$51-Million Loss Forecast From Medi-Cal Experiment

A program to force Medi-Cal patients to get care from state-selected health maintenance organizations will lose $51 million in its two years of existence, according to a state report.

The experiment, called Expanded Choice, will affect about 250,000 people in the Glendale, San Fernando and Santa Clarita Valley areas and San Diego whose medical bills are paid by Medi-Cal. It is scheduled to start next year.

Expanded Choice will save $646,000 in treatment costs, about 0.01% of current Medi-Cal expenditures, but that amount will be eclipsed by $52 million in start-up costs, the office of the state legislative analyst said. The office is a nonpartisan agency whose mission is to supply lawmakers with objective information on state government and legislation.

The report said the state will lose $50 million in interest payments because of a one-time change in reimbursement to health-care providers. Medi-Cal reimburses physicians several months after they have submitted their bills. Under Expanded Choice, the state will pay health maintenance organizations monthly for anticipated services.

Summary From Expert

David Maxwell-Jolly, a Medi-Cal expert in the office, presented the report during a hearing of the Joint Committee on Medi-Cal Oversight at Los Angeles Valley College. His summary triggered a murmur from the crowd and a rush for copies of the report. Assemblyman Burt Margolin (D-Los Angeles), committee chairman, told the analyst: “I’m shocked by the size of the figure you cited. It’s a lot of money.”

Later, Margolin said: “The natural question which arises is, ‘Why are we doing this?’ ”

The California Medical Assistance Commission, a state body that seeks ways to hold down medical costs and helped to create Expanded Choice, originally estimated that it will save the state 5% of its current Medi-Cal costs in the Los Angeles area and San Diego. The savings will be accomplished by forcing most Medi-Cal beneficiaries to give up their private physicians in what is called the fee-for-service system and to enroll in prepaid health plans.

Hoped to Cut Growth

Recently, state officials have conceded that the savings will not materialize the first year and possibly not the second. They contended, however, that the program will at least cut the growth of Medi-Cal costs.

The latest report questions those assertions. “Recent history has shown a faster rate of increase in prepaid health plan costs than in the costs of fee-for-service Medi-Cal beneficiaries,” it said.

Maxwell-Jolly warned that the state’s losses could exceed $51 million if certain Medi-Cal groups are excluded from the experiment. Opponents of Expanded Choice have been urging the state to exempt the elderly, the developmentally disabled and people with multiple handicaps on the ground that health maintenance organizations are not equipped to treat them.

Margolin said Expanded Choice has a “potential for disaster.” The Medical Assistance Commission, he said, should guarantee that the program will offer recipients high-quality medical treatment or scrap the program.