provider visit.” We would not want this to be a psychological barrier to getting needed care, or creating additional stigma for those on Medi-Cal.

Medi-Cal providers may also have concerns about fingerprinting. It will take extra time for office staff to collect fingerprint information… Other may be concerned about the space requirements for the additional associated devices.”

The CPR report also notes that “fingerprints are not reliable indicators for either children or very elderly persons,” even though that is the bulk of the Medi-Cal population.

For the 6.7 million children, seniors and people with disabilities that have Medi-Cal coverage, it would be surreal and unjust to go to a doctor’s office and have a fundamentally different experience than those who have private coverage. The real savings in fighting fraud is with providers, rather than recipients.

Discontinue Medi-Cal Disproportionate Share Hospital (DSH) Payments to Certain Hospitals

Many safety-net hospitals give key funding from the Medi-Cal program under Disproportionate Share Hospital (DSH) Funding, to compensate those hospitals that care for a large percentage of the Medi-Cal and uninsured populations. The report states that, according to self-reported OSHPD data, “some private for-profit hospitals that do not deliver high priority Medi-Cal services such as emergency, obstetrical, or neo-natal intensive care units have significant revenue from the Medi-Cal program by qualifying for DSH payments.” The CPR proposes to:

Comment: A worthy policy goal, depending on the details, such as the definition of “charity care,” and other items that go into the current funding formula.

Health care providers must submit treatment authorization requests to get reimbursed for specific procedures and services. The 300 nurses that process these requests have office space located in field offices around the state, but are most often at health facilities. The CPR proposes to eliminate seven field office locations and the need to provide office space, by:

The CPR report suggests that the current anti-fraud efforts in Medi-Cal are costly and results in a more burdensome program subject to greater delays. Only 1 percent of all provider applications processed are denied because of a fraud and abuse issue. Its alternative is to use a “strategic and data-driven” process to prevent fraud by Harvard Professor Malcolm K. Sparrow. The CPR report proposes:

Comment: In addressing fraud, the significant savings is to be found with providers, but fraud prevention should not deter legitimate providers from participating in the program. Finding the right balance is challenging. Ironically, while this proposal appropriately recommends that the state be more targeted in its anti-fraud efforts, a previous proposal suggests a very broad fingerprinting effort of both Medi-Cal recipients and providers.

For nearly 1,000 Californians who are enrolled in both a Medi-Cal managed care plan and a Medicare managed plan, the CPR proposes to:

The savings would be approximately $1 million a year in general fund costs.

Comment: The report states that the state does not do this now because of “an argument by client advocacy groups that this would interfere with the beneficiaries’ relationship with a managed care provider and interrupt the continuity of care.”

For more information, contact Health Access at http://www.health-access.org, or Anthony Wright, executive director, 916-442-2308, awright@health-access.org.