The California Department of Health Care Services recently sent a letter to most Medi-Cal beneficiaries participating in the adult day health care program, informing them that their coverage for ADHC will end Dec. 1. Medi-Cal is California's Medicaid program.

In Sacramento, legislators are holding hearings on how to help 36,000 elderly and disabled residents continue to receive ADHC-type services in other programs. A lawsuit pending in federal court challenges whether the state can adequately supply replacement services for this population. ADHC providers have accused the department of bad planning for rushing elimination of the services.

All of this turmoil is predicated on one basic outcome: saving money for the state.

In previous budget cutbacks, adult dental services were eliminated as an optional Medi-Cal benefit along with speech therapy, vision services, chiropractic and podiatric care. Now it's ADHC's turn.

The ADHC transition is a kind of pilot project for California, which aims to transition many more individuals who are eligible for both Medicare and Medi-Cal into managed care. But advocates say that the ADHC population should be treated more carefully and more slowly, arguing that a rapid transition threatens the well-being of at-risk elderly and disabled residents.

"This is a human experiment on a scale we haven't seen in California, that's what we're embarking on," Lydia Missaelides of the California Association of Adult Day Services said. "There is no road map, because this has never been done before."

According to DHCS Director Toby Douglas, the ADHC transition is required by law and is a challenge the department can accomplish.

"The majority of these people will be served by our managed care plans," Douglas said. "We have deliberately slowed down the process, so we make sure we do it right. We want these people to be able to remain in the community."

Covering Multiple Needs

Jane Ogle, deputy director for DHCS, said relying on managed care plans for ADHC services could help save the state money.

"I see the savings in the transition and use of capitation payment to provide benefits to these members," Ogle said. "That's the bulk of the savings."

The idea, in shifting to managed care, is that the health plans get a chunk of money, a per-head or capitated rate, for each enrollee up front. Under capitation in a general population, the thought is that healthier people will use fewer services and balance out the costs of sicker enrollees.

That notion doesn't really apply to the ADHC population, according to Debbie Toth, who runs two ADHC centers in Contra Costa County.

"This is the most expensive, most fragile population in the state," Toth said. "This is an adverse selection population."

One-fourth of ADHC beneficiaries -- about 9,600 of them -- have dementia. Another 2,000 have mental disabilities, 17,000 have a psychiatric diagnosis, 14,000 are incontinent and almost 19,000 need restorative physical therapy. Almost 29,000 beneficiaries require skilled nursing services.

To account for ADHC beneficiaries with multiple conditions and high use of services, the state will chip in an additional $60 per person monthly enhanced capitation benefit for the health plans, Ogle said.

But most ADHC beneficiaries could burn through that money without even blinking, Toth said. "Are they going to get all of these services for $60 a month?" she asked. "That's one hour of staff time a month, if you're talking about intensive case management, done by a nurse. One hour a month."

Douglas has said that once assessments of new managed care enrollees are completed, DHCS might increase the enhancement.

Ogle said the state also can step in to help enrollees who need extra services beyond what managed care plans will cover.

For instance, some beneficiaries could be enrolled in the Los Angeles-based Senior Care Action Network, and the state also expects to expand the number of slots in the Program of All-Inclusive Care for the Elderly. Some rural residents will be served by a care management contractor. DHCS also might contract with some existing ADHC centers.