CalAIM, Reports | March 6, 2020

LAO Issues Report on Newsom Administration’s CalAIM Proposal

On Monday, the Legislative Analyst’s Office (LAO) published a report detailing the Newsom Administration’s sweeping California Advancing and Innovating Medi-Cal (CalAIM) proposal to transform the state’s Medi-Cal program. The LAO’s report provides an overview of the primary components to be reformed through the CalAIM proposal, including:

  • Increasing Focus on Medi-Cal’s High-Cost, High-Risk Enrollees – The CalAIM proposal aims to coordinate care through a new “enhanced care management” benefit and provide additional optional “in lieu of services” as alternatives to traditional and often more expensive, Medi-Cal benefits.
  • Transforming and Streamlining Medi-Cal Managed Care – DHCS proposes to restructure a number of current benefits out of Medi-Cal’s fee-for-service delivery system and into managed care, set payment levels for managed care plans on a more regional basis, and consider establishing a full-integration pilot where managed care plans offer physical health, dental health, and behavioral health services.
  • Extending Components of the Current Section 1115 Waiver – CalAIM intends to continue certain programs that are under the current Section 1115 waiver such as public hospital funding and an expansion of substance use disorder services.
  • Rethinking How Behavioral Health Services are Financed and Delivered – Included in the CalAIM proposal are a number of reforms to improve service delivery for county behavioral health, including streamlining financing, integrating behavioral health services at the local level, and changing eligibility rules around behavioral health services.

The LAO indicates that many of the CalAIM components are still under development and are yet to be finalized through the legislative and budget processes. Recall, Governor Gavin Newsom in his January budget proposed $348 million General Fund ($695 million total funds) for CalAIM for a half year of implementation activities in 2020-21; ongoing costs are anticipated to be $395 million General Fund ($790 million total funds) moving forward.

In assessing the overall CalAIM proposal, the LAO determines many of its approaches, including the vision of managed care plans in the Medi-Cal program, additional tools to  managed care plans to address the broad needs of beneficiaries, and opportunities to receive federal funding for services not previously eligible, are promising. The LAO further indicates that CalAIM has the potential to move Medi-Cal toward greater standardization across the state, reduce some complexities of the program, and address behavioral health system barriers.

However, the LAO indicates many components included in the broader CalAIM proposal raise many questions and present significant risks to the state. Among the questions and risks identified by the LAO are the readiness of managed care plans to take on significantly expanded responsibilities under the proposal, the likely difficulties that state and plans would face ensuring that in-lieu of services are cost-effective, how new benefits would expand the supply of already-limited services and interact with existing services, and how the state could minimize new complexities the proposal may introduce.

As the Legislature begins it budget process and considers the broader CalAIM proposal, the LAO recommends a number of considerations:

  • Focusing on Resolving Key Questions – In discussing its recommendation, the LAO indicates the Newsom Administration has not submitted any trailer bill or statutory language for the proposal, making its recommendations to the Legislature challenging. Instead, the LAO suggests focusing on specified overarching questions, high-risk/high-cost populations, managed care activities, and behavioral health reforms.
  • Exploring Implementation Delays – The LAO recommends the Legislature explore and identify potential implementation delays given CalAIM’s aggressive implementation timeline. The LAO points to the significant actions necessary by the state and managed care plans to implement its components, as well as the risks that unplanned delays could present to the overall Medi-Cal program as reasons for exploring implementation delays.
  • Mitigating Potential Fiscal Risks – In determining which components of the CalAIM proposal to ultimately approve, the LAO recommends the Legislature consider the potential for CalAIM to result in significantly higher costs to the state on an ongoing basis, what fiscal transparency measures are needed to ensure accurate tracking of CalAIM expenditures, and what policies should be in place to mitigate potential fiscal risks of CalAIM.
  • Ensuring Robust Legislative Oversight and Evaluation – The LAO determines legislative oversight of CalAIM implementation will be critical to ensuring smooth and successful transition of the sweeping Medi-Cal program reform. To assist in this oversight, the LAO recommends the Legislature establish a framework for an independent and robust evaluation of adopted CalAIM components.

The full LAO report on CalAIM is available here.