California ruling challenged after awarding Medi-Cal contract concessions

California’s decision last month to cancel the results of a long-planned bidding competition between commercial health plans on its Medicaid program has some industry experts and consumer advocates wondering if the state can cope. to insurers and force improvements in care for millions of low-income people. beneficiaries.

In a backroom deal announced in the waning days of 2022, the administration of Gov. Gavin Newsom, which is facing lawsuits, awarded concessions that allowed major insurers to win back business they would have lost if health officials had stuck with contract awards. state initials for managed care plans. . Oakland-based Blue Shield of California and St. Louis-based Centene Corp., which owns Health Net, the largest commercial health plan for Medi-Cal, the state’s version of Medicaid, were among those who they had aggressively challenged the initial results.

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“They had a long process and then they reached agreements,” said Maya Altman, who retired a year ago after nearly 17 years as executive director of the San Mateo Health Plan, who did not participate in the tender. “It’s a bit weird. Not transparent, a lot behind closed doors.”

It was a remarkable turnaround that came four months after the state announced its initial contract award. The Department of Health Care Services, which oversees Medi-Cal, spent years preparing for the bidding competition and promoting it as an important means of addressing poor care. Eight commercial Medi-Cal plans, covering about 30% of the program’s 13 million managed care enrollees, were required to bid for contracts worth approximately $70 billion over five years.

Locally administered, non-commercial Medi-Cal plans that cover the other 70% of managed care enrollees did not have to bid, but will have to sign the same new contract as commercial plans, which will take effect next year.

State officials said their new decision avoids uncertainty after losing health plans — Health Net, Blue Shield of California, Community Health Group and Aetna — threatened lengthy legal action. It also drastically reduces the number of Medi-Cal enrollees who will have to switch plans, from an estimated 2.3 million to about 1.2 million. And state officials said it strengthens its ability to improve Medi-Cal through the new contracts, which will contain requirements for higher quality care, greater transparency and more equitable access.

Other states have faced legal stoppages after they put their Medicaid contracts up for bid. In Louisiana, for example, Centene and Aetna protested in 2019 over the results of a rebid process, which led that state to void its awards and start over. The new results were announced almost two years later, with Centene and Aetna among the winners.

“When you create disputes and lawsuits, they always create some uncertainty,” Dr. Mark Ghaly, secretary of the California Health and Human Services Agency, told KHN. “We feel like we ended up in a place where we reached certainty. We have a set of [health] plans that are committed to this.”

Consumer advocates were concerned that lingering uncertainty would hamper the launch of a far-reaching, nearly $12 billion, five-year Medi-Cal initiative to provide non-medical social services that address socioeconomic factors such as homelessness and poverty. food insecurity, widely seen as key health indicators.

Still, the state’s decision to throw out the bidding results has many patient advocates and some health plan executives questioning the value of future contract competitions and even whether health officials will effectively enforce the higher standards. in the new contract.

“It would be extremely disappointing if underperforming plans could sue to participate in Medi-Cal,” said Abbi Coursolle, a senior attorney in the Los Angeles office of the National Health Law Program.

Tony Cava, a spokesman for the Department of Health Care Services, said the bids were still “incredibly valuable” because they showed how health plans intend to improve care. He said the commitments made in the offers will be incorporated into the new contracts. Cava also said the department, which had not previously held a statewide bidding competition, now intends to hold one every five years.

Patient advocates and industry experts credited the state for fining health plans that failed to meet quality and access standards in a report issued late last year. But they also noted that several of the health plans that will continue to operate on Medi-Cal, including Molina Healthcare and Health Net, were among the lowest performers.

When the state announced its initial awards in August, Blue Shield was left out, despite its huge impact on health care across the state and its longstanding efforts to curry favor with the state’s political class. The state also initially said it would remove Los Angeles County, a large Medi-Cal contract, from Health Net.

Between 2018 and 2022, Blue Shield spent at least $31 million on lobbying, political donations and other contributions, including $20 million for a state homeless fund that Newsom established, according to a KHN analysis of filings with the secretary of State and California Fair. Political Practices Commission. Health Net’s parent, Centene, spent at least $5 million during that period, mostly on lobbying and political donations.

Under the new deal, Blue Shield will keep its Medi-Cal business in San Diego County after initially losing it in the competition for the contract, though it won’t win a contract in any of the 12 other counties in which it bid. Its roughly 129,000 San Diego enrollees won’t have to switch plans, but more than 100,000 San Diego Medi-Cal members will still have to switch as Health Net and Aetna leave.

In Los Angeles County, Health Net will retain its primary Medi-Cal contract, but will have to split its 1.1 million members 50-50 with Molina under a subcontract. Molina already has a subcontract with Health Net in the county, but currently only has 80,000 members under that agreement.

Some observers questioned how the division can be maintained. Cava said half of new Medi-Cal enrollees in Los Angeles County don’t choose a plan and are instead assigned one, according to the most recent data. These allocations will be used to help balance enrollment between Health Net and Molina, she said.

The state and the five participating health plans issued an unusual joint statement, and the plans put a positive spin on it. Centene said the state’s revised decision “is in the best interest of millions of members.” A Blue Shield executive said he was “honored to continue serving Medi-Cal recipients in San Diego County.”

On an investor call this month, Molina CEO Joseph Zubretsky said his company’s Medi-Cal membership will double under the new deal, though it would have tripled under the state’s initial decision. He summed up Molina’s situation as “taking three steps forward, taking one step back, and ending up two steps forward.”

Consumer advocates, patients and medical professionals expressed relief that the new agreement allows Community Health Group, the largest Medi-Cal health plan in San Diego County, to continue to operate there. Had the initial results held up, it would have lost its contract and its 335,000 members would have had to choose new plans.

Christine Xayalinh, a member of Community Health Group in Escondido, said the plan treated her for type 2 diabetes and referred her to the University of California-San Diego for a successful gastric bypass.

“I know some people are worried about their health insurance,” said Xayalinh, 29, “but for me it has been a lifesaver.”

With contract awards decided, the state’s hope of improving Medi-Cal will depend on its ability to enforce the new contracts.

“The focus now needs to be on making sure it works,” said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Network. “This is a very vulnerable population of Californians who are not getting what they need.”

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

KHN (Kaiser Health News) is a national newsroom that produces detailed journalism on health issues. Along with Policy Analysis and Polling, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is an endowed non-profit organization that provides information on health issues to the nation.


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