In each county, beneficiaries are required to enroll in either the “local initiative”—a publicly sponsored health plan cooperatively developed by local government, clinics, hospitals, and other providers—or the commercial plan, under contract in a beneficiary’s county of residence.The local initiative concept was developed to support health care safety-nets—those providers, such as community health centers and federally qualified health centers, that provide health care services to the indigent. Beneficiaries are informed about the mandatory expansion program and their available choices primarily through an enrollment packet that they receive through the mail. Implementation of Expansion Program Is More Than 2 Years Behind Initial Schedule

Full implementation of Medi-Cal’s mandatory expansion program is more than 2 years behind its initial implementation schedule. However, repeated delays in the awarding of contracts and the development of plans made it clear that some counties would be ready for implementation before others. As of July 1997, plans in 7 of the 12 affected counties had been fully implemented, and full implementation in all counties was scheduled for the end of 1997 at the earliest. As of July 1997, over 1.1 million beneficiaries were enrolled in the 12-county expansion program. Education and Enrollment Problems Contributed to Low Beneficiary Choice Rate and Confusion

Despite California’s efforts to encourage beneficiaries to choose a health plan, many beneficiaries have been assigned to a plan by the state. There also have been problems with the HCO presentations. HCFA, advocates, and managed care plans have long called for increased outreach efforts—not only to beneficiaries, who can be difficult to reach, but to providers and others in the community as well. DHS has recently begun to explore additional ways to improve outreach and involve community-based organizations in HCO activities, such as participating in DHS-sponsored work groups. Weaknesses in State Management of the HCO Program Contributed to Implementation Difficulties

Over the past several years, California has been criticized for a number of weaknesses in the management of its Medi-Cal managed care program. HCFA is in the process of developing guidelines to assist states with designing and implementing an effective education and enrollment program, including contracting with enrollment brokers—an increasing trend. Safety-net providers—such as federally qualified health centers, and community and rural health centers—provide health care services to the medically indigent. Some providers have reported that they are having difficulty operating under the two-plan model, especially in maintaining their former patient base. According to DHS, it did not require plans to assign a specific number of beneficiaries to safety-net providers because federal law requires states to ensure that beneficiaries have a choice of providers. The state is now taking certain actions to improve the program, but many are too late to benefit those beneficiaries already enrolled in the seven counties where implementation has been completed. To identify the state’s efforts to educate Medi-Cal beneficiaries about managed care and enroll them into one of the state-contracted plans, and to evaluate its management of the education and enrollment process, we interviewed DHS and HCFA region IX officials and obtained and reviewed relevant state law, regulations, policies, and procedures; the state’s strategic plan for expanding its Medi-Cal managed care program; the state’s two-plan model waiver application submitted to HCFA; Health Care Options (HCO) program documents, including enrollment materials; minutes from DHS’ Policy and Transition Workgroup meetings; HCO’s problem log; enrollment broker contracts and the 1995 Request for Proposal; HCO management reports, including monthly enrollment summaries; and HCFA’s preimplementation reviews.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed California's Medicaid Program, Medi-Cal, focusing on: (1) the implementation status of California's managed care expansion, including identifying the primary causes of delays; (2) the degree to which state efforts to educate beneficiaries about their managed care options and enroll them in managed care have encouraged beneficiaries to choose a plan; (3) the management of the state's education and enrollment process for the new program, including state and federal oversight of enrollment brokers that the state contracted with to carry out these functions; and (4) the impact of the managed care expansion on current safety-net providers, such as community health centers, that serve low-income beneficiaries.

What GAO Found

GAO noted that: (1) despite California's extensive planning and managed care experience, implementation of its 12-county expansion program is more than 2 years behind its initial schedule and is still incomplete; (2) California originally had planned to implement the program simultaneously in all affected counties by March 1995; (3) however, as a number of unforeseen difficulties arose, the state began to stagger implementation as it became clear that some counties would be ready before others; (4) still, as of July 1997, the program had been fully implemented in only seven counties; (5) the most recent schedule estimated complete implementation in all 12 counties by December 1997, at the earliest; (6) the state's efforts to encourage beneficiaries to choose a health plan have been undermined by problems in the process for educating and enrolling beneficiaries; (7) according to the Health Care Financing Administration (HCFA), beneficiary and provider advocates, and managed care plans, a number of problems contributed to confusion for many beneficiaries, including incorrect or unclear information about the mandatory Medi-Cal program and participating plans as well as erroneous assignments of beneficiaries to plans; (8) available data show that, on average, almost half of affected beneficiaries have not actively chosen their own plan but instead have been automatically assigned to one by the state; (9) other problems were evident in California's Department of Health Services' (DHS) management of the program, including insufficient performance standards for enrollment brokers and poor internal communication and weak ties with advocacy and community-based organizations; (10) California has taken a number of actions to improve the implementation and administration of its mandatory expansion program; (11) DHS also has taken steps to work more closely with community-based organizations to improve outreach efforts; (12) however, these actions were taken too late to benefit the many beneficiaries who have already enrolled in the seven counties where full program implementation has been completed; (13) HCFA is in the process of developing federal guidelines on designing and implementing an education and enrollment program; and (14) despite the fact that the state's 12-county expansion program was designed to help ensure that federally qualified health centers, community and rural health centers, and other safety-net providers participate in the provider networks, some safety-net providers have reported difficulty maintaining their patient base.