Behind the Battle Over Orange County's CalOptima

Wednesday, Oct. 26, 2011 | Orange County supervisors don't seem to know whether CalOptima — the county's unusual system to manage healthcare for the poor — is a national model for such programs or a broken system in need of reform.

Earlier this month, Supervisor Janet Nguyen triggered a firestorm of controversy around the two-decade-old agency, painting an ugly, unspecific picture of what she described as an insider bureaucracy dominated by nonprofit providers that hand out bonuses to its executives and operates in a nontransparent manner.

She said the CalOptima board needed a new alignment right away, because the new national health plan, which critics refer to as ObamaCare, goes into effect in two years, potentially adding 100,000 to 200,000 people to the CalOptima rolls.

Nguyen, who is the Board of Supervisors' representative on the CalOptima board, proposed major changes that are supported, in part, by hospital providers, who say they need a direct, permanent voice on the CalOptima governing board.

But CalOptima supporters, including some providers and members of the health plan's board, said they were ambushed by Nguyen's plan to remove representatives of the poor from the board.

Nguyen added yet another concern in a telephone interview last week, saying, "There is an internal investigation going on at CalOptima that I can't discuss." She said the probe is being conducted by an outside law firm, involves "legal issues, compliance issues, operational issues" and "should be finalized soon."

"These are all accusations," she added. "I can't tell you if they're factual or not" because they are still being investigated.

Other public officials didn't have much to say about the investigation. Supervisor John Moorlach, who is Nguyen's alternate on the board, said he was unaware of it.

In fact, Moorlach had nothing but praise for the system.

"If this nation is looking for a health care model, CalOptima is phenomenal," said Moorlach, a fiscal conservative who was Nguyen's predecessor on the health program's board, serving for four years.

Orange County is different from most large counties because it doesn't have a county hospital where the poor and medically indigent can be treated. Orange County supervisors turned the county hospital over to UC Irvine in the mid-1970s. Now working through CalOptima, all county hospitals care for the poor.

The CalOptima system has garnered its share of national attention. For example, CalOptima CEO Richard Chambers serves on the 21-member Congressional Budget Office Panel of Health Advisers, a nonpartisan, independent group that advises the Budget Office on national health policies, economics and insurance.

Jean Forbath, one of the founders of Share Ourselves (SOS), the Costa Mesa-based nonprofit that helps the poor with medical care, was involved in county efforts to provide health services for the poor since the 1970s.

She told the supervisors earlier this month that the creation of CalOptima "was a completely transparent and open process. As the old saying goes, 'if it ain't broke, why fix it?' "

Is It Broke?

The controversy over CalOptima began earlier this month when Nguyen quietly engineered an effort to give herself and providers, particularly hospitals, more power over the health agency, which has an annual budget of $1.3 billion.

Nguyen did not win immediate approval of her plan to give her district a permanent seat on the CalOptima board and to restructure it to lessen the role of nonprofits that represent the poor. Her plan also would give hospitals a permanent seat.

But during the process, several other supervisors acknowledged they knew little about how and why the nine-member CalOptima board was created in 1993 and how it works today.

In fact, they said, in the past they've had trouble enlisting members of the five-member Board of Supervisors to even serve on the CalOptima board.

Moorlach said that when some supervisors agreed to serve, they didn't take their roles seriously. He said former Supervisor Thomas Wilson often skipped CalOptima board meetings and former supervisor and current Assemblyman Chris Norby (R-Fullerton) "made fun" of the organization, which serves 430,000 poor adults and children.

The county Health Care Agency was supposed to make a presentation to the board Tuesday about CalOptima, but Nguyen pulled the issue from the agenda and rescheduled it for the Nov. 8 meeting.

CalOptima officials haven't been asked to make their own presentation to the board.

Nguyen was strongly criticized, even by colleagues, for springing the issue on the board this month, cloaking it as coming from the County Counsel's office and giving only a minimum amount of public notice.

Other board members urged her to open up her approach to dealing with problems and include other board members and those who work with CalOptima.

Nguyen has scheduled two, separate, two-hour public forums Wednesday with providers, such as hospitals, doctors and clinics, and with members of the public who use CalOptima services.

Several of those who helped create CalOptima two decades ago, including Forbath, emphasized how open the process was that set the system up.

A key issue that led to the agency's creation was lack of care for Orange County's poor, particularly pregnant women, according to those involved at the beginning.

After the federal Medicare and Medicaid systems were started in the late 1960s, a cumbersome process developed in which, under Medi-Cal, doctors and other providers for the poor had to submit bills to Sacramento and would often wait months for repayment.

Patients, meanwhile, had to go through a separate, lengthy system to become certified for coverage.

As a result, doctors were frequently unwilling to accept Medi-Cal patients. Many, particularly pregnant women, went without care until they wound up using emergency rooms as delivery rooms.

A big part of the goal of CalOptima was to bring order to the system by bringing providers and patients together. It created a method by which the county Social Services Agency would screen patients for eligibility, and CalOptima, through state and federal funding, would pay the providers.

Since its inception, Medicare and Medi-Cal have been the frequent target of fraud by doctors, hospitals and other providers.

In fact, one of California's landmark political corruption cases occurred in Orange County in the 1970s when Dr. Louis J. Cella, who ran two private hospitals, was convicted on federal charges of stealing millions from Medicare to make political contributions to scores of local, state and federal politicians.

In his day, he was the biggest individual donor to politicians in the entire state, and according to court records, most of the money was stolen from Medicare.

In the struggle to find a way to solve problems facing poor patients and providers, special federal and state laws allowed the creation of CalOptima as well as two earlier versions in Santa Barbara and San Mateo counties. Operations of all three were subject to strict guidelines.

The task force report stated that according to the law at the time "the Board of Supervisors could appoint no more than two of its own members to the [CalOptima] Commission."

Nguyen and other supervisors have now raised the possibility of adding all five supervisors to the CalOptima board.

Yet one reason for several restrictions, according to the task force report, is to protect the county from legal liability. The report and county ordinance try to make it clear that county government isn't legally responsible for medical errors or other mistakes by providers.

Adding more supervisors or county departments, like the Social Services Agency, to the CalOptima board could imply more direct county involvement in operations and increase liability, some critics worry.

Nguyen's questions prompted supervisors to seek more information about CalOptima and its $1.3-billion annual budget.

Correction: A previous version of this story did not identify Medi-Cal as California's system for delivering healthcare to the poor.