The head of the Department of Health Care Services is often referred to in the media as the Medicaid director. That’s because 99% of the department’s budget is spent on Medi-Cal, which is what California calls Medicaid. DHCS is the conduit for $42 billion worth of state and federal health care services to 7.7 million low-income state residents. The department gets well over half its budget from the federal government, but 70% of what California spends from its own General Fund on health care passes through the department. One out of every 10 General Fund dollars eventually ends up at DHCS. Although the department is the lead agency handling Medi-Cal, about one-fifth of Medi-Cal expenditures are made through the Department of Developmental Services, Department of Mental Health, Department of Social Services and the Department of Alcohol and Drug Programs. People enroll in Medi-Cal through their county social services department. DHCS also finances and administers programs for children’s medical services, and primary and rural health care. The department is in the Health and Human Services Agency.

Health and Social Services Budget Primer (Office of the Legislative Analyst)

Medicaid was created in 1965 when the federal government passed Title XIX of the Social Security Act. Each state administers its own Medicaid program while the federal government sets requirements for service delivery, quality, funding and eligibility. Washington also monitors the state-run programs, which must conform to federal guidelines in order to receive matching funds. Unlike Medicare for the elderly, Medicaid is a means-tested, needs-based social welfare program rather than a social insurance program.

Medi-Cal, California’s version of Medicaid, was originally administered by the Department of Health Services (no Care in the title). But the department was split into two entities in 2007, partly in response to the September 11, 2001, terrorist attacks. The Department of Public Health was spun off to address issues of bioterrorism, as well as emerging antibiotic-resistant diseases, environmental threats and general public health issues, leaving the newly renamed Department of Health Care Services to tend to the health needs of low-income and uninsured Californians.

Department of Health Care Services Announces New Leadership Team (DHCS press release) (pdf)

The department is the lead health agency in California assisting underserved and indigent people with health care needs by working with county governments, health care professionals and various health plan providers. Programs are designed to deliver health services to low-income persons and families; emphasize prevention-oriented services; and provide public funds for Californians with the greatest health care needs. Many of these services are delivered through Medi-Cal.

The department lists 55 programs and services, many of them through Medi-Cal, that it offers to low-income residents. Medi-Cal provides health funding care to low-income individuals and families, people with disabilities, senior citizens, children in foster care, and people with diseases such as breast cancer, HIV/AIDS or tuberculosis.

Some of those programs and services are:   

American Indian Infant Health Initiative

This program is modeled after the Healthy Families America program, which offers home visitation to provide basic health care information for high-risk or potentially at-risk families with young children under age 5.  This service also connects families with available resources in the American Indian communities such as the federal WIC (Women, Infants and Children) program, parenting and child safety classes, basic health care information as well as other social services.  Families receive visits from American Indian paraprofessionals or public health nurses who offer health information about a variety of topics in the privacy of their own homes.

Child Health and Disability Prevention Program

This program is designed to provide complete health care to low-income Medi-Cal children. It provides a host of services helps low-income parents with medical appointments for their children, transportation, and access to diagnostic and treatment services.  A variety of individuals and groups provide services including physicians, health departments, community clinics and local school districts. The child development program Head Start is a collaborative effort between the Department of Health Care Services and the U.S. Department of Health and Human Services.

Genetically Handicapped Persons Program

Adults with certain genetic diseases may find help through the department.  This program works with doctors, nurses, pharmacists and other health care providers to assist people suffering from cystic fibrosis, diseases of the blood, brain and nerve diseases – such as Huntington’s – among other illnesses.

Office of Multicultural Health

This is a shared unit between Health Care Services and the Department of Public Health. Originally created in 1993 and formally established by statute in 1999, its responsibilities are to analyze health legislation and policies as they might impact different ethnic and racial California populations. One major goal of the department is to “Promote culturally appropriate and linguistically accessible services for California’s multicultural communities.”

Office of Women’s Health

Examining women’s health issues is the primary function of this office.  It also oversees and sponsors Women’s Health Month in California, which was established in 2002.  Held in May, this statewide outreach incorporates clinics, colleges and the Mexican Consulate, among others, to host events bringing health care information and services to more than 32,000 women annually.

Primary and Rural Health

This division provides a framework for linking rural communities with state and federal resources. It facilitates recruitment of physicians, and addresses problems of migrant labor and Native Americans.

Working Disabled Program

This program allows individuals who meet the federal definition of disabled and certain income standards to become eligible for Medi-Cal by paying low monthly premiums.

Strategic Plan (DCHS website)  (pdf)

Indian Health Program (American Indian Health Policy Panel) (pdf)

Genetically Handicapped Persons Program  (DHCS website)

Child Health and Disability Prevention Program (DHCS website)

CHDP (Children’s Medical Services Branch) (ppt)

Office of Multicultural Health (DHCS website)

Office of Women’s Health (DHCS website)

Medi-Cal’s budget for 2011-12 anticipated spending of about $28.9 billion for so-called fee-for-service (FFS) care, including $1.6 billion for physician services, $13.5 billion for hospital inpatient services and $5 billion for nursing facility services. An additional $10.7 billion funds payments to health plans for beneficiaries in managed care that indirectly pay for physician, hospital and other services.

3-Year Budget (pdf)

Oversight of Managed-Care Plans

More than 7.5 million Californians are Medi-Cal beneficiaries, and 4.9 million receive their care through managed care. The Department of Health Care Services makes sure the managed-care plans follow laws governing managed care and the Department of Managed Health Care keeps tabs on their finances.

But the State Auditor says both are falling down on the job.

The two departments failed to conduct medical audits of the health care delivery system as often as the law requires and Health Care Services was inconsistent in performing financial reviews. It sometimes failed to analyze financial soundness elements like working capital and administrative costs, as required by law, and failed to review financial reports it received within the legally-required two week period.

The Department of Managed Health Care was “chronically late,” sometimes by 200 days, doing financial reviews of local initiatives deemed critical to Medi-Cal’s success, and made significant errors categorizing administrative expenses as medical ones. In one case, the department failed to note that Kern Health Systems had incorrectly categorized $5.3 million as medical expenses when it was actually for claims processing.

“Managed Health Care's failure to identify these errors in its financial reviews is troubling and suggests that it may be overlooking other errors as well,” a December 2011 auditor’s report said.

The report also said that once the department had identified local problems, it didn’t have a good system for determining if the problems were addressed. 

Audit Faults State Health Officials on Medi-Cal Oversight (by Anna Gorman, Los Angeles Times)

Medi-Cal Managed-Care Program (State Auditor) (pdf)

Block Grants

Early in 2011, Republicans rallied around a plan by House Majority Leader Paul Ryan of Wisconsin to transform Medicaid by repealing Obama’s health care reform act and  capping federal contributions. This would shift the burden of ever-expanding health costs to patients. The plan gives states more power and flexibility over their programs by using an alternate system of block grants to distribute money from the federal government to the states, rather than the current system of matching federal funds with strict guidelines.

Ryan’s plan met stiff resistance from Democrats, but a scaled-back Republican plan that allows states to essentially opt out of Medicaid expansion and could actually reduce participation in the program has fared better. Legislation that would eliminate federal regulations preventing states from trimming their Medicaid rolls or erecting new barriers to enrollment has been introduced in Congress and the Obama administration continues to negotiate changes in Medicaid law.

Rep. Paul Ryan's Medicaid Gamble (by Jonathan Allen, Politico)

Medicaid Roulette (by Suzy Khimm, Mother Jones)

The Ryan Plan for Medicaid (New York Times editorial)

House Republican Budget Plan: State-By-State Impact of Changes in Medicaid Financing (Kaiser Family Foundation)

GOP's Kinder, Gentler Medicaid Gutting (by Suzy Khimm, Mother Jones)

Department of Mental Health

Governor Jerry Brown’s proposed 2011-12 budget recommended eliminating the Department of Mental Health and moving its responsibilities to counties and the DHCS.  The move raised concerns among various mental health advocates.  One problem critics point out is that mental health programs will be transferred from the state level to counties creating a sort of patchwork system of care under the auspices of various health care services administrators.

DHCS Director Toby Douglas insisted that elimination of the mental health department was simply reorganization. “There are ways we can create better efficiencies, better ways of integrating behavioral and physical health.” But Rusty Selix, executive director of California’s Mental Health Association, wasn’t so sure. “It matters where in the Department of Health Care Services this (mental health) will be,” Selix said. “It’s important that a deputy director is in there, appointed by the governor.” Selix strongly preferred having a department devoted solely to mental health care.

Incredulity, Concern over Mental Health Elimination (NAMI California)

May Revise Targets Mental Health, Healthy Families and More (by David Gorn, California Healthline) (pdf)

California Association of Alcohol and Drug Program Executives, Inc.  (letter from Albert Senella to David Maxwell-Jody)

Proposed Legislation to Transfer Medi-Cal Functions from the Department of Mental Health to Department of Health Care Services (letter from Patricia Ryan, executive director) (pdf)

Being There: Making a Commitment to Mental Health (pdf)

New Duties

Governor Jerry Brown’s proposed 2011-12 budget included the elimination of 43 boards and commissions that would directly affect the Department of Health Care Services. Elimination of the California Medical Assistance Commission (CMAC) would shift its last remaining responsibilities for negotiation contracts with medical facilities to DHCS. The department already absorbed CMAC’s managed care contract responsibilities in 2010. If the Managed Risk Medical Insurance Board (MRMIB) disappears, all of its programs would move to DHCS. Demise of the Department of Mental Health would see its state-level responsibilities associated with Medicaid programs migrate to DHCS. And the elimination of the Department of Alcohol and Drug Programs would necessitate any state functions needed to operate Drug Medi-Cal moving to Health Care Services.

Reducing State Government (DMCS website) (pdf)

Productivity

Shortly after the Department of Health Care Services was reconstituted in 2007 with a sole focus on low-income residents, the state’s independent Little Hoover Commission published a report on what the department could do to become more productive. The study warned that the state’s Medi-Cal program as structured was unsustainable and that it should focus on “prevention, coordinated care that includes better chronic disease care and demonstrating value in terms of improved health outcomes.” But until the department had better data and analysis, the study said, it would not be able to switch from worrying about what Medi-Cal is paying for health care to focusing on what it is buying.

A first place to start, according to the commission, is by improving access to primary care by bolstering the state’s network of community health clinics.  Another recommendation is to turn these clinics into facilities that can offer chronic care as well as primary.  By doing so, fewer indigent patients will fill hospital emergency rooms, reducing costs.

And, according to the non-partisan Legislative Analyst’s Office, Medi-Cal reimbursements to health care providers will drop under the 2011-2012 state budget.

The office says that California, through Medi-Cal, pays physicians about 83% of that of other states’ Medicare programs.

For patients, this is a potential problem.  The reason?  Doctors, realizing their income will drop without greater reimbursement, might stop accepting poor people for care.  Those indigent patients will most likely use hospital emergency rooms, not pay and, thus, drive up health care costs even further.

The analyst’s office recommended a reduction of reimbursements of up to 10%, but only upon completion of a study to determine its impact on patients and health care facilities.

Medi-Cal Payment Reductions May Be Risky (Legislative Analyst’s Office)

A Smarter Way to Care: Transforming Medical for the Future (Little Hoover Commission) (pdf)

Recommendations for Measuring the Performance of California’s Medicaid Program (California HealthCare Foundation) (pdf)

Affordable Care Act

The Patient Protection and Affordable Care Act of 2010 is President Obama’s signature health care reform legislation. If fully implemented as designed, an estimated 94% of Californians will have health coverage by 2014, although California is in the forefront of states trying to implement the program early and reap additional benefits from the federal government. Two million low-income Californians would be newly enrolled in Medi-Cal and other public programs, and up to 3 million people would be able to obtain private coverage. The new law increases compensation to doctors who treat Medi-Cal patients, bringing them up to the level of Medicare, and reshapes the health insurance market. A modernized Medi-Cal eligibility and enrollment process would be put in place.

It is difficult to gauge how much the federal health care reform will cost California taxpayers but initial estimates put it in the “low billions” annually. Efforts to derail the reform are in full force at the state and national level, pitting the left and right against each other in as clear an ideological battle as exists in U.S. politics.

On the Right: Dump Obamacare

It’s a head-first slide halfway down the slippery slope to “socialized medicine.” Obamacare, as it’s derogatorily called by its detractors, will put the private insurance industry out of business and force the country into a single-payer government-run health care system. “That, of course, would be a tremendous mistake, a fundamental mistake. America is a land of free individuals.” The Cato Institute, a think tank on the right, strongly favors strengthening of the existing employer-based, third-party payer approach.

Critics fear that Obama’s reform law will reduce the level of health care while raising its cost. A requirement that everyone have health insurance, called the individual mandate, will force a decision on people by government. Government will make choices the free market should make and they will be the wrong choices. Some of our nation’s strongest and most productive industries – insurance, pharmaceutical, medical technology – will be damaged, if not destroyed. An already broken system, Medicaid, will be propped up by a blatant transfer of wealth to low-income people. The medical profession will be demoralized and devastated. The best and the brightest won’t want to become doctors. Our health care infrastructure will crumble, endangering our well-being and security.

As of 2008, only 57% of physicians were accepting new Medi-Cal patients and reimbursement rates to doctors were among the lowest in the nation.

Dr. Elaina George, an ear-eye-nose-and-throat specialist who writes about health care for conservative Internet entrepreneur and provocateur Andrew Breitbart’s BigGovernment.com, says Obamacare is rationing. Resonating with more heated commentary from the right that warns of “Death Panels” condemning grandma to an early demise, Dr. George argues that health care plan savings claimed by the Obama administration are based on “reducing access to physicians, restricting access to medication and technology, and/or hoping that people will either be too sick or too frustrated to access the system.”

In general, Dr. George joins with critics on the right who prefer to see health care administered by a free market involving insurance, pharmaceutical and technological companies, medical facilities and other private enterprises. But she draws the line at information companies like Google who she fears are working with government to violate the privacy of Americans by aggregating and sharing data with the aforementioned free market players.

The Cato Institute projects health care reform will cost California an additional $11.7 billion spread over 10 years for Medi-Cal. (Florida will double that and New York will have to pay five times that amount, $65.5 billion.) This is on top of increased medical costs that would occur even without health reform; the institute projects a doubling in the state’s Medi-Cal costs unaltered by 2020.

On the Left: Time for a Change

The problem isn’t Medicaid, defenders of the program say. It’s a relatively efficient program with low administrative costs, a high reliance on managed care and much lower payments to providers than other forms of insurance. The problem is soaring medical costs. If we don’t act now, supporters of reform say, we will be instituting a de facto rationing of care by cutting payments to doctors, hospitals and nursing homes, curtailing eligibility, and reducing benefits.

Health care costs have been skyrocketing for years. Total U.S. expenditures in 2008 were $2.3 trillion dollars, more than three times the amount in 1990 and eight times as much as 1980. More than 20% of Californians are uninsured and the number is rising. California has the largest total number of people without insurance of any state. The United States is ranked 72^nd in “level of health care” and 37^th in the world in “overall health system performance” by the World Health Organization (WHO), just behind the Dominican Republic and Costa Rica and just ahead of Cuba.

Efforts to control costs over the past 20 years have relied heavily on free market forces, with a major expansion of managed care (HMOs) that empowers insurance companies to set care levels for individuals rather than the medical profession. Just about everyone agrees it’s not working. President Obama’s health care reform is an integrated effort to expand coverage to the uninsured, set standards for care and leverage the power of government to rein in costs.

While tax expenditures to make the system work may increase, supporters of reform argue, actual health care costs will decline. The U.S. spends almost 17% of its gross domestic product on health care, according to WHO. That’s $6,100 per person. European nations spend 8.6%. France, which has the highest ranked health care system in the world, spends $3,500 per person. Supporters of Obama’s health care plan make a strong argument that nonprofit care is superior to for-profit care; it costs less and delivers better results.

Expansion of Medi-Cal will be funded primarily by the federal government. For every dollar the state pays toward Medi-Cal, it will receive more than $6 from Washington. This will help raise the rates paid to health care providers, expanding physician participation. Federal participation will shrink over time, but still cover 90% of the coverage costs for newly eligible adults in 2020.

In short, Obama’s reform will result in coverage being extended to thousands of uninsured, it will be more affordable, it will protect people with pre-existing conditions and it will reduce the cost of delivering health care. It will put a humane face on a medical services industry that has, in recent years, become viewed with fear and loathing.

The Affordable Care Act in California (California HealthCare Foundation)

The Patient Protection and Affordable Care Act: An Overview of Its Potential Impact on State Health Programs (Office of the Legislative Analyst)

Obama Sneaks Death Panels Back Into Obamacare (The Stuttering Messiah)

Obamacare: Medical Malpractice (by Edward H. Crane, Cato Institute)

The Administration’s Answer to High Healthcare Costs Is … Rationing (by Dr. Elaina George, BigGovernment.com)

In the Age of Obamacare Will Your Medical Information be Used Against You? (by Dr. Elaina George, BigGovernment.com)

Obamacare ... a Personal Look (by CheekyRedhead, Conservative Salt)

Estimating Obamacare’s Effect on State Medicaid (by Jagadeesh Gokhale, Cato Institute)

Non-Profit vs. For-Profit health Care: How to Win the Looming Battle Over Cost Control (by Steven Hill, Washington Monthly)

Dealing With Medi-Cal Expansion (California Health Benefit Exchange)

What Does Health Reform Mean for the Coverage of California’s Families? (Health Access)

Toby Douglas, 2010-2014

David Maxwell-Jolly, January 2008 – December 2010. Maxwell-Jolly was named undersecretary of the state’s Health and Human Services Agency in January 2011 after leaving the Department of Health Care Services.

Sandra Shewry, July 2007 – December 2007