Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
118564830
label
Issue Papers - Medi-Cal
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
118564830
contentType
document
title
Issue Papers - Medi-Cal
citationUrl
identifierLocal
840
collections
Ronald Reagan's Governor's Papers of the Press Unit
Issue Files
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
118564830
coverageEndDate
logicalDate
1975-12-31
year
1975
coverageStartDate
logicalDate
1967-01-01
year
1967
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
74c591a5931e186a
ocrText
Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Reagan, Ronald: Gubernatorial Papers,
1966-74: Press Unit
Folder Title: Issue Papers - Medi-Cal
Box: P30
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
From:
Dale W. Wagerman
County Supervisors Association of Califoria
1100 Elks Building
Sacramento, California 95814
Telephone: (916) 441-4011
FOR IMMEDIATE RELEASE
Sacramento, California, January 15, 1971 -
CAL/CARE
Cal/Care, a new system of health care for needy Californians
and a new and positive alternative to Medi-Cal, was proposed today
by the County Supervisors Association of California (CSAC).
The Cal/Care plan will provide for a county-administered and
county-centered program to provide Health Care for the needy.
Major Points of the Proposal:
The county shall determine the entry point into the health
care services system, regardless of who provides the services.
The state and counties will be jointly responsible for pro-
viding health care services to all needy. This also means sharing
the total cost of services. Now the counties are charged by law
with providing for medically indigent not covered by Medi-Cal.
This new concept would create a single system for all indigent
patients.
--A family or individual will be required to pay for services
if adequate income or other resources are available.
--A State Health Care Commission would be established to govern
the program.
"It's no secret that the economic burden carried by the counties
under Medi-Cal has been tremendous," said CSAC President Ralph P.
Thiel. "Recent administrative cost shifts from the state to the
county taxpayers have meant near fiscal disaster for county govern-
ment.
"This proposal culminates a two-month effort by our association.
It is an innovative approach that is reasonable and flexible and that
the taxpayers of California can afford.
"Medi-Cal is a fragmented program that has defied cost controls.
Through a single system centered in the counties, California can
provide health care for the needy but still keep the program within
budgetary limits."
Under the Cal/Care plan, each county would annually prepare and
submit a program and budget to provide the scope of services and
standards of care for the needy which are generally available for
other persons in that county. Medi-Cal has been criticized for
providing better and more comprehensive medical care to the indigent
than the average citizen can afford.
The program would also provide counties with the flexibility to
provide care to persons above the upper limits of financial eligi-
bility or the community standard of care.
The program continues to assure freedom of choice to the needy
by permitting those who are eligible to select from approved services
and facilities included in the county program. However, those ser-
vices provided by the private sector will be reimbursed according
to a fee schedule established by the State Health Care Commission.
-2-
"Cal/Care" will be able to curb many of the abuses of the
current Medi-Cal system," Thiel continued. "With a county system
close to the people, California should be able to control expendi-
tures in the program and excessive uses of it."
The CSAC proposal was developed primarily by administrators
of county health care systems and reviewed and approved by the CSAC
Welfare/Medi-Cal/Hospitals Committee and the CSAC Board of Directors.
County hospitals are the usual means of fulfilling the state mandate
that counties provide health care services to the indigent, and to
the extent that state subventions and other sources of revenue are
inadequate, property taxpayers supply the actual cost needs.
The proposal will be part of legislation to be sponsored
by the association.
In a related action, the association called for emergency legis-
lation for a deficiency appropriation for the "Option" portion of
Medi-Cal for this fiscal year. The association estimates that
option costs may be as much as one-third short of counties' needs.
#
#
#
#
-3-
County Supervisors Association of California
CSAC POSITIVE HEALTH CARE PROPOSAL
January 14, 1971
MEDICAL CARE POLICY RECOMMENDATIONS
CSAC HOSPITAL ADVISORY COMMITTEE
CSAC Hospital Advisory Committee of the County Supervisors
Association of California recommends: 1) that CSAC seek emergency
legislation for a deficiency appropriation of $
for the
"Option" portion of the California Medical Assistance Program (Medi-
Cal) which was not funded for fiscal year 1970-71; 2) that CSAC seek
legislative and/or judicial relief from Medi-Cal regulations that
shift costs from the state to the counties; and 3) that CSAC sponsor
legislation in the 1971 Session of the California Legislature to
create a new single system for meeting the health care needs of
medically needy Californians.
The new system will:
1) Make the state and the counties jointly responsible for
providing health care services, through a single system, to
all persons unable to provide their own.
2) Require the state and the counties to share in the total
cost of health care for the needy in the future in the same
ratio as they did in 1969-70 for persons on welfare, those
"just like" welfare persons now known as Group 2 and all others
such as needy children and all persons who rely on county
sources for care.
3) There shall be established a sliding scale of income and
resources relative to the cost of episodic care requirements
Page Two
January 8, 1971
which are in the nature of a financial catastrophy for the
affected family or individual with provision for the program
to pay the immediate costs and be reimbursed for the bene-
ficiary share over time.
4) Each county will annually prepare and submit a program and
budget to provide the scope of services and standards of care
for the medically needy which are generally available for all
other persons in that county. Such program and budget are to
be reviewed and approved by the State Commission on Health Care
(see Item #8).
5) Permit counties which desire to provide care to persons
above the upper limits of financial eligibility or to augment
the approved scope of services or standards of care to assume
responsibility for the full cost of such additional care.
6) Provide for administration of the system at the county level
with the county having the responsibility to provide its
approved program.
7) To insure the availability of funds for payment of medical
care costs, the state will advance its estimated share of such
costs to the respective counties monthly, subject to regular
reconcilation of over or under advances and county compliance
with its approved program and budget.
Page Three
January 8, 1971
8) There shall be a State Health Care Commission composed
of seven members which include the following: 1) The Director
of the State Department of Health, who shall serve as Chairman
of the Commission; 2) two public members appointed by the
Governor; 3) two legislative members, one senator appointed by
the Senate Rules Committee and one assemblyman appointed by the
Speaker of the Assembly; 4) one county supervisor appointed by
the Governor from a list of three submitted by the County
Supervisors Association of California and 5) one County Health
Care Administrator appointed by the Governor from a list of
three submitted by the County Supervisors Association of California
This Commission shall have authority to set financial
eligibility criteria; review and approve submitted county
programs and budgets; make rules and regulations governing the
administration of this program. The Commission will establish
fee for service schedules as appropriate to be used as the basis
for payment of any services provided by the private sector. The
Commission shall exercise its authority so as to insure federal
conformity and maximize federal sharing.
9) Freedom of choice will be assured by permitting applicants,
whose eligibility and medical need have been confirmed, to select
from approved services and facilities included within the
approved county program. The county will be the entry point into
the system regardless of who provides the service.
State of California
Midoscal
Memorandum
To
: SENIOR STAFF
Date ,December 7, 1970
CABINET
fate
#
Subject: Medi-Cal Table
From : Jerry Martin
Attached is a table showing (Medi-Cal Scope) the type of service and
the amount of benefit financed by Medi-Cal. This is compared across
the page with the types of health insurance plans offered by typical
major group programs (in this case, the three major state employee
health plans).
The last three columns are two union and one private company group
health plan and the benefits they offer. This whole package was
printed in a series on Medi-Cal uses in the Sacramento Union,
September 20, 1970.
Comparison of Benefits:
SACRAMENTO UNION 9/20/70
Medi D Cal vs. private plans
$
MEDICAL
BLUE CROSS
CAL/WEST/
KAISER
CARPENTERS HEALTH AND
LOCKHEED MISSILES
LABORERS HEALTH
SERVICE-GROUP SCOPE
SCOPE
BLUE SHELD
OCCIDENTAL
NORTHS SOUTH
WELFARE TRUST FUND FOR
AND SPACE COMPANY
AND WELFARE
CAUFORNIA
UNDERWRITTEN
TRUST FUND
Yes/ICOS 111 doys/yes:
Yes/70 days/3
Yes/70 days/
North
Yes/70days/36edWd
Yes/365days/
Bed W/d Rate
$40.00 per day
Yes/100% 125days/year
Rata/Co-Pay For
$50.00 parday
Yes/100 days
Hospital Ingationt (F)
Yes/100%
Co-Pay
maximum
South
Private Room
maximem
Semi-privote Room
Hospital Cutpationt(F)
Yes/100.
Yes/Limited/Co-Pay
Yes/Limitsd/Co-Pay
Yes/1003
Yes/Limited/Co-Pay
Yes/Limited/Co-Pay
Yes/107100 Pay
O
Yes/1000
Yes/Umitad Co-Pay
Yes/Limited/Co-Pay
Yes/1000
Yes/Limited/Co-Pay
Yes/Limited/Co-Pay
Yes/103Co-Pay
NursingHoma (F)
Yes/1005
Mone
None
None
None
None
Yes/100%/120days
Physician Services (F)
Yes/1003
Yas/Limited/Co-P3;
Yes/Limited/Co-Pay
Yes/1003
Yes/Limited/Co-Pay
Yes/Limite3/Co-Pay
Yes/105 Co-Pay
Home Mealth Agencias (F)
Yes/100%
None
None
Minimal
None
None
None
#.
Medical Transportation (F)
Yes/1005
Yes/Co-Pay
Yes/Co-Pay
Yes/when authid
Yes/Limited/Co-Pay
Yes/Limited/Co-Pay
Yes/105 Co-Pay
Paarmacy (Drugs)
Yes/100,
None
None
Yes/Co-pmt
Yes/Co-Pay
None
Yes/20,Co-Pay
Dental Care
Yes/100%
Name
None
None
None
Yes/Limited/Co-Pay
Minimal
State Hospitals
Yes/1976
Yas/30 days/Co-Pay
Yes/70 days/Cc-Pay
None
Nane
Yes/365 days/Co-Pa
Yes/209.Co-Pay
Optememists
Yes/100%
Nona
None
Yes/100%
None
None
None
Chirogractors
Yes/1005
None
None
None
Yes/Limited/Co-Pay
Nona
Nena
Podiatrists (Foot Doctor)
Yes/100%
Yes/Limited/Co-Pay
Yes/Limits1/Co-Pay
None
Yes/Limited/Co-Pay
Yes/Limited/Co-Pay
Yes/105Cc-Fay
SpecialiDuty Nursing
Yes/100%
None
None
Minimal
None
Yes/Limited/Co-Pay
Yes/106 Co-Pay
Dispensing Opticians
Yes/100%
Name
None
Yes Kaisar Staff/Full Co-Pay
None
None
None
Prostbetic & Crthotic
Yes/100%
None
Yes/Umite J/Co-Pay
None
None
None
Yes/105Co-Pay
Psychology (CPC)
Yes/100%
None
None
None
None
None
None
Occupations Therpay
Yes/1003
Name
None
None
None
None
Yes/105 Co-Pay
Physical Therapy
Yes/100%
None
None
None
Nona
None
Yes/105 Co-Pay
Speech Therapy
Yes/100%
None
None
None
None
None
None
Hearing Ads
Yes/100,
None
None
None
Nona
None
None
Equipment
Yes/100%
None
Mainet
None
None
Minmal
Yes/16,Co-Pay
Christian Science Service
Yes/1004
Name
Yes/Co-Pay
None
None
None
New
o
(F) - Federally mandated.
Co-pay-patient pays part of cost under private plans, but
co-payment by Medi-Cal recipients is prohibited
by federal government.
State of California
Medi - Lal
Memorandum
EJG>WAS-
To
:SENIOR STAFF
Date :
December 22, 1970
CABINET
for
Parl
Subject:
From : Jerry Martin
Attached is a package of factual material of the 1970-71 Medi-Cal
reductions. It includes a background report on the nursing home
situation and a chart comparing Medi-Cal services offered free to
welfare recipients with six major health plans offered to public
and private employees.
The main point is that the average citizen finances medical benefits
to welfare recipients far beyond those which he receives.
EXPLANATION CODE:
Listed below are a selected number of large group health insurance
plans available to public and private employees and the health care
services each plan provides compared with the services offered under
Medi-Cal to welfare recipients.
1. Column 1, (Medi-Cal Scope) is the authorized range of health care
services, which the Medi-Cal program provides for welfare recipients.
2. Columns 2 through 4 are health plans available to state employees.
3. Column 5 is the health plan offered by the Carpenters Health and
Welfare Trust.
4. Column 6 is the Lockheed Company Health Insurance Plan.
5. Column 7 is the Laborers Health and Welfare Trust Fund Plan.
STATE OF CALIFORNIA
DEPARTMENT OF HEALTH CARE SERVICES
COMPARISON of BENEFITS MEDI-CAL WITH PRIVATE PLANS
BLUE CROSS, BLUE
CAL/WEST/
KAISER NORTH &
CARPENTERS HEALTH AND WELFARE
LOCKHEED MISSILES AND
LABORERS HEALTH AND
SHIELD FREE
OCCIDENTAL -
SOUTH CLOSED
TRUST FUND FOR CALIFORNIA
SPACE COMPANY UNDERWRITTEN
WELFARE TRUST FUND -
MEDI-CAL
CHOICE/SERVICE
FREE CHOICE/
PANEL/GROUP
HOSPITAL SERVICE OF CALIFORNIA
BY TRAVELERS INSURANCE
SELF-ADMINISTERED PLAN
SERVICE - GROUP 1 SCOPE
SCOPE
PLAN
INDEMNITY PLAN
PRACTICE
(BLUE CROSS)
COMPANY
PLAN
Hospital Inpatient
Yes/100%
Yes/70 days/ 3
Yes/70 days/
Yes/100% 111 days
Yes/70 days/3 Bed Wd Rate/
Yes/365 days/
Yes/100%/120 days/
Bed Wd Rate
$40.00 per day
North
Co-pmt if Higher Accom's
$50.00 per day
Semi-private Room
Co-pmt/Higher
maximum
Yes/100% 125 days
Required
maximum
Accd. Required
South
(South has 240 more
days at 1/2 cost)
Hospital Outpatient
Yes/100%
Yes/Limited /
Yes/Limited/
Yes/100%
Yes/Limited/Co-pmt
Yes/Limited/Co-pmt
Yes/10% Co-pmt/
Co-pmt
Co-pmt
$15,000 Max
Lab and X-ray
Yes/100%
Yes/Limited/
Yes/Limited/
Yes/100%
Yes/Limited/Co-pmt
Yes/Limited/Co-pmt
Yes/10% Co-pmt/
Co-pmt
Co-pmt
$15,000 Max
Nursing Home
None
None
None
None
None
Yes/1007/120 days
Yes/100%
(2 for 1) ECF Care
Physician Services
Yes/100%
Yes/Limited//
Yes/Limited/
Yes/100%
Yes/Limited/Co-pmt
Yes/Limited/Co-pmt
Yes/10% Co-pmt/
Co-pmt
Co-pmt
$15,000 Max
Home Health Agencies
Yes/100%
None
None
Minimal
None
None
None
Medical Transportation
Yes/100%
Yes/Co-pmt
Yes/Co-pmt
Yes/when auth'd
Yes/Limited/Co-pmt
Yes/Limited/Co-pmt
Yes/10% Co-pmt/
$15,000 Max
Yes/100%
None
None
Yes/Co-pmt
Yes/Co-pmt
None
Pharmacy (Drugs)
Yes/20% Co-pmt/
$15,000 Max
Dental Care
Yes/100%
None
None
None
None
Yes/Limited/Co-pat
Minimal
State Hospitals
Yes/100%
Yes/30 days/
Yes/70 days/
None
None
Yes/365 days/Co-pmt
Yes/20% Co-pmt/
Co-pmt
Co-pmt
120 days
Optometrists
Yes/100%
None
None
Yes/100%
None
None
None
Chiropractors
Yes/100%
None
None
None
Yes/Limited/Co-pmt
None
None
Podiatrists
Yes/100%
Yes/Limited/
Yes/Limited/
None
Yes/Limited/Co-pmt
Yes/Limited/Co-pmt
Yes/10% Co-pmt/
Co-pmt
Co-pmt
$15,000 Max
Special Duty Nursing
Yes/100%
None
None
Minimal
None
Yes/Limited/Co-pmt
Yes/10% Co-pmt/
Within
$15,000 Max
Require.
Dispensing Opticians
Yes/100%
None
None
Yes/Kaiser Staff/
None
None
None
Full Co-pmt
Prosthetic & Orthotic
Yes/100%
None
Yes/Limited/
None
None
None
Yes/10% Co-pmt/
Co-pmt
$15,000 Max
Psychology (OPC)
Yes/100%
None
None
None
None
None
None
Occupational Therapy
Yes/100%
None
None
None
None
None
Yes/10% Co-pmt
$15,000 Max
Physical Therapy
Yes/100%
None
None
None
None
None
Yes/106 Co-pmt
$15,000 Max
Speech Therapy
Yes/100%
None
None
None
None
None
None
Hearing Aids
Yes/100%
None
None
None
None
None
None
Durable Medical Equipment
Yes/100%
None
Minimal
None
None
Minimal
Yes/10% Co-pmt
$15,000 Max
Christian Science Service
Yes/100%
None
Yes/Co-pmt
None
None
None
None
7/24/70
MEDI-CAL FACTS
1.
COST COMPARISON
1. Medi-Cal cost about $517 per capita in 1970. During the same fiscal
year, the per capita cost for health care in the United States was
about $312, according to the latest available federal statistics.
2. The average citizen is helping finance (through his taxes) a
program of medical benefits and services for welfare recipients that
is far more extensive than
many private health insurance plans
and costs about $205 a year more than the per capita cost of health
care in the United States.
3. One newspaper (Sacramento Union, Sept. 20, 1970) estimated that
to obtain comparable health care benefits from private insurance, a
family of four would have to pay a premium of $2,000 a year!
MEDI-CAL BENEFITS EXCEED PRIVATE HEALTH PLANS
1. Medi-Cal finances full-cost benefits for a list of 23 basic and
optional medical and related health care services. Medi-Cal provides
23 of 23 services on the list.
By contrast:
One major group plan (Blue Cross, Blue Shield) provides benefits
for only the 7 most basic categories of medical services. And it
requires limited co-payment in six of those seven!
Another private plan (Kaiser Group Practice) offers benefits in
10 of the 23 service categories. BUT, it requires partial or full
co-payment by the person receiving benefits in 4 of the 10 and
imposes limitations of benefits in two others!
In short, many private citizens are being taxed to pay for
welfare recipients' medical benefits that are more extensive than they
themselves have under private insurance. And the cost of Medi-Cal is
$517 a year versus the approximately $312 per capita that is spent
on health care in U.S. (1970).
MEDI-CAL'S GENEROUS BENEFITS
1. In addition to the basic medical services, Medi-Cal also must pay
for benefits such as occupational therapy, chiropractors, dental care,
psychologists, speech therapy, physical therapy, optometrists, home
health agency services, nursing home services and medical equipment.
NONE of those benefits are offered under many major private health
Group plan available to state employees.
Health care cost estimate (national total) by Task Force on Medicaid
and Related Programs, HEW, June 30, 1970; census data.
2.
plans, the ones which cover most citizens who pay the taxes to
finance Medi-Cal.
Yet all of these and most important, all basic health needs will
still be offered by Medi-Cal under the December regulations. (Federal
and state law prohibits eliminating any. The state is mandated to
make across the board reductions, such as the 10% cut. It could not,
for example, eliminate Dental care to provide more funds for some
other benefit such as nursing home care).
Non-Elective Surgery
All surgery or other medical benefits necessary to prevent
death or significant disability will CONTINUE TO BE OFFERED AND
FINANCED TO the FULL EXTENT OF EXISTING BENEFIT SCHEDULES! Only
non-essential services are affected by the new limitations.
An example of non-emergency, non-essential services that can be
safely postponed for 90 days or more without causing significant
disability include:
A "bunionectomy", or a hernia repair (non-emergency).
Why Trim Services?
The law requires the state administration to make a specific
sequence of cost reductions when Medi-Cal exceeds its budget.
The first cut on the list is a 10% reduction of fees to
physicians, chiropractors, nursing homes, and other health providers.
Then the state must order a postponement of non-elective services
under a sequence written into the law by the Legislature in 1967.
Services cannot be eliminated and only a comparatively small number
of persons, the "affluent poor", can be dropped from the program
under emergency circumstances. These are the 230,000 medically needy
who have too much income to qualify for a cash grant. There are no
present plans to drop them. The law requires Medi-Cal to accept all
welfare recipients on its rolls, too.
Why the Budget Squeeze?
The original 1970-71 budget included funds for a projected average
monthly caseload of 2,119,600 (including all welfare categories).
Now the number of Medi-Cal recipients is expected to average more
than 2,400,000 a month for Fiscal 1970-71. The caseload growth in
Medi-Cal is caused by the growth of the welfare rolls, including the
impact of court decisions which liberalize benefits and add people to
welfare.
3.
MAINSTREAM MEDICAL CARE?
Q--Some critics have said the latest Medi-Cal restrictions means that
the poor no longer will be in the "mainstream" of medical care.
A--On the contrary, the tightening up still leaves welfare recipients
and the medically needy with a far more generous array of medical
benefits than the average working taxpayer has for his own family.
Most private plans offer one-half to two-thirds FEWER health services
than Medi-Cal. And in many private plans, the person receiving the
care must make at least a small co-payment for the service rendered.
Medi-Cal recipients pay nothing. FURTHERMORE, ALL essential health
services are still fully provided.
Q--The benefits offered free by Medi-Cal to welfare recipients must
be more expensive than the health insurance the average citizen has
for his own family since it provides so many more benefits. IS it
more expensive?
A--It certainly is. During Fiscal 1970, the cost of Medi-Cal on a
per capita basis was about $517. The Task Force on Medicaid and
Related Programs, U.S. Department of Health, Education and Welfare,
has reported that for Fiscal 1970, (June 30, 1970) the total
expenditure for health care in the United States was about $64 billion.
That means that the per capita (per person) expenditure for health
care in the United States during Fiscal 1970 amounted to about $312
a year for 205 million American citizens, about $205 less than the
Medi-Cal per capita cost.
NURSING HOME RATES
The subject of what constitutes "reasonable" reimbursement for
nursing homes in the Medi-Cal program is a complex problem. A proper
perspective for evaluating the situation requires some background
into the whole history of the Medi-Cal nursing home program.
Immediately prior to the advent of Medi-Cal and Medicare in
California, there were approximately 22,000 nursing home beds in the
State of California. In the five years the two government health
care programs have been in existence the number of nursing home beds
has increased to approximately 100,000 beds at the present time.
4.
Many homes, including those built as speculative investment
ventures, rely heavily upon the Medi-Cal and Medicare programs for
filling their beds. But the vacancy factor in California is
relatively high--15 per cent--indicating an over-capacity which the
industry itself created.
Eighty per cent of those beds which are filled are occupied by
Medi-Cal and Medicare patients.
In effect, the Nursing home industry in California was largely
built through the Medi-Cal program. There is nothing wrong in this.
Private enterprises such as private nursing homes should be
encouraged to help meet existing public needs (1.e. the need for
nursing home facilities for the elderly).
But the Reagan administration does not believe that the taxpayers
should be forced to pay excessive daily rates to make up for a high
vacancy factor caused by over-capacity.
The Reagan administration does believe that nursing home operators
participating in the Medi-Cal program are entitled to "reasonable"
reimbursements. The attempt is being made now to define "reasonable".
The State really is caught in a bureaucratic cross fire in this
situation. The Federal Government indicated after a survey that 45%
of Medi-Cal nursing home patients should not be in this type of
facility, but instead should be in an "intermediate care" program
(one which doesn't require the higher degree of medical attention in
nursing homes).
No such program existed. The State must develop standards for an
intermediate care type facility from scratch. It is attempting to do
this by cooperating with the nursing home operators and the Federal
government.
But some nursing home operators have objected to the "intermediate
care" concept because it would mean lower daily rates than they have
been demanding from the State.
In brief, the dispute involves what constitutes a "reasonable"
daily rate.
1.
BACKGROUND OF NURSING HOME RATES
The California Association of Nursing Homes sued the State in
November 1967, charging that nursing home rates under Medi-Cal were
not reasonable. These rates were established by the Department of
Finance at the direction of the former Governor in 1961.
An appeal upheld a trial court decision which said essentially
that the court had no way to decide if the rate was reasonable
because it did not go the State Administrative Procedure Act route.
This course allows data (or regulations) establishing a base to be
introduced as evidence at a public hearing. There it is open to
challenge and contrary evidence may be introduced. Public hearing
testimony in effect provides a body of evidence that sometimes
obviates the need for a court to take evidence itself.
The legal route ran its course in late 1969 and the Department
ordered that Ernst and Ernst, a national accounting firm, establish
nursing home data from a valid statistical sample which proved to
be 76 nursing homes chosen from about 1,300. Ernst and Ernst was
advised not to chose a nursing home that had less than 65% occupancy
nor one that had less than 35% Medi-Cal patients. This was to prevent
"outlaw" statistics from distorting the present picture. Based on their
data, the Department's analysis showed that the proposed rate should
be $13.54 a day.
The December 15-16 public hearing for nursing home rates will
result in the adoption of a rate on February 1, 1971. That rate--
whatever it is-- will be subject to a 10% cut which is being levied
against all until June 30, 1971. The current rates are also subject
to the 10% cut until such time as the new rates are established.
INTERMEDIATE CARE FACILITIES
As of early December, approximately 300 beds have been approved
for intermediate care in northeastern California by Comprehensive
Health Planning. At that time, there were applications for another
300 beds awaiting CHP approval in the Los Angeles area. Ordinarily,
this approval required a public hearing and CompHealth has yet to
make a Southern California swing.
At the same time, the State Department of Health Care Services
has medical-social review teams operating in the Sacramento and Los
Angeles areas. These teams are surveying the medical and social needs
2.
of every Medi-Cal patient in each nursing home to ascertain what level
of care that patient needs. So far, their survey shows about 30% of
the patients need some lesser level of care than nursing homes. The
nursing home industry and the public have been assured that even though
Medi-Cal patients are identified as requiring a lesser level of care,
none will be moved until that care is available in the area. The
accent on intermediate care is for social activity rather than medical
care. For example, instead of a staffing requirement for 24 hour
nursing care, 40 hours a week nursing standards are all that's
necessary. On any given day, there are about 55,000 Medi-Cal
patients in nursing homes. The Department will adopt emergency
regulations governing standards for intermediate care on December 10.
Nursing homes, convalescent hospitals, or hospitals already licensed
by DPH do not have to go through Comprehensive Health Planning, nor
be additionally licensed by DPH which will entail an on-site
inspection by the Department's licensing agency. This will identify
a wing or section in a licensed facility that could be used for
intermediate care. This will sever a great deal of red tape that
presently is inhibiting nursing home operators from applying for
ICF. The rate for ICF, as proposed by Human Relations Agency (and
also subject to public hearings later) is $305 per patient a calendar
month.
There are, of course, avenues through which the nursing home
operators may seek equitable adjustments in the rates. Both the
Federal government and the State have established procedures for this
purpose.
But both the Federal and State governments also have an obligation
to make sure that taxpayers are not forced to pay an excessive nursing
home rate for a facility built in the wrong place at the wrong time.
Nor should taxpaying citizens who finance their own, less extensive
medical care, be required to subsidize inefficiency to meet a payment
level that a nursing home operator arbitrarily thinks if "fair".
If the state administration did not insist upon tight fiscal
checks upon rates, nursing home expenses could be subject to the
same type of massive cost over-runs that the Federal government has
experienced with some of its large defense contracts.
PB
December 22, 1970
REPLY TO KCBS RADIO EDITORIAL
By Dr. Earl Brian
Director, Department of Health Care Services
State of California
Several weeks ago, when Governor Reagan announced temporary
steps his administration was taking to help head off the financial
crisis in the state's Medi-Cal program, he noted the public's
confusion about the program. I'd like to clear up some of that
confusion.
Medi-Cal was created by law in 1965, implemented in early 1966
and inherited by Governor Reagan in 1967. Since assuming office,
the governor has warned repeatedly of the enormous difficulties of
administering the program.
To get a Medi-Cal card, one need only get on welfare. The card
provides the most complete array of health care services imaginable
all paid in full by the taxpayers working men and women who cannot
even afford such care for themselves or their families.
Today, one out of every nine Californians is on welfare and
therefore a Medi-Cal recipient. That compares with one of every
15 citizens four years ago.
Despite the tremendous increase in those receiving Medi-Cal,
the law Section 14120 of the Welfare and Institutions Code
requires the Medi-Cal program to be operated within budgeted
expenditures. The law says that if, at any time, we know the cost
of Medi-Cal will exceed available funds, we must reduce by up to
10 percent the amounts the state pays for Medi-Cal services.
The governor's action was explicitly required by law. Had the
temporary controls not gone into effect December 15, the Medi-Cal
program would have run out of funds next April, two and one half
months before the end of the fiscal year. And that is against
California law.
I want to emphasize that the cuts we made were in fees paid
to doctors, dentists and other providers. No essential services
have been eliminated. The fact is: because the administration
took the action in time, Medi-Cal recipients are now assured of
receiving the necessary care they require.
In the meantime we are putting the finishing touches on a
complete overhaul and reform of Medi-Cal---which Governor Reagan
will be announcing in the coming months.
Time: 1:58
EJG:feb
From:
12/70
Chuck Broadhurst
County Supervisors Association of California
1100 Elks Building
Sacramento, California 95814
Telephone (916) 441-4011
FOR IMMEDIATE RELEASE
Sacramento, Dec. 17--The president of the County Supervisors
Association of California today expressed alarm over the serious
implications to local property taxpayers stemming from State efforts
to overcome a $140 million deficit in California's Medi-Cal program.
In a statement issued from the Association's offices in Sacramento,
Ralph P. Thiel, a Tuolumne County supervisor, declared:
"The State has simply told county hospitals to make their services
available to Medi-Cal recipients at a multi-million dollar loss,
whereas in the past they've provided them at cost. This regrettable
move was ordered by the Director of the State Department of Health
Care Services without even consulting the counties, and we are
important financial partners in the Medi-Cal program. Specifically,
the Department:
"One--ordered the counties to provide outpatient Medi-Cal services
at below their actual cost. We estimate the direct impact of this
order to be between $5 and $8 million on the county property tax-
payer.
"Two--imposed a further 10% reduction in the amount the State
will pay for county medical services. This adds another $2 million
to the county property taxpayers' bill.
"Three--on top of this the State proposes to require the counties
to provide long term care to the chronically ill at a loss. In
Tuolumne County alone, this would cost real property taxpayers
$161,280, which would mean an increase of 20.6 cents on our county's
tax rate. Statewide, our preliminary estimates of the amount that
would have to be raised locally is between $10 and $15 million. Again,
it would be the county property taxpayer who would have to pick up
the tab.
"And four--circumstances threaten to shift over 200,000 medically
needy recipients to care in county hospitals. The cost implication
of this move, if it occurs, is between $100 and $150 million.
"It is totally unreasonable to expect counties to absorb such
massive costs. For one thing, this year most county tax rates jumped
to all time highs. For another, county budgets for the current fiscal
year have already been adopted and their tax rates established. There
is positively no way for county boards of supervisors to go back to
the property taxpayer and raise the 1970-71 tax rate. If the State
prevails, it will mean the counties will have to cut such desperately
needed services as law enforcement, fire protection, mental health,
and probation. Most counties have no reserves whatever from which
to bail the State out of its Medi-Cal financing crisis.
"Moreover, there is a serious question under the Medi-Cal law
whether the State Director of Health Care Services has the authority
to impose fees on counties at less than the cost of the services they
provide. Counties are required, by law, to provide medical care
services to the poor, whereas private hospitals are not. They cannot
close their doors to the poor. This principle has been recognized
since the inception of the Medi-Cal program in 1965 and is due to the
simple fact that county hospitals are supported by property tax
revenues. Californians should realize that county health care is
provided at cost, and that any fee schedules or reductions in pay-
ments by the State is nothing less than an outright cost-shift to the
county property taxpayer. They should also realize that the property
taxpayer is a heavy contributor to the funding of Medi-Cal. He
supplies approximately $1 for every $2 that the State puts up.
"If doubt is now to be cast upon this State-county relationship,
the counties believe they will have no other alternative but to
secure judicial or legislative interpretation of the Medi-Cal law
rather than relying upon the unilateral interpretation of the State
Director of Health Care Services.
"Counties quite appropriately are alarmed, for the State's
directives are clearly a breach of faith in the joint State-county
partnership to deliver health care services to the poor. "
# # #
State of California
Health and Welfare Agency
Memorandum
To :
Date :
Edwin Meese, III
July 14, 1970
Executive Secretary
Governor's Office
bill
File No.:
21:38
Subject:
Medi-Cal Management
System
From : Office of the Administrator
In response to questions raised at staff meeting this morning,
transmitted herewith are Earl Brian's explanations.
LUCIAN B. VANDEGRIFT
Secretary
Attachment
CC: Verne Orr, Director, Department of Finance)
James Crumpacker, Cabinet Secretary
)
Governor's Office
)
with copy of
Paul J. Beck, Press Secretary
)
attachment
Governor's Office
)
State of California
Memorandum
hand. 4:30 carried/1/1/70
Human Relations Agency
JUL 1 4 1970
To
:
Lucian B. Vandegrift, Secretary
Date :
July 14, 1970
Human Relations Agency
Subject :
From
:
Department of Health Care Services
Earl W. Brian, M.D., Director
This memorandum will summarize the events to date regarding the Medi-Cal
Management System.
In 1967, the Governor's Survey on Efficiency and Cost Control recommended
that the claims processing system for the Medi-Cal program be reviewed,
with the idea that considerable revision in the system was needed.
In the Fall of 1968 Lockheed Corporation was awarded a contract for the study
of the existing claims processing system and proposal of a new system, which
is now called the Medi-Cal Management System. The Lockheed proposal was
put out to bid, and finally two companies submitted bids to design, implement,
and test the system on a prototype basis in two California counties. The
final contract for $5. 5 million was awarded to Health Care Systems Adminis-
trators (HCSA), a joint venture of Occidental, Pacific National, Pacific
Mutual, and Cal-West insurance companies, in conjunction with IBM. After
lengthy contract negotiations the final contract was signed on June 15, 1970,
and since that time has been approved by the Department of General Services.
HCSA is now working to implement the computerized claims processing
system in two California counties San Diego and Santa Clara.
The system is quite complex in that there are many different factors involv-
ing the Medi-Cal program, which includes such things as eligibility deter-
mination, mechanics of claims processing, systems for duplicate payment
checks, systems for utilization review, which will be built into the Medi-Cal
Management System. The contract calls for an 18-month design and
implementation period. If the system is as successful in the prototype
counties as is anticipated, the state will have to give consideration to state-
wide implementation of the system.
The attached reports prepared by the Lockheed Corporation indicate what
effect might be anticipated if a successful system can be implemented state-
wide. The last chart in the group projects a program saving of $172 million.
Lucian Vandegrift
-2-
July 14, 1970
This may be somewhat optimistic, but it seems reasonable to assume that
a system such as the Medi-Cal Management System can effect a 7% program
savings (which in the Medi-Cal program would approximate $100 million).
There may be some concern that the conflict of interest question regarding
Carel Mulder has some relationship to the Medi-Cal Management System.
This is not the case. The question surrounding Carel Mulder arose out of
a relationship between EDS-F of Dallas, Texas, and California Blue Shield.
Neither of these two organizations have any relationship with the Medi-Cal
Management System. (Furthermore, as you will recall, the Attorney
General investigated the Mulder charge and found him to be "without conflict
of interest".)
Tail w. Brian
Earl W. Brian, M.D.
Director
EWBdw
Attachments
cc: Verne Orr, Director
State Department of Finance
LOCKHEED PROJECT STARTUP COSTS
Low Estimate
Per Claim
High Estimate
Per Claim
Cost to Start
$5,000,000
$6,000,000
Amortized Over 3 Years
1,667,000
$0.56
2,000,000
$0.67
Claims Load*
3,000,000
3,000,000
Operating Expense
3,000,000
$1.00
4,000,000
$1.33
Total Annual Expense
$4,667,000
$1.56
$6,000,000
$2.00
(First 3 Years)
*To keep amortized cost at less than $1.00 per claim, and also
have reasonable overall processing cost.
Estimated Monthly Claim Volume for Larger Foundation and Society Counties:
Foundation Counties
Medical
Dental
Drug
Total
Fresno
27,930
2,560
51,720
82,210
San Bernardino
27,260
2,210
43,590
73,060
Sacramento
25,610
2,490
41,180
69,280
San Diego
22,910
2,260
66,680
91,850
Santa Clara
22,910
2,060
37,690
62,660
Riverside
17,120
1,390
32,500
51,010
Kern
15,810
1,060
30,520
47,390
Tulare
13,760
930
25,690
40,380
Society Counties
San Mateo
8,992
667
12,139
21,797
Ventura
7,030
610
10,678
18,319
Santa Barbara
6,553
567
8,585
15,704
Butte
5,034
411
9,116
14,560
San Luis Obispo
5,185
465
8,362
14,012
Solano
4,503
379
7,591
12,472
Marin
3,409
313
5,273
8,995
MEDI-CAL SYSTEM COST METHODOLOGY
PROGRAM SAVINGS BASED ON EXPERIENCE IN FRESNO COUNTY ON MEDICARE CLAIMS
NATIONWIDE CLAIM REDUCTION
1½
FRESNO CLAIM REDUCTION
14 %
DIFFERENCE ATTRIBUTED OF
IMPROVED UTILIZATION CONTROL
12½
ADMINISTRATIVE SAVINGS BASED ON EXTENSION OF LOCKHEED WORK - USING A CONSTANT
PERCENTAGE SAVING
ESTIMATED ANNUAL TOTAL
MEDI-CAL CASH FLOW
FISCAL
YEAR
$
1970
$484,000
ADDED COST
1971
$163,400,000
SAVINGS
1972 onward
$172,200,000
SAVINGS
MEDI-CAL COSTS: 1969/1970 ESTIMATED
FULLY OPERATIONAL
PRESENT
PROPOSED
CHANGE
SYSTEM
SYSTEM
ADMINISTRATION
$39,500,000
$30,300,000
$9,200,000
APPLICANT PROCESSING
CLAIMS PROCESSING
FISCAL OPERATIONS
PLANNING, ANALYSIS & CONTROL
PROVISION OF SERVICE
$1,020,000,000
$857,000,000
$163,000,000
TOTALS
$1,059,500,000
$887,300,000
$172,200,000
ESTIMATED TOTAL MEDI-CAL SAVINGS
ESTIMATED ANNUAL CASH FLOW ADMINISTRATIVE COSTS ONLY
9,000,000
NEW SAVINGS
395,000
PRESENT LEVEL
PRESENT LEVEL
1,304,000
70
71
72
73
ADDED COSTS
74
ESTIMATED
CHANGE IN MEDI-CAL
COSTS.
PRESENT
PROPOSED
SYSTEM
$1,059,500,000
SYSTEM
TOTAL PROGRAM SAVINGS
$172,200,000
TOTAL PROGRAM COSTS
$887,300,000
$0
HUMAN RELATIONS AGENCY
FOR IMMEDIATE RELEASE
Sacramento, California
Contact: Walter Barkdull
Telephone: (916) 445-6951
April 17, 1970
Plans to establish a new intermediate category of out-of home care for the aged
or disabled were announced today by Lucian B. Vandegrift, Secretary of the
Human Relations Agency, in a report to the Legislature.
"Intermediate care will fill the existing gap between homes that either provide
no regular nursing care or provide it around the clock, 11 Vandegrift said. "This
new category will permit the aged or disabled to secure the combination of
medical and social care best suited to their needs. 11
The new combination category will go into effect after hearings are held, standards
officially adopted, and licenses are issued by the State Department of Public
Health - - probably in September, 1970.
At the same time, State medical-social review teams will be formed which will
place residents whose care is paid by the State Medi-Cal or welfare programs in
the most appropriate type of program. The teams will review the placement of
each resident annually to insure that his needs are being met. Teams will be
under control of the Department of Health Care Services.
Vandegrift said that he expects most of the new intermediate care beds will come
from conversion of distinct portions of existing nursing and residential care homes,
minimizing the need to move residents.
The Agency proposes that the staffing of intermediate care homes include a
licensed nurse on duty full-time for the day shift during the regular work week
and another employee responsible for planning and directing social and recreational
programs.
Nursing homes are now required to have licensed nursing personnel on duty 24-hours
a day, every day, while the residential care homes require no nursing personnel.
-2-
On the basis of preliminary comparisons, the average intermediate care rate is
expected to be approximately $300-$320 a month -- about $100 a month less than
skilled nursing home care and $100 more than residential care.
The new category was developed under authority of legislation authored by
Assemblyman Eugene Chappie (R-Cool) which was adopted in 1968.
A study conducted by the Agency showed that 35 percent of a sampling of Medi-Cal
recipients in skilled nursing homes could be served more appropriately by a
lower level of medical care together with a higher level of social care, a com-
bination that does not now exist.
Vandegrift said that the cost of the review team operation would be paid by the
savings from utilizing the less costly care during 1970-71. He said that in
subsequent years savings to the State should be "substantial".
# # #
Mide carl
State of Califo nia
CC
Crimpacker Beck
Human Relations Agency
Memorandum
To
Lucian Vandegrift, Secretary
Walton
Date :
March 12, 1970
HumanRelations Agency
file
they
Subject
From
Department of Health Care Services
Earl W. Brian, M.D., Director Designate
On March 11, 1970, I attended the California Hospital Association's
Board of Trustees meeting, and during the course of that meeting I
was forced into a position of having to speak for Governor Reagan in
regard to a basic health concept. The conversation went something
like this:
The President of the California Hospital Association said,
"Dr. Brian, we have heard from a reliable source that
when told that needy patients would have to go to county
hospitals (in lieu of private hospitals) if Medi-Cal funds
were cut, Governor Reagan responded: 'What is wrong
with that?'. " The CHA President went on to say that this
caused concern in their ranks about the Governor's posi-
tion in regard to the "mainstream health care" concept
under which the Medi-Cal program (theoretically) operates.
I responded to the audience (of approximately 50 people) in
the following manner: "I am certain that Governor Reagan's
intent, if he made such a statement was to get at the crux
of the subject rather than to take an unfavorable position
in regard to the mainstream concept. The Governor is a
pragmatic individual who keeps an open mind to the various
possibilities. While I know for certain that he desires to
help the truly needy members of our society who, for reasons
beyond their control, are unable to help themselves, the
Governor has some reservations about the manner in which
this help is delivered to those persons. Generally I feel that
he is interested in having me attempt to make this mainstream
health care concept work efficiently and, in fact, has hired
me to do that particular job. However, he would be willing
to take a hard look at alternative methods for delivering health
care to the needy members of our society."
Lucian Vandegrift
-2-
March 12, 1970
Generally, my position in the discussion was one of leaving the door
open for the Governor to proceed in either direction; but, since this
and other related questions tend to crop up continuously, I believe it
would be advisable for us to sit down with the Governor for a few
minutes and review this subject.
Earl W. Brion
Earl W. Brian, M.D.
Director Designate
EWBdw
HUMAN RELATIONS AGENCY
FOR IMMEDIATE RELEASE
Sacramento, California
Contact: Spencer Williams
November 7, 1968
Spencer Williams, Secretary of the Human Relations Agency, issued the
following statement in connection with the release by the Attorney General
of the report on Medi-Cal:
"We join with the Attorney General in our mutual determination to eliminate
fraud in the State's Medi-Cal program.
The suggestions contained in his report, aimed at reducing abuses in this
important area, should contribute to creating additional safeguards in the program.
As this administration has said many times, Medi-Cal was hastily conceived
in the closing days of the 1965 legislature, prior to the time Governor Reagan
took office. In this connection, it is important to note that the Attorney
General's report emphasizes that the necessary planning and research needed for
the effective operation of Medi-Cal unfortunately did not accompany the initial
enactment of the program.
We also echo his warning that the enactment of Federal legislation which
requires immediate response from the states to take advantage of Federal funding
is laden with peril. Certainly, as the report emphasizes, the formulation of
programs without sufficient preparation and analysis is ill-considered.
We have not, and will not, tolerate fraudulent misuse of Medi-Cal funds
by those who receive or provide services.
We have asked to meet with the staff of the Attorney General to secure
specific cases of fraud and abuse which were uncovered. Further, we will
continue to insist on prosecution in any case where there is evidence of wrong-
doing.
Even though the 'illegal and unethical activities' identified in the report
amount to only about one percent of program expenditures, the fact is that this
still represents one percent more misuse of the taxpayers' money than is warranted.
Every penny spent for Medi-Cal must be spent for those who require treatment, not
for the benefit of cheaters.
We are continuing to improve the management of Medi-Cal and are making sub-
stantial progress in this regard.
-2-
As the report notes, 'efforts have already been made to remedy many of the
problems' mentioned. For example, before the study was even contemplated we
had tested and installed a new computerized billing system which resulted in the
recovery of more than $1 million paid out prior to January, 1967. Since that
time we have rejected duplicates at the rate of about $100,000 a month. Further-
more, the new multi-card identification system will make false billing even more
difficult.
After many months of complex negotiation we awarded contracts last September
to begin audits. We supported legislation months ago that will shortly become
effective to place the Medi-Cal consultants under State control. We have a
management systems study underway which will result in further improvements in
the program."
# # #
State of California
Memorandum
To
:
Governor Reagan
Date :
May 3, 1968
Subject:
Suggested comments
concerning press stories on
Legislative Joint Committee
Report on Medi-Cal
From
:
Spencer Williams
As to necessity to propose program reductions and postponement of
non-essential services last August: This year's budget was prepared
on the basis that carry-over debts were to be paid out of this
year's appropriation. This position was made known to the Legis-
lature at the time the budget was presented, and subsequently
during June and July. The ability to pay off the Medi-Cal debts,
however, out of prior-year resources from other programs made
possible the Medi-Cal surplus which we will experience this year.
As to the comment in the report, "The Administration's response
to (Supreme Court's) decision was to answer that 160,000 medically
indigent people would be totally eliminated from the program unless
the Legislature authorized the Administration to make the reductions
in benefits the courts held to be illegal". It was the court, not
the Administration, which said the first, step in reducing or post-
poning program services must be the elimination of the 160,000
medically indigent. The Administration rejected this concept as
unfair and as requiring a shift of unreasonable expenses to the
counties. It was for this reason that it sought legislative
alternatives.
In general, the report gives the Administration proper credit for
actions taken to control the program by tightening up in the
administration of Medi-Cal. These total approximately 64.6 million
General Fund savings. There will be no relaxation of these
efforts to control program costs which result from over-utilization
by both providers and patients.
As to statements alleged that future Medi-Cal cuts are unnecessary
and that the program does not face fiscal problems next year, the
question asked of Mr. Williams was that "if this year's surplus is
carried over and added to next year's budget as mentioned in the
report (page 20, last paragraph) can the current level of service
be maintained?" The response was "assuming that the surplus is
carried over it would seem that unless unforeseen circumstances
arise, the program could be operated at current levels, however,
in view of the broader overall General Fund problem that faces
the state there can be no assumption of such carryover".
RR. grog. shud be reduced in cost 9 all cmte did was
portpont day of rechaning
page -2- continues
As to the need for the Sherman Bill: The Sherman Bill is necessary
to establish sensible priorities for program controls in the event
of fiscal problems whether they develop this year or any year. In
a program affected by as many variables as Medi Cal, such variables
including changes in federal legislation and reductions in federal
funding, the legislative establishment of such criteria is
essential. Whether the program faces fiscal difficulties next year
will depend upon these variables as well as whether the condition
of the total General Fund allows or does not allow the application
of this year's Medi-Cal surplus to next year's program.
Rough Draft
BACKGROUNDER - Medi-Cal/Proposed Prepaid Program
1/ Medi-Cal is one of our biggest fiscal headaches. The way it
is now run, it will continue to be a headache.
It is draining the taxpayer. It is draining the state budget.
It is building a bureaucracy. It is not answering the real needs
for mainstream medicine for our needy. It is causing a deep rift
between the medical community and the administration.
It must be overhauled.
2/ The California Medical Association (CMA) House of Delegates
meet in state convention in San Francisco March 23-27
It is reported that quite a few resolutions have already been
submitted that deal with the Administration's proposals (Spencer
Williams) :
- (a) to cut the doctors fees under Medi-Cal
(sixty percentile) and
- (b) the proposed doubling of the OHCS budget
for Medi-Cal vender surveillance.
The medical association feels that these
proposals are direct slaps at it. There
will probably be hot debates, hard criticism,
extensive press coverage -- all of which
would be most embarrassing to the Governor.
We must move to preempt this (to strike first
as we did in the mental hospitals* report
situation several weeks ago).
3/ The ground work for such a coup has already been laid.
On February 14 a group of doctors met with the Governor and
with Spencer Williams, Mike Deaver and myself. The doctors
Backgrounder
Page two
previewed a concept for prepayment plan for Medi-Cal -- i.e. a
giant prepaid insurance program through which Blue Shield would
contract with the State of California to provide doctors' services
for Medi-Cal recipients for a set annual contract fee. The California
Physicians Service would agree to provide care for all recipients of
Medi-Cal. If the costs of fulfilling such a contract exceed the
amount of the contract Blue Shield would absorb the loss. If the
costs did not total the dollar amount of the contract, the savings
would be returned to the State for the next year's operation.
Reportedly, Spence has also been working with several other groups
on a similar plan.
The Governor was most receptive to this concept.
It was agreed that this group of doctors would on March 15 present
the Governor with a draft proposal for such a prepayment plan.
Therefore, we should schedule at least a half an hour for these
doctors with the Governor on either March 14 or 15.
(The draft proposal has already been submitted to Spence on
March 4. He is now reviewing it with people in his shop.)
4/ We should now schedule the release of such a concept at the
Governor's news conference on March 19.
The Governor should outline the basic structure of the concept,
have
point out that he and Spence Williams been working on it for
sometime and that progress is being made and that this seems to be
the proper role of state government in the overall Medi-Cal program.
(Also, reference to recent recommendation of Assembly Public
Health Committee - 3/7/68.)
5/ Such a plan could put the Governor in a position of leadership
(National overtones here).
It would help short circuit those resolutions now boiling for the
CMA convention (our friends could say "the Governor is already working
Backgrounder
Page three
to solve the problem"). Hopefully it will enable us to both avoid
bad publicity and bad relations with the doctors and once again
give us the positive ascendency in a very important matter.
To
:
Paul Beck
Date : March 15, 1968
Subject:
New York State's
Medicaid Plan
From :
Jim Gibson
Two years ago Governor Nelson Rockefeller fathered a program
of state medical assistance which was the most liberal, in
terms of benefits, in the nation. He has now signed legis-
lation which becomes effective April 1, and which will eliminate
1.5 million possible recipients from the program.
The new legislation lowers the eligibility standards and denies
practically all benefits to persons aged 21 through 64. Under
the current program a family of four could qualify if its net
annual income after taxes and other deductions didn't exceed
$6,000.
The new law lowers this standard to $5,300 for this typical
family. The parents, however, might be excluded under the
age qualification.
This new legislation will cut New York State participation from
$600 million to $300 million.
OJG:sjs
FOR IMMEDIATE RELEASE
STATEMENT OF SPENCER WILLIAMS
CONCERNING THE PRELIMINARY REPORT ON MEDI-CAL
BY THE ASSEMBLY COMMITTEE ON PUBLIC HEALTH
The preliminary report of the Assembly Committee on Public Health
is comprehensive and constructive. I agree with the Committee
that its recommendations will serve as a useful point of departure
in stimulating solution to Medi-Cal problems and I will be pleased
to work closely with Chairman Duffy and the members to that end.
The Administration also will have proposals and I am confident the
Committee will find them worthy of serious consideration. The
Administration, like the Committee, is vitally concerned with
making the present program efficient and economical while providing
good health care for those who need it. With the assistance of
the Governor's task force and the recently appointed advisory
committee, the Administration has instituted a number of steps to
improve the program.
I am gratified that the Committee recognizes that the Administrator
must have the flexibility to make program adjustments in order to
maintain essential services while keeping within the funds
available.
We will present our detailed views concerning the Committee recom-
mendations as the bills are heard. At this time, however, let me
note that several pilot projects to develop prepaid contracts for
comprehensive health care services are currently nearing the
operational stage. These will give us a basis for evaluation of
the proposal.
# # #
March 7, 1968
State of California
Program Cost Estimates Bureau
Office of Health Care Services
Report No. 400 #1.4
February 26, 1968
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Current Analysis of Preliminary Medi-Cal Expenditure Estimates
Fiscal 1968-69
(Not adjusted for effects of PL 90-248)
The attached tables present a comparison of the December 14, 1967, subvention budget
estimates and current estimate revisions based on:
1. Modified Medically Needy caseload projections.
2. Elimination of Group II extension caseload increment and subsequent
cost as a separate estimate component.
3. Reduction in estimated days of care for nursing homes, and revised
per diem rates.
4. Revised State mental hospital estimate.
5. Elimination of Group II revised maintenance need adjustment.
6. Inclusion of the Short-Doyle program.
The following sections describe these changes in greater detail. As noted in the
above head-note, revised 1968-69 expenditure estimates are not adjusted for the
effect of PL 90-248, which is now being evaluated by OHCS staff.
Caseload
The Department of Social Welfare has not revised its Cash Grant caseload estimates;
therefore, OHCS used these same caseload figures, as presented in the December 14
estimate package. The earlier Medically Needy caseload estimates were developed
from a least squares regression line based on thirteen months' experience - August
1966 through August 1967. The growth rate of Medically Needy certified population
declined significantly during May, June, and July, 1967. At the time caseload
projections were developed for the December 14 budget estimates, caseload experience
was available only through the month of September, thus the continuing effect of the
reduced rate of growth was beyond prediction. The revised Medically Needy caseload
projections were developed from November 1966 - November 1967 experience, which
picks up more months of the declining growth rate. Group II caseload projections
also take recognition of the fact that the earlier estimates assumed a greater
awareness and utilization of certain outpatient benefits, which have not occurred
to date. Increased certifications due to the availability of outpatient physicians'
services, laboratory and radiology, and hospital outpatient services are being
absorbed within predicted caseload growth.
The revised Medically Needy caseload estimate is 84,500 (or 27.4 percent) below
the average monthly caseload projected for the December 14 budget estimates.
Program Cost Estimates Bureau
Report No. 400 #1.4
- 2 -
February 26, 1968
Two-fifths of the overall reduction relates to elimination of 33,800 persons formerly
included for Group II benefit extension. The caseload reduction without Group II
extension increment amounted to 18.5 percent of total Medically Needy, or 2.8 percent
of the total Medi-Cal eligibles.
State mental hospitals
Mental Hygiene produced a revised estimate of Medi-Cal subventions for care of aged
persons in State mental hospitals. This figure is approximately $4.0 million below
the December 14 amount.
Nursing homes
Recent payment and utilization experience indicates that the method initially used
to project nursing home days of care for fiscal 1968-69 produced an excessive number
of days. The previous estimate of 18.5 million days was reduced to 15.7 million by
projecting December 1966 through December 1967, experience by a least squares regres-
sion line.
The nursing home per diem rate used in the December 14 estimates was developed from
cost statements reflecting rate adjustments retroactive to July 1, 1966. The average
per diem rate applied to the current nursing home estimate was developed from new
cost statements, reflecting rate adjustments retroactive to July 1, 1967. This rate,
$12.05, was effective until February 1, 1968, at which time rates were adjusted for
the State minimum wage increment.
On February 1, 1968, the maximum daily rate was increased from $12.74 to $14.00,
effective to June 30, 1968. An overall average daily rate of $13.22 was used for
this five month interval. A statewide average rate of $13.88 was derived for fiscal
1968-69, based on a normal annual rate increase of 5 percent ($13.22 X 1.05 = $13.88).
Gross expenditures were developed by multiplying projected days of care times $13.88.
Patient liability was computed at the rate of $1.71 per day for Group I Medically
Needy and $1.88 per day for Group II Medically Needy and subtracted from gross expen-
ditures. Expenditures were further reduced by $8.6 million to reflect estimated cost
reductions due to tighter utilization controls.
Group II maintenance need
The December 14 estimates included an adjustment for a revised maintenance need
schedule assumed to be effective by July 1, 1968. The revised estimates do not con-
tain this adjustment because PL 90-248 includes provision for some modification of
the current maintenance schedule.
Short-Doyle program
The Short-Doyle program was included in the current 1968-69 subvention estimates by
adding $4.0 million to the "all other services" category and distributing this amount
among the aid groups.
CALIFORNIA MEDICAL Ass. PROGRAM
Report
400 # 1.4
TABLE / ESTIMATED EXPENDI THRES, by PROGRAM
Feb26,1968
Fiscal Year 1968-1969
Budget Estimates
Program
Rensed Estimate
of Der 14,1969
Difference
5
Cash Shant
#
#
It
531 952 300
514 531 200
17,421,100
aas
132 323 0'00
121 789 300
-
10,53,2,700
AB/APSB
9 377 0'00
8 572 800
- 804,200
AID
163 498 500
155 788 i00
- 7,710,500
AJDC
226 753 8'00
228 381 ioo
+
is
1,627,300
315 797 90°
11.2 145 80'0
53,552,100
Group I
168 056 9'00
147 834 800
-
222100
Aged
135 824 700
119 925 700
- 15,899,000
Blind
/ 9.73 900
1738100
- 235,800
Disabled
20 146 000
19 039 100
- 1,106, 900
Hamilies
10 112 3'00
7/3/900
- 2,980,400
Group #
LL
147 741 0'00'
114 411 000
33,330,000
aged
73 983 500
53 842 400
20,141,100
Blind
893 500
725 700
-
167,800
Disabled
33975800
30 399 100
-
2,576,700
Hamilies
38,888,200, 38 888 200.
29 443 800 29 443 800
% 444,00
Nursing Home adj.
27 000 000
27,000.000
-0-
9
-
16 258 800
16-258800
-0 -
Sat.Cosh yeare
891 009 000
820 035 800
1
70,973.20
Administration
28 657 807
28657807
-0-
H
$
919,666,807
848693607
-70973,201
(a) Includes $12.0 million for hospital-based physicians and $4.0 million
for Short-Doyle program.
(b) Excludes adjustment due to Group II revised maintenance need.
you
#1.4
Calif. med. ass. Program
Lable
2
Estimated Enpend ty May
Fiscal year 1968-1969
Service
Budjtcestimate
Devised Estimate
Difference
of Rise 14, 1967
$
@
1st
191 643 800
183 786 8'00
7,857,000
Prescrip. Drugs
55399 800
53 196.700
-2,203,100
Dental Care
47 47201700 201 700
46564300 46 564 300
- 637,400
Co. Hospitals
107 205 900
104 037 700
-3,168,200
152 297 300
141 716 200
-10,581,100
state
21 959 800
18 008 ioo
3,951,700
233 016 2'00
188 029'700
- 44,986, 500
39.025700
41437500 (t)
+
2,411,800
Muring / tome adj
27,000,000
27,000,000
0
Litte XIIIIB) Buych
16 258 800
16258800
0
Loh Costif Care
-
891 009 000
820 035 800
70,973.200
administration
28657807
28 657 807
0,
$
Joh Expenditional
919,666,807.
848693607.
-70973,200
100 Includes omillion for
(B) Includes 4.0 million for Short-Doyle program.
you
Calif. Med. ass. Proj.
#1.4
Lable
3.
no.of Caertified Persons
Fiscal Year 1968-1969
By Program
Program
Perised Estimate
Difference
1,507,700
1,507,700
0
aas
305,500
305,500
0
aB/aPAB
12,800
12,800
0
aID
157,200
157,200
0
AJDC
1,032,200
1,032,200
0
(a)
Medically
307,900
223,400
-84,500
Group I aged
99,100
70,200
- 28,900'
42,000
31,700
- 10,300
Slind
700
300
- H00'
Disabled
9,300
7,800
- 1,500'
Jamilies
47,100
30,400
- 16,700'
Group #
208,800.
153,200
- 55,600
And
39,900
29,100
- 10,800
Blind
500
40.0
- 100
Disabled
9,800
8,500
- 1,300'
Jamilies
158,600
115,200
- 43400
1,815,600
1,431,100
- 84,500
(a medically needy carelord projections we mudified
using movement caselord informance, exchudes
caselood adjustment for Smy TI benefit intension
PILIOIITEY IO
rrogram
Office of Health Care Services
Report No. 400 #1
February 14, 1968
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Premises and Methodology of Revised Medi-Cal Expenditure Estimates
1967 - 1968
The attached tables present a comparison of the December 14, 1967, subvention budget
estimates and current estimate revisions based on:
1. Modified Medically Needy caseload projections.
2. Elimination of Group II extension caseload increment and subsequent
cost as a separate estimate component.
3. Reduction in estimated days of care for nursing homes, and revised
per diem rates.
4. Revised State mental hospital estimate.
5. Elimination of Group II revised maintenance need adjustment.
6. Inclusion of the Short-Doyle program.
These changes are described in greater detail in the following sections.
Caseload
The Department of Social Welfare has not revised its Cash Grant caseload estimates;
therefore, OHCS used these same caseload figures, as presented in the December 14
estimate package. The earlier Medically Needy caseload estimates were developed
from a least squares regression line based on thirteen months' experience - August
1966 through August 1967. The growth rate of Medically Needy certified population
declined significantly during May, June, and July, 1967. At the time caseload
projections were developed for the December 14 budget estimates, caseload experience
was available only through the month of September, thus the continuing effect of the
reduced rate of growth was beyond prediction. The revised Medically Needy caseload
projections were developed from November 1966 - November 1967 experience, which
picks up more months of the declining growth rate. Group II caseload projections
also take recognition of the fact that the earlier estimates assumed a greater
awareness and utilization of certain outpatient benefits, which have not occurred
to date. Increased certifications due to the availability of outpatient physicians'
services, laboratory and radiology, and hospital outpatient services are being
absorbed within predicted caseload growth.
The revised Medically Needy caseload estimate is 45,100 (or 20.9 percent) below
the average monthly caseload projected for the December 14 budget estimates.
Approximately one-half of the overall reduction relates to elimination of 25,400
persons formerly included for Group II benefit extension. The caseload reduction
without Group II extension increment amounted to 10.4 percent of total Medically
Needy, or 1.3 percent of the total Medi-Cal eligibles.
Report No. 400 #1
- 2 -
February 14, 1968
State mental hospitals
Mental Hygiene produced a revised estimate of Medi-Cal subventions for care of aged
persons in State mental hospitals. This figure is $3.6 million below the December 14
amount.
Nursing homes
Recent payment and utilization experience indicates that the method initially used
to project nursing home days of care for fiscal 1967-68 produced an excessive number
of days. The previous estimate of 15.7 million days was reduced to 14.4 million by
projecting December, 1966 through December, 1967, experience by a least squares
regression line.
The nursing home per diem rate used in the December 14 estimates was developed from
cost statements reflecting rate adjustments retroactive to July 1, 1966. The average
per diem rate applied to the current nursing home estimate was developed from new
cost statements, reflecting rate adjustments retroactive to July 1, 1967. This rate,
$12.05, was effective until February 1, 1968, at which time rates were adjusted for
the State minimum wage increment.
On February 1, 1968, the maximum daily rate was increased from $12.74 to $14.00,
effective through June 30, 1968. An initial adjustment of $1.00 will be added to the
schedule of each nursing home; thereafter, individual adjustments will be made to
departmental costs, up to a maximum of $1.26, on the basis of revised cost statements.
Adjustments will be retroactive to February 1. An average increment of $1.17 was
selected for this period, raising the average daily rate to $13.22.
Days of care were separated into seven (July - January) and five (February - June)
service month periods and were multiplied by the corresponding rate of each period
to derive gross expenditure estimates. Patient liability, at the rate of $1.71 per
day for Medically Needy Group I and $1.88 per day for Group II, was computed and
subtracted from gross expenditures. Expenditures were further reduced by $7.0
million to reflect estimated cost reductions due to tighter utilization controls.
Group II maintenance need
Although a revised maintenance need schedule has been proposed it is doubtful it
will become effective much earlier than July 1, 1968, when the revised Federal
participation levels become operative. Thus, no adjustment was made for a revised
schedule.
Short-Doyle program
The Short-Doyle program was included in the current 1967-68 subvention estimates by
adding $4.0 million to the "all other services" category and distributing this
amount among the aid groups.
Dental care and "other services"
Compared to year-to-date payments and apparent reduced utilization in some services
Report No. 400 #1
- 3 -
February 14, 1968
during the months subsequent to October, 1967, current expenditure estimates are
too high for dental care and services and supplies of vendors in the "all other
services" category. Present estimates are based on payment experience January
through September 1967; thus not reflecting any effect of the September "cuts."
Dental care utilization subsequent to November, 1967 is not expected to increase
sufficiently to absorb earlier reductions and to also achieve the current estimated
expenditure level. Services of podiatrists, chiropractors, optometrists, and other
vendors are more likely to close the gap between reduced payments and estimated
fiscal year expenditures.
It is anticipated expenditure estimates in these categories for fiscal 1967-68 will
be revised, possibly during March, with the availability of more payment and utiliza-
tion experience reflecting the effects of temporary cuts in some services and the
impact on utilization after the court ruling in November.
State of California
Program Cost Estimates Bureau
Office of Health Care Services
Report No. 400 #1
February 14, 1968
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Table 1. Estimated Expenditures, by Program
1967 - 1968
Budget Estimates
Revised Estimates
Program
of Dec. 14, 1967
of Feb. 14, 1968ª
Difference
Cash Grant
$449,006,800
$441,348,000
$-7,658,800
Old Age Security
116,545,200
110,886,900
-5,658,300
Aid to the Blind
8,236,200
7,837,000
-399,200
Aid to the Disabled
129,658,600
125,727,600
-3,931,000
Aid to Families with
Dependent Children
194,566,800
196,896,500
2,329,700
Medically Needy
238,746,100
213,406,200
-25,339,900
Group I
125,558,500
121,120,200
-4,438,300
Aged
102,956,100
99,561,700
-3,394,400
Blind
1,479,700
1,445,600
-34,100
Disabled
14,396,400
14,509,500
113,100
Families
6,726,300
5,603,400
-1,122,900
Group II
113,187,600
92,286,000
-20,901,600
Aged
58,653,000
45,702,600
-12,950,400
Blind
707,900
587,600
-120,300
Disabled
27,191,200
25,094,300
-2,096,900
Families
26,635,500
20,901,500
-5,734,000
Title XVIII (B) Buy-in
12,766,800
12,766,800
0
Total Cost of Care
700,519,700
667,521,000
-32,998,700
Administration
23,443,000
23,633,443
190,443
Total Expenditures
$723,962,700
$691,154,443
$-32,808,257
Includes $6.0 million for hospital based physicians and $4.0 million for Short-Doyle.
Excludes adjustment due to Group II revised maintenance need.
c/ Increase due to distribution of Short-Doyle program among aid categories.
State of California
Program Cost Estimates Bureau
Office of Health Care Services
Report No. 400 #1
February 14, 1968
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Table 2. Estimated Expenditures, by Major Types of Services
1967 - 1968
Budget Estimates
Revised Estimates
Service
of Dec. 14, 1967
of Feb. 14, 1968
Difference
a
a
Physicians' Services
$154,066,800
$149,272,400
$-4,794,400
Prescription Drugs
46,374,700
45,226,900
-1,147,800
Dental Care
39,697,200
39,429,900
-267,300
County Hospitals
99,838,400
98,324,800
-1,513,600
Other Hospitals
119,348,800
113,921,600
-5,427,200
State Mental Hospitals
21,959,800
18,382,000
-3,577,800
Nursing Homes
173,992,200
154,591,500
-19,400,700
All Other Services
32,475,000
35,605,100
3,130,100
Title XVIII (B) Buy-in
12,766,800
12,766,800
O
Total Cost of Care
700,519,700
667,521,000
-32,998,700
Administration
23,443,000
23,633,443
190,443
Total Expenditures
$723,962,700
$691,154,443
$-32,808,257
a Includes $6.0 million for hospital-based physicians.
b/ Includes $4.0 million for Short-Doyle program.
State of California
Program Cost Estimates Bureau
Office of Health Care Services
Report No. 400 #1
February 14, 1968
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Table 3. Average Monthly Number of Certified Persons, by Program
1967 - 1968
Budget Estimates
Revised Estimates
Program
of Dec. 14, 1967
of Feb. 14, 1968
Difference
Cash Grant
1,357,400
1,357,400
0
Old Age Security
298,500
298,500
0
Aid to the Blind
12,800
12,800
0
Aid to the Disabled
127,000
127,000
0
Aid to Families with
Dependent Children
919,100
919,100
0
Medically Needy
215,600
170,500
-45,100
Group I
67,800
57,000
-10,800
Aged
30,800
27,500
-3,300
Blind
400
300
-100
Disabled
5,400
4,700
-700
Families
31,200
24,500
-6,700
Group II
147,800
113,500
-34,300
Aged
33,800
25,200
-8,600
Blind
400
300
-100
Disabled
7,500
6,900
-600
Families
106,100
81,100
-25,000
Total number of eligible persons
1,573,000
1,527,900
-45,100
a/ Medically Needy caseload projections were modified using more recent caseload
experience; excludes caseload adjustment for Group II benefit extension.
mide Cal
HEALTH AND WELFARE AGENCY
FOR IMMEDIATE RELEASE
Sacramento, California
Contact: Spencer Williams
February 20, 1968
A five-member advisory committee to guide reorganization of Medi-Cal
in the continuing effort to achieve improved operational and financial control
was named today by Spencer Williams.
Appointment of the advisory committee was recommended by the Governor's
Survey on Efficiency and Cost Control as the initial step in implementing
far-ranging program revisions.
Named to the committee by Williams, Administrator of the Health and
Welfare Agency, were:
Kenneth D. King, President, Fireman's Fund American Life
Insurance Company, 3333 California Street, San Francisco;
Malcolm C. Todd, M.D., 1515 N. Vermont Avenue, Los Angeles,
President-Elect of the California Medical Association;
Gordon Cumming, Administrator, Sacramento County Hospital,
President of the California Hospital Association;
J. Scott King, Jr., Treasurer, The Rand Corporation, 1700 Main
Street, Santa Monica; and
Roland E. Robbins, Vice President and General Manager, Bank of
America, 350 Pine Street, Long Beach.
"I deeply appreciate the willingness of these outstanding citizens
to assist us in reorganizing this complex and expensive program to keep it within
fiscal bounds and assure that every dollar spent provides maximum health care
benefits to the needy," Williams said.
##########
Ronald Reagan, Governor
STATE OF CALIFORNIA-HEALTH AND WELFARE AGENCY
XEDMUNDC BROWN Governor
OFFICE OF HEALTH CARE SERVICES
1340 K STREET
SACRAMENTO, fili CALIFORNIA 95814
September 27, 1967
TO:
MEMBERS OF THE HEALTH REVIEW AND PROGRAM COUNCIL
SUBJECT:
CALIFORNIA HOSPITAL ASSOCIATION ACTUARIAL REVIEW
OF 1967-68 ESTIMATES
Pursuant to your request of August 4, the actuaries engaged by the California
Hospital Association have submitted their report on the various projections
of Medi-Cal Program costs for fiscal year 1967-68. A copy of this report
is attached, herewith, for your information.
As previously indicated during testimony before the Assembly Public Health
Committee, this report shows areas of both agreement and disagreement.
While the new figures verify the need for substantial program reductions,
we are pleased to point out that, by virtue of more up-to-date figures
derived from bills received, both the California Hospital Association
actuaries and the Office of Health Care Services figures (also attached)
indicate expenditures less than those reported on August 4.
Although these figures make us optimistic that we may commence restora-
tion of services at an early date, no final decisions in this regard can
be made until the issues presently before the Supreme Court are resolved.
Furthermore, incomplete information as to the effects of the law suit on
program costs between September 1 and the date the case is decided
(probably mid-November) complicates the problem of determining the extent
of restorations possible. This occurs because the longer the controls
contained in the September 1 regulations remain in question, the longer
program costs may continue at an accelerated rate and the fewer months
remain in which to achieve necessary program economies.
The over-all estimates of expenditures contained in the staff analysis
and the actuaries' reports are within 5 percent of each other. While the
actuaries' study indicates expenditures of some $60 million less than the
state's previous estimates, OHCS staff review based on updated data indi-
cates a reduction of $26.5 million in estimated expenditures. The areas
of difference are agreed by both staff and actuaries to be judgemental in
nature and will require further review and analysis as still more recent
data becomes available. These areas of difference are pointed out in some
detail in the staff analysis attached.
In order that I may act in the future as promptly as possible and with
the full advice of the Health Review and Program Council, I am requesting
that you provide me with your order of priority listing for the restoration
Members of the Health Review and Program Council
September 27, 1967
Page 2
of benefits removed from the program by the September 1 regulations. In
this way, the restoration of benefits can be made promptly as soon as
the fiscal situation becomes clear and available funds permit.
I want to express my appreciation to the California Hospital Association
for the contribution of time and talent represented by this study.
SPENCER WILLIAMS
Administrator
Attachments
State DI California
Office of Health Care Services
September 25, 1967
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Comments on Report of Consulting Actuaries to
the California Hospital Association
In evaluating areas of difference and agreement between the estimates of the
consulting actuaries and those of OHCS, it must be kept in mind that both
sets of estimates are based on the assumption of a fully operating program
unaffected by administrative actions subsequent to August 4, or by psychological
inhibitions set up among beneficiaries and providers of service by the current
controversy and its attendant publicity. In a sense this places the estimates
in a "never-never land" of false reality, but it is important to keep them in
context because they are the determinants of the amounts which must be reduced
or might be restored, in terms of the total budget.
The following comments take up the points raised in the actuaries' report of
September 15.
1. June 30, 1967 accruals and SB 1065 modified accrual saving
Staff is unable to agree with any reduction in the 1966-67 year end accruals
at this time (staff is $16.8 million higher than actuaries). The 1967-68
ending accrual reduction due to the effects of SB 1065 (Chapter 1421 Statutes
of 1967) of $56 million as computed by the actuaries is considered to be
conservative and may be larger.
2. Population estimates
We agree that a reduction in the estimate for the Medically Needy group
appears to be in order. The estimate of 229,300 contained in the August 4
package was based on experience through March 1967. Since then, data through
July have become available, with July showing a reduction. Our straight-line
projection based on 13 months' experience (July 1966 - July 1967) gives an
average of 198,300 for 1967-68. This is 10,000 higher than the actuaries'
estimate of 188,300. The difference results from their extrapolating the
regression line from the low point of July rather than from the point of
origin, which balances low against high points.
Revision of the OHCS caseload estimates for the Medically Needy resulted in
reductions of estimates for all services except county hospitals, state
hospitals and nursing homes, which were not derived from caseload projections.
These reductions totaled $6.9 million.
3. Physicians' services
The OHCS estimate of physicians' services was based on experience through
July 1967, with a 5 percent increment for "normal" upward movement in unit
costs. The actuaries reduced the average cost per beneficiary for the aged
on grounds that full effect of Title XVIII (B) has not yet been experienced,
due to the necessity of a double build-up of the $50 deductible during fiscal
1966-67. Grounds for reducing averages for those under 65 are not clear.
No increment for unit costs increases was used by the actuaries.
-2-
September 25, 1967
We believe it is safer to rely on January-June experience, and that unit
cost increase must be included, since the estimates relate to the program
before a roll-back was ordered. As the result of the differences in
approach, combined with the Medically Needy caseload difference, the
actuaries' estimate is $21.3 million lower than that of OHCS.
4. Extension of outpatient care to Medically Needy Group II
The actuaries' estimate was based on the composite Medically Needy
Group I average cost per eligible for physicians' visits and other
physicians' services. This has several disadvantages:
a. The Medically Needy Group I caseload is heavily weighted by
Long-Term Non-Grant beneficiaries, who are not recipients of
outpatient care. Many of them are in county hospitals, for
whom there are no physician billings, even for inpatient care.
b. The Medically Needy Group I caseload contains a greater proportion
of the aged than the current Group II and the anticipated new
Group II eligibles. The Group I average cost therefore is more
depressed by Title XVIII (B) participation.
The Medically Needy Group I composite average cost per eligible for
physicians' services appears less appropriate as a base for estimating
Group II outpatient cost than does the cash grant average for corres-
ponding linkage groups, used by OHCS. The use of an upward adjustment
factor for increased utilization would seem justified on the basis of
the fact that the new group will be coming into the program specifically
for outpatient care, and the current Group II beneficiaries, having come
in because of inpatient care needs, may be expected to have increased
need for and facility in use of the outpatient services.
The actuaries' estimate is $5.3 million lower.
5. County hospitals
An increased cost for county hospitals was developed by the actuaries
through use of the average billing per eligible beneficiary during the
period January-June 1967, plus an 8 percent increase in level of
hospital cost.
We question the reliability of the county hospital billing pattern for
the six months, and have instead relied on the counties' cost estimates
supplemented by audits of the OHCS Special Audits Bureau.
The actuaries' estimate is $17.7 million higher.
-3-
September 25, 1967
6. Other hospitals
The OHCS estimate of $141.1 million is lower than its August 4 estimate
by $3.0 million, as the result of reduction in the Medically Needy
caseload estimate. It is higher than the actuaries' estimate by $7.9
million, due to use of a 12 percent increment over the full year for
increased cost level, compared with the actuaries' use of 3/4 of an 8
percent annual rise.
7. Nursing homes
We are in agreement that the estimated nursing home cost needs reduction.
However, the actuaries' base of March-June 1967 average cost per eligible
appears to be a low point from which rising costs for the next fiscal
year may be expected, due to the fact that the initial impact of Medicare's
100-day participation will have been exhausted for those remaining in
the nursing homes. There also is question of whether an annual cost
increment of 4½ percent is sufficient.
The OHCS revision is based on the estimated average number of licensed
nursing home beds during 1967-68 (62,000) at a Medi-Cal occupancy rate
of 63 percent. The resultant number of patient days approximates very
closely the number derived from a projection of the caseloads at average
number of patient days per eligible person during recent months. Total
cost was obtained by multiplying total days by the estimated per diem
rate under the revised reimbursement formula retroactive to July 1, 1967,
adjusted for Title XVIII (A) participation and patient liability, and
increased by a factor of 8 percent for increased cost level.
The new OHCS nursing home estimate of $168.3 million is lower than the
August 4 estimate of $187.9 (Table 2) but higher than the actuaries'
estimate of $153.4 by $14.9 million.
8. State mental hospitals
The actuaries noticed a decreasing monthly average cost per eligible for
mental hospital care. They revised the 1967-68 estimate by multiplying
the most recent month's average ($.99 rounded to $1.00) times the total
caseload and distributing the cost among programs according to the
percent distribution of the August 4 estimated mental hospital cost.
We have retained our original figure, $3.4 million higher than the
actuarial estimate, because long-term cash grant patients in mental
hospitals will revert to full Medi-Cal status after depleting their
Medicare eligibility. It is anticipated the average cost per eligible
trend line will turn upward in future months.
Office of Health Care Services
September 25, 1967
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Table A. Estimated Expenditures, by Type of Service
July 1, 1967 - June 30, 1968
OHCS
Difference
Between
Type of Service
Consulting
OHCS Sept. 25
August 4
September 25
Actuaries
and
Consulting
Actuaries
Physicians' services
$155,359,200
$153,086,400
$131,823,480
- $21,262,920
48,356,900
47,683,300
a
Prescription drugs
47,648,880
- 34,420
Dental care
43,101,900
42,592,000
a
42,700,572
108,572
County hospital care
97,559,300
97,559,300
115,259,904
17,700,604
Other hospital care
144,142,500
141,122,700
133,256,688
- 7,866,012
State mental hospitals
21,959,800
21,959,800
18,558,000
- 3,401,800
Nursing homes
187,899,600
168,327,000
153,399,276
- 14,927,724
Other services
32,818,200
32,361,200
32,335,944
- 25,256
Optometrist
8,652,800
8,543,600
8,566,212
22,612
Chiropractor
1,392,200
1,382,800
1,384,740
1,940
Podiatrist
2,276,500
2,240,500
2,237,460
- 3,040
Home health agencies
1,825,800
1,815,900
1,814,160
- 1,740
Other services and supplies
18,670,900
18,378,400
18,333,372
- 45,028
Subtotal
731,197,400
704,691,700
674,982,744
- 29,708,956
Federal requirements
Outpatient benefits extension (Group II)
11,342,400
11,342,400
6,000,000
- 5,342,400
Title XVIII (A) nursing home requirements
27,000,000
27,000,000
27,000,000
----
Other medical services
Hospital-based physicians
6,000,000
6,000,000
6,000,000
---
Free-standing clinics
300,000
300,000
300,000
-
Title XVIII (B) buy-in
11,511,900
11,511,900
11,511,900
---
Total cost of care
787,351,700
760,846,000
725,794,644
- 35,051,356
Administration
23,358,286
23,358,286
23,358,286
---
Grand total
$810,709,986
$784,204,286
$749,152,930
- $35,051,356
a
Revision due to decreased Medically Needy caseload estimate.
State of California
Medical Care Research Bureau
Office of Health Care Services
September 25, 1967
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Table B. Estimated Caseloads, by Eligibility Group
July 1, 1967 - June 30, 1968
OHCS
Difference
Between
Consulting
OHCS Sept. 25
Eligibility Groups
August 4
September 25
Actuaries
and
Consulting
Actuaries
Cash Grant program
1,358,200
1,358,200
1,358,200
I
Old Age Security
297,800
297,800
297,800
---
Aid to the Blind
12,800
12,800
12,800
---
Aid to the Disabled
127,200
127,200
127,200
---
Aid to Families with Dependent Children
920,400
920,400
920,400
i
Medically Needy program
229,300
198,300
188,300
- 10,000
Group I scope of benefits
102,600
75,300
81,900
6,600
Aged
44,400
37,000
37,700
700
Blind
600
500
600
100
Disabled
5,200
5,900
5,200
- 700
Families and Foster Children
52,400
31,900
38,400
6,500
Group II scope of benefits
126,700
123,000
106,400
- 16,600
Aged
23,100
22,600
21,700
- 900
Blind
400
300
400
100
Disabled
8,100
7,300
8,100
800
Families
95,100
92,800
76,200
- 16,600
All programs
1,587,500
1,556,500
1,546,500
- 10,000
Outpatient benefits extension (Group II)
33,800
33,800
33,800
-
Total caseload
1,621,300
1,590,300
1,580,300
- 10,000
Office of Health Care Services
September 25, 1967
CALIFORNIA MEDICAL ASSISTANCE PROGRAM
Table C. Estimated Expenditures, by Program
July 1, 1967 - June 30, 1968
OHCS
Difference
Between
Eligibility Groups
Consulting
OHCS Sept. 25
Actuaries
and
August 4
September 25
Consulting
Actuaries
Cash Grant program
$481,829,900
$476,657,000
$457,596,312
- $19,060,688
Old Age Security
123,267,200
120,632,700
105,111,788
- 15,520,912
Aid to the Blind
8,315,800
8,106,000
7,736,924
- 369,076
Aid to the Disabled
137,939,100
135,625,700
140,860,592
5,234,892
Aid to Families with Dependent Children
212,307,800
212,292,600
203,887,008
- 8,405,592
Medically Needy program
249,367,500
228,034,700
217,386,432
- 10,648,268
Group I scope of benefits
124,129,900
105,820,000
99,367,140
- 6,452,860
Aged
100,061,400
84,833,900
77,872,020
- 6,961,880
Blind
1,481,600
1,212,800
1,479,024
266,224
Disabled
11,904,400
/ 15,035,600
11,532,768
- 1,502,832
Families and Foster Children
10,682,500
6,737,700
8,483,328
1,745,628
Group II scope of benefits
125,237,600
122,214,700
118,019,292
- 4,195,408
Aged
74,036,800
73,355,800
59,905,648
- 13,450,152
Blind
1,076,600
837,900
961,248
123,348
Disabled
28,820,000
27,128,500
35,461,428
8,332,928
Families
21,304,200
20,892,500
21,690,968
798,468
All programs
731,197,400
704,691,700
674,982,744
- 29,708,956
Federal requirements
Outpatient benefits extension (Group II)
11,342,400
11,342,400
6,000,000
- 5,342,400
Title XVIII (A) nursing home requirements
27,000,000
27,000,000
27,000,000
Other medical services
Hospital-based physicians
6,000,000
6,000,000
6,000,000
---
Free-standing clinics
300,000
300,000
300,000
---
Title XVIII (B) buy-in
11,511,900
11,511,900
11,511,900
---
Total cost of care
787,351,700
760,846,000
725,794,644
- 35,051,356
Administration
23,358,286
23,358,286
23,358,286
---
Grand total
$810,709,986
$784,204,286
$749,152,930
- $35,051,356