Medi-Cal is the largest Medicaid program in the U.S., covering more than 14.6 million low-income Americans as of this year.
Holding a competitive procurement for commercial managed care plans reflects California’s objective to hold managed care companies and their subcontractors more accountable for high-quality care, DHCS said. With the new contracts, DHCS wants to reshape how care is delivered to Medi-Cal beneficiaries, 99% of whom will be enrolled in managed care by 2024.
At that time, managed care plans will provide not only medically necessary healthcare services, but also additional services to treat the whole person. Plans can accomplish this through partnerships with local groups like health departments and social services, DHCS said.
Plans and their subcontractors with a positive net income will also be required to reinvest 5% to 7.5% of profits in local community infrastructure.
DHCS is also strengthening its oversight of Medi-Cal providers. Payments to plans will be linked more closely to member access and outcomes, and plans will be required to report on primary care utilization and spending, the state said.
Plans must also meet requirements for reducing health disparities and improving outcomes, including addressing unmet social needs like food insecurity.
DHCS is also allowing 17 counties to change the type of managed care model they participate in, and approved a proposed direct contract with Kaiser Permanente in 32 counties, subject to federal approval. That will allow Kaiser to continue selecting its customers, a controversial allowance that rivals argue allows the payer to select healthier and therefore less expensive members.
Molina, Centene and Elevance already held Medicaid contracts with California, but the overhaul in counties served is already causing one payer to consider appealing the proposed contracts.
In a statement, Centene said it was pleased to have been awarded the contracts in nine counties, but was disappointed to lose contracts in Los Angeles, Sacramento and Kern.
"We strongly believe our exit in these counties will be a significant disruption in services to our members and providers. We are evaluating all options to appeal the decision,” the St. Louis-based payer said.
Centene, the largest Medicaid insurer in the U.S. (and in California), received the contract despite a recent California investigation into allegations that the insurer defrauded Medi-Cal by overbilling for prescription drugs.
CVS-owned Aetna and UnitedHealth were among those not chosen for the Medi-Cal contracts. At the end of last year, Aetna had contracts in two counties — Sacramento and San Diego — while UnitedHealth had a contract to serve San Diego.
Plans that lost bids have until Sept. 1 to appeal.
DHCS estimates that roughly 2.3 million managed care members, or 18%, will likely transition to a new plan as a result of the commercial procurement, with the majority of churn in the counties of Los Angeles, Kern, Sacramento and San Diego.
The contracts can be lucrative for managed care organizations. Centene’s Health Net, for example, reported net income of $127 million in the last quarter of 2021, while Molina brought in $59 million and Elevance’s Blue Cross of California Partnership Plan brought in $31 million, according to state data.
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The focus on social determinants of health has only increased as the COVID-19 pandemic has devastated the United States.
UnitedHealthcare, Anthem and Centene are among the major payers already hosting machine-readable cost files onsite.
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