In this episode, Foley partner Anil Shankar discusses California’s new Medicaid wavier called CalAIM, (California Advancing and Innovating Medi-Cal, the multiyear care delivery and payment reform initiative led by the California Department of Health Care Services (DHCS)) with Jackie Bender, Chief of Finance Strategy from the Los Angeles County Department of Health Services. This waiver contains innovative programs to provide coverage through managed care plans for alternative services and settings designed to address the whole person and not just their medical needs traditionally covered through Medicaid and other insurance programs. Take it away Anil.
We encourage you to listen to the podcast in its entirety.
Anil Shankar is a partner and health care lawyer with Foley & Lardner LLP, and a member of the Health Care Practice. He provides strategic counsel to health care providers as they navigate complex regulatory and reimbursement matters, with a particular focus on the Medicaid program and issues affecting safety net providers.
Jacqueline (Jackie) Bender is the Chief of Finance Strategy for the Los Angeles County Department of Health Services. Prior to joining the LA County Department of Health Services, Jackie was the Vice President of Policy for the California Association of Public Hospitals and Health Systems.
Please note that the interview copy below is not verbatim. We do our best to provide you with a summary of what is covered during the show. Thank you for your consideration, and enjoy the show!
Thanks, Judy. And hi everyone. My name is Anil Shankar. I'm a partner with Foley & Lardner LLP with a practice focused on the Medicaid space. I work on reimbursement and compliance issues with a primary focus on issues affecting safety net health care providers. We've got a fascinating podcast topic for you today. I'll be speaking with a good friend and one of my favorite clients, Jackie Bender from the Los Angeles County Department Of Health Services.
We've got a very timely topic for the discussion as California and Los Angeles County recently received approval for its new Medicaid waiver called CalAIM. This is a section 1115 waiver approved by the federal government. And California's Medicaid program called Medi-Cal has a long history of developing innovative programs and proposals through the 1115 and other waiver processes, many of which end up catching on and being replicated around the country.
This new CalAIM waiver continues to break new ground as it contains innovative programs to provide coverage through managed care plans for alternative services and settings. They're designed to address the whole person and not just their medical needs that are traditionally available through Medicaid and other insurance programs.
And as part of the topic today, and the reason we're talking with Jackie about these things, is that these programs are not entirely new. CalAIM is new, but it builds on a framework that was laid down over many years by LA County and other public entities in California. With this new waiver, these preexisting programs are being moved into the states chosen delivery system, which is really doubling down on the use of Medicaid managed care, and is putting Medicaid managed care in the center of administering and contracting and ensuring the availability of these alternative services and settings and supports, sometimes called in-lieu-of services or community supports, as well as enhanced case management and other programs designed to help the whole person.
With these changes, and with the transition from an old waiver to a new waiver, it raises a number of opportunities to bring social determinants of health supports into the mainstream in California, potentially reaching a lot more Medicaid beneficiaries than previously, but it also raises a lot of challenges. And Jackie has been spearheading these issues for many years. First through her long time role as the vice president of policy at CAPH, where she helped design California's Whole Person Care pilots, which began this work five or six years ago. And now through her job as the chief strategy finance officer at LA County. So we're going to have a discussion about some of the opportunities and challenges of California's experimental new waiver. So, hi Jackie, welcome to the podcast.
Hi Anil, thanks for having me.
I thought we'd start, if you could tell me a little bit about some of the programs that LA County is operating and how they are helping to serve the whole person.
Sure. So like you said, a lot of this work started in earnest under Whole Person Care. Although in LA County, I would argue that a lot of this work was beginning even before that. I think a favorite thing to say in Washington is that most good policy ideas don't come from Washington. They in fact come from local communities and places where individuals on the ground are trying to solve real problems that they see in their communities.
So I think that's true of LA, and it's truly a part of how Whole Person Care became a statewide program was drawing on the experience of local counties and trying to address issues of people experiencing homelessness. Seeing a lot of people show up in the ER and the hospitals and the inpatient setting who really were there, not for lack of good medical care, but they had other social needs and traditional health insurance programs weren't addressing those. And weren't there better ways that we could think of investing funding and treating people's needs really at the source of problem, the root cause of the problem? Those kinds of issues are all of the reasons why we ended up creating a program like Whole Person Care.
So under that program, which started in 2015, a lot of the services that we were able to grow and strengthen in Los Angeles County were things like increasing the number of people we were able to serve in permanent supportive housing by making sure that we had the wraparound services available, so that they could get maybe a federal voucher through HUD. But a lot of those vouchers require wraparound services in order to kind of activate them. And this pilot allowed an opportunity to create those services and to expand the availability of those services as an example.
We did a lot of work also with just alternative settings to hospital stays, places where people who didn't need acute care anymore, but really didn't have a safe place to recover and get better and maybe help get navigated to more permanent services. We were able to increase the reach of those kinds of services, which we call sometimes recuperative care or medical respite, and other interim housing solutions. So that essentially is just trying to address a very widespread problem in Los Angeles and California, and I know in other states too, of people who are experiencing homelessness for a wide variety of reasons.
That is very true. Can you say a little bit about the housing then? What do you do with these individual clients when they're in need of housing?
Sure. So a lot of people, I think when they maybe ... when any hospital might see a lot of clients like this or patients, it's people that haven't been in contact with services for long enough to actually get them housed. So it can start with just housing navigation and trying to get all of the paperwork lined up so that a person is ready to apply for federal head vouchers or go into the coordinated entry system, which helps match people with housing. People need help getting their social security card or driver's license or any other number of documents. They need help applying for the Medi-Cal program.
I don't recall the last time I saw a medical application, but I'm sure it's probably at least 10 pages long. I'm sure it's actually longer, but these are complicated forms and they require a lot of information and a lot of verification to get in the program. And it's only through eligibility through these various programs that you gain access to services. So this eligibility gateway is so key. And it just requires so much effort that you need a lot of support to get someone through those gates.
And then once you're there, you have the opportunity to maybe get signed up with a primary care provider, you get case managers. And then if you eventually have the good fortune of getting matched with a housing resource, like a permanent way to fund your ongoing rent, which Medi-Cal will not pay for. So that comes from HUD, or that comes from other local sources. Then we have a really wide array in Los Angeles County of housing options. And so our team will work to place that person with the resource that best matches their need, and get them stably housed, get them situated, and then provide ongoing support services, whatever those needs may be that the client has, which could fluctuate month to month and year to year. So it's just having that resource there for helping ensure that the client stays housed and has all of their needs met to be successful in that housing environment.
Yeah, that's great. I know it's been a really successful program that's helped a lot of people. You mentioned the federal prohibition, that the Medicaid program they have a firewall up where they will not pay for rent or for what they call room and board for non-institutionalized individuals. But there's been a fair amount of federal guidance suggesting that Medicaid will pay for a variety of the ancillary services that you mentioned, including housing modifications, helping people with move-in assistance, and then tenancy supports to help them remain housed.
It's been a beneficial arrangement for LA County to be able to receive the Medicaid dollars for several years now. And what we're seeing is that under this CalAIM, they're moving the authority over to pay for those services out of the state's hands, where they used to pay directly under Whole Person Care, and instead into the hands of the Medicaid managed care plans. And if you could tell us a bit about some of the advantages and disadvantages of that shift. How has the take-up been? Are the plans ready to step into this role?
Sure. I mean, I think it is a real mixed bag. And so maybe I'll start with the things that are really great about it and then I can share some of the anxieties that I and others have, because I think as you said in the introduction, we are just launching this new system. It went live January 1st, so it hasn't even been live for two months because now we're in February, but it's ... I don't know when this will get aired, but it's new. And so I think a lot of the anxieties are just that and we have to see how it plays out.
But in terms of what's really positive, the original way we were funding this was through a Medicaid 1115 waiver. Those waivers get approved on five year cycles through CMS. And so it does create this kind of five year cliffs that you're always facing where the funding runs out. You have to get a new agreement. And the upside of an 1115 is you get a lot of flexibility and you get to experiment. And that's exactly what we did under Whole Person Care. And I think we demonstrated a lot of really successful interventions that attempt to support people's social needs in a way that the traditional Medi-Cal program just does not.
The benefit of running it through the managed care plans though is it's a different financing mechanism. It is through this opportunity that I think is in a managed care role and you could cite the regs better than I can for the audience, or they may already know it, but it's through these in-lieu-of services. And it's an opportunity to use the existing managed care premium, but to support alternative services that aren't usually covered in the state plan, but they are in-lieu-of the state plan covered service.
The benefit of running the money this way is that basically it's not a special project. It's not a five year deal. It is essentially allowed to happen indefinitely. And if there really is a good relationship between investing in social services and saving on the health care side, it's a really good way to just have some longevity to the way your program is set up. I don't know if you want to say anything more about the actual regs.
I don't want to bore anybody with the actual regs, but I mean, the opportunity we're talking about here is the federal Medicaid managed care rule, which gives affirmative authority for plans to build in coverage of what they call in-lieu-of services. These are alternatives to what normally a Medicaid plan would cover, which is based on what the state covers to a state plan. And there's actually a fair argument that plans can always do this stuff, that if a plan wants to pay for housing for someone, even the rent, and they think they have savings, that'll generate enough savings from paying for inpatient days or whatever, they could choose to spend their money that way. But by and large, they haven't, or if they have, they've done it in a piecemeal and a non organized fashion.
So I think what's happening under CalAIM is a vision of the state, that they want to take these opportunities, make them more formalized, more widespread, more available, and build them into the package of what really is available for Medicaid beneficiaries through their managed care plans. And the benefit for the plans is that when the state is rolling this out, there's now affirmative contract authority identifying the services that can be provided with some state infrastructure.
I mean, you can speak to this more than I can Jackie, but this does have some benefits operationally. Because it means, or it should mean in theory anyway, that the multiple plans are operating under a similar set of packages and not each designing their own, which can lead to some unfortunate fragmenting. And the real benefit here for the plans is that they actually can get what accounts in this business just like credit for furnishing these services when they pay for these services, when they pay for someone's housing supportive services, or for removing assistance to get them into a housing unit. Those costs can be recognized when the state does their future capitation rates.
I mean, they're also going to reflect that it's reduction hopefully in inpatient utilization or some other kind of utilization that offsets it, but it's not just a total loss for the plan because without the state's authority to plan, if they could choose to spend their money in that way, but it wouldn't get treated as a cost for future capitation rate. So, what CalAIM is doing is really making new opportunities to incentivize plans to want to do these things and giving them infrastructure so that they can do it.
That said, one of the key features of these federal in-lieu-of regs is that they are voluntary for the plan and for beneficiary. For the beneficiary, I think that's pretty straightforward. They don't want to force anyone to have to get a service they don't want. If they prefer to get their traditional Medicaid benefit, they can do so. But the idea of it being voluntary for the plan, wonder if you could speak a little bit to that, Jackie, because how has take-up been? Is there the uniform rollout that I think the state was hoping for or is it more patchwork?
Sure. I mean, you raise so many good points with just touching on the way that the regulatory framework is structured and how that incentivizes plan. I mean, before we had this big statewide rollout and a real campaign behind standardizing these opportunities statewide, like you said, plans could do certain things, but you didn't have the benefit of knowing that expenditure and utilization could get built into the rates.
And you also then had a patchwork where when fans chose to do it boiled down to the leadership, and leadership decisions, and variation and local culture in terms of whether or not localities felt like this was a good investment or not, whether or not you had an innovative plan leader or not. And so, there was really wide variation across the state in terms of the ways in which health plans were willing to invest in these kinds of services.
But even though it's voluntary by making it a statewide effort, there's been a couple of years, at least now, since we had a one year delay with COVID of stakeholder engagement and rollout and preparation and anticipation for this to get launched. And I think because of that, even though it's voluntary, there is still a lot of pressure on the plans to participate, and to at least give it a try. This is still an experiment in a different form, but it has the state's backing. It has CMS approval. I think there's a promise that everyone wants to try to make this work. And I think right now the plans are trying to be good participants.
Just to illustrate, there are 14 different in-lieu-of services that the state kind of blessed and the CMS has blessed. And the plans could choose to do all 14. They could choose to do none. They could choose to do some of them. Most plans have elected to do just some of them so far. And they're trying to ramp up over the course of the next couple of years to add more. And I think that makes a lot of sense. Kind of dipping your toe in the water, seeing operationally how you make this happen. What's the expenditure actually look like. What's the return on investment in terms of utilization on the health care side?
I think for those reasons we're going to see hopefully an eventual ramp up, but it's also going to require a lot of, I think, encouragement from all the parties including from the state, and also some state financial support to basically get everyone over the finish line and really give this a full try.
Yeah. That's great. And something that you and I have talked about before is some of the pros and cons of the medicalization of these social services. I mean, one of the of reasons why there's so much talk these days about the social determinants' health and the health care space is it's largely financial in nature. Social services have historically been under resourced in America for a long time, whereas health care I don't think you can say the same thing about health care. We might as well as get to the right places, but there's certainly a lot of money in the system.
And with more and more managed care entities and other entities taking on risk for value based solutions, there's now this thinking that, well, we might be able to take some of that health care money and use it to invest in social services in a way that wasn't really possible decades past, and in a way that could be really beneficial to the social services network, because it would be a whole new set of resources to tap into.
And frankly, it does seem a little bit like fair game. Because insurers, if there is an effective housing network or food assistance network that should work to help reduce medical expenditures. And the thought is, well that we can have them pay for some of the things that they're saving. But I wanted to touch on with you today some of maybe the pros and cons of doing so, because you started off at the beginning by saying a lot of these programs been around for a long time, even predating the investment by the Medicaid program in them.
And a lot of good solutions come from local entities who are trying to serve their community better. And it wasn't really financial in the same way. They weren't doing this to get Medicaid money. They were doing it because these people needed housing or these people needed food or they needed support so they could take their medication in a reliable way. And so it seems like that's still an area that we're still working on or waiting to be seen is like, well, how does that sort of altruism or sense that we're trying to service community link up with the idea of Medicaid managed care getting involved? When really they're only kind of authorized to do it when it saves money through the health care system.
Yeah. And I don't know that we know that answer yet. That's part of the experiment part of all of this. And certainly when we have worked with the plans over the last several months, this issue of cost effectiveness does come up repeatedly. It's also one of the conditions of the waiver. So the thing with these services is they are authorized under a joint ... kind of two different waivers that are jointly authorized, but many of them are through this 1915(b) waiver, which has with it some cost effectiveness requirements.
And this idea of cost effectiveness has come up repeatedly in our conversations with the plans, because at some point there will actually be some sort of evaluation and conclusion that we need to be able to show that these investments are in fact cost effective, however that ends up getting defined. We don't actually even know yet. So the question is, cost effectiveness for whom? And it gets to this wrong pocket problem. And if I make an investment in housing who gains? And who should therefore be chipping in to pay for these services?
I think the balance that California is trying to strike through this, and I'd be interested to get your take on this Anil too, is that there's some share that the Medi-Cal program should pay. There is some benefit that Medi-Cal and health insurance plans and the state get when people are stably housed and are receiving the right social services and supports to help them live a more dignified and healthy life. And it's not fair to just have all that money go back in the pockets of managed care plans or go back to the state if there's not some sort of commensurate investment on the housing side.
And the hard part about housing is that it is a long term commitment. People typically need housing support when they're able to qualify for vouchers and need this level of supportive services, they need it for their entire lives. And that's just a different time horizon than an annual actuarial PMPM analysis that you need for health plans to operate. So the time horizon issue is difficult, the wrong pocket problem is difficult. And then how you actually measure whether or not this is cost effective and who's defining that is an issue. But I'm curious kind of how you've seen it Anil, and you've thought about. I know we've had many conversations about this particular topic, and what's a good way to actually fund these services long term.
Yeah. I mean, I don't think anyone has the magic bullet. I do agree with your earlier point that thus far the managed care plans have been good partners. And it seems like the CalAIM has been initially successful at least in getting people to be interested. And I think this new money will be coming into the system. It's coming into the managed care plans and they are interested in taking it up. I think where that kind of challenge, where the rubber hits the road here is, well, how do we figure out who gets this money? Maybe you can speak to what you've seen on it from an operational perspective.
But how do they figure out which individuals are eligible for these services? Eligibility criteria and then plans to have to implement them. But it seems to me there's a really difficult question here of, how can you tell when someone needs housing support or some help cleaning their apartment? And doing so will lead to medical cost savings in such a way that the plan is sort of obligated or able to pay for them versus individuals who would just benefit from those services because it's a good thing. They actually just do need help, but their connection to health is a little bit more tenuous.
It's hard to slice that onion and figure out who is responsible for which. And I think it's part of what you're getting at with the wrong pocket problem, where we just don't know which interventions are going to benefit on the health plan side in terms of proofing cost savings. But we do know that everyone or not everyone, but a broad swath of the population ... unfortunately, large swath population in places like LA County and other urban settings do just need a lot of support. And doing so is in their best interest and helps support these communities.
Yeah. So what the state is doing to try to address the problems that you're identifying here, which are very real, are a couple of things. One, they are trying to create some really specific definitions of who is eligible for these in-lieu-of services and who is not, and how long you can offer them for, to give plans some comfortable space to operate without having complete uncertainty about, well, if I give this person housing and then they don't use the ER for ... do they have to not use the ER for a certain amount of time in order for this to be okay? I think the state's trying to remove some of that uncertainty by creating these definitions. And CMS has seen all of those, and I think has blessed those as well.
But another thing, at the same time that we expect to happen a couple years from now is that I think regardless, almost of what the data says, I think the state will probably try to extract some kind of savings from the health plan rates. We don't know how much, and it'll probably be something like a slower growth rate than what they might have otherwise authorized. But they're going to somehow account for the fact that through the opportunity to make these in-lieu-of services investments, plans will have likely saved money on hospital services or other types of expensive interventions that Medicaid can pay for on a regular basis.
And by announcing that they're going to do in a couple of years, it's just another incentive for the plans to actually take up these services, which as you mentioned before are voluntary, but if they know that they're going to get a haircut in a couple of years anyway, it's just another reason that they should try to actually make that investment in those in-lieu-of services so that they're prepared to operate under slightly tighter fiscal controls in a couple of years.
Yeah. That’s great. That's very helpful. I wanted to change directions just a little bit. Do you have any recommendations? I mean, you've been in charge of overseeing some of the contracting negotiations and the internal restructuring that has to happen to modify your programs to fit into the managed care space. Do you have any recommendations or thoughts about entities that are moving into this space, such as the social determinants health alternative services and settings, and how they can make that transition successful?
Part of it is that I have not been the one on the ground from day one in Los Angeles. A lot of other people have done that heavy lifting and that good work. And because of those investments that have occurred over the last six plus years, we're in a pretty decent position to be launching these services in a managed care context. Although I will note as a side point that we can come back to this if you want, that social services is not historically set up to be able to bill health insurance. It's just not the financial model. And the amount of information and tracking and systems you need to have in place in order to do that successfully is a really heavy lift. We don't normally have access at the housing level of services to someone's medical eligibility status and which health plan they're enrolled in.
And we don't typically do prior authorization. We don't submit, I don't even remember the name of the claim form like an 837, whatever the claim form is that you have to send in to the health plan to get paid. It's just not the way those systems have operated. And so even though we have a lot of good things in place, we're having to do major modifications to our IT systems to be able to do this kind of billing, and tons and tons of staff training and just new operational process on the ground. So it's an extremely heavy lift, even though we've been doing this for a while.
Yeah. That's really interesting. I mean, it's challenging even for LA County, which has a lot of IT infrastructure and support. I can only imagine how challenging it is for a social service provider that wants a directly contract with a plan that has no involved in the health care space at all. I wouldn't underestimate those challenges. I mean, the legal risks are there as well. I mean, there's a fairly straightforward argument. There are also some counter arguments, but there's a real question of whether you become a HIPAA covered entity if you start billing for even a non-traditional health care service.
And if it starts getting paid for through health care plans or an organization of any amount of size that is billing would probably want to start having like a compliance officer, a security officer. They need to make sure they can meet the documentation. And that there's a lot of challenges to go along with being a Medicare and Medicaid provider. And for some of these organizations that are now being contracted with plans, they have no experience with health care laws the kickback statute or the False Claims Act. All of a sudden will be applicable to them in ways they weren't before. And they can have real impacts on what previously were normal ways they ran their business. So I think the transitional challenges are real and shouldn't be underestimated.
Yeah. And maybe the way, I don't know if this is advice necessarily, but maybe some of the ways that we are able to get around that, so to speak is that LA DHS, the Department of Health Services, through our own work, have this vast network of housing providers that we contract with. And as a major hospital system and health care system, we have a lot of experience with billing and with managed care plans. And so we had a person in house that has done contracting for years with health plans. And we were able to leverage that resource because we're both hospital and social services to bring those things together and successfully get to the place where we could do all of the billing.
But none of our contractors at social services organizations have to ... they don't have to set up anything on their own per se, but they're using our system. And we're the ones that are, I think, taking the accountability for meeting all of those kinds of requirements. I don't know if you're starting from scratch and you are a CBO out in the community, maybe there's conversations to have with other partners in the local county government, other entities to think like, what are the best arrangements so that we can overcome some of those challenges?
Yeah. That's certainly an interesting approach that others can explore is the idea of contracting with a local public entity or a health care system where they work as a subcontractor. So they don't have the primary relationship with the health care billing and reimbursement, and instead are responsible through their contracts. But I mean, some of those requirements are going to flow down.
If you need data on an individual level, it's going to have to come from the one doing the service. So it's still going to have some challenges, but it certainly can help to team up with a partner like LA County that has a lot of that infrastructure in place already. All right, well, do you have any other recommendations or thoughts that you wanted to conclude with about CalAIM or moving the future of this space?
I mean, I guess back to your initial question about the pros and cons, I think it is a really exciting opportunity to see if there is a sustainable way for the Medi-Cal program in California to be contributing its fair share to social services investments that benefit everyone in the community, including the Medi-Cal program. It is also requiring the entire social services infrastructure to become kind of medicalized, and to know how to operate and bill in a health insurance environment, which is new and it's a heavy lift, as I mentioned.
And it also requires thinking through how ... it's adding a whole other layer of Medicaid managed care requirements on top of lots of programs that have other requirements already from other federal agencies for how they need to operate or other state or local requirements. And how you bring managed care plans into the fold and integrate them into that local framework that already exists is really important. And it's so important to have ongoing dialogue with your plans. Hopefully there's already a good relationship if you are in a managed care environment and you could use whatever foundation is there to build on that to help launch these new kinds of services.
But it's still a challenge because everyone operates kind of in their own silos, according to their sets of rules. And sometimes you even have issues with just using different terms for the same kind of service. There's cultures within each kind of sphere of service, health versus housing versus other social services. You have to spend some time to bridge those. So I think just having those strong partnerships and the opportunities to work together over a long period of time, celebrate the easy wins, start on things that you can achieveto build that trust so that you can work on the harder things down the road.
Well, I think that's a great way to wrap up Jackie. I appreciate your time today and always appreciate being able to chat with you about these interesting topics. So thanks for coming to the podcast. And I guess we'll sign off. Back to you, Judy.