Gov. Jerry Brown and Democratic leaders are crafting an exception for Kaiser Permanente as they prepare to move 880,000 Healthy Families patients to lower-cost Medi-Cal as part of their budget agreement.
The provision would enable Oakland-based Kaiser to keep its 200,000 Healthy Families patients as Medi-Cal clients through a direct contract with the state, according to Department of Health Care Services Director Toby Douglas. It would also give Kaiser the ability to avoid paying fees to county-based health plans for an additional 200,000 people it already serves through Medi-Cal.
As part of the budget deal, Democratic leaders agreed to dissolve Healthy Families, which provides low-cost health care to children whose families are at the federal poverty threshold ($23,050 for a family of four) up to 250 percent of that amount ($57,625). The state will shift all 880,000 Healthy Families children to Medi-Cal in waves next year, starting in January.
Many health care advocates have attacked the Healthy Families move, saying that it would disrupt a successful program and force children to switch pediatricians in Medi-Cal networks with worse access. Senate President Pro Tem Darrell Steinberg, D-Sacramento, said Thursday that Democrats acquiesced on the governor's demand to dissolve Healthy Families as part of an overall deal to spare other programs such as welfare-to-work and subsidized child care from deeper cuts.
Health care insiders have privately groused about the Kaiser provision, considering it an unfair exception that other health plans did not receive.
Douglas said Friday that the changes are necessary to keep Kaiser as a participant in public health care programs and avoid cutting off 200,000 children from their pediatricians and specialists, often described as "continuity of care." He noted that Kaiser has a closed system in which patients cannot access Kaiser health care providers if forced to switch to another insurer.
"Kaiser is a very unique health plan in California in that it is a health and hospital and physician system," Douglas said.
John Ramey, executive director of Local Health Plans of California, which represents public plans that have subcontracts with Kaiser, criticized the overall elimination of Healthy Families and the Kaiser provision. He said it would mean less money for public hospitals and safety net clinics who benefit from subcontractor fees that Kaiser would otherwise pay.
"We are dismayed," Ramey said. "What's to keep the other Healthy Families plans from asking for the same deal? What's to keep Anthem Blue Cross from asking for this deal?"
Health care providers receive lower reimbursements in Medi-Cal than they do in Healthy Families, which advocates say has caused many to stop taking Medi-Cal patients.
Kaiser initially had concerns about a disruption in services and a significant loss of funding by shifting its patients to Medi-Cal, according to Christian J. Stenrud, Kaiser Permanente executive director for advocacy and public affairs. Douglas said Kaiser stands to receive $23 million less each year under the budget deal.
Kaiser currently has no position on the proposal as it negotiates with Brown officials and lawmakers, Stenrud said.
"If we are able to reach some kind of agreement here, from our perspective, that means we are no longer in opposition to the proposal as the governor has put forward," he said. "But even if we are able to reach some kind of accommodation here, we're not going to be in a place where we support this. We're just trying to mitigate the disruption our own members would face."
Kaiser is an influential health care player in the Capitol, and it initially opposed Brown's plan last month. Kaiser contributed $250,000 to Brown's tax initiative campaign in January, state records show. Other Medi-Cal health insurers gave as well, including Anthem Blue Cross, which donated $50,000.
Stenrud said Kaiser gave the money because it supports the effort to raise taxes and prevent deeper budget cuts in the future. Brown press secretary Gil Duran said, "I can say that Gov. Brown makes his decisions based on what's best for California and Californians, and there is no other consideration that goes into making his decisions."
One critic of the governor's overall plan to eliminate Healthy Families expressed support for preserving the same medical providers for 200,000 Kaiser children.
"It's good that this would minimize the disruption for (Kaiser) patients in this switch," said Anthony Wright, executive director for Health Access California. "It doesn't resolve our overall issue with continuity of care and need for strong oversight in these plans."