The 2023-24 Budget

Whole Child Model Expansion

Summary. The Whole Child Model, currently implemented in 21 counties, integrates children’s specialty care services provided in the California Children’s Services (CCS) program into Medi-Cal managed care. The Governor proposes trailer bill legislation to expand the Whole Child Model to 15 additional counties. While we understand the administration’s rationale for the proposal, the Legislature is at a critical juncture in deciding whether to further integrate the CCS program into Medi-Cal managed care. Given the complex policy considerations at hand, we recommend the Legislature act cautiously with this proposal and consider deferring some or all of the proposed expansion as it weighs its long-term policy plans for CCS. Moving forward, we recommend the Legislature begin contemplating its long-term plans for CCS, focusing on an approach that best coordinates care for beneficiaries, improves the existing shortcomings in CCS, and is cost-effective. Moreover, the Legislature likely will want to minimize variation across the state in how CCS services are delivered, allowing for variation only where a clear rationale exists.

Background

This section provides background on (1) the CCS program; (2) Medi-Cal managed care; and (3) the Whole Child Model, which increases the role of Medi-Cal managed care plans in administering CCS services to beneficiaries.

CCS

CCS Provides Specialty Care for Children With Specified Conditions. Established originally in 1927, CCS covers health care services for low-income children with certain disabilities or chronic conditions (such as cancer or hemophilia). The program specifically covers treatment, case management, physical and occupational therapy, and medical equipment for specified conditions in state law. CCS does not cover health care for beneficiaries that is not related to their CCS-eligible condition, such as primary care and mental health services. According to the Department of Health Care Services (DHCS), around 90 percent of CCS beneficiaries receive coverage for their remaining health care through Medi-Cal, the state’s combined Medicaid program, and the Children’s Health Insurance Program (CHIP). (CHIP provides health coverage for pregnant women, newborn infants, and children whose household income falls below certain thresholds but is too high for Medicaid eligibility.) The remaining around 10 percent of CCS beneficiaries do not qualify for Medi-Cal and either have their non-CCS care covered through private insurance or are uninsured. Based on data from DHCS, we estimate average monthly enrollment in CCS in 2020-21 (the most recent fiscal year readily available) was around 160,000. (This count includes children in the Whole Child Model, discussed later.)

Traditionally, Counties and State Have Administered CCS Program. Historically, the counties and the state have shared responsibility for administering the CCS program. All counties are responsible for determining whether beneficiaries meet the program’s financial eligibility requirements, as well as certain other related tasks. Historically, larger counties also assumed most other CCS administrative tasks, including determining medical eligibility, providing case management services, coordinating care, and authorizing coverage of services. For smaller counties, DHCS has assumed a larger role in performing these functions. The state also historically has been responsible for maintaining the statewide network of CCS providers, certifying providers and care facilities, and providing overall program oversight.

CCS Services Are Supported From a Mix of Fund Sources. The state historically has supported CCS services provided to Medi-Cal beneficiaries using a mix of federal funds, state General Fund, and county funds. For Medicaid-eligible children, costs generally have been shared equally between the federal government and state General Fund. For children in CHIP, the federal government historically has covered 65 percent of costs and the remaining 35 percent has been shared equally between state General Fund and county funds. The state supports CCS services provided to children who are not enrolled in Medi-Cal primarily through a mix of state General Fund and county funds. A small portion of funding for non-Medi-Cal CCS services (around 5 percent) also comes from certain drug rebates, federal block grant funding for children’s specialty health care, and administrative fees paid by a subset of families. As of this publication, comprehensive information on total Medi-Cal and non-Medi-Cal CCS spending across all fund sources was not available, but likely is around $1 billion.

Medi-Cal Managed Care

Medi-Cal Delivers Most Services Through Managed Care Plans. The state contracts with health insurance plans, also known as “managed care plans,” to deliver most benefits in Medi-Cal. Under this arrangement, managed care plans enroll Medi-Cal beneficiaries and arrange for their care through the plans’ networks of providers. The state in turn pays managed care plans a monthly rate for each enrollee, with rates varying for different populations (such as for children, adults, and seniors). The state sets these rates based on plans’ past expenditures, as well as adjustments for inflation and other factors determined by actuaries. Currently, the state contracts with 24 managed care plans, with several plans serving beneficiaries in more than one county.

Many Counties Are Changing Their Models of Managed Care. Counties differ in how Medi-Cal managed care is administered to residents. For example, 22 counties have what is known as the “County Organized Health System” (COHS) model, whereby generally only one county-formed managed care plan participates in Medi-Cal. These counties are collectively served by six public managed care plans. Another 14 counties have a “Two-Plan” model, whereby county residents in Medi-Cal can choose between one public and one private managed care plan. The remaining 22 counties operate other models that rely on private managed care plans only. As part of a series of recent changes to Medi-Cal, many counties are planning to change their managed care model in January 2024. As Figure 1 shows, most of these counties will change to either a COHS model (to be served by two existing public managed care plans) or a new “Single-Plan” model (similar to the COHS model but with some differences in how the plans are regulated).

Historically, CCS Generally Was Administered Outside of Managed Care. Historically, the CCS program has existed as a “carved out” benefit in Medi-Cal. That is, counties and the state have paid for and delivered CCS benefits outside of the managed care system. As an exception, prior to changes in 2013 and 2016 (described later), the state “carved in” funding for CCS in six large COHS-model counties. Under this approach, the state paid for CCS services in the rates it provided to the managed care plans in these counties. The plans in turn provided the funding to these counties to administer CCS services.

Whole Child Model

Over Time, Some Stakeholders Have Raised Concerns With the CCS Program. Over the years, some stakeholders have identified areas for improvement in the CCS program. For example, some stakeholders have raised concerns with the bifurcated Medi-Cal managed care and CCS system, which can be difficult for families to navigate and can limit providers in each program from focusing on a child’s comprehensive health care needs. Policymakers in past years also raised concerns that the fee-for-service payment structure in CCS limits opportunities to incentivize providers to use lower-cost settings of care, when appropriate. In addition, stakeholders have noted complexities in authorizing care and claiming reimbursement (with services taking up to two-to-three months to receive authorization), shortages of CCS providers, and difficulty with beneficiaries accessing medical equipment, among other issues. In recent years, DHCS has undertaken several initiatives to address these issues—including by implementing the Whole Child Model, described below.

In 2013, State Adopted “Whole Child Model” Pilot in San Mateo County. As part of a series of federal Medicaid authorizations in 2010, the state received approval from the federal government to pilot new approaches to better coordinate CCS and non-CCS services. According to DHCS, these pilots were intended to improve health outcomes and patient and provider satisfaction while also slowing the rate of growth in spending. In 2013, following a call for proposals, DHCS selected a demonstration project in San Mateo County (a COHS-model county). Under the demonstration project, the county’s Medi-Cal managed care plan was responsible for the “whole child” in CCS, taking on a greater role in administering CCS services to its members. Non-Medi-Cal CCS beneficiaries were excluded from the demonstration project. This pilot eventually was replaced by the Whole Child Model in 2016, described below. (DHCS enacted a second CCS demonstration project in 2018 and extended it through 2021, piloting an integrated care model at Rady Children’s Hospital-San Diego.)

In 2016, State Established Whole Child Model in Most COHS-Model Counties. The state established the Whole Child Model in Chapter 625 of 2016 (SB 586, Hernandez) in 21 of the state’s 22 existing COHS-model counties. These counties are collectively served by five Medi-Cal managed care plans. (The legislation excluded Ventura County and its associated Medi-Cal managed care plan.) Under the Whole Child Model, the five managed care plans have a more substantial role in administering CCS services, including by providing case management services, authorizing care, and arranging for CCS care through their networks of providers. Counties and the state continue to maintain certain functions, such as determining program eligibility and certifying CCS providers and facilities. Chapter 625 set forth a number of goals for the Whole Child Model, including improving the coordination of CCS and non-CCS care, maintaining or exceeding access and quality of CCS services, providing for continuity of care during the transition of between traditional CCS and the Whole Child Model, and improving the transition of CCS children to Medi-Cal managed care as they become adults.

Counties Receive Specific Rate for Whole Child Model Beneficiaries. Chapter 625 directs DHCS to provide participating managed care plans a specific rate for each Whole Child Model enrollee for the cost to provide both CCS and non-CCS care. As with other managed care rates, Whole Child Model rates are based on plans’ past costs and adjusted by actuaries for inflation and other factors. The Whole Child Model rate has been notably higher than the rate for other children, reflecting the relatively higher cost of care for CCS-eligible children. Chapter 625 also requires managed care plans to pay at least the same rate as in traditional CCS for physician and surgeon services, unless the providers and plans mutually agree to an alternative payment methodology.

DHCS Recently Released an Evaluation of Whole Child Model. Chapter 625 required DHCS to contract with an independent entity to evaluate managed care plan performance in the implementation of the Whole Child Model. The statute specified numerous performance areas to assess, such as enrollment in CCS, access to services, and patient and family satisfaction with the Whole Child Model. DHCS ultimately contracted with the Institute for Health Policy Studies at the University of California, San Francisco. The department publicly released the evaluation report on March 30, 2023.

Proposal

Proposes Expanding Whole Child Model to Additional Counties. The Governor proposes trailer legislation to expand the Whole Child Model to the 15 counties that are changing to a COHS or Single-Plan model. The administration has stated that its goal is to reduce complexity and variation in the administration of CCS benefits across the state. The proposal reduces this variation by continuing to administer the Whole Child Model in nearly all COHS or Single-Plan model counties. (The proposal would continue to exclude Ventura County and its associated managed care plan from the Whole Child Model.) The Governor’s budget assumes the proposed expansion and associated shift from fee-for-service payments to managed care rates would be fiscally neutral to the state.

Phases Expansion Over Two Years. Under the proposal, the ten smallest counties would transition to the Whole Child Model in January 2024, and the remaining five counties (including the three Single-Plan model counties) would transition in January 2025. According to DHCS, more time is needed in these five counties to ensure a seamless transition of duties from the counties to the managed care plans.

Assessment

Without Proposal, Administering Services to CCS Beneficiaries Could Become More Complex for Some Managed Care Plans. With the upcoming managed care model changes, two health plans that currently participate in the Whole Child Model—Central California Alliance for Health and Partnership Health Plan—will be responsible for serving Medi-Cal beneficiaries in the 12 counties transitioning to the COHS model. Absent this proposal, these plans would administer the Whole Child Model in some of their counties and not in others, potentially adding to the complexity of administering services to their beneficiaries. By contrast, the model changes in the three Single-Plan model counties (Alameda, Contra Costa, and Imperial) do not create this complexity, as the affected managed care plans currently do not administer the Whole Child Model.

Evaluation Found Several Positive Outcomes From Implementing Whole Child Model… The findings of the evaluation are complex and difficult to concisely summarize. Ultimately, the evaluation did not find substantial differences between the Whole Child Model and traditional CCS in many of the measures it considered. That said, the evaluation did find a few relatively better measures under the Whole Child Model. For example, CCS children in many Whole Child Model counties were more likely to have the recommended number of primary care checkups than children in CCS counties. Also, notably smaller proportions of families in the Whole Child Model reported having less unmet behavioral health need than families in traditional CCS. Moreover, medical equipment providers that were interviewed in the evaluation noted more streamlined and much faster authorization of services in the Whole Child Model (for example, from 45 days to 60 days under traditional CCS to around five days under the Whole Child Model).

…But Also Raises Several Issues for Further Study. Despite identifying several promising outcomes, the evaluation also found some mixed trends or raised issues that warranted further study. Below, we summarize four key examples.

• Enrollment. Over the period considered by the evaluation, CCS enrollment declined in many counties. The evaluation concluded, however, that the drop in overall and new enrollment was greater in most Whole Child Model counties relative to traditional CCS counties in similar regions of California and with similar populations. The evaluation did not ascertain the exact reasons for the decline, but suggested that drops in referrals for neonatal intensive care unit and high-risk infant follow-up services were contributing factors.

• Care Coordination. Despite being a core rationale for the implementation of the Whole Child Model, the evaluation found that overall care coordination tended to be similar to traditional CCS and that the quality of coordination varied by health plan. In some cases, the evaluation noted that services became more fragmented. For example, families experienced more fragmented CCS case management services under the Whole Child Model, in some cases resulting in a longer time to authorize certain services. Also, the evaluation did not find evidence that the Whole Child Model notably improved transition out of CCS and into adult managed care, another of the statutory goals of Chapter 625.

• Quality. A majority of families in the Whole Child Model reported that the quality of care they received was about the same or better than when they were in traditional CCS. Families that reported worse quality, however, tended to have poorer health and higher specialty needs.

• Cost-Effectiveness. The scope of the evaluation did not include examining per-enrollee cost or overall cost-effectiveness of the Whole Child Model relative to traditional CCS. To date, we are unaware of an analysis that examines cost effectiveness in the Whole Child Model—meaning that the Legislature does not know whether the Whole Child Model is more or less cost-effective than traditional CCS.

Proposal Could Have Complex Impacts on Medi-Cal Payments to Providers. The shift of CCS services to managed care under the Whole Child Model interacts with Medi-Cal’s complex financing system and shifts the way payments are distributed among providers. For example, the shift in services to managed care results in a shift in supplemental payments for hospital outpatient CCS services from fee-for-service to a broader pool of managed care payments. This shift on net yields financial reductions to children’s hospitals, which disproportionately serve CCS beneficiaries. One hospital—Children’s Hospital of Orange County—has estimated to our office that it will begin incurring a reduction in funding of around $20 million annually beginning in 2025 as a result of this redistribution. (Though authorized in 2016, Orange County did not transition to the Whole Child Model until 2019. Hospital supplemental payments also rely on past actual data, resulting in the lagged fiscal effect.) Another hospital—University of California, San Francisco Benioff Children’s Hospital—estimates a reduction of $29 million were the Whole Child Model to expand to Alameda and Contra Costa Counties (two Single-Plan model counties). This impact likely would occur several years after the proposed expansion. The Legislature could weigh this potential distributional impact in its consideration of whether to expand the Whole Child Model.

Evaluation and Proposal Renew Broader Questions About the Future of CCS. For many years, policymakers have contemplated changes to the CCS program to enhance quality, coordination, and cost-effectiveness. Now that the Legislature has an evaluation of the Whole Child Model, it is in a better position revisit this issue. The Legislature’s long-term plans for CCS impact how it will want to approach this proposal. For example, to the extent the Legislature does not intend to further integrate CCS into managed care, approving an expansion of the Whole Child Model at this time could run counter to its policy plans. The Legislature already is considering a proposed bill that, among other changes, would permanently limit the expansion of the Whole Child Model. On the other hand, the proposal could be reasonable to the extent the Legislature intends to further integrate managed care in the CCS program over the long term. Ultimately, the Legislature likely will want to adopt a broader approach that better standardizes the way services are delivered across the state, allowing for local variation only when clear rationale exists.

Recommendations

Cautiously Weigh Proposal and Consider Deferring Action. Given the timing of the release of the Whole Child Model evaluation (just a few months before budget closeout) and the outstanding issues, we recommend the Legislature act cautiously on this proposal. Specifically, we recommend the Legislature consider deferring some or all of the proposed expansion and allow for more time to weigh its long-term plans for CCS and the Whole Child Model. To the extent the Legislature finds at least some of the proposed expansion warranted given the anticipated managed care model changes, we recommend it adopt only the parts that are most urgent. For example, the Legislature could authorize the expansion of the Whole Child Model to the counties transitioning to a COHS model but defer action on the counties transitioning to a Single-Plan model. This approach would ensure plans that currently participate in the Whole Child Model continue to administer services similarly across the multiple counties in which they serve. We recommend adopting the entire proposal (including expanding to the three Single-Plan model counties) only to the extent the Legislature is comfortable with the trade-offs of expanding the Whole Child Model and that doing so aligns with the Legislature’s long-term plans for the CCS program. We also recommend pairing any expansions with additional reporting requirements to monitor the impact on CCS enrollment, access to care, quality of care, and provider finances.

Begin Contemplating Long-Term Approach to CCS. Beyond any action taken in this budget cycle, we recommend the Legislature begin assessing a more long-term and statewide approach to providing CCS services. For example, the Legislature could weigh the trade-offs of expanding the Whole Child Model to all counties versus continuing the historical approach of providing services outside of Medi-Cal managed care. In deciding these changes, the Legislature likely will want to select an approach that best coordinates care for beneficiaries, improves the existing shortcomings in CCS, and is cost-effective. Moreover, the Legislature likely will want to minimize variation across the state in how CCS services are delivered, allowing for variation only where a clear rationale exists.