United States: CMS Approves $25 Billion California Medi-Cal 2020 Demonstration Project

On December 30, 2015, the Centers for Medicare and Medicaid Services (CMS) approved a new Section 1115 Demonstration Project for California which could total $24.8 billion over a five year period to serve the uninsured and provide incentives to safety net providers to focus on enhancing the value of care. Under California Medi-Cal 2020, the state Department of Health Care Services (DHCS) will expand current efforts to support the public safety net system through a variety of strategies and new initiatives summarized below.

Global Payment Program

Enrollment in Medi-Cal has increased to more than 12 million people, about one-third of the total population of the state. However, in its waiver application, DHCS estimated that even after expansion, three million Californians will remain uninsured. More than half of the funding in the new demonstration ($12.8 billion) will be available through a new Global Payment Program (GPP) for 17 designated public safety net care providers. Payments for uncompensated care through the GPP will be made to public health care systems (PHCSs), which will be required to provide a threshold amount of care, measured based on a point system, to earn an annual GPP budget amount. The purpose of the GPP is to shift funding for the uninsured from a cost basis to a system based on payment for value. As such, the GPP will incorporate Disproportionate Share Hospital (DSH) payments for hospitals participating in the GPP. Much of the GPP will be described in protocols that have not yet been completed.


The second largest component of the waiver makes $7.464 billion available for the Public Hospital Redesign and Incentives in Medi-Cal (PRIME) program. There are 22 Designated Public Hospitals (DPHs) and 38 District/Municipal Hospitals (DMPHs) that will be eligible to participate. PRIME will pick up where the state's previous Delivery System Reform Incentive Payment (DSRIP) program left off. As more states seek federal funding for their own proposed DSRIP programs, PRIME may offer additional insights as to how CMS expects these programs to operate and become sustainable without further federal assistance beyond 2020.

The five PRIME goals are:

  1. Increasing the capabilities of participating PRIME entities to furnish patient-centered, data-driven, team-based care to Medi-Cal beneficiaries, especially those who are high utilizers or at risk of becoming high utilizers.
  2. Improving the capacity of participating PRIME entities to provide point-of-care services, complex care management and population health management by strengthening their data analytic capacity to drive system-level improvement and culturally competent care.
  3. Improve population health and health outcomes for Medi-Cal beneficiaries served by participating PRIME entities, as evidenced by the achievement of performance goals related to clinical improvements, effective preventive interventions and improved patient experience metrics.
  4. Improving the ability of participating PRIME entities to furnish, in the most appropriate setting, high-quality care that integrates physical and behavioral health services and coordinates care in different settings for targeted vulnerable Medi-Cal beneficiaries.
  5. Moving participating PRIME entities towards value-based payments through the adoption of alternative payment models.

DPHs will be required to implement projects under each of three domains: outpatient delivery system transformation and prevention; targeted high-risk or high-cost populations; and resource utilization efficiency. Incentive funds are not guaranteed, they are available only if the entities meet performance metrics. The state must adopt the PRIME Projects and Metrics by March 1, 2016.  By January 2018, half of all Medi-Cal managed care enrollees must receive all or a portion of their care under  Alternative Payment Methodologies (APMs) that shift risk for costs and/or outcomes to the PRIME entities. This requirement increases to 55 percent by January 2019 and 60 percent by the end of 2020. If statewide targets are not met, PRIME funding will reduce statewide.

As with other DSRIP programs, payments from PRIME are intended to support and reward entities for improvement in the delivery system and are not considered reimbursement for health care services. Incentive payments are not considered patient revenue. The non-federal share of payments under PRIME will be funded by voluntary intergovernmental transfers.

Whole Person Care Pilots

The waiver also makes $3 billion available for Whole Person Care (WPC) pilots. Payments are intended for "infrastructure and non-Medicaid covered interventions that support increased integration among county agencies, health plans, and providers ... increased coordination and appropriate access to care for the most vulnerable, and improved data collection and sharing among local entities to support ongoing case management, monitoring, and strategic program improvements." These payments are not for services otherwise reimbursable under Medi-Cal.  Providers therefore would continue to bill Medi-Cal or a managed care plan for state covered services. They are not considered patient care revenue.

These WPC pilots are targeted at high-risk, high-utilizing Medi-Cal beneficiaries such as those with repeated incidents of avoidable emergency use, hospital admissions or nursing facility placement. They may be currently experiencing homelessness or likely to experience homelessness upon release from institutions including county jail and state prison. Entities that may apply for WPC pilots include a county, a city, a health or hospital authority or a consortium of such entities. Participating entities must include at least one Medi-Cal managed care plan and may include other entities including:

  • the health services agency
  • specialty mental health agencies
  • county alcohol and substance abuse disorder programs
  • human services agencies
  • public health departments
  • criminal justice/probation entities
  • housing authorities
  • at least two key community partners such as physician groups, clinics, hospitals and community-based organizations.

Lead entities must be either a county agency or one of the 22 DPHs or 38 DPMHs eligible for PRIME. Beneficiaries must opt-in to the WPC pilot to receive services.

Dental Transformation Initiative

California Medi-Cal 2020 also includes up to $750 million for a Dental Transformation Initiative (DTI) that provides incentives to improve access to dental care and reduce preventable dental conditions among children.

The program will include three domains:  (1) increase preventive services utilization for children to age 20; (2) caries risk assessment and disease management pilot for children age six and under; and (3) increase continuity of care among Medi-Cal children.

The state may also select up to 15 Local Dental Pilot Programs to implement the domains.  Applicants may be from a county, a consortium of counties/cities, a Tribe, an Indian Health program or university system.

Incentive payments out of the DTI pool are intended to support and reward performance that will be measured over a baseline year. For example, 37.84 percent of children utilized a preventive dental service in 2014. The Department's goal is to increase utilization by at least 10 percentage points over the demonstration period. The incentive payment for increasing preventive services utilization for children will equate to a payment of approximately 75 percent above the Schedule of Maximum Allowances (SMA) for all preventive services for children. The results of this project will be used to determine if incentive payments are an effective method for increasing provider participation.

The dental strategies will be developed and operated by both Fee-for-Service (FFS) and the six Dental Managed Care (DMC) contractors.

Designated State Health Programs

The state may also claim up to $375 million in federal funds to support a number of Designated State Health Programs (DSHP). These include:

  • California Children Services (CCS)
  • Genetically Handicapped Persons Program (GHPP)
  • Medically Indigent Adult Long Term Care (MIALTC)
  • Breast & Cervical Cancer Treatment Program (BCCTP)
  • AIDS Drug Assistance Program (ADAP)
  • Department of Developmental Services  (DDS)
  • Prostate Cancer Treatment Program (PCTP)
  • Song Brown HealthCare Workforce Training Program
  • Steven M. Thompson Physician Corp Loan Repayment Program
  • Mental Health Loan Assumption Program

Supplemental payments to IHS and Tribal 638 facilities

Waiver expenditures also include up to $7.75 million to make supplemental payments to certain Indian Health Services providers and Tribal 638 facilities for uncompensated care.


The new California waiver is expansive and comprehensive and will have an impact on enrollees, providers, health plans, units of government and IT vendors. Nearly $25 billion in federal, state and local funds are at stake. Much of it must be earned through meeting performance-based incentives. The state has made a significant commitment to move people and money into new managed care models. It will have a significant impact on California. In addition, because there are many other states currently considering or in the process of seeking similar Section 1115 waivers, the California waiver provides a strong signal of what to expect from CMS in the final year of the Obama Administration.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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