How deficient is California’s Medicaid program?

Improved Monitoring of Medi-Cal Managed Care Health Plans Is Necessary to Better Ensure Access to Care

California State Auditor, California Department of Health Care Services, Report 2014-134, June 2015

Cover letter of report:

June 16, 2015

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the California Department of Health Care Services’ (Health Care Services) oversight of California Medical Assistance Program (Medi-Cal) managed care health plans (health plans).

This report concludes that Health Care Services did not verify that the provider network data it received from health plans were accurate. Therefore, it cannot ensure that the health plans it contracts with had adequate networks of providers to serve Medi-Cal beneficiaries. Health Care Services’ contracts with health plans to provide medical services to Medi-Cal beneficiaries generally require the plans, among other things, to maintain a network of primary care providers that are located within either 30 minutes or 10 miles from a member’s residence. To determine whether the health plan has an adequate provider network to meet these standards, Health Care Services receives provider network data from each of the health plans. However, for the health plans we reviewed, Health Care Services did not verify the accuracy of these data before certifying the health plans’ network adequacy during the Healthy Families Program transition to Medi-Cal and did not verify data for another health plan at the time the health plan entered the Medi-Cal program. Similarly, it does not verify the accuracy of the data it receives from health plans and that it provides to the California Department of Managed Health Care (Managed Health Care), with which it has an agreement to conduct quarterly network adequacy reviews. Furthermore, it has not ensured that Managed Health Care performed all quarterly reviews of health plans’ provider networks required pursuant to the agreement.

In addition, flaws in Health Care Services’ process for reviewing provider directories have resulted in it approving provider directories with inaccurate information. Specifically, our review of provider directories for three health plans — Anthem Blue Cross, Health Net and Partnership HealthPlan — found many errors in directories, including incorrect telephone numbers and addresses, or information about whether they were accepting new patients. However, Health Care Services’ review of these same directories had not identified these inaccuracies before it approved the directories for publication. Furthermore, we noted that thousands of calls from Medi-Cal beneficiaries seeking assistance through Health Care Services’ Medi-Cal Managed Care Office of the Ombudsman have gone unanswered. Specifically, each month between February 2014 and January 2015 an average of 12,500 calls went unanswered. Finally, Health Care Services has not performed all statutorily required annual medical audits of Medi-Cal managed care health plans to determine whether the health plans meet their beneficiaries’ needs.

Respectfully submitted,


State Auditor

Full report:

Summary of report:

Fact sheet:



By Don McCanne, MD

Medicaid patients throughout the nation are being transferred into Medicaid managed care plans, allegedly to provide more coordinated care at a lower cost. There has been some justifiable concern that these plans may not be delivering on their promises. This auditor’s report of California’s Medi-Cal managed care plans provides some limited insight into the performance of these plans.

Medi-Cal is California’s Medicaid program for low-income individuals and families. Three-fourths of the 12 million Medi-Cal patients are already enrolled in the Medi-Cal managed care plans (state population 39 million). Astonishingly nearly half of all children in California are enrolled in Medi-Cal managed care, especially since those previously enrolled in CHIP were transferred to Medi-Cal. It is a massive program.

The auditor did not look at the adequacy or the quality of the health care services that are being delivered. Rather she looked at the plans’ reports submitted to the Department of Health Care Services on the adequacy and accessibility of their networks, the accuracy of the provider directories, and the effectiveness of the Medi-Cal Managed Care Office of the Ombudsman - basically just whether or not the infrastructure was adequate to provide the promised services.

The auditor found that the reports from the plans were inadequate and the oversight provided by the California Department of Health Care Services and the Department of Managed Health Care was also inadequate. It was not possible to determine the degree of the failures, but enough information was gathered to know that the system fell far short of the requirements. Some perspective of the extent of this problem is demonstrated by the fact that each month about 12,500 calls to the Office of the Ombudsman went unanswered. The Medi-Cal system wasn't working for the patients, and the calls for help overwhelmed the telephone system.

Some have suggested that the funding was inadequate. Medicaid has been chronically underfunded, and Medi-Cal is near the bottom of all states in its level of funding. Also governments chronically underfund their own agencies. In a health care system that is infamous for its administrative excesses, under the Affordable Care Act we have expanded the need for yet more administrative services for both the health plans and for the government bureaucracies that provide oversight (not to mention the providers), yet our federal and state legislators do not authorize adequate funds to carry out their requirements.

Although the auditor attributed most of the blame to failures of the California Department of Health Care Services, the real blame lies with those who devised these expensive and inefficient programs and then failed to fund them adequately. The agencies cannot do their job if they are unable to hire the personnel that they need.

Although this report raises serious concerns about the infrastructure, much more important is whether or not the actual health care services are adequate in both quantity and quality. Though this report does not address that, there is reason to be concerned. Are the health plans really delivering more integrated care at a lower cost? Is the funding enough for the dedicated health care professionals to deliver on this promise? Unlikely, based on preliminary information. It is unfortunate that we will have to wait longer until the severity of the deficiencies is exposed.

If nothing else, it does appear that, through Medicaid, we have institutionalized a lower tier of a two-tiered health care system. The Affordable Care Act perpetuates a mediocre system for middle-income individuals and families and a substandard system for those with low incomes. Most other wealthy nations have a single higher health care quality standard for all of their people, delivered at a much lower cost. What is our resistance to learning from them?