In this brief, we recommend that DHCS use a waiver amendment for DMC to achieve the following goals:

Transforming Drug Medi- Cal: Key Considerations for a Waiver Amendment Prepared by John Connolly and Chauntrece Washington May 2014 California s expanded Medi-Cal program and expanded Substance Use Disorder (SUD) benefit provides an opportunity for beneficiaries to access improved services through the Drug Medi-Cal (DMC) program. In California, 1.9 million individuals are newly enrolled in Medi-Cal in 2014, 1 and an anticipated 147,000 to 195,000 of these individuals are in need of SUD treatment. 2 New enrollees include childless adults, and this group includes some individuals who are homeless or have been involved in the criminal justice system. These individuals often have greater SUD needs than previously enrolled beneficiaries. 3 Traditionally, these groups previously experienced barriers to service access, poor treatment outcomes, and high cost of services (i.e. Emergency Department visits), 4 and could benefit greatly if they utilize new SUD services. Senate Bill X 1-1 increased the availability of SUD services, which were previously only available to certain populations, to all Medi-Cal beneficiaries. Enhanced SUD services include intensive outpatient treatment, residential SUD services, and a new elective detoxification benefit. 5 However, the complete set of expanded SUD services are unavailable due to federal regulations and a lack of network capacity. 6 In an effort to resolve this problem and recent program integrity issues, the state has begun to develop a 1115 Demonstration Waiver amendment for the DMC program. The 1115 Waiver amendment will allow California to test new programs to improve the quality and program integrity of DMC. 7 This policy brief identifies the current priority policy considerations for the DMC program, examines key opportunities for the upcoming waiver, and provides recommendations on how to implement changes to promote an organized delivery system. In this brief, we recommend that DHCS use a waiver amendment for DMC to achieve the following goals: 1. Increase local authority through selective contracting with providers; 2. Establish a robust state oversight and quality improvement program for DMC; 3. Make available the residential treatment benefit by resolving with CMS the outstanding issues related to the Institute for Mental Disease (IMD) exclusion; 4. Cover SUD services under the Medicaid Rehab Option; 5. Support an integrated safety net delivery system by coordinating SUD services with physical and mental health services. 1 Covered California. Covered California s Historic First Open Enrollment Finishes with Projections Exceeded; Agents, Counselors, Community Organizations and County Workers Credited as Reason for High Enrollment in California. Available at: http://news.coveredca.com/2014/04/covered-californias-historic-first-open.html. 2 Connolly, J., Vishaal, P. Toward a Better Medi-Cal Substance Use Disorder Benefit in California: Smart Investments for Improving Lives. 3 Ibid. 4 The California Department of Health Care Services. California Mental Health and Substance Use System Needs Assessment and Service Plan. Available at: http://www.dhcs.ca.gov/provgovpart/documents/cabridgetoreformwaiverservicesplanfinal9013.pdf. 5 Connolly, J., Vishaal, P. Op cit. 6 SB X 1-1 requires the Department of Health Care Services to submit any necessary State Plan Amendments (SPA) or waivers to make the full benefit available. A Substance Use Disorder Services Expansion SPA was submitted on December 05, 2013 and sought approval to authorize the above-mentioned benefits. While under review by CMS, residential treatment services was removed from the SPA, and the State must now seek a waiver to make this benefit available. 7 The California Department of Health Care Services. Meeting Minutes: Substance Use Disorder Drug MediCal Waiver Advisory Group. Available at: http://www.dhcs.ca.gov/provgovpart/documents/behavioral%20health%20service%20plan%20stakeholder%20m eetings/waiveradvisorygrpminutes4214.pdf.

Medicaid Waivers: A Brief Background Medicaid waivers provide states the opportunity to experiment with new or existing approaches to the healthcare delivery system that require the federal Centers for Medicare and Medicaid Services (CMS) to waive certain program rules. Waivers must be time-limited (three to five years), cost neutral, and align with the aims of the Medicaid program. There are four main types of waivers: 1915(b) Managed Care Waivers, 1915(c) Home and Community-Based Care Waivers, Concurrent 1915(b) and 1915(c) Waivers, and 1115 Demonstration Waivers. California currently operates a 1915(b) Medi-Cal Specialty Mental Health Waiver that could be used to guide the DMC waiver in its aim to improve program integrity. 1915(b) Managed Care Waivers A 1915 (b) Waiver allows states to enroll Medicaid beneficiaries, either statewide or in a specific area, into a managed care program. There are four options for states in how they use a 1915(b): restrict provider choice; allow county or local government broker rights to help individuals choose plans; 8 restrict the number or type of providers available to provide specific Medicaid services; and use managed care savings to provide additional services. 9 California s current 1915(b) Waiver, the Specialty Mental Health Consolidation (SMHC) Program, is a Freedom of Choice Waiver. This waiver allows California to offer a single plan model in each county in place of the traditional two-plan managed care model, which allows consumers to choose between the plans. 10, 11 County departments of mental health are the exclusive provider of specialty mental health services under this waiver, and qualifying beneficiaries are provided medically necessary services from the restricted provider network that each county organizes. 12 As required by the Centers for Medicare and Medicaid Services (CMS), states must ensure that access to services is not impacted as a result of selective contracting. States and counties are thereby responsible for monitoring whether beneficiaries have timely access to services and if there is a sufficient supply of providers to meet client needs. These requirements aim to increase county accountability and ensure the availability of services for California residents. As seen through the recent FBI investigation of provider fraud in the DMC program, DHCS oversight of beneficiary access to adequate services needs improvement. 13 Historically, the state has directly contracted with providers (discussed later) in certain cases when counties do not. As a result, counties have not been able to effectively perform oversight to improve program integrity because they lack the ability to selectively contract. For the SMHC program waiver, selective contracting has promoted a uniform set of performance standards, increased county administrative authority, and allowed counties to better monitor and oversee contractor s performance. 14 This waiver demonstrates positive outcomes related to selective contracting, and a waiver for DMC, if approved, could yield similar results. 1115 Demonstration Waivers 8 This option allows a locality to assist beneficiaries with choosing between competing health plans by providing more information on available health care options open to them. 9 Medicaid. 1915(b) Managed Care Waivers. Available at: http://www.medicaid.gov/medicaid-chip-program- Information/By-Topics/Waivers/Managed-Care-1915-b-Waivers.html 10 The California Department of Health Care Services. MCMHP Consolidation and Managed Care. Available at: http://www.dhcs.ca.gov/services/mh/pages/mcmhp-consolidation.aspx 11 In all but two counties, the county mental health department is the single operating managed care mental health plan (MHP). 12 To qualify to receive SMHC services, Medi-Cal beneficiaries must meet diagnosis, impairment, and intervention related criteria. 13 Assembly Health and Accountability & Administrative Review Committees. Joint Oversight Hearing: A Review of the Drug Medi-Cal Program. Available at: http://aaar.assembly.ca.gov/sites/aaar.assembly.ca.gov/files/dmc%20oversight%20hearing%20background%20p aper.pdf. 14 The California Department of Health Care Services. Organized Delivery System Waiver for the Drug Medi-Cal (DMC) Program. Available at: http://www.dhcs.ca.gov/dataandstats/reports/documents/dmcwaiverdevshprocess.pdf. 2

Medicaid Section 1115 Waivers are intended to be research and demonstration projects that test new approaches to program design and administration. They are typically used to expand eligibility, cover services unavailable under Medi-Cal, modify provider payments, and improve patient care in a costeffective way. 15 Additionally, with the passage of the Affordable Care Act (ACA), the public has the opportunity to provide public input while a waiver is under review by CMS. 16 This new rule increases the transparency of demonstration projects and allows consumers the opportunity to voice opinions about projects that will likely impact their care delivery. California s 1115 Bridge to Reform Demonstration Waiver, which sunsets October 2015, played a pivotal role in assisting the State with the implementation of health reform. The waiver created county-based Low-Income Health Programs, required mandatory enrollment of seniors and persons with disabilities (SPDs) into managed care plans, and provided funds for a new Delivery System Reform Incentive Pool (DSRIP) and Safety Net Care Pool to support services for low-income adults. 17, 18 These provisions allowed the State broad authority to reduce the number of uninsured by investing in our low-income populations and developing streamlined enrollment express lanes when the coverage expansions took full effect in January 2014. DHCS has begun a process to develop a broad DMC amendment to this 1115 Waiver, which could offer the ability to test approaches that further improve, organize, and integrate the safety net SUD services. Substance Use Disorder Service Improvement through a 1115 Demonstration Waiver The State is focused on improving the DMC program and implementing changes that allow access to high performing providers and all newly funded services. With an 1115 demonstration waiver amendment, the following can be accomplished: increase local authority through selective contracting with providers; establish a robust state oversight and quality improvement program for DMC; make available the residential treatment benefit by resolving outstanding issues with CMS related to the Institute for Mental Disease (IMD) exclusion; cover SUD services under the Rehab Option; and further support an integrated system through care coordination. The subsequent sections will discuss how these recommendations can be implemented through a 1115 waiver. Improving Program Integrity and Service Quality SUD providers can obtain DMC contracts with their affiliated county or the state as a direct result of the Sobky v Smoley class action lawsuit. Prior to Sobky v Smoley, counties chose whether to contract with some or any DMC providers, which created a coverage gap for beneficiaries living in counties without methadone providers. 19 In 1994, the DMC program was found in violation of Medicaid statue, and was ordered to provide prompt access to treatment evenly throughout the state. 20 If counties deny a contract, or choose not to contract with private providers, creating an access issue, the Department of Health Care Services (DHCS) will then directly contract with providers. 21 Although this decision helps the State ensure state-wideness and a greater number of participating providers, it restricts county administrators authority to perform oversight and hold providers accountable by controlling the makeup and performance of the network. California s recent fraud investigation demonstrates the need for fundamental changes in this aspect of the DMC program. 15 Kaiser Family Foundation. The ACA and Recent Section 1115 Medicaid Demonstration Waivers. Available at: http://kff.org/medicaid/issue-brief/the-aca-and-recent-section-1115-medicaid-demonstration-waivers/ 16 Medicaid. Section 1115 Demonstrations. Available at: http://www.medicaid.gov/medicaid-chip-program- Information/By-Topics/Waivers/1115/Section-1115-Demonstrations.html. 17 Federal matching funds were designated to upgrade county hospitals infrastructure, invest in innovative care delivery models, enhance care delivery for chronic diseases, and improve hospital-specific interventions. 18 Kaiser Family Foundation. California s Bridge to Reform Medicaid Demonstration Waiver. Available at: http://kff.org/health-reform/fact-sheet/californias-bridge-to-reform-medicaid-demonstration-waiver/. 19 Connolly, J., Vishaal, P. Op cit. 20 Personal Assistance Services. California: Sobky v. Smoley. Available at: http://www.pascenter.org/state_based_stats/olmstead/olmstead_cases.php?state=california. 21 Connolly, J., Vishaal, P. Op cit. 3

Under Governor Brown s 2011 Realignment legislation, the State retains the responsibility to certify and monitor DMC programs, while state/county realignment funds pay for SUD services. When DHCS directly contracts with providers, counties retain the financial responsibility and risk for the services that these providers deliver because the state taps the counties DMC realignment funds to reimburse these directly contracted providers. Under this arrangement, county administrators have limited authority to maintain a network of high-performing and financially responsible providers and to control county DMC realignment funds. 22 To better account for DMC treatment services and program spending, counties have expressed an interest in time-limited DMC certification for all providers and standard contracting requirements and monitoring protocols across all counties. 23 If county administrators are to remain responsible for the financial risk of SUD treatment programs, a waiver amendment should also give them greater authority to manage these programs provider networks. A waiver also has the potential to improve oversight through enhanced monitoring activities and improved quality assurance activities. In the ongoing 1115 DMC Waiver development, DHCS will have to collaborate closely with counties to create new provider quality standards that ensure timely access to quality services, contain costs, and develop improved oversight activities to prevent fraud in the future. For example, the State is required to evaluate factors such as workforce development and network adequacy, and develop a strategic plan to ensure access to care. 24 The inclusion of these requirements in the waiver creates a stronger incentive to ensure provider capacity and access to services, as well as quality assurance through improved evaluation and monitoring tools. To improve program integrity within DMC, several inefficient practices should be addressed. Within DHCS, there are multiple divisions with various branches responsible for the monitoring and policing of Alcohol and Other Drugs (AOD), Narcotic Treatment Programs (NTP) and DMC services. Traditionally, these divisions perform utilization reviews, audits, and certification renewal activities separately. 25 The DMC waiver amendment should improve the communication between all divisions responsible for SUD services by developing a single data collection system. Data sharing would help determine trend analysis, track unique information (e.g. changes in provider location), prevent utilization review duplications, and allow cross-reference of non-eligible providers. 26 27 In terms of performance standards, the state, with county input, should use the waiver amendment as a means to test quality improvement activities and share best practices. The state must define high quality performance standards for both physicians and other SUD service practitioners. Thus, models that set performance targets and benchmarks should be incorporated in the waiver. An example is the Network for Improving Addiction Treatment (NIATx) learning collaborative, which seeks to improve quality measures by focusing on improving organizational problems and consumer utilization. 28 Last, DMC certifications should be time-limited and align with the AOD and NTP re-certification process (occurs biennially and annually, respectively). 29 Requiring certification renewals every three to five years would further monitor whether providers continue to meet set quality measures and remain compliant with Medicaid standards. In addition, while licensed clinical social workers, marriage and family therapists, and licensed physicians can deliver SUD services in any treatment setting, the state must improve certification or licensure requirements for the SUD workforce that is non-licensed. The state should establish a unified accreditation with clear standards for required training and competencies, instead of accepting certifications from seven different organizations as it currently does. These steps to 22 The California Department of Health Care Services. Stakeholder Recommendations for Mental Health and Substance Use Disorder Services. Available at: www.dhcs.ca.gov/documents/stakeholderrecommen_formhsud.pdf. 23 Assembly Health and Accountability & Administrative Review Committees. Op cit. 24 The California Department of Health Care Services. California Bridge to Reform Demonstration. Available at: www.dhcs.ca.gov/provgovpart/documents/waiver%20renewal/ca_bridge_amendment_cnoms_cms_approved _3_19_14.pdf. 25 DHCS. Drug Medi-Cal Program Limited Scope Review. Available at: http://www.dhcs.ca.gov/dataandstats/reports/documents/dmcltdscopervw.pdf. 26 Providers with prior denials or revocations. 27 Ibid. 28 Available at: http://www.niatx.net/home/home.aspx 29 DHCS. Drug Medi-Cal Program Limited. Op cit. 4

unify and improve certification for practitioners would serve to increase the knowledge and service quality of the DMC program. Provider Capacity and the Residential Treatment Benefit As defined by DHCS, residential treatment covers rehabilitation services provided in non-institutional, non-medical, residential programs for Medi-Cal beneficiaries with SUD diagnoses. 30 Newly funded residential treatment services prescribed by a physician as medically necessary are available to all Medi- Cal beneficiaries. Yet, residential treatment programs covered under the DMC program must adhere to the federal Institutions for Mental Disease (IMD) exclusion policy. Any facility with over sixteen beds that primarily provides diagnosis, treatment, or care for persons with mental health conditions is known as an IMD, and under federal law, cannot receive Medi-Cal federal matching dollars (FFP) to provide services. 31 Removing federal dollars from these facilities has deinstitutionalized mental health, but has also reduced the number of inpatient treatment beds available to Medi-Cal beneficiaries. Consequently, treatment demand has shifted to hospitals with psychiatric units and emergency rooms. Available beds in these facilities are scarce, and patients encounter long wait times, become roomed in hallways, and often receive generally inadequate care as a result. Care is also sometimes terminated early because of these difficulties. 32 Further, DMC coverage is terminated while receiving care at an IMD. 33 As a consequence, beneficiaries with co-occurring conditions must re-apply for Medi-Cal when in need of medical care, impacting the continuity of their care. Since Medi-Cal does not pay for IMD inpatient services, other public funds (e.g., the Substance Abuse Prevention and Treatment (SAPT) block grant) finance these treatments when they could be better dedicated to other programs. Beneficiaries utilizing hospital emergency rooms or other more costly hospital resources in lieu of the IMDs can increase overall public spending. More appropriate and less costly residential services can achieve better outcomes at lower cost. Likewise, community behavioral health care funded by the Mental Health Services Act (MHSA) are not achieving optimum results for those patients who need residential treatments that cannot be funded due to the IMD exclusion. Prior to SUD expansion, residential treatment was limited to perinatal beneficiaries, and only eleven DMC licensed residential programs existed throughout California to serve those individuals. 34 These eleven programs are configured to house perinatal clients, and cannot presently accommodate the new broader Medi-Cal population. In a letter to CMS, Director of the Department of Health Care Services, Toby Douglas, states that only twenty-one percent of the available California residential treatment beds are in facilities that are reimbursable under the DMC program due to the IMD exclusion. 35 This capacity constraint prevents the residential benefit from being available to the 1.9 million newly enrolled Medi-Cal beneficiaries, as well as other groups of existing beneficiaries. To increase access to needed services, the State should continue to seek flexibility from CMS to utilize existing beds in permissible ways or to deliver services in alternate settings to meet the needs of 30 The California Department of Health Care Services. State Plan amendment 13-038 Submitted December 2013. Available at: http://www.dhcs.ca.gov/formsandpubs/laws/documents/pending%20spa%2013-038%20not%20ada.pdf.. 31 The California Department of Health Care Services. The Inpatient Psychiatric Treatment Coverage: Fact Sheet. Available at: http://www.calduals.org/wp-content/uploads/2013/03/inpatient-and-imd-fact-sheet.pdf. 32 Glover, RW., Miller, J.E. The Interplay between Medicaid DSH Payment Cuts, the IMD Exclusion and the ACA Medicaid Expansion Program: Impacts on State Public Mental Health Services. Available at: http://www.nasmhpd.org/docs/publications/thedshinterplay04_26_13websitefinal.pdf. 33 Ibid. 34 California Mental Health Directors Association. Proposed 1115 Demonstration Waiver for Substance Use Disorder Treatment --CMHDA Support. Available at: http://www.cmhda.org/go/portals/0/cmhda%20files/breaking%20news/1403_march/cmhda%20support%20 for%20sud%20waiver%203-19-14.pdf. 35 California Mental Health Directors Association. SB 1161 IMD Eclusion: Fact Sheet. Available at: http://www.cmhda.org/go/portals/0/cmhda%20files/committees/legcomm/1404_apr/sb%201161_factshee T.pdf. 5

individuals requiring residential treatment. A 1115 Demonstration Waiver provides an opportunity for California to experiment with innovative ways to deliver the residential treatment benefit while also satisfying the requirements of the IMD exclusion. The IMD exclusion aims to prevent the warehousing of individuals with mental health conditions; it has been interpreted to apply to residential treatment of SUDs. As a way to comply with the appropriate IMD exclusion policy, the SUD residential treatment could be structured as a short-term benefit. If approved, residential treatment facilities that restrict services to less than 90 days would no longer be categorized as IMDs. Greater flexibility in how the IMD exclusion is applied would allow counties the ability to maximize existing resources. Utilizing existing facilities will help relieve current capacity issues while new residential treatment facilities are constructed. Medicaid Rehabilitation Services Option The Medicaid Rehabilitation Services Option (Rehab Option) allows states the flexibility to provide rehabilitation services to individuals with physical and mental conditions in community settings (in a home or work environment). 36 Under the Rehab Option, states can offer a wide range of services that assist individuals in acquiring and retaining skills that are essential for everyday functioning. Similar to other states, California utilizes this option to assist beneficiaries with mental health conditions. California could also consider using the Rehab Option for more intensive DMC services. Communitybased services would provide another treatment option for individuals who do not have access to residential treatment as a result of provider capacity limitations. Under the DMC program, services must be provided at a DMC certified and/or licensed treatment clinic. This policy, in combination with the IMD Exclusion, vastly limits beneficiaries access to residential treatment services. Considering the limits of IMD Exclusion, the state should pursue the waiver amendment as an opportunity to use the Rehab Option to cover more intensive DMC services delivered through alternative approaches. Indiana, for example, includes under the Rehab Option an addiction counseling benefit through intensive adult rehabilitation services provided by licensed clinical addiction counselors. 37 Also, six states (DE, ID, MI, RI, TX, and WI) currently provide intensive behavioral health services in community settings through Assertive Community Treatment (ACT) programs under the rehab option. 38 ACT is a service delivery model that utilizes a multidisciplinary team approach to provide direct services to consumers twenty-four hours a day. 39 This broadened set of reimbursable treatment settings, providers, and services would allow counties to provide access to complementary services if the demand for residential beds exceeds capacity. Coordinating and Integrating DMC with Physical and Mental Health Services The waiver holds tremendous potential for coordinating and integrating SUD services with physical and mental health services one of the major areas for improvement in the Medi-Cal program. Many other states have used Medicaid waivers to integrate services. Many have used waivers to transition behavioral health benefits into managed care, and others have created opportunities to coordinate services within a carve-out structure. Importantly, a research and demonstration waiver places many requirements on state innovations. Requirements include access requirements for services covered in the demonstration, as well as an evaluation of an innovation s effects, both in terms of quality of care and overall costs. As a consequence, regardless of the integration approach the state chooses, waivers introduce a higher level of accountability for service delivery and performance, which the DMC program greatly needs. Different providers are experimenting with multiple integration approaches. New connections are forming between primary care and SUD service providers through the implementation of screening brief intervention and referral to treatment (SBIRT) in primary care settings. These developments are removing barriers between different benefits by coordinating provider networks, referral relationships, 36 Crowley J, O Malley M. Medicaid s Rehabilitation Services Option: Overview and Current Policy Issues. Available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/7682.pdf. 37 Indiana Family and Social Services Administration. 2013. Medicaid Rehabilitation Option Provider Manual. Available at: http://provider.indianamedicaid.com/ihcp/manuals/mro_%20provider_%20manual.pdf 38 Los Angeles County Network of Care. Program of Assertive Community Treatment. Available at: http://losangeles.networkofcare.org/mh/library/article.aspx?id=311. 39 Ibid. 6

and data transfers. For example, many Medi-Cal mental health specialty care providers are becoming trained in SBIRT, as well as specialty SUD treatment. While some facilities, either specialty mental health clinics or federally qualified health centers (FQHCs), may have the ability to co-locate providers of different benefits, many SUD providers do not have this capability. Providers may not necessarily need to be co-located, but they should be coordinated, and the waiver should have a robust demonstration component to support and expand these efforts across the state. A more comprehensive case management approach at the provider level within DMC would offer an effective way to coordinate multiple service providers across carve-outs, and to help beneficiaries navigate different delivery systems. Care coordination is an integral part of how managed care plans organize and deliver care, and in a fee-for-service environment like DMC, it would be most effective if it occurred at the provider level. Since SUD treatment often requires case management and engagement in continuing care for addiction, specialty SUD providers are frequently the care providers with the strongest relationships with their clients. A waiver should attempt to use these connections as broad access points for other needed mental and physical health services. For beneficiaries whose primary diagnosis is a SUD, on-site case managers in DMC facilities could engage clients through a chronic disease management approach, and refer them to local primary and other specialty care providers for co-occurring conditions. In these activities, they would serve as the primary contact for other providers, and as an active care navigator for beneficiaries. This service would be particularly valuable for people who do not have relationships with needed providers, either because they infrequently seek services or have been without health coverage. However, case management must become reimbursable to enable providers to employ professionals who can offer the service. While case management is not currently billable in DMC, the waiver could allow DHCS to create a DMC case management program that would access federal matching funds and Medicaid health home funds (available through the ACA) for this purpose. California already includes in its Medicaid state plan targeted case management for Medi-Cal beneficiaries with mental illness. 40 Further, thirty states with fee-for-service Medicaid payment structures have a primary care case management (PCCM) program to perform care coordination functions, 41 and some states also have enhanced PCCM programs for beneficiaries with chronic conditions or disabilities. For example, North Carolina and Oklahoma have been leaders in establishing this model of care management, and evaluations have found that these programs have increased access to care and been cost-effective. 42, 43 This model could be replicated within the specialty SUD setting, with the potential to offer many similar advantages for individuals struggling with addiction In sum, case managers within DMC would smooth care transitions between primary care, mental health, and SUD service providers, coordinating DMC with other Medi-Cal services. Care transitions often cross separate, carved-out provider networks, which very frequently do not allow for fluid transfers. Case mangers could coordinate specialty SUD consultations for primary care providers screening individuals for more intense treatment, and this workforce could connect individuals to additional community services and supports, including housing assistance, CalFRESH, or CalWORKS. Greater fluidity among care settings and more unified treatment plans that take into account all medications and services would serve to reduce duplication and beneficiary harm. Individuals Involved in the Justice System and Community Reentry 40 California Department of Health Care Services. 2010. State Plan Amendment 10-012B. Available at: http://www.dhcs.ca.gov/formsandpubs/laws/documents/supp1toatt3.1-a98-16%20(10-012b).pdf 41 Kaiser Family Foundation. 2011. Medicaid Enrollment in Managed Care by Plan Type. Available at: http://kff.org/medicaid/state-indicator/enrollment-by-medicaid-mc-plan-type/ 42 Verdier et al. 2009. SoonerCare Managed Care: History and Performance. Mathematica Policy Research. Available at: http://www.mathematica-mpr.com/publications/pdfs/soonercare%20summary.pdf 43 Artiga S. 2009. Community Care of North Carolina: Putting Health Reform Ideas into Practice in Medicaid. Kaiser Family Foundation. Available at: http://www.dhcs.ca.gov/provgovpart/documents/waiver%20renewal/community%20care%20of%20north%20caroli na%20(2).pdf 7

With Medi-Cal expansion, newly eligible individuals continue to enroll in the program, and many groups of new enrollees will not be traditional beneficiaries. Many individuals who have been involved in the criminal justice system will be a part of the newly eligible group of adults without minor dependent children. Incarcerated individuals are more likely to have a range of conditions, including roughly two thirds who have a substance use disorder. This group is also more likely to suffer from mental illness and many physical conditions, such as HIV, hepatitis C, tuberculosis, and asthma. 44, 45 For these reasons, it is important for these individuals to have proactive care coordinators. Since Realignment of 2011 transferred responsibility for low-level offenders from state prisons to county jails, any care coordination initiative for DMC should incorporate links to county sheriffs, who also have responsibility for community supervision (parole and probation) and reentry activities. Case managers within DMC would serve as a valuable point of contact and coordination for parole and community supervision officers who connect reentering individuals with needed services. DMC case managers would be helpful in this effort for a multiple reasons. First, the very high rates of SUD among the inmate re-entry population could allow these professionals to reach a relatively large number of beneficiaries. Second, professionals trained in SUD service delivery may have greater cultural competencies in serving and engaging this group of beneficiaries. Peer support has been an effective way of helping people involved in the criminal justice system to access necessary services. 46 Case managers with the appropriate experience could serve this purpose themselves or engage other individuals from the community who could offer support to beneficiaries. Health Neighborhoods Initiative in Los Angeles County An SUD case management program could also advance county-level efforts to create more coordinated care across safety net services. Los Angeles County safety net stakeholders are currently engaged in developing health neighborhoods, which are local coalitions of providers of all health, behavioral health, and community services. 47 The aim of the health neighborhood is to create a coordinated team of multidisciplinary service providers with strong referral relationships, data sharing arrangements, unified treatment plans, and co-located providers when feasible and appropriate. The health neighborhood model also heavily emphasizes community involvement in education and outreach to increase prevention, and access to and treatment for, many chronic conditions. 48 At the local level, service providers who make up actual coalitions for health neighborhoods will likely have to establish a number of connections that will enable them to achieve many of their coordination goals, including incorporating community services and supports, and collaborative outreach to the community. Care managers within SUD treatment facilities could facilitate each of these innovations by serving as a primary point of contact for beneficiaries, a range of service providers, and the broader public. These professionals could serve as local experts about a range of resources and addiction issues in the surrounding community. Data Sharing, Electronic Health Records, and Disease Registries California s safety net delivery systems have a general need for much better data exchange to enable providers to coordinate their services in all of the ways discussed above. A waiver amendment should include an information technology component to integrate the electronic components of the different safety net delivery systems (i.e., managed care, mental health, and SUD services) and the county sheriffs departments. Creating interoperability with managed care and mental health IT systems would allow SUD 44 Boutwell AE, Freedman J. 2014. Coverage Expansion and the Criminal Justice-Involved Population: Implications for Plans and Service Connectivity. Health Affairs 33(3): 482-6. 45 Davis et al. 2009. Understanding the Public Health Implications of Prisoner Reentry in California. RAND Corporation. 46 Magura S. 2008. Effectiveness of Dual Focus Mutual Aid for Co-Occurring Substance Use and Mental Health Disorders: A Review and Synthesis of the Double Trouble in Recovery Evaluation. Substance Use and Misuse (43) 12-13:1904-26. 47 Los Angeles County Department of Mental Health. 2013. System Leadership Team Meeting Minutes. Available at: http://file.lacounty.gov/dmh/cms1_201836.pdf 48 Community Partners in Care. Available at: http://www.communitypartnersincare.org/about/ 8

providers to coordinate services much more effectively, as well as to evaluate the relative effectiveness of different interventions and care coordination models. The SUD services network should also have the ability to transfer data to and from correctional facilities that treated individuals while they were incarcerated. In many cases, correctional facilities could offer very valuable beneficiary data about chronic physical and behavioral health conditions that require ongoing care management. 49 Yet, transfers of individuals health and treatment information between different entities would, and should, require consent from beneficiaries. Sheriffs departments, mental health departments, and health plans should develop consent forms and protocols to inform newly enrolling beneficiaries about their privacy protections and the option to share information with new providers. Additionally, a disease registry that includes SUD would offer a tool that would inform policy through more reliable reporting and monitoring of drug use patterns and their associated complications. Providers electronic health records should ideally be able to connect to this system for reporting purposes. All collected patient information will remain confidential. In sum, these electronic tools should ultimately benefit individuals with SUD through higher-quality care and an improved beneficiary experience. Enhancing the electronic consultation technology between the broader safety net and the DMC network would also meaningfully improve access to SUD treatment. The Los Angeles Department of Health Services (LADHS) recently implemented an e-consult system that allows primary care providers to electronically consult with specialists to assess and treat certain conditions. This capability has increased access to specialty services by substantially reducing appointment wait times for specialty care for beneficiaries in the LADHS system. 50 DHCS should ensure that the DMC provider network is included in these systems to allow for other providers to consult with SUD specialists when appropriate to increase access to and timeliness of treatment. The waiver amendment could also use Medicaid health home funds for this project to support the electronic connectedness of DMC providers with the rest of the safety net. Waiver Evaluation A waiver will require an evaluation of its impact both on the delivery of care and its impact on the cost of care. The evaluation should also assess the waiver s effect on beneficiary costs for the broader health care delivery system, not just DMC services. Creating a better system of safety net SUD services should have positive effects on individuals physical health outcomes and the cost of care for the whole patient. These effects should manifest themselves in utilization and costs for managed care and county mental health plans. State Medicaid programs and private managed care plans have both realized cost savings from enhancing SUD benefits and service delivery. 51, 52, 53 The waiver should track quality, outcomes, and cost performance measures for individuals with SUD across all of these delivery systems. A more comprehensive assessment would increase understanding of the broader impacts of SUD treatment, which could support the state s efforts to maintain and build upon an expanded benefits package and a more organized delivery system in the future. Transition to Managed Care Ultimately, these steps to organize and improve the SUD delivery system should move it toward a managed care structure. While a transition into managed care may require several steps to ensure the 49 Boutwell AE, Freedman J. 2014. Coverage Expansion and the Criminal Justice-Involved Population: Implications for Plans and Service Connectivity. Health Affairs 33(3): 482-6. 50 ITUP. 2014. LA Health Collaborative 2013 Executive Summary. Available at: http://lahealthaction.org/library/lahc_2014es.pdf 51 Colorado State Auditor. 2010. Medicaid Outpatient Substance Abuse Treatment Benefit, Department of Health Care Policy and Financing Performance Audit. 52 Mancuso D, Nordlund DJ, Felver BEM. 2009. DASA Treatment Expansion: Spring 2009 Update. Washington State Department of Social and Health Services. 53 Parthasarathy S, Weisner CM. 2005. Five-Year Trajectories of Health Care Utilization and Cost in a Drug and Alcohol Treatment Sample. Kaiser Permanente and UCSF. 9

necessary infrastructure and health plan readiness, it would allow one entity to organize care for the whole patient. A carved-in framework gives managed care plans the financial incentives to manage all conditions for the best possible outcomes. Moreover, managed care plans specialize in provider contracting and benefit management to ensure the most appropriate services at the right time, and in the most appropriate setting. These care management functions are sorely needed in DMC. Carving a broader range of services into managed care plans would strongly support many physical and behavioral health care coordination activities across the state. California s safety net increasingly boasts provider networks that can deliver both primary care and behavioral health services. Also, many counties are also attempting to coordinate local providers of different types of services if providers cannot deliver these benefits in the same facility. Managed care would offer providers a common payer and administrative entity that could facilitate these types of local cooperation needed to establish referral and information-sharing relationships. In sum, the waiver should lay the foundation for a transition of SUD benefits into managed care to more effectively establish care management and provider coordination in DMC. At the same time, any managed care transition process must ensure that plans provider networks and workforces have the necessary training to deliver a high-quality SUD benefit that emphasizes coordinated, whole-person treatment. California s recent transition of seniors and people with disabilities into managed care had several glitches that caused considerable problems for beneficiaries, plans, and providers. 54 DHCS must ensure that that any future transitions into managed care have a timeline that allows for the necessary stepwise plan, provider, and beneficiary preparation that would prevent a repeat of these problems. Looking Ahead As DHCS moves forward to develop the DMC waiver amendment proposal, it should ensure that its terms and conditions address provider quality and oversight, access to a residential treatment benefit, and the creation of an integrated system of care for SUD safety net services. Furthermore, an amendment to the current Bridge to Reform waiver should only be a first step toward these goals. This waiver expires in October 2015, and as the state develops its proposal for the next 1115 Waiver, it should build upon this waiver amendment. The next waiver and future state and local policy development should include a strong set of delivery system improvement goals for safety net SUD services that will be a continuation of this effort. In sum, the state should leverage upcoming policy opportunities to launch an aggressive multiyear initiative to build a high-quality, integrated SUD service system in each county. To reach this goal, DHCS will have to address inequity in quality and access to SUD services across counties. DHCS has stated that it will continue to allow counties the option to operate a DMC program or not, and to participate in the waiver amendment or not. Therefore, the Department will have to take on the responsibility of building SUD delivery systems in these non-implementing counties that reflect the advances that other counties achieve and the opportunities that this waiver amendment provides. Ultimately, creating a high-quality, integrated SUD service delivery system in all areas of the state is an integral part of the broader vision to create a high-quality integrated safety net in California. 54 Wunsch B. 2012. A First Look: Mandatory Enrollment of Medi-Cal s Seniors and People with Disabilites into Managed Care. California HealthCare Foundation. Available at: http://www.chcf.org/~/media/media%20library%20files/pdf/f/pdf%20firstlookmandatoryenrollmentspd.pdf 10