The 2021-22 Budget: Medi-Cal Enterprise System Modernization Effort

analysis full gutter The 2021-22 Budget: Medi-Cal Enterprise System Modernization Effort FEBRUARY 2021 The 2021-22 Governor’s Budget proposes to for planning, development, and implementation of continue the replacement of several Medi-Cal a new system, and 75 percent of total costs for information technology (IT) systems and to plan the maintenance and operations of the system (once modernization of many of the remaining systems certified as aligned with MITA). To better align some under a new effort called the Medi-Cal Enterprise Medi-Cal IT systems with MITA and benefit from the System (MES) Modernization. This post assesses available enhanced federal funding, DHCS started the Governor’s budget proposal related to the new a number of Medi-Cal IT system modernization MES Modernization effort and provides associated initiatives, including CA-MMIS Modernization in recommendations. 2010, the Comprehensive Behavioral Health Data System in 2015, and MEDS Modernization in 2016. Background Some IT Modernization Projects Went The Department of Health Care Services Through the California Department of (DHCS) Manages Hundreds of IT Systems to Technology’s (CDT’s) Project Approval Lifecycle Operate the Medi-Cal Program. Medi-Cal, the (PAL) Process. CDT’s PAL process is the state’s IT state’s Medicaid program, provides health coverage project approval process. The PAL process requires to more than 13 million of the state’s low-income state entities to submit planning documents to residents. To operate the program, DHCS manages CDT for approval that together provide a complete many IT systems enabling payment of over project plan, including projected cost, schedule, $100 billion in expenditures annually. (Other entities and scope. (For a comprehensive description also manage IT systems that support the Medi-Cal of the PAL process, please see our February program.) This post refers to some of the Medi-Cal 17, 2017 report—The 2017-18 Budget: The IT systems DHCS manages that are relevant to New IT Project Approval and Funding Process.) this modernization effort, including the California Some of the IT projects within DHCS’s Medi-Cal Medicaid Management Information System IT system modernization initiatives completed (CA-MMIS) that processes payments for providers the PAL process and started development and in Medi-Cal’s fee-for-service program; Medi-Cal implementation, including the Federal Draw Eligibility Determination System (MEDS) as the and Reporting IT project within CA-MMIS system of record for program eligibility, enrollment, Modernization. Other projects started the PAL and reporting functions; and several separate process, but were withdrawn as the administration behavioral health data systems. moved away from individual initiatives and towards DHCS Started a Number of Individual a single, consolidated modernization effort. Medi-Cal IT System Modernization Initiatives. All of the Prior Modernization Initiatives Many of the Medi-Cal program’s IT systems do not and Projects Are Now Consolidated Into a meet the updated guidelines and standards in the New Single MES Modernization Effort With an federal government’s recommended framework for Expanded Scope. The administration decided last state Medicaid IT systems, known as the Medicaid year to consolidate the previous Medi-Cal IT system Information Technology Architecture (MITA). modernization initiatives and associated projects States that redesign their IT systems to align with into a single MES Modernization effort. While DHCS MITA generally are eligible for enhanced federal expects MES Modernization to include the previous financial participation at 90 percent of total costs Medi-Cal IT system modernization initiatives, the 2021-22 LAO Budget Series 1 analysis full gutter new effort also will include other projects and California.) The administration’s traditional approach substantially broadens the scope of Medi-Cal IT to the planning, development, and implementation system modernization. DHCS expects to identify of IT projects likely will need to be modified to business needs across many Medi-Cal IT systems accommodate the individual projects within the and address the program needs with modern MES Modernization effort, as well as oversight technology that serves to benefit all Medi-Cal of the whole project portfolio. We understand enrollees. For example, CA-MMIS Modernization that DHCS and other state entities currently are focused on replacing the CA-MMIS subsystems exploring how to modify existing processes, such that handle payments for Medi-Cal’s fee-for-service as CDT’s PAL process, for the MES Modernization program, which currently delivers services to less effort. than 20 percent of Medi-Cal enrollees. The MES Unclear What Baseline Cost, Schedule, and Modernization effort, in contrast, also will include Scope Information Will Be Available for the MES modernization and/or replacement of subsystems Modernization Effort. As individual IT projects that operate the Medi-Cal managed care program, within the portfolio are planned (either through which now supports the more than 80 percent of the traditional PAL process or some modified enrollees served by Medi-Cal managed care plans. process the administration implements), baseline project cost, schedule, and scope information is Budget Proposal expected to be made available for the Legislature The Governor’s Budget Requests to assess future budget requests. Whether the $22.3 Million ($4 Million General Fund) for the baseline cost, schedule, and scope of the entire MES Modernization Effort. The administration MES Modernization effort will ever be available, requests $14.1 million ($2.9 million General however, is unclear. This information is critical Fund) in 2021-22 and $1.3 million ($128,000 because it would help identify when complex and General Fund) in 2022-23 to continue three of costly Medi-Cal IT system modernization projects the previous Medi-Cal IT system modernization in the portfolio are expected to begin and what (if projects—the approved Federal Draw and any) impact their failure could have on the MES Reporting project, the proposed California Modernization effort as a whole. Cost, schedule, Automated Recovery Management project, and and scope information for the effort also would the proposed Comprehensive Behavioral Health identify the dependencies between projects in the Data System Modernization project. The remaining portfolio that could affect the effort’s schedule. $8.2 million ($1.1 million General Fund) in 2021-22 This information also could list any of the potential would provide resources to plan and support changes to interfaces between Medi-Cal IT systems the new MES Modernization effort more broadly. and other health and human services IT systems Figure 1 on the next page describes each of that might be required to avoid unanticipated these modernization proposals and provides the disruptions to other programs and services. requested limited-term funding amount in 2021-22. Potential Modifications to Existing Processes and Lack of Information Raise Concerns About Assessment Legislative Oversight. While we raise no specific The New MES Modernization Effort Is concerns with the funding aspect of this specific Unlike Almost Any Other IT Project. DHCS’s proposal, we do raise concerns about the lack of new MES Modernization effort represents an detail regarding legislative oversight of the MES as-yet-determined portfolio of numerous IT projects Modernization effort in light of potential changes to expected to modernize the state’s Medi-Cal existing IT project processes (such as the project IT systems. The project portfolio will be unlike approval process) and limited baseline cost, almost any other IT project in the state because schedule, and scope information. We understand of its breadth and complexity. (Another project of the magnitude of this effort to modernize Medi-Cal comparable breadth and complexity, for example, IT systems is unique, but the Legislature should might be the Financial Information System for have input on any major IT policy changes to 2021-22 LAO Budget Series 2 analysis full gutter accommodate the MES Modernization effort. We Direct the Administration to Work With the also would argue the MES Modernization effort Legislature on Potential Changes to IT Project requires the administration and the Legislature to Processes. To improve legislative oversight rethink how the state oversees complex and costly of the MES Modernization effort (and possibly IT projects in general. (In particular, the state might other complex and costly efforts or projects), we rethink oversight of projects that are part of a larger recommend the Legislature direct the administration portfolio of projects like MES Modernization, and to keep the Legislature regularly informed of key projects that address similar business needs like changes to existing IT project processes that supporting the Medi-Cal program across several the administration is considering for the MES state entities.) Modernization effort. (The Legislature could, for example, direct the administration to update our Recommendations office at least quarterly on these changes.) We also Approve the Budget Proposal. We recommend recommend the Legislature adopt supplemental the Legislature approve the budget proposal for report language that directs the administration DHCS to continue existing Medi-Cal IT system to report back before January 10, 2022 on modernization projects that leverage enhanced (1) changes made to existing IT project processes federal financial participation, and for the for the MES Modernization effort; (2) new options department to plan a strategy for the complex MES for legislative oversight of MES Modernization; Modernization project portfolio. and (3) other potential improvements to current oversight processes for, in particular, complex and costly IT projects. Figure 1 Breakdown of the 2021-22 Governor’s Budget Request for the MES Modernization Effort (In Thousands) Total General Project or Effort Descriptiona Funds Fund Federal Draw and Reporting IT An approved IT project in development and implementation to replace the $9,800 $2,450 Projectb current system (CMS-64) that receives requests for Medi-Cal provider payments, assigns costs to federal and state program funds, reconciles financial data with other state accounting systems, and submits reports to CMS. California Automated Recovery A proposed IT project to replace the current system (Automated Collection 2,970 297 Management IT Projectb Management System) that manages third party Medi-Cal expense liability and recovery. Comprehensive Behavioral A proposed IT project to consolidate functions from at least 11 separate 1,275 128 Health Data System systems that collect and store behavioral health data into a single Modernization IT Project system. MES Modernization Effort— A new effort to combine previous Medi-Cal IT system modernization 8,234 1,141 Planning and Support initiatives and broaden scope to other Medi-Cal IT systems based on Medi-Cal program business needs. Requested resources would plan the remainder of the effort, and support contracts for services such as change management and project oversight across both existing and new Medi-Cal IT system modernization projects. Totals $22,279 $4,016 a Approved IT projects are projects approved by the California Department of Technology (CDT) through its Project Approval Lifecycle (PAL)—the state’s IT project approval process. Proposed IT projects are projects that continue to be planned through CDT’s PAL process. b These projects were part of the former California Medicaid Management Information System modernization initiative. MES = Medi-Cal Enterprise System; IT = information technology; and CMS = Centers for Medicare and Medicaid Services. 2021-22 LAO Budget Series 3 analysis full gutter LAO Publications This report was prepared by Brian Metzker, and reviewed by Mark C. Newton and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2021-22 LAO Budget Series 4