Medi-Cal fails to provide adequate health care access for 7 million California Latinos


To:  Office for Civil Rights, U.S. Department of Health & Human Services

December 15, 2015


Re: Inadequate Access to Health Care Violates Latino Civil Rights in California’s Medi-Cal Program



This administrative complaint challenges ongoing civil rights violations in Medi-Cal, California’s Medicaid program. The Medicaid Act is intended to ensure that state programs like Medi-Cal provide access to medical services equal to the access that other Americans have, notwithstanding the low income of those who qualify for Medi-Cal.

Medi-Cal’s inadequate, extremely low reimbursement rates—in both the fee for service and managed care settings—and its failure to adequately monitor access to medical care, effectively deny the full benefits of the Medi-Cal program to the more than seven million Latino enrollees who rely on Medi-Cal for their healthcare. Over the past fifteen years, the level of Medi-Cal reimbursements has fallen in tandem with a rise in the number and proportion of Latinos covered by the Medi-Cal program. Today, no other type of health insurance in California covers a population that is so heavily Latino. The separate and unequal system of healthcare thus violates the protections of Title VI of the Civil Rights Act and the Department of Health and Human Services’ implementing regulations, as well as Section 1557 of the Affordable Care Act, as described below.


B. Low Reimbursement Rates Limit Access to Care for Medi-Cal Enrollees.

1. Background on Medi-Cal Rate Setting in California.

Medi-Cal rates in California are set differently based on two payment mechanisms: (1) fee for service; and (2) managed care.

In the fee for service mechanism, the State sets per-service reimbursement rates for a particular procedure, treatment, or service. These rates are near the lowest in the country relative to Medicare rates. Medi-Cal’s 2014 reimbursement rate for primary care was just 42 percent of Medicare’s, ranking forty-ninth out of fifty Medicaid programs in the United States. For all services, including both primary and specialty care, the ratio of Medi-Cal fee for service reimbursement to Medicare reimbursement in California was 14 percent below the national average ratio. This ratio ranks forty-eighth out of fifty Medicaid programs in the United States. Notably, these numbers have likely only worsened in 2015, given reductions implemented this year.

In managed care, which now covers about 77 percent of the Medi-Cal population, plans are reimbursed on a capitated basis with a set amount per member per month regardless of the amount of services provided to that individual. Pursuant to federal regulation, the State is required to set capitation rates for MCOs sufficient to cover a minimum level of services for the populations enrolled in each MCO. Once these capitation rates are set, CMS reviews them to determine whether they are “actuarially sound.” In other words, it reviews them to determine whether they are sufficient to provide the minimum level of services predicted by a third-party actuarial contractor. Additionally, under the Medicaid law, the MCO must also make services available to the same extent as they would be available to Medi-Cal fee-for-service beneficiaries (and thus to the same extent as required by § 30(a)). See 42 U.S.C. § 1396b(m)(1)(A)(i).

Although the rates paid to MCOs are proprietary, it is widely recognized that they are set arbitrarily low due to the use of the low Medicaid fee-for-service fee schedule as a benchmark, or another set of benchmarks provided by plans that may be even lower than the Medicaid fee-for-service fee schedule. Further, the evidence will show that the State typically reverse engineers its capitation rates from budgetary decisions, first deciding how much money to allot for Medi-Cal managed care, then coming up with capitation rates within that budget by manipulating the potential prices for services such that the predicted utilization (from the actuaries) when combined with pricing information, will be within budget. Finally, the State typically selects rates that are at the lower of the range of rates recommended by the actuary.

2. Restricted Access for Medi-Cal Beneficiaries.

The data show that non-elderly adults enrolled in Medi-Cal have substantially less access to health care than Medicare beneficiaries, individuals covered by private insurance plans and/or other groups in the general population.

In 2013, on the eve of the implementation of the Affordable Care Act, the care available to non-elderly adult Medi-Cal enrollees was worse than the care available to those covered by employer-sponsored insurance plans. Medi-Cal enrollees faced disparities at levels that were statistically significant for such measures of availability of care as (a) not having a usual source of care other than an emergency room; (b) not having a personal physician as the main medical provider; (c) difficulty getting a needed doctor’s appointment; (d) difficulty finding a doctor who would see them or accept their health insurance; (e) difficulty communicating with their doctors; (f) being less likely to receive flu
vaccinations; (g) not having a doctor visit in the last year; and (h) delaying medical care because of cost.

The ACA increased enrollment in Medi-Cal, but, as implemented by California, the ACA did not resolve pre-existing access problems. As a result of the Healthy Families transition, ongoing enrollment, and the ACA, over 4 million people enrolled in Medi-Cal over the past two years. A two-year, federally-funded increase in the Medi-Cal reimbursement for primary care to 100 percent of the Medicare reimbursement rate during 2013 to 2014 was allowed to expire without Respondents maintaining the increase through use of state funds (as done by fifteen other states). The increase was applicable to both fee for service and managed care populations and designed to improve access. This short-term investment in increasing primary care provider rates did not result in a sustainable increase in primary care access for Medi-Cal beneficiaries. The State implemented it late (going into effect in 2014 and retroactively reimbursing providers by paying the difference between the Medicare and Medicaid fee schedules after the fact). And, the additional investment of funds ended on December 31, 2014. Thus, regardless of whatever minimal increase in services may have occurred in 2014, it is likely that availability of primary care services for Medi-Cal enrollees has returned to pre-2014 levels.

Indeed, the Medi-Cal provider to population ratio was already substandard, but with the increase in enrollment and withdrawal of the temporary rate increase the gap can be expected to widen even further.

3. Evidence that Low Reimbursement Rates Limit Medi-Cal Beneficiaries’ Access to Care.

Both the fee-for-service and managed care rates fail to ensure equal access to quality care for Medi-Cal enrollees, as the insufficient reimbursements make it difficult to enlist Medi-Cal primary care and specialty care providers.

C. Disparate Outcomes for Medi-Cal Patients.

As a result of the low access that Medi-Cal enrollees have to primary care, many Medi-Cal recipients are not referred to specialists for treatment of acute conditions and illnesses. Chronic conditions and illnesses thus go untreated or are not adequately treated. Substantially fewer physicians provide care to Medi-Cal enrollees than Medicare beneficiaries in every major medical specialty except two. The two exceptions are obstetrics/gynecology and pediatric care, specialties that the Medicare population is unlikely to need to the same extent as Medi-Cal beneficiaries.

E. Medi-Cal’s Inadequate, Low Rates, Combined with the Lack of Monitoring and Enforcement, Have a Disparate Impact on Latinos.

The low reimbursement rates described above—including within fee for service and managed care—along with the lack of monitoring and enforcement, have an adverse, disparate impact on Latinos because this racial group is disproportionately represented among Medi-Cal enrollees.

F. There Is No Discernible Justification for the Disparate Impact Caused by Low Medi-Cal Reimbursement Rates.

Under Title VI, the HHS Title VI regulations, and Section 1557, a showing of disparate impact shifts the burden to Respondents to justify the adverse disparate impact on Latino Medi-Cal enrollees as necessary or legitimate under the Medicaid statute.

Complainants respectfully submit that Respondents are unable to justify the adverse disparate impact of denial and delay of care and adverse health consequences because a key purpose of the Medicaid Act is to provide Medicaid enrollees with the access to health care afforded other members of the general population irrespective of poverty.

G. The Record Also Demonstrates Intentional Discrimination.

The record demonstrates as well that Respondents engaged in intentional discrimination. Where official action has a racially disparate impact, and “a clear pattern, unexplainable on grounds other than race, emerges from the effect of the state action even when the governing legislation appears neutral on its face,” that gives rise to a strong inference of intentional discrimination. Village of Arlington Heights v. Metropolitan, 429 U.S. 252, 266-67 (1977).

Here, intentional discrimination is evident in the stark differences in reimbursement rates for Medi-Cal (a program overwhelmingly enrolling low- income Latino people), as compared to the rates for Medicare and employer- sponsored insurance plans (programs largely benefitting higher-income, White people). Comparing the higher reimbursement rates when Latinos were a smaller share of Medi-Cal enrollees further demonstrates intentional discrimination. See Arlington Heights, 429 U.S. at 266-68. Additional such evidence includes, as described above, the failure to follow appropriate procedures to set rates for managed care and fee-for-service care to provide equal access to medical care; and the failure to follow legally-mandated monitoring and enforcement procedures. See id. (substantive and procedural departures relevant to intent inquiry).


Under 45 C.F.R. § 80.7(c), the Office for Civil Rights must undertake a prompt investigation of this Complaint. Based on the evidence discussed in this complaint and the attachments provided, the Office for Civil Rights should find that Respondents have violated Title VI, the HHS Title VI implementing regulations, and section 1557. The Office for Civil Rights should order Respondents to raise primary care and certain specialty care reimbursement rates to assure that Medi-Cal enrollees have access to medical care to the same extent as care is available to Medicare beneficiaries and individuals covered by employer- sponsored health insurance plans.

Administrative Complaint (24 pages):



By Don McCanne, M.D.

There are over seven million Latinos enrolled in Medi-Cal - California’s Medicaid program. Although one of the most important features of the Affordable Care Act was to expand the Medicaid program to cover many more individuals and families who have incomes near or below the federal poverty level, the chronic underfunding of this program demonstrates “intentional discrimination” against low-income Latinos in California, since it denies them “access to health care afforded other members of the general population irrespective of poverty.”

Medi-Cal has more comprehensive benefits than does Medicare. But Medi-Cal beneficiaries frequently do not have near the same access to care as do Medicare beneficiaries or privately insured patients, as this Administrative Complaint describes. This is because of a lack of willing Medi-Cal providers since Medi-Cal frequently pays less than the costs of providing care. It is appalling that this then results in de facto discrimination against seven million of California’s low-income Latinos.

Imagine improving the benefits of Medicare so that they were at least comparable to Medicaid. Then place everyone in the same program - an improved Medicare for all. That certainly would not eliminate all discrimination in our nation, but at least it would be a giant step forward in our quest for equitable health care for all.

Over seven million! That's not right.