Health California inks sweetheart deal with Kaiser Permanente

SACRAMENTO >> Gov. Gavin Newsom’s administration has negotiated a secret deal to give Kaiser Permanente a special Medicaid contract that would allow the health care behemoth to expand its reach in California and largely continue selecting the enrollees it wants, which other health plans say leaves them with a disproportionate share of the program’s sickest and costliest patients.

The deal, hammered out behind closed doors between Kaiser Permanente and senior officials in Newsom’s office, could complicate a long-planned and expensive transformation of Medi-Cal, the state’s Medicaid program, which covers roughly 14 million low-income Californians.

It has infuriated executives of other managed-care insurance plans in Medi-Cal, who say they stand to lose hundreds of thousands of patients and millions of dollars a year. The deal allows KP to limit enrollment primarily to its previous enrollees, except in the case of foster kids and people who are eligible for both Medicare and Medi-Cal.

“It has caused a massive amount of frenzy,” said Jarrod McNaughton, CEO of the Inland Empire Health Plan, which covers about 1.5 million Medi-Cal enrollees in Riverside and San Bernardino counties. “All of us are doing our best to implement the most transformational Medi-Cal initiative in state history, and to put all this together without a public process is very disconcerting.”

Linnea Koopmans, CEO of the Local Health Plans of California, echoed McNaughton’s concerns.

Insurance plans got wind of the backroom talks when broad outlines of the deal were leaked days before the state briefed their executives Thursday.

Dr. Bechara Choucair, Kaiser Permanente’s chief health officer, argued in a prepared written response on behalf of KP that because it operates both as a health insurer and a health care provider, KP should be treated differently than other commercial health plans that participate in Medi-Cal. Doing business directly with the state will eliminate complexity and improve the quality of care for the Medi-Cal patients it serves, he said.

“We are not seeking to turn a profit off Medi-Cal enrollment,” Choucair said. “Kaiser Permanente participates in Medi-Cal because it is part of our mission to improve the health of the communities we serve. We participate in Medi-Cal despite incurring losses every year.”

His statement cited nearly $1.8 billion in losses in the program in 2020 and said KP had donated $402 million to help care for uninsured people that year.

Kaiser Permanente, the state’s largest managed-care organization, is one of Newsom’s most generous supporters and close political allies.