California Inks Sweetheart Cope with Kaiser Permanente, Jeopardizing Medicaid Reforms

SACRAMENTO, California — Gov. Gavin Newsom’s administration has negotiated a secret deal to provide Kaiser Permanente a particular Medicaid contract that may permit the well being care behemoth to develop its attain in California and largely proceed choosing the enrollees it needs, which different well being plans say leaves them with a disproportionate share of this system’s sickest and costliest sufferers. 

The deal, hammered out behind closed doorways between Kaiser Permanente and senior officers in Newsom’s workplace, may complicate a long-planned and costly transformation of Medi-Cal, the state’s Medicaid program, which covers roughly 14 million low-income Californians. 

It has infuriated executives of different managed-care insurance coverage in Medi-Cal, who say they stand to lose a whole bunch of hundreds of sufferers and thousands and thousands of {dollars} a yr. The deal permits KP to restrict enrollment primarily to its earlier enrollees, besides within the case of foster youngsters and people who find themselves eligible for each Medicare and Medi-Cal.  

“It has induced a large quantity of frenzy,” stated Jarrod McNaughton, CEO of the Inland Empire Well being Plan, which covers about 1.5 million Medi-Cal enrollees in Riverside and San Bernardino counties. “All of us are doing our greatest to implement essentially the most transformational Medi-Cal initiative in state historical past, and to place all this collectively and not using a public course of could be very disconcerting.” 

Linnea Koopmans, CEO of the Native Well being Plans of California, echoed McNaughton’s considerations.

Insurance coverage acquired wind of the backroom talks when broad outlines of the deal had been leaked days earlier than the state briefed their executives Thursday.

Dr. Bechara Choucair, Kaiser Permanente’s chief well being officer, argued in a ready written response on behalf of KP that as a result of it operates each as a well being insurer and a well being care supplier, KP ought to be handled in another way than different industrial well being plans that take part in Medi-Cal. Doing enterprise straight with the state will get rid of complexity and enhance the standard of look after the Medi-Cal sufferers it serves, he stated. 

“We aren’t looking for to show a revenue off Medi-Cal enrollment,” Choucair stated. “Kaiser Permanente participates in Medi-Cal as a result of it’s a part of our mission to enhance the well being of the communities we serve. We take part in Medi-Cal regardless of incurring losses yearly.” 

His assertion cited almost $1.8 billion in losses in this system in 2020 and stated KP had donated $402 million to assist look after uninsured those who yr.

Kaiser Permanente, the state’s largest managed-care group, is one among Newsom’s most beneficiant supporters and shut political allies. 

The brand new, five-year contract, confirmed to KHN by administration officers and anticipated to be introduced publicly Friday, will take impact in 2024 pending approval from the legislature — and can make KP the one insurer with a statewide Medi-Cal contract. It permits KP to solidify its place earlier than California’s different industrial Medi-Cal plans take part in a statewide bidding course of — and after these plans have spent many months and appreciable sources creating their bidding methods.

Different well being plans concern the contract may additionally muddle a large and costly initiative referred to as CalAIM that goals to supply social providers to the state’s most susceptible sufferers, together with home-delivered meals, housing support for homeless individuals, and mildew elimination from houses. Below its new contract, KP should present a few of these providers. However some executives at different well being plans say KP won’t must enroll numerous sick sufferers who want such providers due to the way it limits enrollment.

Critics of the deal famous Newsom’s shut relationship with KP, which has given almost $100 million in charitable funding and grant cash to spice up Newsom’s efforts towards homelessness, covid response, and wildfire aid since 2019, in accordance with state information and KP information releases. The well being care big was additionally one among two hospital programs awarded a no-bid contract from the state to run a discipline hospital in Los Angeles through the early days of the covid pandemic, and it acquired a particular settlement from the Newsom administration to assist vaccinate Californians final yr.

Jim DeBoo, Newsom’s government secretary, used to foyer for KP earlier than becoming a member of the administration. Toby Douglas, a former director of the state Division of Well being Care Companies, which runs Medi-Cal, is now Kaiser Permanente’s vp for nationwide Medicaid.  

Nonetheless, many critics agree that Kaiser Permanente is a linchpin of the state’s well being care system, with its robust give attention to preventive care and excessive marks for high quality of care. Most of the public insurance coverage upset by the deal subcontract with Kaiser for affected person care and acknowledge that their general high quality scores will possible decline when KP goes its personal approach.

Michelle Baass, director of the state Division of Well being Care Companies, stated Medi-Cal had risked shedding KP’s “top quality” and “scientific experience” altogether had it been required to simply accept all enrollees, as the opposite well being plans should. However she stated KP should adjust to all different circumstances that different plans should meet, together with tightened necessities on entry, high quality, shopper satisfaction, and well being fairness. 

The state may also have higher oversight over affected person care, she stated.  

“This proposal is a approach to assist guarantee Kaiser treats extra low-income sufferers, and that extra low-income sufferers have entry to Kaiser’s high-quality providers,” Baass stated. 

Although Kaiser Permanente has 9 million enrollees, near 1 / 4 of all Californians, solely about 900,000 of them are Medi-Cal members. 

Below the present system, 12 of the 24 different managed care insurance coverage that take part in Medi-Cal subcontract with KP to look after a subset of their sufferers, conserving a small slice of the Medi-Cal {dollars} earmarked for these sufferers. Below the brand new contract, KP can take these sufferers away and preserve all the cash.

In its subcontracts, and in counties the place it enrolls sufferers straight, KP accepts solely people who find themselves current Kaiser Permanente members and, in some circumstances, their members of the family. It’s the solely well being plan that may restrict its Medi-Cal enrollment on this approach. 

The brand new contract permits KP to proceed this follow, nevertheless it additionally requires Kaiser Permanente to tackle extra foster kids and complicated, costly sufferers who’re eligible for each Medi-Cal and Medicare. It permits KP to develop its geographic attain in Medi-Cal to take action. 

Baass stated the state expects KP’s Medi-Cal enrollment to extend 25% over the lifetime of the contract. 

KP defended the follow of limiting enrollment primarily to its earlier members, arguing that it gives “continuity of care when members transition into and out of Medi-Cal.” 

The state has lengthy pushed for a bigger KP footprint in Medi-Cal, citing its top quality rankings, its robust built-in community, and its enormous function on the broader well being care panorama.

“Kaiser Permanente traditionally has not performed a really huge function in Medi-Cal, and the state has lengthy acknowledged that we’d profit from having them extra engaged as a result of they get higher well being outcomes and give attention to prevention,” stated Daniel Zingale, a former Newsom administration official and medical health insurance regulator who now advises a lobbying agency that has Kaiser Permanente as a consumer. 

However by accepting primarily individuals who have been KP members within the current previous, the well being system has been capable of restrict its share of high-need, costly sufferers, say rival well being plan executives and former state well being officers.

The executives concern the deal may saddle them with much more of those sufferers sooner or later, together with homeless individuals and people with psychological diseases — and make it more durable to supply enough look after them. Lots of these sufferers will be a part of Medi-Cal for the primary time below the CalAIM initiative, and KP won’t be required to simply accept a lot of them.

“Awarding a no-bid Medi-Cal contract to a statewide industrial plan with a observe file of ‘cherry choosing’ members and providing solely restricted behavioral well being and neighborhood assist advantages not solely conflicts with the intent and targets of CalAIM however undermines publicly organized well being care,” in accordance with an inner doc ready by the Inland Empire Well being Plan. 

The plan stated it stands to lose the roughly 144,000 Medi-Cal members it delegates to KP and about $10 million in annual income. L.A. Care, the nation’s largest Medicaid well being plan, with 2.4 million enrollees in Los Angeles County, will lose its 244,000 KP members, primarily based on information shared by the plan. 

The state had been scheduled on Wednesday to launch closing particulars and directions for the industrial plans which might be submitting bids for brand spanking new contracts beginning in 2024. Nevertheless it delayed the discharge per week to make the KP deal public beforehand.

Baass stated the state agreed to exempt KP from the bidding course of as a result of the standardized contract anticipated to end result from it might have required the insurer to simply accept all enrollees, which Kaiser Permanente doesn’t have the capability to do. 

“It’s not shocking to me that the state will go to extraordinary means to make it possible for Kaiser is within the combine, given it has been within the vanguard of our well being care supply system,” Zingale stated.

Having a direct statewide Medi-Cal contract will significantly cut back the executive workload for KP, which is able to now take care of just one company on reporting and oversight, slightly than the 12 public plans it presently subcontracts with. 

And the brand new contract will give it an excellent nearer relationship with Newsom and state well being officers.

In 2020, KP gave $25 million to one among Newsom’s key initiatives, a state homelessness fund to maneuver individuals off the streets and into resort rooms, in accordance with a KHN evaluation of charitable funds filed with the California Truthful Political Practices Fee. The identical yr, it donated $9.75 million to a state covid aid fund.

In summer season 2020, when native and state public well being departments struggled to include covid unfold, the well being care big pledged $63 million in grant funding to assist contract-tracing efforts.

KP’s affect extends past its huge charitable giving. Its CEO, Greg Adams, landed an appointment on the governor’s financial restoration job power early within the pandemic, and Newsom has showcased KP hospitals at vaccine media occasions all through the state. 

“In California and throughout the U.S., the marketing campaign contributions and the organizing, the lobbying, all of that stuff is necessary,” stated Andrew Kelly, an assistant professor of well being coverage at California State College-East Bay. “However there’s a distinct sort of energy that comes out of your potential to have this privileged place inside public applications.”

This story was produced by KHN, which publishes California Healthline, an editorially impartial service of the California Well being Care Basis.

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