Failure to Launch

Problems Cited in the Center for Medicare and Medicaid Services Evaluation of California’s Coordinated Care Initiative May Cripple Its Success

By Jason Bloome

In December 2018, the Centers for Medicare and Medicaid Services (CMS) published the first evaluation report of California’s Coordinated Care Initiative (CCI).  Here are some of the report’s findings.

Demonstration Changes Announced in California’s 2017–2018 Budget

California’s Coordinated Care Initiative (CCI) consists of two parts: Managed Long Term Support and Services (MLTSS) which is mandatory enrollment of dual-eligibles (beneficiaries who are on Medicare and Medi-Cal) with Managed Care Organizations (MCOs) and Cal MediConnect (CMC) which is optional enrollment with the same MCO to manage the Medicare benefits as well. In authorizing CCI, California’s SB 94 included a “poison pill” provision that all part of CCI would become inoperative if the program did not provide net savings to the state’s general funds. In the Governor’s 2017–2018 budget the Department of Finance found: 1) CCI was not fiscally viable; 2) CMC would continue throughout fiscal year 2019; and 3) CMC would continue without the In Home Support and Services (IHSS) component.

The annual negative fiscal reviews have had a negative impact on the success of CCI. Every fall, CCI MCOs unsure about the status of the program were uncertain about investing time and resources into developing program components that might not continue beyond each calendar year; beneficiaries who choose to opt-out of CMC did not know if they should leave their trusted provider networks to enter new systems of care; and state staff responsible for managing CCI were not sure if their job positions were stable. Even though the “poison pill” provision was dropped in the 2017–2018 budget fiscal issues continue to plague CCI.

Low CMC Enrollment

The state’s ambition was to enroll every dual-eligible within the demonstration program’s seven counties (Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo and Santa Clara) with CMC but, as the CMS report found, opt-in rates for CMC were very low. As of December 2016, out of 475,000 participants ever eligible for CCI, only 113,600 (about 25%) opted-in to the program. Recent enrollment data (July 2018) show CMC enrollment has declined to 111,444 participants.

Contributing to CMC low enrollment, according to providers and stakeholders, were dual-eligibles reluctant to leave known provider networks (e.g., their family doctors), complex enrollment forms, difficulty in reaching dual-eligibles because of incorrect contact information, stakeholder’s inability to answer dual-eligible questions and lack of plan experience in assisting dual-eligibles with complex care needs. State analysis of CMC low enrollment also found a very high opt-out rate by non-English speakers (as high as 94% for certain linguistic groups in certain counties) and confirmed the suspicions that a large number of health providers told their plan members to opt-out of CMC. The majority (approximately 61%) of dual-eligibles receiving IHSS services also opted out of CMC.

IHSS is removed from CCI

CMC proposed to demonstrate the efficacy of MLTSS which included the In-Home Supportive Services (IHSS) program, the Multipurpose Senior Services Program, Community-Based Adult Services and Skilled Nursing. CCI MCOs struggled with integrating IHSS into their care systems. CCI MCOs were required to pay for IHSS but county agencies still maintained control over all program components (e.g., management and the number of hours provided). Additional problems included budgeting for IHSS when repayment for program costs was extremely delayed by the state which prevented CCI MCO plans from assessing their financial standing. In the state’s 2017–2018 budget IHSS was entirely removed from MLTSS and returned back to county control. CCI MCOs were very disappointment with this outcome: many dual-eligibles depended on IHSS and the plans considered it integral to the demonstration.

Insufficient fiscal incentives to promote SNF diversion/transition

According to the CMS report, CCI MCOs expressed continued frustration with financing and payment. Primary concerns were related to low CMC enrollment and insufficient reimbursement for delivered services. When, despite expectations, so few dual-eligibles signed up with CMC, many CCI MCOs reported they were unlikely to recapture fixed investment costs for programs that depended on Medi-Medi consolidation.

CCI MCOs were also frustrated that the state expected them to promote SNF diversion/transition but did not give them sufficient tools and adequate reimbursement to cover community-based care expenses. Contributing to plan uncertainty was a lack of updated MLTSS rate tables (the last published MLTSS rate tables for non-CMC dual-eligibles was in 2014).

State officials said establishing the correct Medi-Cal rates were one of CCI’s biggest challenges. Plans expressed frustration with the long delays by the state in completing the necessary tasks to establish how CCI plans would be paid for care provided to their members. Baked into CCI’s rate methodology was the assumption that each year CCI MCOs would increase the percentage of SNF diversions/transitions when there never was a path forward to make this fiscally viable. Plans were entitled to keep the higher institutional rate for a limited time for SNF-home transitions but once the initial rate expired the lower rates (e.g. Home and Community Based High (HCBS High)) were not enough to cover program expenses. 

Capitated Rate Erosion

CMC’s low enrollment not only prevented Medi-Medi consolidation to produce significant cost savings it also produced a painful side effect: if CCI MCOs tried to save money through MLTSS they would either be forced to ration care (no longer possible in the case of IHSS since it was removed from the program) or incur losses when increasing SNF transitions. The more successful a CCI MCO was in transferring dual-eligibles from high rate cells to lower rate cells the less money they would receive per member per month (PMPM) when the blended capitated rate was recalculated at the beginning of each year (also called capitated rate erosion).


1000 total CMC enrollees with 100 SNF transitions from the MLTSS non-CMC rate categories Institutional ($5,300/month) to HCBS High ($1,800/month).

[(500 x 5300) + (500 x 1800)]/1000 =  $3,500 PMPM

[(400 x 5300) + (600 x 1800)/]/1000 = $3,200 PMPM

CCI has no built-in bonuses (quality withhold measures) that pay CCI MCOs for SNF diversion/transition. Without monies to replace financial losses CCI MCOs have no fiscal motivation to promote SNF diversion/transition. CCI is at risk of failing. The state urgently needs to redraw the blueprint for CCI and replace faulty components which prevent SNF diversion/transition from progressing in California. We cannot expect a rocket ship to blast off when poor engine design keeps it stuck on the launch pad.

Jason Bloome is owner of Connections–Care Home Referrals, an information and referral agency for care homes for the elderly in Southern California. More information can be found at

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