Calif. Finds New Double Trouble on Duals: Replacing Two Sanctioned Plans
By James Gutman - February 14, 2014

California’s Department of Health Care Services (DHCS) must be feeling kind of snakebit by now on its CMS-backed demonstration program for Medicare-Medicaid dual eligibles. On top of a host of prior delays and complications, DHCS this year has had to deal with two of its selected duals plans getting placed on CMS sanctions that for now will prevent them from participating in the start of the state’s duals initiative. The new problems relate to the sole Orange County contractor, CalOptima, which last month was placed on marketing and enrollment sanctions for a host of violations under its prior management, and LA Care, a Los Angeles County contractor that scored below three stars in the 2014 Part D portion of the CMS star quality ratings and thus is ineligible to receive duals-demo enrollees until that star rating goes up.

But DHCS is nothing if not resourceful. For Los Angeles County, the department persuaded two subcontractors to LA Care — Care 1st and the CareMore unit of WellPoint, Inc. — to become direct contractors and Molina Healthcare, Inc., which is a contractor in three other regions for the duals program but had dropped out of a subcontracting arrangement with the other original contractor in the county (Health Net, Inc) to become a direct contractor as well. LA Care will share in the pool when it’s able. The Los Angeles County portion of the demo is still slated to start on its revised target date of April 1, which is about a year later than originally planned.

The problem is somewhat more difficult in Orange County, since CalOptima is county-operated and was the only plan selected by the county to serve a duals population of about 57,000. DHCS had no choice therefore but to put Orange County on the back burner temporarily.

However, finding ways around problems on the demo has been what DHCS and other state agencies and contractors have been doing virtually since the demo was enacted as part of the Affordable Care Act. Previously, among other things, the agency signed risk-sharing agreements with WellPoint and Net, whose CEO, Jay Gellert, said Feb.11 that the company now expects 38,000 members and $348 million in duals-related revenue from California in 2014 and 100,000 members there by the end of 2015. DHCS also was actively involved in state legislation last year that gave California the right to pull out of the demo and proceed on its own if projected state savings levels could not be achieved otherwise.

What do you think will happen with the California demo? Will it launch this spring as now scheduled, and will any selected plans drop out? Is the approximately $2,100 average payment rate that Gellert said this week Health Net will receive going to be enough to yield a profit? Can DHCS catch a break on this program?

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