Hello, everyone. This is Jacob Emerson with the
Becker's Payer Issues podcast. Thrilled today to be
joined by CalOptima Health CEO, Michael Hahn. Michael,
thanks so much for taking the time to
be with me on the podcast today.
Jacob, it's awfully nice to be here and
really appreciate the invitation.
Yeah. Likewise. I I appreciate you taking the
time, Michael. And,
we're here today to talk with you a
little bit about the federal reconciliation bill, which,
of course, as you know, was recently passed
earlier this month.
But before we dive into that and all
the complexities involved in that bill for for
your organization and and across the wider health
care system,
can you remind our listeners, what is CalOptima
Health? Who do you serve, and and what
markets,
are you in?
So, CalOptima Health serves the Medicaid
population, which we refer to as Medi Cal
here in Orange County, California.
Orange County, California is the sixth largest county
in The United States,
here in the state of California.
We currently are the third largest,
Medicaid health plan in the state of California.
We serve
out of our 3,100,000
member population,
we serve about a million in the Medicaid
program just here in Orange County.
So what that means is that there are
a million people out of
3,000,000 or a third of the county that
are low income
or live below the federal poverty level here
in Orange County.
We're also a
what's called a county organized health system.
Back when we were founded thirty years ago
in 1994,
the county decided not to build,
public hospitals.
So we don't have a public hospital. We
administer the Medi Cal program
through about 10,000
contracts with providers.
That includes our doctors, our clinics, our hospitals,
our skilled nursing facilities, our ambulatory centers, and
our community clinics.
So we are a county organized health system.
We have a separate
nine member fiduciary board. We are not part
of the County Of Orange.
We have a $4,700,000,000
budget this year.
90%
of our revenues come from state tax revenues
and 10%
from CMS Medicare.
So that's a little bit about CalOptima Health.
Fantastic. Well, appreciate that overview and context for
our listeners,
Michael.
Let's let's dive in and talk about HRM
one, the the federal reconciliation
bill that president Trump signed into law on
July 4.
Massive bill. So many different things we could
talk about today. But,
let's specifically focus on Medicaid where,
it's anticipated that, Medicaid spending will decrease by
nearly $1,000,000,000,000
over the next decade. And, under that same
timeline, we're expecting the uninsured population
nationwide to,
increase by an additional 10,000,000 people.
And that's that's by 2034
according to the Congressional Budget Office and their
latest estimates. So,
talk to us about the bill's impact on
the operations and strategy at CalOptima,
over over the next five to ten years?
How are you thinking about this internally? How
are you preparing for this,
financially?
So, Jacob,
one of the things that is important for
a lot of folks to understand
right now is that all although HR one
has been passed and we've got a state,
budget that our governor signed into law as
well,
nothing yet has actually changed in either the
services,
or eligibility
of any of our Medicaid members here, certainly
in California and certainly here in Orange County.
So the first messaging we're sending out is
to our members letting them know,
one, we haven't shared any of their confidential
private information.
Two,
their benefits and their eligibility
at this moment in time remains the same.
And three, please,
please, please go get your health care services.
Take your kids in for baby well checks.
Get your immunizations.
Do your developmental screenings with your younger children.
Make sure you're getting your pharmaceuticals
for blood pressure
and diabetes and whatever else,
and make sure you're going to the doctor.
And if you can't,
or don't want to go to the doctor
because you're concerned about things in the community,
then try to use telehealth.
We added on our website,
caloptima.org
backslash
get care,
a list of our physicians that do telehealth.
So in preparing for the changes, first and
foremost, we want people to continue to get
their care until there is a change in
the actual benefits eligibility
and determinations.
So the work eligibility,
the soonest that that will start to occur
for individuals
that have to perform eighty hours a month
for able-bodied
adults without dependents
under 14 years of age,
Probably end of next year, so December
2026,
December 31,
but no later than 12/31/2028.
That's the mandate.
And so one of the things we'll look
at is making sure that our eligibility,
which is determined by our social service agency,
is kept up to date, And we, as
the health plan, are aware of who is
and is not eligible to receive services.
So our initial preparation
is, one, letting people know that right now,
nothing has changed.
Next, as we get ready to start implementing
eligibility
changes,
most likely, that'll begin to at the 2026.
Then on the financing, and you're asking how
are we preparing for it financially,
we currently have about a hundred and twenty
days of cash on hand.
And that doesn't sound like a lot,
but we spend between 350
and $400,000,000
a month in medical care and overhead.
Our medical care, we spend about 94¢
of every dollar on care.
Our administrative
overhead last year, we're just closing the books,
for our last fiscal year, which ended June
30,
is 4.2%
to 5.2%.
The year will close out at 5.2
for the full year.
That is one of the lowest administrative overheads
of any health plan I'm aware of in
the state of California.
So we're preparing by being very fiscally prudent,
and we are preparing to make sure that
we have adequate reserves in case there's a
interruption
in revenues from either the state or the
feds.
So those are some of the initial things
we're looking at, Jacob.
Absolutely. And and such an important call out
that you made there in the beginning, Michael,
that benefits have not been affected yet, and
these changes will really start to become,
more real towards the end of next year,
and that your members need to be proactive
with with, getting their services now before anything
concretely
changes.
I'm glad you brought up the work requirements
piece of all this because that's been, you
know, some of the main focus, we've seen
across the media, certainly one of the biggest
changes,
for Medicaid.
So
can you talk about how you think the
relationship
between,
just in California, the Medi Cal
with the states and then with your organization,
a managed care organization,
how will that influence the relationship between,
states and and these and private insurers across
the country?
So
we work very closely here in California with
the Department of Health Care Services,
DHCS.
We also for those that have,
covered California
exchange products, we work closely with the Department
of Managed Health Care, the DMHC.
And then from a regulatory
standpoint,
our commercial
plans here in the state,
we have a a board called the California
Association of Health Plans. I have the privilege
of serving on that board,
and it's representative of both the commercial
as well as the
public plans.
And I think together,
we try to work very collaboratively
with DHCS
and DMHC
to come up with policy and implementations
that make sense,
but also understanding
the state has to maintain its budget and
has its struggles, of course.
But we wanna be as collegial as possible.
We wanna work on solutions
together.
And so to the great credit of the
Department of Health Care Services, the director,
of DHCS here in California
is very amenable to meeting.
It is a very professional
staff.
We look at the problems together. We offer
suggestions,
recommendations.
DHCS does reach out to us and ask
for input,
and, we're allowed to be able to offer
suggestions and recommendations
on implementation.
We know that implementing work requirements
and implementing some of the financing changes
is going to require a lot of collaboration,
a lot of coordination, and a lot of
communication.
And so as we move forward together,
we are going to try to
do that
with as little disruption and impact to services
to our members.
Couple of examples.
On the financing side,
we have to rely on actuaries. Those are
the individuals that are skilled
in looking at, okay, how sick is the
population?
And what we do is we look at
all the claims that get filed for medical
care.
And each one of those claims is attached
to a condition,
and it gets a numerical
number.
And we can aggregate and pull together all
that data
and start to project
how how high of a risk is this
population,
how what is their propensity
for being healthy or unhealthy.
And then the state, along with us, negotiate
to set rates
to be able to reimburse
to cover the costs that are allowable under
the Medicaid program.
And in turn, we pass those monies on
to the doctors and hospitals
and providers that provide the care.
Right now, we are relooking at, okay, if
there's gonna be changes in enrollment
and eligibility
changes,
and we have, let's say, a 20% decrease
in the number of individuals that are eligible
for Medi Cal,
what does that do to the risk and
how healthy or unhealthy is the population,
and how much are we going to need
in order to take care of them.
So this is complex work. I'm trying to
simplify it here for understanding.
But go forward, we will have to work
very closely with our state and federal partners
as we take care of our almost million
folks. In the Medicare population alone, we have
a 127,000
seniors,
of which about two hundred and eighty five
are centenarians.
That's that's a lot of folks over 100
years old, and I know it because I
signed birthday cards to all of them.
But in that, we have to understand
how that population
is staying or not staying healthy.
And our largest
growing number of individuals
is our senior population.
So we are gonna have to be very
diligent as we look at the finance models
go forward
because the seniors, as we age, we become
more expensive.
So those are some of the collaborations that
we will undertake
with our state and federal colleagues on rate
setting go forward.
Absolutely. No. It's a very you're making it
very clear. This is going to be a
significant lift for for the Medicaid system,
for for companies like yours.
And it's good it's it's good to hear
that the state is being proactive in in
managing through some of those challenges that you
foresee,
Michael. And I and I I wonder if
you would offer any advice to others listening
in, who are also operating in the Medicaid
states all over the country in terms of,
how to begin navigating some of these challenges
that you're foreseeing,
that will pop up as as this this
moves forward?
So, Jacob, I think one of the key
things, especially in our roles, you know, I
have
this great privilege
to be the current CEO
at CalOptima Health here in Orange County. I'm
standing on the shoulders of of the other
CEOs and the staff
and the community that have gone
many, many years before my time here.
And then I will have my time and
move on and be part of the heritage
and legacy.
But one of the things that we have
proactively
worked very hard to do is to create
communications
with our county partners.
In a lot of circumstances,
the Medicaid program that's operated by the county
health plan
is separate from the county,
and we have a social service agency that
actually does the eligibility,
helps the individuals to fill out the applications.
The social service agency for the county is
the one that actually submits the application to
the state.
The state says yes or no,
then sends back a file to the social
service agency saying, here are all the eligible
members that have been approved.
The social service agency then sends us a
file
and says, please go ahead and proceed to
put these folks on the Medi Cal role
in Orange County.
We issue an insurance card,
assign them to a medical group and a
medical home and a primary care doctor.
What we have done the last few years
is that we have had routine standing meetings
with the executive leadership of the social service
agency,
and we work hand in hand,
with the director and his team.
We go to community
events together.
They're there with their computers and their multilingual
staff signing people up and helping them navigate
the application
process to remain eligible or to achieve eligibility
for Medi Cal.
We go to those same community events, and
we have our informational
booth,
And we actually coordinate
our communications
with the county social service agency
so that the members in the community in
all nine threshold languages that we have, English,
Spanish, Vietnamese,
Chinese, Korean,
Farsi, Russian, etcetera,
that we're both saying the exact same thing,
that we're sending the exact same messages.
Even the most recent letter we sent out,
and we text our members.
We do about 250,000
texts a a week,
and we told them, hey. Your privacy is
is protected. Your benefits and eligibility have remained
the same, and please go get your health
care.
We are both saying the same thing.
I would encourage those around the country that
listen in, and I have great regard, Jacob,
for Becker's and their reach in health care
and their updates that you send out on
all sorts of disciplines,
I would encourage them to have strong working
relationships.
The way it started for us,
I picked up the phone and I called
the director of the social service agency, and
I said, this is who I am. I'd
really like to start to work better with
you.
Let's get together and have a conversation.
And it started with a dinner.
And from there, we have built a standing
relationship.
We work collaboratively
at community events together,
and we're now planning and coordinating with all
these changes because
they field about 80,000
phone calls a month. We field about 80,000
a month.
Now we're saying the same thing
from the same talking points to ensure that
members are getting consistent
information.
That to me would be a huge win
for the community and our Medi Cal, Medicaid
members
that they're counting on us to get this
stuff right.
And I don't know that we can do
that if we're in separate silos.
So I would really strongly encourage,
try to punch a hole in the silo
and, string a phone line across
and talk to your colleague at the county
where,
they do the eligibility,
and you as the health plan provide the
care
communicate with each other. That would be one
of my key messages, Jacob.
Absolutely. Working, you know, more closely with your
state partners and and engaging more deeply,
with your community and with your members and
patients,
is is clearly going to be so key
here over the next few years.
Michael, throughout this entire process over these last
several months in terms of,
what we've been hearing from from the insurance
community and from providers and and large hospital
groups all over the country, There's a real,
fear here around what is coming over over
the next decade,
and certainly what we've heard on the ground
from from members and from patients all over
the country,
worried about losing their benefits.
So on the flip side of of that,
is there anything you would mention,
in terms of specific provisions of the bill
that you think could potentially
reduce administrative burdens or or even just create
new opportunities for innovation,
in in managed care?
So one of the things that I'm hopeful
of
is that
together in our individual communities, if you've seen
one county in The United States, you've seen
one county. Each community is unique in itself.
And I do have great concerns about what
HR one and the the changes will do,
especially to our hospital partners.
The bill
is to trim out 1,200,000,000,000.0
over the next ten years into 2034.
Of that, 665,000,000,000
will come out of our hospitals across the
country.
Just here in California,
that'll be about a $119,000,000,000
reduced
here in the community.
So we are all gonna have to get
very innovative
about managing our overhead
and managing the delivery of care.
Those innovations
will also include the implementation
of AI technologies,
hopefully, that will make
processes and functions more efficient.
Given our administrative
overhead right now,
at 5.2%,
which is, like I said, the lowest that
I'm aware of in the state with either
a public or private plan.
One of the things that we have done
is starting
to really
medically
manage and oversee
our key services. So in transplants
alone,
we're responsible
for about a hundred and seventy transplants a
year,
and we brought a specialty doctor in who
is a transplant surgeon.
And now he's overseeing,
our transplant
program,
and he has been able to streamline
the
transplant process,
streamline and eliminate a lot of
duplicate or unnecessary
testing,
and make much quicker decisions to approve a
transplant go forward
or indicate that the patient really doesn't have
the clinical,
capability of accepting a transplant
and making
really,
upfront good clinical decisions.
We did it because I really felt it
was imperative that we coordinate our care
and that patients get timely care and not
be waiting so long for transplants or to
get on the list for a transplant.
I then had a request. Well, how are
we doing with that program? And so I
ran some financial numbers,
Keeping in mind, we didn't go into this
process
for a financial reason, but we discovered
because we were managing the program, eliminating a
lot of duplication and unnecessary
repeated tests, and it's very expensive in the
transplant world,
we ended up reducing our year over year
cost for transplants by $20,000,000.
That's an efficiency that if we multiply that
by all the health plans across the state
doing transplants,
what impact could we have
on really
not slowing down care, but speeding it up,
but being a lot more efficient?
Those are the types of innovations we're gonna
have to work on together.
And I think we have been very good
about wanting to share our experiences. And I
think
if there are things that plans are doing
today that are working well,
it would be nice to create a toolkit
of here's what's working well, and we're willing
to share the white paper
or the details.
We are currently preparing a white paper on
our transplant program
to share with everybody
how we were able
to speed it up,
become more efficient,
and the byproduct was we preserved
very precious health care dollars.
So that's a little bit about what we
might be able to do together to innovate.
Sure. Sure. That's a it's a great example,
and I I do hope some of our
listeners take you up on that that white
paper offer,
Michael.
Before we go, we we've heard from GOP
lawmakers throughout this process and and certainly after
the bill's passing that the focus here has
been on improving Medicaid's
sustainability in the long term.
So what's your perspective on that given given
the position you sit in? What do you
think are some of the most important strategies
moving forward here, in terms of preserving the
long term viability
of the managed care system?
So we are a firm believer here in
Orange County. We have had
a long history of managed care, Medicaid, or
what we call Medi Cal again.
And we currently delegate
about 700,000
of our members to nine large delegated
medical groups.
I believe we are the highly the most
highly delegated,
health plan on the Medicaid side in California,
and we have worked very closely with our
managed care medical group partners.
We have seen that a member being in
managed care
gets far better care than if they're fee
for service.
Why?
They have a medical home, so they belong
to a medical group and a clinic and
a primary care doctor.
Two,
that managed care model
reaches out to them consistently
for their medical care reminders of their checkups,
reminders of their medications,
making sure they're following up on any of
their disease issues or health issues,
and that they're being managed from a case
management standpoint
and given access to other services that we
as the health plan provide
or they, as the medical group, provide.
So we believe that being in a managed
care model
in a medical group
with a medical home and a primary care
doctor is better for your health
than being fee for service and no one's
really tracking or following up for you.
I do think that it's imperative
that the program
continue to provide this coverage
for those that are low income or live
below the federal poverty level.
We believe
that that access to care is critical.
But what we don't wanna have happen and
which could really impact things severely
is that the individuals
lose eligibility.
The plan changes.
It doesn't change the fact that they need
health care, and it doesn't change the fact
that they will have health crisis.
And where are they all going to go?
In the end, what I fear is it'll
land in the emergency room.
I ran acute care hospitals for almost thirty
years of my career. I've been the CEO
of many hospitals
and have had the great privilege of working
with so many amazing doctors and
communities,
and I don't want the emergency room to
become the primary care office
for millions of people. Here in Orange County,
from an eligibility
standpoint,
we could see up to 200,000
of our members lose coverage.
Where are they going to go?
Set aside any of the other issues that
go with the access to care and just
focus on the care part. If you need
emergency care under EMTALA, under federal rules,
emergency medical treatment rules.
Every hospital emergency room has to see you
whether you have means to pay or not,
but that is gonna put a huge burden
on our hospitals. So my hope
is that we can preserve precious
dollars, be very efficient in our delivery of
care,
and still have the ability through our state
budget
to fund the care for individuals
that have no ability to find care for
themselves.
So that's my go forward hope. And on
a
on another note, I also believe firmly in
the goodness of the human heart.
And I know that there are a lot
of good folks out in our community
that will figure out how to create,
either free clinics, free access to care, free
access to pharmaceuticals,
free access to eye care, free access to
dental care.
We have amazingly,
good
community organization
organizations
and philanthropists.
So I also wanna believe
that many will step forward to care for
our community.
Wonderful. I I think that's a great last
note to leave things on, Michael. So I
wanna thank you for taking the time to
sit down with us and and for sharing
your perspective
on what is such an important issue,
especially in the in the years to come.
So so thank you for taking the time.
Jacob, thank you. And our our thanks to
Becker's as well for hosting this. And,
on my final final note, I really encourage
folks out there that are responsible for these
populations.
Make sure that you always have that element
of love
that, we are really here to care for
each other,
And, this is really important work, and our
community
is truly counting on us to get it
right. So, Jacob, thank you.
Yeah. Thank you, Michael. And and to our
listeners, if you'd like to listen to more
podcasts from Becker's Health Care, you can visit
beckershospitalreview.com.