2009-10 Budget Analysis Series: Health

DHCS—Failure to Promulgate Regulations Leads to Inefficiency


State Delegates the Eligibility Processing Function to Counties. Counties administer Medi–Cal eligibility determinations for new applicants and redeterminations for persons who are enrolled and wish to remain in the program. How counties perform this function affects access to health care for the poor, compliance with federal laws and regulations, and overall state costs for the Medi–Cal Program. The state reimburses counties for the cost of performing these eligibility–related functions.

How the State Directs County Eligibility Administration Activities. Counties receive direction from DHCS regarding how to perform eligibility–related functions in two main ways. Many directives to counties involve the issuance of state regulations. Regulations act to define and clarify statute. In California, the Office of Administrative Law (OAL) has responsibility for overseeing the promulgation of regulations. Before a regulation is promulgated, it normally must go through a development process in which it is available for review and public comment. This process generally takes 6 to 24 months to complete.

However, on a number of issues, the department issues what are termed All County Welfare Director’s Letters (ACWDLs). An ACWDL is an administrative tool used by departments to communicate changes in policy or to provide clarification on various issues. The issuance of ACWDLs is not under the jurisdiction of the OAL and is, therefore, not subject to the same development and review process. Departments can develop and issue ACWDLs relatively quickly, usually in about one to six months.

DHCS Has Not Updated Eligibility Regulations in a Number of Years. Although DHCS has indicated that a number of regulation packages are currently undergoing the formal OAL process, the latest update to county administration regulations occurred in November 1998. The department has preferred to use ACWDLs to implement changes to county eligibility–related functions because they can be issued so much more quickly than regulations. For this reason, it is common practice among state departments that direct county programs to first publish documents comparable to ACWDLs to provide immediate direction on how to implement programmatic changes, such as changes to federal or state statute. However, most departments then follow up on the initial letter to counties with the completion of formal regulations to ensure that their directions are clear, effective, and subject to review by the public and OAL.

Overuse of ACWDLs Can Be Problematic

While the ongoing use of ACWDLs is convenient for DHCS, our analysis indicates that this practice creates additional administrative workload for the counties and impedes legislative oversight over the county administration of Medi–Cal. We discuss these concerns below.

Counties Often Find ACWDLs Unclear. We are advised by county personnel that they consider DHCS’s heavy reliance on ACWDLs to be problematic. According to county officials, the letters are often unclear and are drafted in a way that require county eligibility workers to review and reference several previous related letters to fully understand how to implement a new policy or statute change. Our review of some recent ACWDLs found that these letters pose real challenges for county officials.

Among the key problems:

If DHCS followed up ACWDLs with regulations, all the information would be organized and accessible in one location, facilitating the consistent implementation of statute. As we noted, however, that has not been the past practice of the department.

Lack of Clear Direction Can Cause Inefficiency. When counties are unable to easily reconcile and interpret ACWDLs regarding eligibility determinations, they must commit time and resources to sort through these issues and have less time to focus on ensuring that processing eligibility determinations is being properly implemented by their staff. We find that the promulgation of regulations by DHCS, as a follow–up to the release of ACWDLs, would likely improve county efficiency and consistency in the administration of eligibility–related functions.

Current Process Impedes State’s Ability to Manage County Administration. The widespread use of ACWDLs impedes the state’s ability to manage the county eligibility functions. The confusion at the local level over how to follow DCHS’s directions on the administration of Medi–Cal eligibility has hampered the state’s efforts to improve the efficiency of these functions. For example, the Governor’s budget for 2007–08 initially proposed to increase the county performance standard regarding the timely processing of applications and redeterminations from a 90 percent accuracy threshold to a 95 percent threshold. However, counties argued that such a change would pose extreme difficulties for them in large part because of the lack of clear guidance from the state on eligibility functions. As result, the performance standard was not improved. If the state is not able to effectively manage the county administration function, it also loses some of its ability to control its Medi–Cal caseload, as the counties determine who is eligible for Medi–Cal.

Analyst’s Recommendations

We recommend that the Legislature direct DHCS to report at budget hearings on the status of its plans to issue regulations necessary for the county administration of Medi–Cal eligibility functions. Specifically, the department should identify how many regulatory packages would be necessary to fully update the regulations governing the county administration function, what steps the department would take to promulgate the regulations, and how long it would take for the department to do so. We believe this is a reasonable first step to bring about more efficient administration by counties and the state of these activities, which are critical for the operation of the Medi–Cal Program.

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