Plan to overhaul Medi-Cal system draws yeas, nays; some local experts have misgivings about use of HMOs.

Plan to overhaul Medi-Cal system draws yeas, nays

The $8 billion Medi-Cal system, which provides health care to the state's 3.4 million elderly, disabled and indigent, would become the latest convert to the managed health care movement under a sweeping proposal by Gov. Pete Wilson.

If adopted, it would be the biggest overhaul of the troubled program since the last major reform in 1982.

The 15-point plan, now under consideration by the state Legislature, would encourage Medi-Cal beneficiaries to choose a health maintenance organization for their care. It downplays the traditional fee-for-service system relied upon by most enrollees in the state's health insurance program.

Contained in a bill by State Sen. Ken Maddy (R-Fresno), the plan is now being circulated for comment among legislators and health care officials statewide. The proposal is in a preliminary stage, state officials said.

The bill has been temporarily placed on the back burner because of the state budget crisis. But spokespersons for Maddy and the state Department of Health Services said it will be vigorously pushed after a budget is adopted.

Local health care industry spokesmen expressed mixed reactions to the Medi-Calas-HMO plan. Most local health care experts said that the level of funding for Medi-Cal was as important as what form the funding took - if not more important.

Already, hospitals get only 50 cents per dollar expended on Medi-Cal beneficiaries, and doctors get about 40 cents of their normal charges, said David Chernof, oncologist and president of the Los Angeles County Medical Association.

"It's difficult to understand how many economies can be obtained by paying less for services," said Chernof. "Medi-Cal already pays so little that many providers do not serve Medi-Cal patients."

Chernof said the vast majority of Medi-Cal enrollees are children in poor families, elderly in nursing homes and the disabled, including the blind. "There aren't a lot of beach bums in this program," he said.

A hospital industry spokesman also expressed reservations about the new Medi-Cal program.

"It is good that Gov. Wilson is at least making an attempt to figure out solutions to the health care crisis," said David Langness, spokesman for the Hospital Council of Southern California. "But it is going to take serious study."

In managed care, health plans receive fixed monthly stipends for providing medical care to recipients. For example, giant HMO Health Net, based in Woodland Hills, charges employers about $106 a month for coverage, per employee.

No matter how ill a patient becomes, or how much care is required to heal the patient, the monthly charge remains fixed.

To hold down costs, HMOs typically employ "utilization review" panels that look at doctors' recommendations for high-cost procedures. Often permission for such procedures is refused - in essence, a cost-saving "second opinion."

HMOs and other health care organizations claim the panels are part of their fight to control rising health care costs. But some doctors and patients say managed care puts cost containment ahead of good patient care.

Chernof said the Medi-Cal system could be more easily fixed by two simple steps. "Pay doctors within 30 days, even if it is only 40 percent of normal charges, and provide for binding arbitration in Medi-Cal cases."

Doctors hate Medi-Cal paperwork and delay, and already such HMOs as Kaiser Permanente require enrollees to submit malpractice claims to binding arbitration, not the civil court system, said Chernof.

With just these two provisions, many more doctors in Los Angeles would be willing to see Medi-Cal patients.

Among the Medi-Cal bill's provisions are the following:

* New Medi-Cal enrollees would be given an orientation briefing that stresses managed care's benefits. Current law mandates the orientation be neutral, and about 15 percent of Medi-Cal recipients now take the managed care option.

* Enrollees who don't explicitly choose between a fee-for-service or managed care plan would be enrolled in managed care. Currently, those not choosing are placed by default into fee-for-service.

* Medi-Cal managed care contractors would be allowed to use arbitration to settle liability claims, instead of having to go to court.

* Expansion of so-called "capitated" contracts, by which a county assumes responsibility for Medi-Cal in its jurisdiction. The state pays the county a fixed fee for each Medi-Cal recipient. The county sets up a network of local health care providers, paying them out of the state-provided funds. Two counties, Santa Barbara and San Mateo, currently take part in the capitated program. Under federal law, three more can join.

* Managed care plans could directly administer capitation contracts under a pilot program. Medi-Cal would select a geographic area and negotiate with managed care plans to provide comprehensive services for the Medi-Cal enrollees in that area. Fee-for-service arrangements would not be eliminated, but become the rare exception. It is an irony of modern medical care than Medi-Cal recipients, even if Gov. Wilson's plan were adopted, would still have more choice in selecting doctors than would many employees. Some employers give to employees only a single HMO plan, which requires employees to see pre-selected doctors or pay their own medical bills.

Fikes is a reporter for the San Diego Business Journal. Los Angeles Business Journal Senior Reporter Benjamin Mark Cole also contributed to this report.