A flawed Medi-Cal fix

The state Senate’s top Democrat, Darrell Steinberg, is making a last-minute push for a bill that would allow some injured people to seek recovery for medical bills that are larger than what their doctors and hospitals actually collected. The goal, Steinberg says, is to generate more money for Medi-Cal, the state’s version of Medicaid. Indeed, state and federal laws have made it difficult for Medi-Cal to recover much of what it spends on medical care even when the victims win judgments against the people who injured them. But Steinberg wants to solve that problem the wrong way.

When someone covered by Medi-Cal is injured, the state can sue the person who caused the injuries to recover what it spent on the patient’s care. It doesn’t usually do so, however; instead, it waits for the injured person to sue, then tries to collect the portion of the judgment or settlement related to medical costs. But state law limits how much the state can collect to 75% of its costs — 25% is deducted to cover the injured person’s attorney fees — and half of the overall damages. A Supreme Court ruling also bars the state from collecting more than the settlement allotted for medical costs. As a result, Medi-Cal often recovers far less than it paid doctors and hospitals to treat the patient.

Steinberg’s bill, whose language is still being negotiated, is modeled on two previous measures that the Legislature passed but then-Gov. Arnold Schwarzenegger vetoed. It would allow injured Medi-Cal beneficiaries to sue for the “reasonable value” of their medical services — an amount that would be considerably higher than the state actually paid the doctors and hospitals that provided treatment, because Medi-Cal rates are typically below what other insurers and self-funded patients pay for care. And if the injured person won a judgment or settlement, the measure would allow his or her healthcare providers to recover more than Medi-Cal had paid for the treatment, provided that they paid back the entire amount they’d received from Medi-Cal.

This is, at best, an indirect way to recover money for Medi-Cal. And it’s built on an irreparably flawed foundation: It would encourage plaintiffs — those who have been injured — to seek compensation for losses they did not experience, in order to reimburse healthcare providers for expenses beyond what they agreed to charge Medi-Cal. And if the plaintiffs persuaded a court to award those extra damages, it would set up a subsequent battle between them and their healthcare providers over how to split the excess amount.

The measure could bring tens of millions of additional dollars to Medi-Cal, but that’s a drop in the bucket compared with the program’s annual cost. The real winners would be the plaintiffs’ lawyers, whose fees would rise as medical damages went up. Echoing a California Supreme Court ruling, the lawyers’ trade association argues that the people who cause injuries shouldn’t benefit from the discounts Medi-Cal demands from doctors and hospitals. But rather than address that issue directly, the bill tries to overcompensate injured Medi-Cal patients for care they didn’t pay to receive. Steinberg’s original proposal was worse, proposing to let any injured party seek to recover the “reasonable” value of the treatment they’d received regardless of what they or their insurers actually paid for their care. He scaled back his ambitions in the face of stiff opposition from business groups and insurers, which would have to cover the cost of the additional damages.

California is struggling to sustain its Medicaid program, as are many other states. To cut costs, it has lowered the rates it pays to doctors and hospitals so much that many of them are refusing to care for the low-income Californians insured by Medi-Cal. That’s a problem the state has to address, and it’s starting to do so by moving more of its costliest Medi-Cal patients into managed care. Such approaches make more sense than Steinberg’s proposal to let plaintiffs sue for damages they didn’t suffer.