Medicaid covers over 90 million Americans. In California alone Medi-Cal (California’s name for Medicaid) enrolls more than 14 million people, which is over a third of the state.

But coverage doesn’t equal access. Medi-Cal patients face long wait times, fragmented care, and too often end up in emergency rooms for problems that could have been handled by a primary care doctor if one were available.

States have the power to experiment through Section 1115 Medicaid demonstration waivers. These waivers let states test other approaches while remaining budget-neutral to the federal government.

We believe there should be a lot more experimentation among the states. Even ideas that seem unconventional deserve a shot if they’re fiscally responsible and could improve access or the quality of care.

In that spirit, we submitted to the California Health Care Foundation as a part of their recent “Call for Bold Ideas to Strengthen and Preserve Medi-Cal.” They didn’t select it for further development, but we still think it’s an idea worth exploring.

Here’s the Idea

Allow Medi-Cal enrollees to redirect a small portion of the capitated payments made on their behalf - about $80 per month - to a Direct Primary Care (DPC) membership. Do it through a pre-paid debit card with as few strings attached as possible.

DPC practices operate outside the traditional insurance billing model. For a flat monthly fee, patients get direct access to a physician - often via text or email, with same-day appointments, and 24/7 availability for non-emergency issues. DPC doctors typically have far fewer patients (around 500, compared to thousands in hospital systems), which means more time and attention per patient.

Under our proposal, Medi-Cal managed care organizations (MCOs) would continue to handle specialty care, hospital services, prescriptions, and behavioral health. But responsibility for primary care would shift to DPC practices that could offer the kind of access Medi-Cal patients currently lack.

The pilot would operate as a voluntary lottery, run for three years, and be rigorously evaluated on access, utilization, cost, health outcomes, and patient satisfaction. If it fails, it ends cleanly. If it works, it offers a scalable model for improving primary care access in Medicaid.

The Way It Could Save Money

Let’s use some round numbers. If the state pays an MCO $8,000 a year per person to provide them with Medi-Cal coverage, the MCO then budgets out where that money is expected to be spent. Let’s say $1,000 of it goes to primary care and $6,000 of it goes to other spending like inpatient and non-primary outpatient spending.

But if that enrollee were given $80 a month ($960 a year) to enroll in a DPC membership and had their primary care needs taken care of that way, would they end up using less than $7,000 in other Medicaid-covered services?

After all, the way that DPC saves money is by reducing unnecessary utilization of higher cost settings like emergency rooms or urgent care centers (PDF).

Why This Matters

Medicaid’s fiscal challenges won’t be solved by a single policy. They’ll be solved by states trying many different approaches and learning what works. That requires a willingness to experiment, and a willingness to share ideas even when they don’t get picked.

The full proposal is below for anyone interested in the details.

Allow Medi-Cal Enrollees to Use a Portion of Capitated Payments for Direct Primary Care (DPC) Memberships

1. Authors

1. Tom Church, MPP, Policy Fellow, Hoover Institution.

2. Anthony DiGiorgio, DO, MHA, Department of Neurological Surgery, University of California, San Francisco; Philip R. Lee Institute for Health Policy Studies, University of California, San Francisco.

2. The Idea

Create a pilot program that allows a set of Medi-Cal enrollees to redirect a small, fixed portion of their capitated Medi-Cal spending to a Direct Primary Care (DPC) membership. Managed care organizations (MCOs) would remain responsible for all other non-primary care and retain the rest of the capitated payment. But enrollees who use funds to obtain a DPC membership would gain access to greater primary care coverage, allowing better access and quality of care without increasing costs to the state or federal government.

Instead of the state sending around $8,000 a year to an MCO to pay for a Medi-Cal enrollee, the pilot program could send $7,040 to the MCO and provide up to $960 ($80 a month) to the enrollee to pay for the DPC membership.

The goals are to increase access to primary care and lower wait times by unbundling primary care from costly hospital-centric systems, all while driving long-term spending lower. Fiscal savings would occur if the cost of non-primary care capitated payments handled by the MCOs were to fall because of changes to utilization and better health management. This Section 1115 Waiver program would operate as a voluntary lottery, run for three years, and be evaluated on access, utilization, cost offsets, health outcomes, and patient satisfaction.

3. The Problem Being Addressed

For many enrollees, primary care is inaccessible even if it is nominally “covered.” That leads routine issues to eventually escalate into urgent or emergency matters.

By using capitated payments, the state limits how much it spends a year providing medical coverage. But when money is limited, as it is in Medi-Cal, patients pay with their time. This leads to relatively long wait times for appointments, fewer providers accepting Medi-Cal patients, fragmented care with little continuity between patients and their physician, and an overreliance by patients on hospital systems and emergency departments for care that could be provided in a lower cost setting.

Direct primary care memberships are characterized by timely and direct access to the physician without any required insurance billing. They typically cover preventative care, vaccinations, care coordination, basic labs, and discounted prescriptions. DPC physicians typically have far fewer patients (~500 instead of thousands in hospital systems), respond 24/7 to text or email, and are available after-hours as a substitute for non-emergency care currently provided at late-night ER visits when no other facilities are open.

4. The Benefits

Enrollees would experience dramatically increased access to primary care, continuity of their care with a single clinician or practice, and reduced reliance on urgent care and emergency departments. The Medi-Cal program would experience lower hospital-billed primary care, better chronic disease management, and greater capacity to treat higher-priority patients. Physicians would see reduced administrative burdens, billing complexity, and higher satisfaction. Populations that require frequent monitoring or non-emergency visits would particularly benefit from a more active physician-to-patient relationship.

5. The Viability

This proposal is both administratively and fiscally viable because it operates entirely within Medi-Cal’s existing managed care structure and uses a fixed, capped reallocation of current spending. DPC practices require no additional state permitting, direction, or funding.

One limit on this program will initially come from the number of physicians who are available to run DPC memberships. That limit availability will allow for a lottery to be run if more Medi-Cal enrollees enroll than there are DPC practices available.

To prevent double payment and gaming, participating DPC providers would be required not to bill Medi-Cal fee-for-service for primary care services covered by the DPC membership and be prohibited from additional membership tiers or add-on fees for Medi-Cal enrollees. Managed care plans would remain fully responsible for specialty care, hospital services, prescription drugs, and behavioral health. DPC providers would function as front-line primary care, not as substitute insurers.

As a Section 1115 Waiver, this experiment would meet all four required criteria: It aligns with Medicaid’s objectives, it tests a policy hypothesis, it is budget neutral to the federal government, and it would lead to a clear and credible evaluation of the experiment.

If the pilot fails to improve access or worsens total costs, it can be terminated cleanly. If it succeeds, it offers a scalable way to improve primary care access while reducing reliance on hospital-based delivery systems.