The 2025-26 Budget: CalAIM Enhanced Care Management and Community Supports Implementation Update

2025-26 BUDGET The 2025-26 Budget: CalAIM Enhanced Care Management and Community Supports Implementation Update GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2025 SUMMARY Medi-Cal Waiver Intended to Improve Care for High-Cost, High-Need Members. Medi-Cal provides health care coverage to almost 40 percent of Californians, but the program’s complexity makes it difficult for some individuals to access appropriate care. The state received federal approval for the California Advancing and Innovating Medi-Cal (CalAIM) waiver that, in part, allows the state to draw down additional federal funding for two new benefits: Enhanced Care Management (ECM) and Community Supports. These benefits are provided by managed care plans (MCPs) and are intended to provide cost-effective services to high-cost, high-need Medi-Cal members to improve health outcomes and reduce reliance on more costly medical services. The ECM benefit provides personalized care management to eligible members and Community Supports services—largely of a social services nature—are substitutes to traditional, often more costly, medical services. Members may be eligible for both benefits, as the two benefits serve broadly overlapping populations. However, the overlap is limited by the fact that each of the ECM benefit and the 14 Community Supports services has distinct eligibility criteria. ECM and Community Supports Utilization Lower Than Expected, but Has Grown in Recent Years. The Department of Health Care Services (DHCS) has estimated that between 3 percent and 5 percent of all MCP members statewide are potentially eligible for ECM, but no such estimate exists for Community Supports. (One reason there is no eligibility estimate for Community Supports is that the eligibility rules for varying Community Supports benefits are different making estimating the eligible population challenging.) The percent of MCP members statewide utilizing ECM and Community Supports in 2022 was 0.6 percent and 0.1 percent, respectively, with both increasing to 0.9 percent in 2024. The complexities of integrating social service providers into MCP networks as well as broader systemic constraints that may limit the provision of services appear to be the main factors keeping utilization lower than expected. Utilization Varies Across Counties and MCPs Due to a Variety of Factors. Benefit utilization rates across counties and MCPs vary considerably, with generally lower utilization rates in the central and eastern portions of the state. Underlying differences in the eligible populations across the state may partially explain some of the regional variation in utilization. In addition, counties that had a related pilot demonstration under the prior Medi-Cal waiver tend to have higher utilization rates than counties that did not. Variation across MCPs may also be due to differences in available provider networks and overall implementation of the program. More Information Needed to Monitor and Assess Waiver. We recommend the Legislature consider requesting additional information from DHCS to enable it to (1) assess whether benefit utilization will continue to grow; (2) assess possible future state costs; (3) understand the variation in utilization across MCPs and counties; (4) identify barriers that MCPs face to increasing access to the benefits; and (5) ensure that a system is in place to allow for a robust, ongoing evaluation of the cost-effectiveness of the benefits and their impact on health outcomes. DHCS will complete evaluations of certain components of the CalAIM waiver by the end of 2025, which will provide some of the information noted above. www.lao.ca.gov 1 2025-26 BUDGET INTRODUCTION This report assesses the implementation of the in the ECM and Community Supports utilization ECM and Community Supports benefits within data and consider reasons for variations across the the CalAIM federal waiver as reported by the state. We then provide the Legislature with issues utilization data from DHCS. This report begins with to consider and questions for the administration background information on the Medi-Cal program as the state evaluates program outcomes and as well as the challenges in providing services prepares to renew its federal waiver, which expires to the state’s high-need, high-cost Medi-Cal in December 2026. members. Next, we identify and assess key trends BACKGROUND Medi-Cal Provides Health Care last ten years. As a share of General Fund spending, Medi-Cal is the state budget’s second largest Services to Low-Income Californians program after schools and community colleges. Medi-Cal Provides a Range of Health Care Medi-Cal Services Provided Through a Services. Medi-Cal, the state’s Medicaid program, Variety of Delivery Systems. The primary way provides health care coverage for low-income Medi-Cal delivers services to beneficiaries is by Californians. Historically, Medi-Cal has covered contracting with health insurance plans, also known traditional health care services such as visits to the as MCPs, which serve the majority of enrollees. doctor’s office, stays at the hospital, prescription The state provides MCPs monthly payments to drugs, behavioral health services, long-term care, enroll Medi-Cal beneficiaries, while the plans in and dental services, among many other areas. turn are required to arrange for the health care The Governor’s budget assumes an average of their enrollees. Medi-Cal pays for some health monthly Medi-Cal caseload level of 15 million in care services, such as pharmacy benefits, by 2024-25, almost 40 percent of Californians. reimbursing providers directly—known as the Medi-Cal Is a State-Federal Partnership. fee-for-service delivery system. Additionally, A key component of Medi-Cal, and the Medicaid counties serve as distinct delivery systems both for program as a whole, is the shared programmatic treatment to Medi-Cal enrollees with severe mental and fiscal responsibility between California and the health conditions and for personal care services. federal government. The federal government has a number of program requirements that Medi-Cal Medi-Cal’s Complexity and High-Need, must follow in order to receive federal funding for High-Cost Populations Pose Challenges eligible services. However, the state is allowed Medi-Cal’s Complexity Puts Burden on certain flexibilities in how to structure the Medi-Cal Beneficiaries and Program Administrators. program that enable it to receive additional federal The complexity of the Medi-Cal program impacts funding for certain services. both beneficiaries and the state in its oversight and Medi-Cal Is a Sizeable Portion of California’s administration of Medi-Cal. Historically, Medi-Cal Budget. More than half of Medi-Cal’s budget is benefits have not always been provided through supported by federal funds, with the remainder the same delivery system in all parts of the state, supported by the General Fund and other state and not all benefits have been available everywhere and local government sources. The General Fund in the state. To some extent, this variation reflects portion of Medi-Cal comprises a sizable share past efforts to test new models of care in only of overall state General Fund spending, ranging portions of the state. Depending on which services between 13 percent and 17 percent in most of the 2 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET beneficiaries require, they may need to navigate California Pilot-Tested Two Programs to multiple delivery systems, which can make it Address the High-Need, High-Cost Population difficult for beneficiaries to receive all the services Challenge. Under the state’s prior Medi-Cal that their conditions would indicate are needed. waivers, the state piloted two programs (from Difficulties navigating Medi-Cal’s multiple systems 2016 through 2021) that focused resources and can be particularly pronounced for individuals with attention on the highest-risk, highest-needs multiple complex conditions. beneficiaries, often with the intent to prevent the Disproportionately High Share of Services worsening of severe health conditions. The first, the Costs Provided to a Relatively Small Number of Whole Person Care (WPC) program, was a set of High-Need Beneficiaries. Medi-Cal enrollees are local pilot programs—typically run by county health diverse and have varying health statuses. The cost agencies—to coordinate physical health, behavioral of Medi-Cal services per enrollee varies significantly health, and social services for beneficiaries with and a small number of Medi-Cal enrollees account the highest levels of need and/or risk. Each local for a large and disproportionate share of total WPC pilot determined target populations—among spending in Medi-Cal. A 2014-15 analysis by DHCS a predetermined set which included, for example, showed the most costly 1 percent of Medi-Cal high utilizers of services and homeless individuals— enrollees accounts for about 20 percent of program and developed strategies to tailor service delivery spending and the most costly 20 percent of to those groups. The second, the Health Home Medi-Cal enrollees account for about 70 percent Program (HHP), had similar goals to the WPC of program costs. Past research indicates that the program and provided extra services—including highest-cost enrollees typically are being treated care management—to Medi-Cal beneficiaries for multiple chronic conditions (such as diabetes who suffered from chronic health and/or mental or heart failure) and often have mental health or health conditions that result in high use of health substance use disorders. Costs for this population care services. often are driven by frequent hospitalizations and Evaluation of Pilot Programs Found high prescription drug costs. In some cases, social Participants Had Lower Costs and Emergency factors like homelessness play a role in the high Department Utilization. As required by the federal health care utilization of these enrollees. Costs are waiver, DHCS contracted with the University of also high for individuals residing in long-term care California, Los Angeles to perform evaluations facilities, which could potentially increase in coming of WPC and HHP to determine if the programs years as the state’s population ages. improved health outcomes. Patients who received services under WPC or HHP generally saw a Federal Medicaid Waivers reduction in emergency department visits and Allow Testing New Approaches hospitalizations, along with overall lower health care State Has Flexibility to Change Medi-Cal costs due to lower utilization of certain services. Service Delivery Through Federal Waivers. Additionally, patients increased utilization of certain Federal law lays out many basic requirements for outpatient services, like primary care, immediately how states may operate Medicaid programs and following enrollment in a pilot program. However, requires states to offer certain benefits. Federal law after accessing the necessary services to meet also allows the federal government to waive certain their immediate medical needs, those same Medicaid requirements in some cases. States patients reduced their utilization of those services, often take advantage of federal waivers to provide further decreasing health care costs. Medicaid benefits in new ways and, in some cases, obtain funding for services that might not otherwise be available. www.lao.ca.gov 3 2025-26 BUDGET The CalAIM Waiver Demonstration • Community Supports Provide Medically Appropriate and Cost-Effective Substitutes CalAIM Intended to Address Challenges for Other Covered Services. Figure 1 of Complexity and High-Need, High-Cost provides a full list of the currently approved Populations. At a high level, CalAIM is intended Community Supports along with a brief to address some of the challenges previously description. Community Supports are identified by (1) providing more comprehensive services or settings—largely of a social benefits and services to high-need, high-cost services nature—that can substitute for, and populations and (2) streamlining and standardizing potentially decrease utilization of, a range of Medi-Cal benefits and administration. Our office covered Medi-Cal benefits, such as hospital assessed the entire CalAIM waiver when it was care, nursing facility care, and emergency first proposed in the Governor’s 2020-21 budget department use. For example, a member may proposal, but implementation was delayed due to receive home modifications that would allow the onset of the COVID-19 pandemic. Our office them to remain in their home rather than need performed a number of follow-up assessments to move to an assisted living facility (which has when CalAIM was introduced again in the a much higher cost to the state). Governor’s 2021-22 budget proposal. While CalAIM consists of a number of program changes Eligibility for ECM and Community Supports across the Medi-Cal system, this post will focus Differ. ECM and Community Supports are two on two key components of the waiver, ECM and distinct types of benefits that are intended to be Community Supports. complementary, with both reducing the reliance ECM and Community Supports Reflect an on high-cost medical services while improving Increased Focus on High-Need, High-Cost health outcomes. However, not all individuals who Populations. ECM and Community Supports are are eligible for ECM are eligible for Community benefits administered by MCPs that were modeled Supports, or vice versa. off of the state’s experience with the WPC and • ECM Is a Required Benefit for All Eligible HHP pilots under the previous federal waivers. MCP Members of Populations of Focus The overall goals of both ECM and Community (POFs). The ECM benefit is required to Supports include improving health outcomes, be offered by MCPs to all members if they providing cost-effective benefits that reduce meet the eligibility requirements of any of the need for higher-cost medical services, and the specified POFs. The number of POFs improving care coordination and access among have increased overtime and include members. (Other components of CalAIM are populations such as individuals experiencing intended to reduce the complexity of the system homelessness, individuals at risk for itself, such as by streamlining and standardizing hospitalization, and individuals with a serious Medi-Cal benefits and administration.) mental illness or substance use disorder. • ECM Benefit Provides Care Coordination Due to the specific eligibility requirements, to Highest-Need Medi-Cal Members. many MCPs are able to identify members who ECM is intended to be a comprehensive, may be eligible for ECM services based on whole-person care management benefit that administrative data. Members may be eligible coordinates all aspects of a member’s care for ECM based on one or multiple POFs, but across physical and behavioral health delivery ultimately must agree to receive the benefit systems. Each eligible member is assigned and participate in the program. a personal ECM Care Manager who helps to • Community Supports Eligibility Is More identify all resources to address all needs of Complex and Is an Optional Benefit. the member, including the development of a Community Supports services are optional care management plan. benefits that MCPs may choose to offer, and each of the 14 Community Supports (as listed 4 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET in Figure 1) can have very different eligibility in a nursing facility. Both members would criteria. Community Supports services be eligible for Community Supports, but are often based not only on a member’s the specific Community Supports they characteristics (for example, an individual at would receive would be tailored to their risk for or experiencing homelessness), but individual needs. These complex and varying on the specific medical and social service circumstantial eligibility requirements make needs of the member. For example, while it difficult to determine the total number of two members may share similar economic members potentially eligible for Community and health conditions, if one is transitioning Supports services statewide. Similar to ECM, from incarceration they may be eligible and members must agree to receive the benefit have needs for a different set of Community and participate in the program to access Supports than another who is trying to the services. remain in their home instead of being placed Figure 1 Available Community Supports Services Benefit Description Housing-Related Services (“Housing Trio”) Housing transition navigation services Assistance with obtaining housing. This may include assistance with searching for housing or completing housing applications, as well as developing an individual housing support plan. Housing deposits Funding for one-time services necessary to establish a household, including security deposits to obtain a lease, first month’s coverage of utilities, or first and last month’s rent required prior to occupancy. Housing tenancy and sustaining services Assistance with maintaining stable tenancy once housing is secured. This may include interventions for behaviors that may jeopardize housing, such as late rental payment and services, to develop financial literacy. Recuperative Services Recuperative care (medical respite) Short-term residential care for beneficiaries who no longer require hospitalization, but still need to recover from injury or illness. Respite services Short-term relief provided to caregivers of beneficiaries who require intermittent temporary supervision. Short-term, post-hospitalization housing Setting in which beneficiaries can continue receiving care for medical, psychiatric, or substance use disorder needs immediately after exiting a hospital. Sobering centers Alternative destinations for beneficiaries who are found to be intoxicated and would otherwise be transported to an emergency department or jail. Services to Enable Members to Remain in a Home-Like Setting Day habilitation programs Programs provided to assist beneficiaries with developing skills necessary to reside in home-like settings, often provided by peer mentor-type caregivers. These programs can include training on use of public transportation or preparing meals. Nursing facility transition/diversion to Services provided to assist beneficiaries transitioning from nursing facility care to community assisted living facilities settings, or prevent beneficiaries from being admitted to nursing facilities. Nursing facility transition to a home Services provided to assist beneficiaries transitioning from nursing facility care to home settings in which they are responsible for living expenses. Personal care and homemaker services Services provided to assist beneficiaries with daily living activities, such as bathing, dressing, housecleaning, and grocery shopping. Environmental accessibility adaptations Physical adaptations to a home to ensure the health and safety of the beneficiary. These may include ramps and grab bars. Medically tailored meals Meals delivered to the home that are tailored to meet beneficiaries’ unique dietary needs, including following discharge from a hospital. Asthma remediation Physical modifications to a beneficiary’s home to mitigate environmental asthma triggers. www.lao.ca.gov 5 2025-26 BUDGET Waiver Requires Evaluation of Outcomes. Access and Transforming Health (PATH) initiative As a part of the approved CalAIM waiver, DHCS (we describe PATH—which provides funding to is required to evaluate the cost-effectiveness help providers participate in CalAIM—in more of Community Supports during the term of the detail in subsequent sections) to determine if waiver and submit interim and final evaluations the additional funding strengthened ECM and to the federal government by December 2025 Community Supports infrastructure and increased and December 2028, respectively. The ECM benefit utilization. As the interim evaluations will benefit, which was closely related to many of the not become available until later this year, we have components of the WPC and HHP pilots, was begun to evaluate the data currently available previously determined to be cost-effective and from the department to provide the Legislature is not required to undergo a full evaluation like an update on the implementation of ECM and Community Supports. DHCS will also release an Community Supports and raise issues for evaluation, required by the waiver, of the Providing legislative consideration. ECM AND COMMUNITY SUPPORTS IMPLEMENTATION ECM Recipients DHCS Implemented a Number of Program Changes to Increase Access to ECM. In 2023, MCPs Phased in ECM to Different POFs Over DHCS implemented a number of policy changes Time. As shown in Figure 2, MCPs have been intended to make it easier for members to access required to provide the ECM benefit to members ECM services, including (1) preventing MCPs from based on a list of eligible POF categories that imposing additional eligibility requirements for ECM have grown over time. These POFs are intended to direct the benefit to members who would especially benefit from Figure 2 personalized care coordination, such as individuals at risk for ECM Populations of Focus Phased in Over Time avoidable hospitalization or emergency department utilization. January 1, 2022 | Pilot Counties Most POF eligibility criteria include • Adults and Their Families Experiencing Homelessness some combination of a complex • Adults at Risk for Avoidable Hospital or ED Utilization • Adults With SMI and/or SUD Needs physical or mental health condition • Individuals Transitioning From Incarceration (some WPC counties) along with a social or environmental factor that influences their health. July 1, 2022 | All Other Counties • Adults and Their Families Experiencing Homelessness Many of the POFs are also similar • Adults Aa Risk for Avoidable Hospital or ED Utilization to the targeted populations within • Adults With SMI and/or SUD Needs the WPC and HHP pilots. Based January 1, 2023 | Statewide on a one-time analysis of actuarial • Adults Living in the Community and at Risk for LTC Institutionalization data, DHCS estimated that • Adult Nursing Facility Residents Transitioning to the Community between 3 percent and 5 percent July 1, 2023 | Statewide of all MCP members were eligible • Statewide for the ECM benefit under at least • Children and Youth Populations of Focus one POF. Some MCPs indicated January 1, 2024 | Statewide that potential eligibility ranged from • Birth Equity Population of Focus (including Children and Youth) 3 percent to as high as 7 percent of • Individuals Transitioning From Incarceration their membership. ECM = Enhanced Care Management; ED = Emergency Department; SMI = Serious Mental Illness; SUD = Substance Use Disorder; WPC = Whole Person Care; and LTC = Long-Term Care. 6 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET authorization, (2) requiring MCPs to contract with DHCS Reversed an Initial Flexibility Afforded ECM providers that specialize in each POF and MCPs to Improve Access to Community have an existing footprint in the communities they Supports Services. Prior to the launch of the serve, and (3) limiting reassessments of eligibility by Community Supports benefit, DHCS allowed MCPs MCPs. Beginning in 2025, DHCS has implemented to modify or restrict Community Supports service a standardized ECM referral form (including definitions if their anticipated provider network restricting MCPs from requesting additional would not allow for the countywide provision of the information) and required MCPs to implement benefit. This flexibility could include changes to presumptive eligibility for members referred by the scope of services or the eligibility of members. authorized ECM providers. (The ECM program MCPs would then have three years to expand changes made in 2025 will not be reflected in our their provider network and capacity. DHCS later assessment and could increase utilization of the determined that the allowed modifications created ECM benefit.) barriers to implementation and accordingly required all MCPs to meet the DHCS-established service Community Supports Services and eligibility definitions by January 1, 2024. MCPs Have Expanded the Number of ECM and Community Supports Funding Community Supports Available Over Time. Community Supports are an optional benefit ECM and Community Supports Funded that MCPs may offer to eligible members. When Within MCP Rates. The state pays MCPs a Community Supports first became available in monthly rate for each enrollee based on plans’ January 2022, only five Community Supports were past expenditures, as well as adjustments for offered by at least half of all MCPs and only two inflation and other factors determined by actuaries. MCPs offered all Community Supports. MCPs have been offering more Community Supports since Figure 3 they first became available. As of June 2024, there are seven MCPs offering all Community Supports MCP Enrollees Have Access to Majority that represent 44 percent of the state’s total MCP Of Community Supports in All Counties enrollment. As shown in Figure 3, all counties have at least eight Community Supports offered by at least one MCP and there are 19 counties where all 8 Community Supports Community Supports are available from at least 9-13 Community Supports one MCP. Unlike with ECM, there is no statewide estimate of potential eligibility for each Community 14 Community Supports Support. Each Community Support has very different eligibility criteria which makes it difficult to estimate the total number of individuals eligible for each service. For example, for an individual to receive the Medically Tailored Meals benefit they must have a chronic condition and have been discharged or be at risk of placement in a hospital or skilled nursing facility. For the same individual to receive Day Habilitation services, they must also be experiencing or at risk of experiencing homelessness and who’s housing stability would be improved by the service. Without comprehensive, real-time, administrative data, it would be difficult to estimate the number of MCP members who would MCP = Managed Care Plan. be eligible for both of these services. www.lao.ca.gov 7 2025-26 BUDGET The ECM and Community Supports benefits are • IPP Provides Additional Funding to MCPs included in this actuarial calculation, and it is up to Expand Provider Network and Expand to MCPs to arrange for ECM and Community Access to Community Supports. The state Supports services for their enrolled members received approval under the waiver to provide through the plans’ network of providers. MCPs $1.5 billion in total funds (incorporating the contract with providers to reimburse for ECM and federal match) as incentive payments to Community Supports services and can structure MCPs. To receive funding, MCPs submit reimbursements in different ways. data to demonstrate they are meeting State Provides Grants to MCPs and Providers certain performance measures on ECM and to Develop ECM and Community Supports Community Supports implementation. MCPs Program Infrastructure. In order to support the have flexibility in how they use IPP funds. implementation of ECM and Community Supports, For example, this funding can be used to hire the state implemented the PATH initiative and the and train staff, provide technical assistance to Incentive Payment Program (IPP) to help create and providers, or provide supplemental payments expand program infrastructure. to providers to incentivize participation in ECM and Community Supports. • PATH Initiative Provides Funding to Help Providers Participate in CalAIM. The state Funding Has Increased Over Time as More received approval under the waiver to provide Beneficiaries Access ECM and Community $1.85 billion in total funds (incorporating the Supports. The Governor’s 2025-26 budget federal match) for the PATH initiative. PATH proposes ECM spending at $956 million (total consists of multiple initiatives intended to funds) and Community Supports spending at build up the capacity and infrastructure $231 million (total funds), a $67 million (7.5 percent) of CalAIM providers. This was needed and $11 million (5 percent) increase over revised as these providers were not traditionally 2024-25 levels, respectively. The General Fund part of the health care delivery system. share of the ECM and Community Supports benefit To support ECM and Community Supports is approximately 40 percent. As shown in Figure 4, services, PATH provides funding for (1) a General Fund spending for these programs has virtual marketplace for technical assistance; increased substantially since 2021-22, with ECM (2) regional facilitators to support collaborative spending increasing by $308 million (466 percent) planning efforts among MCPs, providers, and and Community Supports spending increasing by other behavioral health organizations; and $68 million (317 percent). Both IPP and PATH— (3) Capacity and Infrastructure Transition, incentives funding that is also shown on Figure 4 Expansion and Development (CITED) grants in addition to General Fund ECM and Community that provide direct funding to providers. Supports spending—have fixed, limited-term PATH CITED grants could be used to hire funding availability that ends in 2025-26 and and train staff; expand service capacity; or 2026-27, respectively. improve organizational infrastructure, such as upgrading information technology systems. In addition, the state provided an additional $40 million General Fund to support ECM and Community Supports capacity in clinics. 8 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Figure 4 CalAIM ECM, Community Supports, and Incentives Funding General Fund (In Billions) $1.2 Provider Incentives (PATH) Plan Incentives (IPP) 1.0 Community Supports Services Enhanced Care Management Services 0.8 0.6 0.4 0.2 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 PATH and IPP funding reflect budgeted amounts, actual expenditures may differ. CalAIM = California Advancing and Innovating Medi-Cal; ECM = Enhanced Care Management; PATH = Providing Access and Transforming Health Initiative; and IPP = Incentive Payment Program. SUMMARY OF UTILIZATION DATA AND KEY TRENDS ECM and Community Supports Quarterly Benefit Utilization Has Been Low, but Steadily Implementation Report Provides Benefit Growing. As Figure 5 on the next page shows, Utilization Data. DHCS publishes quarterly both ECM and Community Supports utilization implementation monitoring reports that include began relatively low during the initial period when data on the utilization of the ECM and Community the benefits became available. Initially, ECM Supports benefits across the state, broken down utilization started much higher than Community by MCP and county. The reports also contain Supports, though the gap has narrowed in recent high-level provider information by each MCP, years. This initial gap is somewhat expected as including the number of provider contracts and the previous WPC and HHP pilot demonstrations the type of providers (for example, whether the provided services most similar to those in ECM, so provider is a Federally Qualified Health Center or an plans were better able to transition to providing the organization that serves individuals experiencing ECM benefit. Utilization rates across the state were homelessness). One key component of the relatively flat until 2023, when ECM utilization began report is the “utilization rate” for both ECM and to gradually increase and Community Supports Community Supports. This rate is calculated as the utilization increased much more quickly. share of Medi-Cal managed care members who Majority of ECM Participants Qualify Under have enrolled in ECM or have utilized at least one Three POFs. MCP members may be eligible for Community Support. Our assessment of ECM and ECM under multiple POFs, but as shown in Figure 6 Community Supports utilization draws from data on the next page, the three most common POFs published in this report which, at the time of this that members have qualified under are individuals brief, spans from January 2022 to June 2024. experiencing homelessness, individuals at risk for hospitalization, and individuals with a serious www.lao.ca.gov 9 2025-26 BUDGET Figure 5 mental illness or substance use disorder. All three of these POFs Utilization Has Grown Over Time were some of the optional target Percent of Medi-Cal Managed Care Members Utilizing... populations available for WPC 1.00% and HHP pilot demonstrations, 0.90 so participating MCPs had 0.80 already identified providers 0.70 Enhanced Care Management who would be able to provide 0.60 0.50 services to these populations. 0.40 Medically Tailored Meals 0.30 At Least One Community Support and Housing Trio Were Most 0.20 0.10 Utilized Community Supports. Figure 7 shows Community 2022 2023 2024 Supports utilization has grown in recent years, though the majority of growth is concentrated in a handful of services. Medically Figure 6 Tailored Meals is the most Number of Individuals in Most Populations of Focus Grew utilized Community Support by Number of Individuals Utilizing ECM a fairly large margin. However, this is driven primarily by 60,000 utilization within two health plans SMI/SUD 50,000 in two counties. CalOptima At Risk Individualsa 40,000 health plan in Orange County accounts for almost one-third 30,000 of all Community Supports 20,000 utilization statewide, with the 10,000 Individuals Experiencing Homelessness All Others majority of those services being Medically Tailored Meals. 2022 2023 2024b Beginning in 2024, Community a At Risk Individuals are those who are at risk for avoidable hospital or emergency department utilization. Health Plan Imperial Valley in b Only first two quarters of data available. Imperial County has also begun ECM = Enhanced Care Management and SMI/SUD = Serious Mental Illness or Substance Use Disorder. to rapidly increase the number of members receiving Medically Tailored Meals. The other set Figure 7 of Community Supports that A Few Community Supports Drive Majority of Utilization have been the most utilized Number of Individuals Utilizing Each Community Support are the “housing trio” (as described in Figure 1). Among 80,000 these housing-related services, Medically Tailored Meals 70,000 Housing Transition Navigation 60,000 Services is almost three times 50,000 more common than Housing 40,000 Tenancy and Sustaining Services 30,000 Housing Trioa 20,000 and Housing Deposits. All Other Community Supports 10,000 2022 2023 2024b a Housing Trio consists of Housing Transition Navigation Service, Housing Tenancy and Sustaining Services, and Housing Deposits. b Only first two quarters of data available. 10 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Participation Makes Up Small Share Utilization rates across counties vary considerably, of Overall Medi-Cal MCP Caseload, With with generally lower utilization rates in the central Significant Variation Across Counties and and eastern portions of the state. Geographic MCPs. As shown in Figure 8, the utilization rates differences can highlight regional differences in of both ECM and Community Supports are low capacity or infrastructure, while differences across in most counties, with the majority of counties MCPs can also indicate differences in program having an ECM utilization rate below 0.6 percent implementation. As shown in Figure 9, most MCPs of MCP members and a Community Supports have less than a 1 percent utilization rate for both utilization rate below 0.4 percent. The two outliers, ECM and Community Supports. Even plans that as discussed above, are the high Community have a higher utilization rate for ECM may have a Supports utilization rates in Orange County low utilization rate for Community Supports, and (3.7 percent) and Imperial County (4.4 percent). vice versa. Figure 8 Utilization of ECM and Community Supports Varies Across Counties Utilization of ECM Varies Considerably Across Counties... ...As Does Utilization of Community Supports. Percentage of MCP Percentage of MCP Members Members Utilizing ECM Utilizing Community Supports 2% 4% 0% 0% Based on Average Monthly MCP Membership in 2023-24. ECM = Enhanced Care Management and MCP = Managed Care Plan. Figure 9 ECM and Community Supports Utilization Varies Considerably by MCP Percentage of MCP Members Utilizing Community Supports 4.0% 3.5 Each point represents one MCP plan. 3.0 Based on average monthly MCP membership in 2023-24. 2.5 2.0 1.5 1.0 0.5 0.5 1.0 1.5 2.0 2.5 3.0% Percentage of MCP Members Utilizing ECM ECM = Enhanced Care Management and MCP = Managed Care Plan. www.lao.ca.gov 11 2025-26 BUDGET LAO ANALYSIS OF UTILIZATION DATA LAO Methodology. Our analysis consists of MCP members for Community Supports, primarily of an evaluation of the utilization data given the varying eligibility criteria among the and provider information reported by DHCS in 14 Community Supports services. That said, the their quarterly implementation report. We also differences across counties and plans indicate supplement our analyses with data reported that, at least for some Community Supports, much by MCPs in their Housing and Homelessness higher utilization is possible. For example, the very Incentive Program submissions; responses to the high utilization rates of Medically Tailored Meals in California Health Care Foundation (CHCF) ECM two counties, by two plans using the same provider, and Community Supports implementor survey; may indicate more demand for the benefit above and interviews with MCPs, ECM and Community what is currently being provided. Supports providers, counties, and DHCS. Factors Possibly Limiting Utilization ASSESSING STATEWIDE Utilization May Continue to Grow, but Trend Uncertain. ECM benefit utilization started LEVEL OF UTILIZATION higher than Community Supports, in part due to Utilization Appears Low the capacity established through the WPC and HHP pilot demonstrations, but remained stagnant Utilization of ECM Benefit Expectedly Lower for the first year and half of implementation. As Than Total Potential Eligibility. As shown earlier plans, providers, and members have learned more in Figure 5, the percent of MCP members statewide about the benefit and DHCS made changes to utilizing the ECM benefit was 0.6 percent in 2022, policies to improve access to the benefit, utilization rising to 0.9 percent in 2024. Of particular note, only has increased. Community Supports utilization about one-fifth of all MCP members that identified overall has steadily grown over the course of the as homeless—a key POF—were receiving ECM demonstration. However, most of that growth services in 2023 (about 0.3 percent of all Medi-Cal has been concentrated among a few Community managed care members). As discussed above, Supports services, and for other services utilization DHCS had estimated that between 3 percent and has been relatively flat or slightly declining. Limited 5 percent of Medi-Cal MCP members were eligible data are available to evaluate the demand or for the ECM benefit. While the ECM benefit is capacity for additional services. As such, whether intentionally targeted at a small subset of the overall utilization will increase is unknown. Medi-Cal population, the take up appears to be Three Key Factors May Be Limiting Utilization between about one-third and one-quarter of those Statewide. Utilization of the ECM and Community eligible for services. As enrollees must agree to Supports benefits appears to be lower than participate in ECM, participation may be impacted expected. Based on our analysis and conversations by enrollee interest. Given the notable variation with MCPs and providers, we identify three key between counties and MCPs, however, there factors that appear to be driving lower utilization likely are implementation differences—such as the rates across the state. availability of providers—leading to differences in take up. • MCPs Have Limited Experience Offering Difficult to Assess Potential for Additional Nonmedical Services. MCPs are responsible Growth in Community Supports Utilization. for arranging the majority of health care As also shown in Figure 5, the percent of services their members need. While MCP members statewide utilizing at least one some plans may have offered certain care Community Support was 0.1 percent in 2022, rising management or nonmedical benefits prior to to 0.9 percent in 2024. As mentioned previously, CalAIM, ECM and Community Supports have there is no estimate for the total potential eligibility required MCPs to expand their scope in terms 12 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET of service offerings beyond what they have of housing prevented placement. This in turn historically been responsible for. Most plans kept utilization of other Community Supports have received additional funding to assist in services, like Housing Deposits, lower than expanding their capacity to build provider would be expected. networks to increase utilization of these new benefits. However, many plans have cited Potential Benefits of challenges in working with providers who are Increased Utilization unfamiliar with how services are reimbursed Possible That Utilization Will Continue to within a MCP network. Increase. While utilization of ECM and Community • Providers Have Less Familiarity Supports began lower than anticipated, the Working With MCPs. CHCF conducted a number of MCP members participating in the survey of MCPs and providers on CalAIM programs has steadily increased. As discussed, implementation in 2023 and again in 2024. many of the factors limiting utilization may be While the survey samples were different, addressed with time as familiarity with the program Figure 10 shows that two major factors continues to grow. As shown in Figure 11, the total for providers not participating in ECM and number of provider contracts for both ECM and Community Supports remained the same in Community Supports have increased over time both years. Even three years into the program, as plans have worked to expand their networks. unfamiliarity with the ECM and Community Supports benefits Figure 10 and how to provide them as Top Reasons Providers Did Not Participate in a Medi-Cal benefit are major ECM or Community Supports challenges for providers to enter MCP networks. 2023 Survey 2024 Survey Reasons Given By Providers Results Results The difficulty MCPs have in adding ECM and Community We are in the process of deciding whether to  participate in ECM and/or Community Supports. Supports providers may be keeping utilization rates lower We are not sure how to participate in ECM and/or   Community Supports. than expected. • Systemic Constraints We do not have the capacity to meet the   requirements of the program. Limit Utilization. Lower-than-expected We have heard that payment rates are too low.  utilization of certain benefits may be driven more by Source: California Health Care Foundation and Goodwin Simon Strategic Research 2023 and 2024 Survey of CalAIM implementers. systemic constraints across ECM = Enhanced Care Management. different regions of the state rather than a low demand for those benefits. Almost every Figure 11 MCP and relevant provider Number of Contracts With Traditional and we spoke with cited the lack Nontraditional MCP Providers of available housing as a 2023 Q3 2023 Q4 2024 Q1 2024 Q2 major challenge to providing the housing trio Community ECM Traditional 567 535 527 648 Supports. Members would Nontraditional 736 822 1,090 1,441 remain eligible for the Housing Community Supports Transition Navigation Services Traditional 708 343 456 287 Community Support longer Nontraditional 3,796 3,766 4,436 5,105 than anticipated as the lack MCP = Managed Care Plan and ECM = Enhanced Care Management. www.lao.ca.gov 13 2025-26 BUDGET However, nontraditional providers are more than Benefit of Increasing Utilization of double the number of traditional providers in Community Supports Unknown. The Community ECM and this ratio is even greater for Community Supports program’s benefits to the state and Supports providers. Traditional providers are Medi-Cal members are currently being evaluated those that are typically within the MCP medical by DHCS. While the pilot demonstrations had services network and would have experience the option to include nonmedical services within working with MCPs to provide services and their pilots, it was not a key element of the pilot receive reimbursements (for example, Federally evaluation. Some MCPs cited the costs of providing Qualified Health Centers, hospitals, and physician Community Supports as higher than the payments groups). Nontraditional providers typically provide received from DHCS. As MCPs continue to social services, but may not have experience implement the Community Supports benefit, more with MCPs to bill for those services (for example, information will be needed to determine what, if any, community-based organizations and organizations costs savings the state and MCPs are receiving serving individuals experiencing homelessness). in the form of lower utilization of more expensive How quickly utilization will grow is hard to know medical services. because of the high concentration of nontraditional providers and the challenges cited above to SIGNIFICANT VARIATION IN incorporating providers more generally. Based UTILIZATION ACROSS COUNTIES on previous evaluations, increasing the number AND MCPS of Medi-Cal members utilizing ECM could reduce overall health care costs, though cost-effectiveness Many Factors Impact Variations in ECM and and improvements in health outcomes of Community Supports Utilization. Some variation Community Supports is still unknown. in utilization rates across counties and MCPs is expected as factors such as the differences in ECM Benefit Utilization Has Been Shown the concentration of POFs may drive some of the to Lower Costs and Improve Certain Health variation. In addition, there are capacity constraints Outcomes. As highlighted earlier in the brief, for certain services that vary across the state the results from the evaluations of the WPC and and may impact utilization rates. There may also HHP pilot demonstrations showed that participants be differences in MCP characteristics that make generally saw a reduction in emergency department them better equipped to implement the ECM and visits and hospitalizations, along with overall lower Community Supports benefits. health care costs due to lower utilization of certain services. The results from the final evaluation Variations in Extent of POFs Help Explain focused on three primary target populations, Some Variation in ECM Utilization Across which were equivalent to the ECM POFs of Counties and MCPs. The ECM benefit is required individuals experiencing homelessness, individuals to be offered by MCPs to individuals if they meet at risk for hospitalization, and individuals with a certain criteria for a POF. To the degree that plans serious mental illness or substance use disorder. have a varying share of members in each POF, it Whether the ECM benefit will have the same could lead to variations in utilization. For example, overall level of cost-effectiveness and positive one county may have a disproportionate number health outcomes that were demonstrated in the of individuals experiencing homelessness or have pilots for additional POFs added under CalAIM is a large number of individuals in skilled nursing unknown. However, many new POFs may overlap facilities. However, more information on total with the three listed above and based on their potential eligibility by POF in each MCP would be eligibility criteria would still be considered high-risk, needed to understand how much of the variation high-needs populations, and may still benefit from could be explained by differences in the underlying ECM enrollment. population characteristics. 14 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Systemic Constraints, Such as Lack of Figure 12 Housing Supply, Vary Across State. While certain systemic constraints may be impacting Counties With Pilot Demonstrations utilization statewide, the effects and extent of Generally Have Higher Utilization Rates those constraints may differ among counties and MCPs. While housing affordability and availability ECM Utilization Generally Higher Among are major issues facing the state as a whole, Counties With Pilot Demonstrations certain regions may have a more acute housing shortage that would lead to lower utilization of certain Community Supports services. The availability of providers, especially nontraditional providers, may also lead to differences in Counties with pilot programs had a benefit utilization across counties and plans. higher median ECM utilization rate... Certain regions have more community-based organizations or community-based organizations with sufficient resources to build the infrastructure needed to participate in a MCP network. Certain regions in the state with a limited number of social service providers prior to the ECM and 0.50 1.00 1.50 2.00 2.50% Community Supports programs may lag in Percentage of MCP Members Utilizing ECM utilization of the benefits. Counties That Were WPC or HHP Pilot Pilot Counties All Other Counties Pilot Median No Pilot Median Counties Have Higher Utilization Than Those Who Did Not. As described previously, the Community Supports Utilization Generally Higher ECM and Community Supports benefits present Among Counties With Pilot Demonstrations challenges for both MCPs to implement as well as providers to participate in. As shown in Figure 12, however, counties that had a WPC or HHP pilot demonstration generally have a higher utilization ...and a higher median rate than those counties that did not. MCPs Community Services utilization rate. in these counties had an opportunity to begin building provider networks and had first-hand experience providing benefits similar to ECM and, possibly, Community Supports. The higher levels of utilization in pilot counties may indicate that utilization may increase as more time passes and 0.50 1.00 1.50 2.00% MCPs and providers become more familiar with Percentage of MCP Members Utilizing Community Supports the program and build the necessary capacity to meet demand. Based on 2023-24 average monthly enrollment. Community Supports Graph excludes Imperial (4.38%) and Orange (3.73%) for Providers Cite Grant Funding as Critical to visualization. Pilot Counties had either a Whole Person Care or a Health Home Program pilot Program Participation, but More Information demonstration. ECM = Enhanced Care Management and MCP = Managed Care Plan. Needed to Assess Impact. A number of providers we spoke with indicated that they would be unable to provide ECM and Community Supports services absent the support of the PATH program, both from the technical assistance provided and the direct grant awards. They cited the technical challenges of working within the www.lao.ca.gov 15 2025-26 BUDGET MCP network, specifically around billing, and the available data, however, it is unclear the extent to need to hire individuals with experience in MCP which these direct grants to providers have led to reimbursements. DHCS awarded $348 million an increase in the utilization rate within the counties of PATH CITED funds to ECM and Community they where they were awarded. Supports providers in 2023. Based on the currently ISSUES FOR LEGISLATIVE CONSIDERATION Utilization of ECM and Community Supports facilitate capacity that meets the demand for Benefits Have Grown, but There Is an ECM and Community Supports services? Opportunity for Further Increases. Our analysis • What barriers do plans face to increasing of ECM and Community Supports implementation access to ECM and Community through the first half of the demonstration highlights Supports services? that while utilization of the benefit may be lower • What barriers do providers face to contracting than anticipated, it has grown and may continue to with plans to provide ECM and Community grow as MCPs, providers, and MCP members gain Supports services? more experience with the benefits. The Legislature More Information Is Needed to Assess will need more information from both DHCS and Cost-Effectiveness and Improvements in MCPs to more fully assess whether utilization of Health Outcomes. Increasing utilization of the the ECM and Community Supports benefits are ECM and Community Supports benefit may be an meeting its expectations, whether utilization will immediate goal of the Legislature, but additional continue to increase, and what possible future analyses will be needed to determine whether the state costs could be. DHCS has already indicated benefits meet the goals outlined in the program. it is looking to expand the information available Based on the evaluations of the WPC and HHP in the quarterly implementation report, and the pilot demonstrations, there appears to be some Legislature could work with the department to evidence that the ECM benefit may lower costs and ensure that the information provided is sufficient improve health outcomes for the state’s high-cost, to allow for a robust evaluation of program high-need population of Medi-Cal members. implementation. While some variation in utilization While the terms of the CalAIM waiver require across counties and MCPs is to be expected, some evaluation of cost-effectiveness and health more information is needed to assess what portion outcomes, the Legislature will want to ensure that of the variation is due to MCPs’ implementation systems are in place to allow for a robust evaluation of the benefits. There will also be an evaluation of the program’s impacts to the state and MCPs. of the PATH initiative to determine whether it For example, the Legislature, could consider expanded ECM and Community Supports provider directing DHCS to conduct an evaluation of the networks and increased benefit utilization. Some ECM benefit as implemented under CalAIM (even of the key questions the Legislature may wish to though the waiver does not require this). In the have answered by the administration at budget case of Community Supports, an interim evaluation hearings are: of the benefit is forthcoming from DHCS. That • How many MCP members are potentially evaluation will assess the cost-effectiveness of the eligible for ECM in each MCP and county? benefit as well as its impact on the health outcomes • What Community Supports services do MCPs of participants. In addition, the Legislature may plan to offer? Why these particular services? wish to direct ongoing evaluations to determine • What is the capacity of plans’ current provider whether ECM and Community Supports result in networks to provide ECM and Community net savings to the state and/or improved health Supports services? How can the state outcomes to beneficiaries. This information would 16 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET be particularly helpful as the state considers evaluations required in waivers? What data renewing the waiver next year. In the meantime, does it plan to collect, and what reporting some of the key questions the Legislature may wish from MCPs and providers may it require, to have answered by the administration at budget to enable the required evaluation under the hearings are: waiver as well as any ongoing evaluations? • How does DHCS plan to evaluate—on an • Does DHCS anticipate renewing the CalAIM ongoing basis—the cost-effectiveness and waiver? How could the results of the impacts on health outcomes of the ECM and Community Supports interim evaluation Community Supports benefits outside of the impact the CalAIM waiver renewal? www.lao.ca.gov 17 2025-26 BUDGET 18 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 19 2025-26 BUDGET LAO PUBLICATIONS This report was prepared by Will Owens, 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. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 20 LEGISLATIVE ANALYST’S OFFICE