In the midst of continued opposition, Newsom signs Kaiser no-bid Medi-Cal contract into law


Soraya Marashi


Several organizations and at least 16 counties have spoken out against an exclusive statewide Medi-Cal contract with Kaiser Permanente, which Gov. Gavin Newsom codified into law on Thursday.


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Assembly Bill 2724, sponsored by Asm. Joaquin Arambula (D–Fresno) and known by its critics as the “Kaiser sweetheart deal,” authorizes the Department of Health Care Services (DHCS) to enter into one or more comprehensive risk contracts with an Alternate Health Care Service Plan (AHCSP), specifically defined as Kaiser Permanente, to serve as a primary Medi-Cal managed care plan for beneficiaries in geographic regions designated by DHCS as long as it also provides commercial coverage in that market. 

Under the bill, Kaiser isn’t required to undergo the standard Medi-Cal managed care reprocurement process that all other interested plans must go through—a major point of contention among the bill’s opponents. The contract will be implemented starting Jan. 1st, 2024. 

An AHCSP, as defined in the bill, is a health plan that operates as a provider network and owns and operates its own pharmacies as well. While supporters of the bill have stressed that the deal was made with Kaiser because they are the only AHCSP in the state and that other health plans can be included as they move toward this integrated model, the bill’s opponents maintain that the deal allows Kaiser to encroach on the membership of local health plans. 

The National Union of Healthcare Workers (NUHW) and Local Health Plans of California have been two of the opposing organizations. In their opposing statement, NUHW said:

“We have long advocated for Kaiser to cover larger numbers of Medi-Cal enrollees, but we are gravely concerned that without appropriate safeguards, an expanded Medi-Cal contract with Kaiser could put some of the state’s most vulnerable residents at risk.”

Santa Clara, Colusa, Butte, Glenn, San Benito, and Glenn are some of the counties in opposition to the deal. In its opposing statement, Butte County expressed its concern about Kaiser having the ability to choose its members. 

“Kaiser can choose members who are healthier, forcing local health plans like [Partnership HealthPlan (PHC)]—and our safety net providers and community clinics—to disproportionately care for those who are more ill and complex. This is especially concerning with Kaiser’s well-documented history of undeserving members experiencing complex physical health, mental health and social conditions.”

Glenn County highlighted concerns over the deal harming local safety nets and undermining a public plan model based on local control. They also cited PHC as an example of a local health plan that will be negatively impacted.

“Working with counties, PHC has a proven track record of reinvesting savings back into the community—such as increasing provider reimbursement and improving access, to enhancing member benefits and funding housing projects. The Kaiser proposal damages and undermines these systems, which have provided essential health services to the Medi-Cal and underserved patient populations for decades.”

Kaiser states that this contract will create a more consumer-friendly experience as members enroll in Kaiser coverage. They also emphasize that the single contract will be the same as other Medi-Cal managed care plan contracts on Jan. 1st, 2024, except with controls on growth to ensure there are no adverse impacts on other Medi-Cal managed care plans, the safety net, or Kaiser’s integrated delivery system. 

Other organizations that support the deal, including Western Center on Law & Poverty, National Health Law Program, and Health Access California, state that Kaiser, using its vast resources, will improve the capacity, quality, and accountability of the Medi-Cal program, and will give DHCS more oversight over Kaiser and offer more continuity of care for consumers losing their Kaiser commercial coverage.