Medi-Cal, the name given to California’s medical assistance Medicaid program, was signed into law in November 1965 and went into effect in March 1966. This comprehensive medical care entitlement program is the state’s single largest source of health insurance coverage and the country’s largest Medicaid program in terms of the number of people it serves. It is a complex program that pays providers for essential primary, acute and long term care services delivered to approximately 7 million Californians with low or no incomes and/or costly disabilities. The program is administered by California’s Department of Health Care Services (DHCS), and jointly funded with both federal and state dollars.
The State has always contracted with a Fiscal Intermediary (FI) to receive and process the volume of claims that are submitted for reimbursement.  They in turn produce a Remittance Advice (RA) every week (usually Monday). This RA provides the hospital with a detailed explanation of what was paid, denied or currently in suspense (i.e.: pending some kind of internal review).  The reimbursement checks ultimately come from DHCS, but it is the job of the FI to process the paperwork and deal with claims-processing issues. In the case of Medi-Cal, HP Enterprise Services (formerly EDS) has held the FI contract since September 1987.
The Breakdown
HP/EDS processes the claims for about half the Medi-Cal population (the Fee For Service subscribers) while the other half are handled by any number of private health insurance plans.  Essentially these are sub-contractors of the Medi-Cal Program. This part of the program is called Medi-Cal Managed Care.
  • Fee for Service: When a health insurance plan (in this case Medi-Cal) allows their subscribers to make almost all health care decisions independently.  The subscriber goes to any hospital they want for a service.  The hospital then submits a claim to the FI. And, if the service is covered in the policy (i.e. the Medi-Cal Manual), the hospital receives reimbursement
  • Managed Care: When a health insurance plan (in this case the array of private health plans which receive money from the Medi-Cal Program to provide care for a portion of the Medi-Cal population) acts as an intermediate between the subscriber and the provider of services.  With the exception of emergency related services (and even this must be proven to be life threatening), the subscriber must first seek authorization from their assigned managed care health plan before they are allowed to receive any medical services from the doctor or hospital.