Blue Shield of California sued the state’s Department of Health Care Services (DHCS) over an alleged failure to produce documents about how it plans to contract with for-profit health insurers across the nation who want to participate in the state’s Medicaid program, Medi-Cal.
A new law goes into effect in January 2024 that would affect approximately 14.6 million lower-income individuals covered by Medi-Cal. However, the state has failed to document exactly what that impact might be, according to BSC.
Kristen Cerf, president and CEO of Blue Shield of California Promise Health Plan—BSC’s Medi-Cal plan—said in a press release that “we are turning to the court to insist on a full, fair, and robust Medi-Cal procurement appeals process. We believe that the Department of Health Care Services has a duty to get this right and not just rubber stamp its original decision.” The appeal was filed last week in the California Superior Court.
Opponents of the law particularly take issue with the role Kaiser Permanente will play, charging that KP has gotten preferential treatment from the state's health department, DHCS, that allows it to cherry-pick healthier Medi-Cal enrollees, while BSC and other health plans care for sicker enrollees who drive up costs. About 84% of Medi-Cal enrollees are enrolled in Medicaid-managed care plans.
Medi-Cal wants to give KP a separate no-bid contract that would last five years. KP currently covers about 900,000 Medi-Cal enrollees, about 7% of the state’s Medicaid enrollees. KP’s enrollees have switched from employer-sponsored KP Affordable Care Act plans into Medi-Cal and tend to be healthier, critics charge. Under the new process, KP’s share of Medi-Cal enrollees could swell by over 25%.
California Healthline reported in July that a potential 25% increase in Medi-Cal enrollees for KP doesn’t appear in the text of the law and that the “precise magnitude of the intended enrollment increase for KP remains unclear.” California Healthline is a publication of the California Health Care Foundation, a not-for-profit philanthropy organization dedicated to improving healthcare for lower-income individuals.
Proponents argue that KP possesses unique advantages for serving Medi-Cal enrollees. DHCS wants to contract with an AHCSP, or alternate health care service plan, a not-for-profit integrated health system with at least 4 million members in a state, which functions as both an insurer and provider through contracts with pharmacies, hospitals, physicians' offices and other provider services in specific regions.
The law, as signed by California Gov. Gavin Newsom at the end of June, doesn’t mention KP. But one of the iterations of the legislation (PDF) that the state Senate considered said that KP “is the only such plan that meets all of these requirements. By creating a direct contract with Kaiser as an AHCSP, the state will have direct oversight of Kaiser as they step up to provide more care for Medi-Cal enrollees. Just as important, consumers will have a direct link to Kaiser services, without the need to divert funds intended for healthcare services toward administrative purposes, which happens under current subcontracting practices.” Currently, KP’s Medicaid brand subcontracts with local, publicly governed health plans around the state.
Kaycee Velarde, the head of Medi-Cal contracting for KP, argued in the California Healthline article that the deal gives more people access to KP’s “high-quality Medi-Cal managed care plan” that would “improve quality for a broader number of Medi-Cal enrollees.”
The version of the law the state Senate reviewed states that DHCS plans to “enter into a direct contract with Kaiser Permanente (Kaiser) as a Medi-Cal managed care plan within certain geographic regions of the State, effective January 1, 2024, for a five-year contract term, with potential contract extensions. Under the new contract, subject to federal approvals, Kaiser would operate as a full-risk, full-scope Medi-Cal managed care plan, consistent with other Medi-Cal managed care plans.”
Despite Velarde’s assurances, BSC and others want to see the methodology DHCS used to reach its conclusions. “Blue Shield also requested that the state-appointed hearing officer provide more time for the appeals process so that each party to the appeal has the opportunity to review all documents related to the request for proposals,” BSC said in its press release. The state did not provide the documentation and did not grant BSC’s request for additional time to review the material, according to the press release.
Opponents have also argued that KP’s effect on local health plans providing Medi-Cal could be likened to what happens to smaller retailers when Amazon decides to sell similar products: The smaller entities cannot compete, and healthcare services would be less likely to meet the specific needs in different localities.
The law states that an AHCSP would have to widen the reach of Medi-Cal to include someone “who is in foster care in this state” or meets the criteria to be in foster care as well as dual-eligible seniors who qualify for both Medi-Cal and Medicare.
The law requires the AHCSP to “enter into a memorandum of understanding (MOU) with the department, which would include specified standards or requirements and the AHCSP’s commitment to increase enrollment of new Medi-Cal members.”
Critics of the law point out that MOUs are not as legally binding as contracts and don’t provide enough detail. In the BSC press release, Cerf stated that “we have waited in good faith and the Department of Health Care Services is refusing to provide the public information we are requesting or to provide a reasonable amount of time for the appeal process.”