DHS contract management staff’s monitoring of managed care plan performance in terms of access and quality of care includes (1) investigation of complaints from beneficiaries, county welfare departments, beneficiary advocate groups, and providers; (2) review of disenrollments from plans; (3) review of emergency room visits by plan members; (4) follow-up of contractor corrective action plans for deficiencies identified in medical and financial audits; and (5) reviews of plan capacity and access. The state, however, admits that implementation will be slow and incremental. By December 1996, California intends to have approximately 3.4 million Medicaid beneficiaries enrolled in managed care—a majority of the estimated 6 million Medi-Cal beneficiaries. Problems identified to date in a primarily voluntary enrollment program could be significantly magnified in a much larger program with mandatory enrollment. We believe that California’s two-plan model will restrict competition and beneficiary choice. We reviewed documents related to the Medi-Cal managed care program and plans for expansion, including the following: federal and state program laws, regulations, policies, and procedures;
HCFA Region IX’s Review of California’s Administration of Its Managed Care Program for fiscal year 1993; and
California’s strategic plan for expanding the Medi-Cal managed care program. A number of factors counteract the tendency of financial incentives to impair the quality of care.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed California's Medicaid managed care program, focusing on: (1) state oversight of managed care contractors; (2) state plans for expansion; and (3) key issues in implementing the expanded program.

What GAO Found

GAO found that: (1) California plans a major expansion of its Medi-Cal managed care program in selected counties; (2) by the end of 1996, the number of enrollees in California managed care plans will total over 3.4 million, almost four times the number currently enrolled; (3) enrollment will be mandatory for women and children, who will choose from one of two plans, unlike the current voluntary system with several choices; (4) mandatory enrollment could magnify the problems already associated with California's Medi-Cal program, such as availability and quality of services, capabilities of management staff, and providers' financial incentives to limit care; and (5) any benefits of competitive managed care could be lessened by California's decision to limit beneficiaries to two health plans.