Public Plans and The California Model

Public Plans and The California Model



In the Democratic debates, Warren and Sanders favor Medicare for All (a public, single payer) while Biden and Harris and Buttigieg support different versions of “Medicare for All Who Want It” – the “Public Option” -- a competitive multiple payer model.


It’s therefore worth looking at the performance of public plans in California. About 1/3rd of California’s population is enrolled in its MediCal program for low-income families and individuals. California’s MediCal program began its changeover from fee for service to organized managed care systems in the early 1980s to offer better coverage and more accessible care at a lower price. The earliest adopters were called County Organized Health Systems; county governments put them together. California’s MediCal managed care program now offers its 13 million subscribers a choice between public plans or commercial plans.


The type and extent of choice varies by county. In some counties, there is a single MediCal managed care plan; it's a public plan (County Organized Health Systems); all must enroll. In other counties, there is a choice between a public plan and a commercial plan (the Two Plan Model). In still other counties, there is a choice among multiple commercial managed care plans (Geographic Managed Care). These models work reasonably well and highlight some of the potential performance advantages of public plans in a multi payer competitive market for low income Californians. Two thirds of MediCal managed care enrollees are in the public plans.


To start with, the Warren/Sanders proposal is exclusively fee for service with no health plans. Warren/Sanders has unlimited choice of providers, no copays and no deductibles. All of these features are highly attractive to consumers, but also highly inflationary. The overall problems with the proposal are the static nature of the system, the exclusive reliance on rate setting to control rising health costs, and the uniform nationwide application which leaves inadequate flexibility for local conditions.


One can build universal coverage from a different base. The Biden/Harris/Buttigieg proposals are all a mixture of public fee for service and commercial managed care. They are closer to the current Medicare system where subscribers may choose their preferred system – 40% of Medicare subscribers in California choose commercial managed care. A system, which permits subscribers to have a choice of plans, can offer a more competitive and more dynamic market place and a well organized delivery system, and it relies less on government rate setting to control costs. The Harris plan is a mid way point; it is quite different from Biden/Buttigieg proposals in that it eliminates commercial employment-based coverage while both Biden and Buttigieg retain it, and the Harris plan is quite different from Warren/Sanders which eliminate private insurance entirely.


In California nearly all subscribers must enroll MediCal plans, and all plans are managed care HMO’s. These can be more dynamic and more readily adaptive and responsive to local conditions. They can use a combination of fee for service, modified fee for service and HMO style provider reimbursements depending on their local market conditions. They do cover even more services than the Warren/Sanders proposal. They have no deductibles and nominal or no copays.


These plans all cover the same services, but in other respects they are county specific with differences from county to county and region to region. The LA health plans are not the same as the rural Central Valley plans, nor the Bay Area plans, nor the plans for the rural north. Since health care is local, the local plans can be tailored and responsive to the needs of the local communities in ways that a national plan simply cannot. They negotiate reimbursement rates with providers, but within a budget set by the state legislature and Governor. Their comparable reimbursement rates for doctors are less than Medicare or employment based coverage, and as a result many have greater difficulty attracting and retaining physicians. Their rates for hospital services are at or close to Medicare; they do not have problems with hospital participation.


In the small rural counties of the North, there are few providers and little room for a competitive market because there is often only one hospital and its physician staff in a small town. Thus there is a single regional County Organized Health System for the counties in the rural north.


Two Plan models evolved to assure the market viability of public hospitals, traditional MediCal physicians, and other safety net providers that often do not fare very well in commercial managed care plans. In the competitive provider market of Los Angeles, the state and the county chose a Two Plan model offering a choice between a competing commercial and a public plan. The same Two Plan model applies in most of the high priced, provider oligopolistic Bay Area counties, like Santa Clara, San Francisco and Alameda.


In the competitive provider market of San Diego which lacks a public hospital, there are multiple competing health plans (Geographic Managed Care), including one local plan that grew out of a local community health center and another local plan that grew out of a local hospital. In the competitive market of Orange County, which also lacks a public hospital, there is a single County Organized Health System; this is a historical anomaly, and it performs very well. In the rural Central Valley region with provider shortages, some counties (Kern and San Joaquin) have a commercial plan and a public plan competing with each other, while others have two competing commercial plans, and one county has a County Organized Health System.


The plans perform quite differently on quality measures; the variation is highly differentiated both by county or region, and by plan governance. The County Organized Health Systems perform very well. See the MediCal Managed Care Dashboard at


In general, Kaiser, a non-profit commercial plan operating in San Diego and Sacramento, has the top HEDIS scores (close to 100) while for profit commercial plans operating in rural regions with provider shortages typically have the worst scores (in the range of 50). Public plans in San Francisco, Santa Cruz/Monterrey, Santa Barbara, San Mateo and Orange have excellent scores and generally outperform their commercial, for profit plan competitive counterparts. Plans in the rural North and the Central Valley counties where there are provider shortages often have much lower HEDIS scores.  Public plans generally outperform the commercial plans (other than Kaiser) on the HEDIS quality scores.


For an excellent overview of this, see


Unlike Medicare, MediCal does not have a robust fee for service market. Its fee for service system is reserved for categories of subscribers for whom managed care is not appropriate, such as those in nursing homes or with limited emergency only benefits. Thus it is unclear how MediCal managed care would perform in truly competitive voluntary market.


MediCal managed care has many specialty carve outs: substance abuse, dental care, serious mental illness, CCS services, dual eligibles and in home support services. The carve outs are supposed to provide effective special treatment for special conditions. However they may needlessly complicate treatment for vulnerable populations. If you are an addict with a severe mental illness like bi-polar illness and physical health challenges, you must surmount three separate bureaucracies to get your care, and then your three types providers may be barred from sharing your treatment plans and conditions with each other unless you have signed a special confidentiality waiver. If your child has a CCS condition, they get their care for the treatment of the CCS condition from the CCS network and their primary care and specialty care for all other conditions from their managed care network.


Likewise, subscribers’ incomes and jobs change, so their eligibility for health coverage may shift between their employer, Covered California and MediCal. Each may have a different health plan and provider network. This interrupts continuity of care and treatment for conditions that may be best treated with continuous care through the same provider. Some plans do participate in all three markets; most however do not.


California’s MediCal experience suggests that MediCal fee for service is less effective than high performing MediCal managed care and that the public plans outperform their commercial for profit counterparts.


Prepared by: Lucien Wulsin

Dated: 10/2/19











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