California’s Medicaid Managed Care Procurement: A Leap Forward

Last week, California’s Medicaid agency issued a Request for Proposals (RFP) to provide managed health care services to program beneficiaries. This is not just another Medicaid RFP. California is far and away the nation’s largest Medicaid managed care market. As of  September 2021 the state Medicaid agency contracted with 24 managed care organizations (MCOs) to cover 11.9 million enrollees, including 4.6 million children 18 and under.  Subsidiaries of five of the nation’s largest for-profit health insurers—Aetna/CVS Health, Anthem, Centene, Molina, and UnitedHealth Group—currently participate in Medi-Cal (as the state’s program is known), as does the nation’s largest non-profit, Kaiser Permanente.  In 2019, the eight commercial MCOs reported a total of over $10.5 billion in Medi-Cal revenues. Presumably, these firms will want to defend and expand their footprints. There are widespread health disparities among children and other enrolled populations that must be reduced. In short, the health equity, market share, and fiscal stakes could not be higher.

In states that like California enroll most or all of their beneficiaries in managed care—a total of 40 plus the District of Columbia do so—a procurement is a potential opportunity to fix whatever needs fixing and to bring in new MCO talent to replace substandard performers. There is definitely room for improvement in the provision of preventive health services to children in California as well as in the quality of MCO services generally. Child health advocates and the California Health Care Foundation, among others, have recognized this opportunity and have been pushing state officials to make the most of it.  The procurement process, which formally began last August, will determine the MCOs that operate effective as of January 1, 2024 in 21 counties where about 3.7 million children are now enrolled in Medi-Cal.

The RFP is one of several moving parts in Medi-Cal managed care policy. These include the execution of a Comprehensive Quality Strategy with four-year quality improvement and health equity goals described as “perhaps the most ambitious of any state’s Medicaid agency;” the implementation of the newly-approved five-year CalAIM section 1915(b)(4) managed care waiver; and the Governor’s budget proposal to allow the current MCO tax to expire at the end of 2022.  As might be expected, there are elements of the RFP that are unique to California, such as increasing accountability within the problematic “delegation” model used by many MCOs. But there are also a number of elements that have significance for child health policy nationally. This blog will focus on three of our favorites: health equity for children; delivery of EPSDT services; and transparency.

Health Equity for Children. The RFP has a set of health equity requirements that MCOs will have to meet that are specific to children. MCOs would have to report, annually, on both quality and Health Equity performance measures related to children under 21. They would have to exceed specified minimum performance levels (MPLs) for both quality and Health Equity measures. In addition, the MCOs will have to meet “Health Disparity reduction targets” for enrollees under 21. The RFP does not specify the quality and Health Equity performance measures, the Health Disparity reduction targets, or the MPLs that MCOs will have to meet. These are to be identified in the future by the state Medicaid agency (DHCS).

Failure by an MCO may (or may not) result in corrective actions, financial sanctions, or adjustments to the MCO’s capitation rates—all to be specified by DHCS. Intriguingly, the RFP states that “DHCS may require Contractor to make changes to its executive personnel, if a Contractor has persistent and pervasive poor performance as evidenced by multiple performance measures consistently below the MPL over multiple years.” The full text of these requirements is available here.

EPSDT Services. DHCS received the memo from the State Auditor on preventive services for children. The RFP acknowledges that the performance of MCOs for children needs improvement: “Contractor must identify and address underutilization of Children’s preventive services including but not limited to EPSDT services such as well-child visits, developmental screenings, and immunizations.” This somewhat hortatory statement is backed up by a lengthy list of specific requirements relating to the provision of EPSDT services. Among these, critically, is the specification that the medical necessity standard that MCOs apply when determining whether to pay for services to children is different from and broader than, the standard MCOs may apply for adults. In addition, the RFP includes EPSDT services in the Population Health Management services that it requires MCOs to provide to children under 21. These and many other EPSDT specifications are available here.

Transparency. One of the RFP’s overarching goals is transparency of information related to, among other things, access, quality improvement, and health equity. The purpose is “to drive accountability and provide information to the public to enhance oversight of the Medi-Cal delivery system.” This speaks to the reality that effective oversight of MCO performance for children and other populations requires more than under-resourced state Medicaid agencies; it takes a village, one that has access to publicly-available MCO performance data.

The RFP does not spell out exactly what, if any, MCO-specific information relating to quality or health equity or EPSDT services for children DHCS intends to make publicly available. But it does make crystal clear that “Any person or member of the public can inspect or obtain copies of all proposal materials… On or after the date DHCS posts the Notice of Intent to Award all proposals…become public records.  These records shall be available for review, inspection, and copying during normal business hours” (emphasis added). DHCS is projecting the release of the Notice of Intent on August 9, 2022.

This little bit of transparency will allow MCOs that do not receive awards to review the state’s decision and decide whether to appeal. But it will do more than keep the procurement process in California honest. It will also enable child health advocates in other states to learn more about the performance of subsidiaries of the national companies that submit proposals in California. That’s because under the RFP, proposers must submit detailed information about their track records in all states in which they operate a Medicaid plan, including quality performance measures, any enforcement actions taken against the proposer for performance in the last five years, and primary care utilization data for children (including the percentage of children who did not see a PCP) stratified by race/ethnicity and age for each measurement year 2017 through 2019. You read that correctly. You can read more here.

These provisions, along with others too numerous to cover here, hold the promise for real progress on improving children’s health and reducing disparities. The RFP is a quantum leap from the state’s six—yes, six—current boilerplate MCO contracts, none of which includes the terms “health equity” or “population health management,” much less “transparency.” If implemented, the policies in this RFP—linked to the quality and health equity goals in the state’s Quality Strategy—should reverse the discouraging historical performance of MCOs vis-à-vis children. Of course, the proof is in the pudding. Even under normal circumstances, this RFP would be a high degree of difficulty exercise. But with the unwinding of the PHE on the near horizon and implementation of CalAIM already underway, the circumstances are anything but normal.