Key Facts About Medi-Cal Provider Payments and the Governor’s Special Session

Last month, Governor Brown called lawmakers into special session to address critical issues affecting several health and human services programs — issues that were left unresolved when the Governor signed the 2015-16 state budget package into law on June 24. A major issue raised in the Governor’s proclamation for this special session relates to payment rates for doctors, dentists, and other providers in Medi-Cal, which provides health care coverage to more than 12 million low-income Californians and draws down nearly $60 billion in federal Medicaid funds each year to support vital health care services in communities across the state. This blog post highlights three key facts about Medi-Cal provider payments and the Governor’s goals for the special session, which convened on June 19 and is expected to continue through the summer.

1. The 10 Percent Cut to Medi-Cal Provider Payments That Took Effect in 2013 Largely Remains in Place Today

As part of this special session, the Governor has asked legislators to identify “permanent and sustainable” funding that would be used, in part, to increase payment rates for Medi-Cal providers. The immediate concern for many providers is a 10 percent payment reduction that state policymakers approved in 2011 — amid large state budget shortfalls — and implemented beginning in 2013, following protracted litigation in which the state ultimately prevailed.

While some Medi-Cal providers and services have been exempted from this reduction, the 10 percent cut largely remains in place today — at the Governor’s insistence — despite periodic efforts in the Legislature to scale it back or repeal it. In 2015-16, the fiscal year that began on July 1, this payment cut is estimated to reduce state General Fund support for Medi-Cal by $185 million. (The General Fund is the main account from which the state pays for public services and systems.)

2. Relatively Low Payment Rates Contribute to Diminished Provider Participation in Medi-Cal and Problems With Access to Care

Even before the 10 percent cut took effect in late 2013, California’s fee-for-service payments to doctors who participate in Medicaid were among the lowest in the US. Perhaps not surprisingly, just 62 percent of California physicians accepted new patients covered by Medi-Cal in 2013, compared to 79 percent accepting new patients covered by private health insurance. In addition, California’s payments to dentists generally lag dental reimbursement rates in three key comparison states: Florida, New York, and Texas. As California’s payments stagnated prior to 2014, the number of dentists providing services through Medi-Cal plunged from 9,527 in 2008 to 8,173 in 2013, a 14 percent decline.

Recent research highlights problems with access to care in Medi-Cal — problems that providers and advocates say stem from low payment rates and diminished provider participation in the program. For example, a new study concludes that “access to care is worse for Californians disproportionately represented in Medi-Cal” — such as those who are in poor health or have a disability — compared to Californians with job-based health care coverage. Another new report finds that adults enrolled in Medi-Cal are more likely than Medicaid enrollees in other states “to delay needed care because of difficulty getting an appointment.” Moreover, the problems that children face in accessing Medi-Cal dental services — with more than half of kids not receiving care during a recent one-year period — have been well-documented by the California State Auditor.

These are troubling findings, particularly given that Medi-Cal enrollment has risen by more than 50 percent since 2012-13 an increase that both reflects California’s implementation of federal health care reform and amplifies longstanding concerns about Medi-Cal beneficiaries’ access to care.

3. The Governor Is Willing to Consider Provider Payment Increases – Within Limits

In calling lawmakers into special session, the Governor makes two points about payment increases for Medi-Cal providers:

  • First, the Governor states that any increase should be funded with “permanent and sustainable” revenues from a new tax on health plans and/or “alternative fund sources.” Translation: The Governor has ruled out using General Fund dollars to support ongoing provider payment increases in Medi-Cal. (The Governor mentions a “new” tax on health plans because the state’s current tax no longer complies with federal guidelines and must be revised by mid-2016.) Any tax increase would require a two-thirds vote of each house of the Legislature.
  • Second, the Governor’s proclamation declares that any provider payment increases should “expand access to services” within Medi-Cal. Translation: The Governor prefers targeted payment increases, and would not look favorably on efforts to boost provider reimbursement rates across-the-board.

What kind of payment increase — in the Governor’s view — would help to expand access to care? Jennifer Kent, the director of the state Department of Health Care Services (DHCS), shed some light on this question during an Assembly committee hearing last week. According to Kent, if revenues are “identified and secured” to support a payment increase, DHCS would look at “the main places…where we really feel that there needs to be some enhancement.” As an example, she mentioned the need to boost participation of specialists in rural areas of the state. In contrast, “if we just applied a rate increase, and we didn’t move either the provider to take more Medi-Cal [patients] or to join Medi-Cal,” Kent said, “that is a rate increase in our mind that doesn’t actually accomplish anything.”

An Opportunity to Improve Access to Care in Medi-Cal

The Governor’s acknowledgment of the need for at least a targeted Medi-Cal payment increase is a hopeful sign that state policymakers might make significant progress on this critical issue during the current special session. While boosting provider payments is not the only change that’s needed to help ensure appropriate access to care for Californians enrolled in Medi-Cal, it’s surely one of the most important and sensible steps that the Governor and lawmakers can take — and would represent a critical state investment in the ongoing success of health care reform.

— Scott Graves