Navigating Medicaid Reform and Community Care with CalOptima CEO Michael Hunn

Summary

Becker’s Healthcare Podcast: Detailed Summary of “Navigating Medicaid Reform and Community Care with CalOptima CEO Michael Hunn”

Release Date: August 2, 2025

---

Introduction

In this insightful episode of the Becker’s Healthcare Podcast, host Jacob Emerson engages in a comprehensive discussion with Michael Hunn, CEO of CalOptima Health. The conversation centers around the recently passed federal reconciliation bill, HR1, and its profound implications for Medicaid programs, particularly focusing on CalOptima's strategies for navigating these changes. This summary encapsulates the key points, discussions, insights, and conclusions drawn during the 28-minute dialogue.

---

CalOptima Health Overview

Jacob Emerson begins by inviting Michael Hunn to provide an overview of CalOptima Health for listeners unfamiliar with the organization.

Michael Hunn elaborates:

"CalOptima Health serves the Medicaid population, which we refer to as Medi-Cal here in Orange County, California. Orange County is the sixth largest county in the United States. We are the third largest Medicaid health plan in the state, serving a population of 3.1 million members, with about one million enrolled in the Medicaid program alone."
(00:16)

He further explains that CalOptima operates as a county-organized health system without public hospitals, managing Medi-Cal through approximately 10,000 provider contracts. The organization boasts a robust budget of $4.7 billion, predominantly funded by state tax revenues (90%) and Medicare (10%).

---

Impact of HR1 on Medicaid and CalOptima

The conversation pivots to HR1, the federal reconciliation bill signed into law on July 4th. Jacob highlights the bill's significant impact, noting projections from the Congressional Budget Office that Medicaid spending will decrease by nearly $1 trillion over the next decade, potentially increasing the uninsured population by 10 million by 2034.

Michael responds by emphasizing the current stability:

"Although HR1 has been passed and we've got a state budget that our governor signed into law as well, nothing yet has actually changed in either the services or eligibility of any of our Medicaid members here, certainly in California and certainly here in Orange County."
(03:22)

He outlines CalOptima's immediate actions:

1. Communication with Members: Assuring members that their benefits and eligibility remain unchanged.
2. Encouraging Continued Care: Urging members to seek necessary healthcare services proactively.
3. Preparing for Eligibility Changes: Anticipating the implementation of work requirements for able-bodied adults without dependents by December 2026, with a mandate extending to December 2028.

On financial preparedness, Michael details:

"We spend between $350 and $400 million a month in medical care and overhead. Our administrative overhead last year... was 5.2%, which is one of the lowest administrative overheads of any health plan I'm aware of in the state of California."
(06:45)

He emphasizes fiscal prudence and the establishment of adequate reserves to mitigate potential revenue interruptions from state or federal sources.

---

Medicaid Work Requirements and Managed Care Relationships

Jacob probes into the intricacies of work requirements and their broader implications. Michael delves into the collaborative dynamics between California's Department of Health Care Services (DHCS), Department of Managed Health Care (DMHC), and managed care organizations like CalOptima.

"We try to work very collaboratively with DHCS and DMHC to come up with policy and implementations that make sense... implementing work requirements and financing changes is going to require a lot of collaboration, coordination, and communication."
(08:00)

He discusses:

• Risk Assessment: Utilizing actuaries to project population health risks and negotiate reimbursement rates accordingly.
• Population Health Management: Addressing the financial implications of a potentially reduced eligible population and an aging demographic, specifically the increasing number of seniors under Medicare.

---

Advice for Medicaid Operators Nationwide

When asked to offer guidance to others in the Medicaid landscape, Michael underscores the importance of inter-organizational communication and collaboration.

"I would encourage those around the country that listen in... to have strong working relationships. Try to punch a hole in the silo and string a phone line across and talk to your colleague at the county..."
(13:05)

He highlights CalOptima's successful partnerships with county social service agencies, joint community events, and synchronized communication strategies as pivotal for ensuring consistent messaging and support for Medicaid members.

---

Opportunities for Innovation and Reducing Administrative Burdens

Jacob inquires about potential positive aspects of HR1, such as reducing administrative burdens or fostering innovation. Michael shares CalOptima's initiatives:

"We brought a specialty doctor in who is a transplant surgeon, and now he's overseeing our transplant program. He has been able to streamline the transplant process... reducing our year-over-year cost for transplants by $20 million."
(18:38)

He envisions broader adoption of such efficiencies across health plans and encourages the creation of toolkits to disseminate successful strategies. Additionally, Michael anticipates the integration of AI technologies to enhance process efficiencies in care delivery.

---

Ensuring Medicaid’s Long-term Sustainability

In discussing the sustainability of managed care systems under HR1, Michael articulates a strong advocacy for maintaining comprehensive coverage:

"We believe that being in a managed care model... is better for your health than being fee-for-service... it is imperative that the program continue to provide this coverage for those that are low income or live below the federal poverty level."
(23:21)

He warns against the repercussions of reduced eligibility, predicting increased burdens on emergency rooms and acute care hospitals. Michael stresses the necessity of preserving funding for vulnerable populations and leveraging community organizations and philanthropists to fill potential care gaps.

---

Conclusion

As the episode concludes, Michael Hunn reiterates the critical role of compassionate leadership and community collaboration in navigating the challenges posed by Medicaid reforms. His final remarks emphasize the collective responsibility to ensure that Medicaid members receive uninterrupted and quality care.

"Always have that element of love, that we are really here to care for each other... our community is truly counting on us to get it right."
(28:23)

Jacob Emerson thanks Michael for his invaluable insights, underscoring the episode's relevance for healthcare decision-makers grappling with Medicaid's evolving landscape.

---

Key Takeaways

• CalOptima Health is a major Medicaid health plan serving Orange County, California, with a focus on providing comprehensive care to low-income populations.

• The HR1 bill poses significant challenges, including potential reductions in Medicaid spending and increases in the uninsured population.

• Proactive Communication: CalOptima emphasizes transparent communication with members to maintain trust and encourage continued utilization of healthcare services.

• Collaboration is Crucial: Strong partnerships with state departments and social service agencies are vital for implementing changes smoothly.

• Innovation and Efficiency: Streamlining processes, managing specialty programs effectively, and adopting new technologies can mitigate financial strains and enhance care delivery.

• Advocacy for Managed Care: Maintaining and strengthening managed care models is essential for delivering consistent and quality healthcare, especially amid eligibility changes.

• Community Engagement: Leveraging community resources and fostering collaborative relationships can help sustain healthcare services for vulnerable populations.

---

Notable Quotes

• Michael Hunn on CalOptima’s Role:

  "We serve about a million in the Medicaid program just here in Orange County. What that means is that there are a million people... who are low income or live below the federal poverty level."
  (00:42)

• On Current Stability Amid HR1:

  "Nothing yet has actually changed in either the services or eligibility of any of our Medicaid members here... benefits and eligibility at this moment in time remains the same."
  (03:22)

• On Administrative Efficiency:

  "Our administrative overhead last year... was 5.2%, which is one of the lowest administrative overheads of any health plan I'm aware of in the state of California."
  (06:45)

• On Collaboration:

  "Implementing work requirements and financing changes is going to require a lot of collaboration, coordination, and communication."
  (08:00)

• Advice to Medicaid Operators:

  "Try to punch a hole in the silo and string a phone line across and talk to your colleague at the county..."
  (13:05)

• On Innovation in Care Delivery:

  "We ended up reducing our year-over-year cost for transplants by $20 million. That's an efficiency..."
  (18:38)

• Sustainability and Managed Care Advocacy:

  "Being in a managed care model... is better for your health than being fee-for-service... it is imperative that the program continue to provide this coverage for those that are low income or live below the federal poverty level."
  (23:21)

• Final Inspirational Note:

  "Always have that element of love, that we are really here to care for each other... our community is truly counting on us to get it right."
  (28:23)

---

This episode provides a profound look into the complexities of Medicaid reforms and the strategic responses required by managed care organizations like CalOptima Health. Michael Hunn's insights offer valuable guidance for healthcare leaders navigating similar challenges nationwide.

Transcript

[A]

Hello everyone. This is Jacob Emerson with the Beckers Payer Issues podcast. Thrilled today to be joined by CalOptima Health CEO Michael Hun. Michael, thanks so much for taking the time to be with me on the podcast today.

[B]

Jacob, it's awfully nice to be here and really appreciate the invitation.

[A]

Yeah, likewise. I appreciate you taking the time, Michael. And we're here today to talk with you a little bit about the federal reconciliation bill, which of course, as you know, was recently passed earlier this month. But before we dive into that and all the complexities involved in that bill for your organization and across the wider healthcare system, can you remind our listeners what is Caloptima Health, who do you serve and what markets are you in?

[B]

So Caloptima Health serves the Medicaid population, which we refer to as Medi Cal here in Orange County, California. Orange County, California is the sixth largest county in the United States. Here in the state of California, we currently are the third largest Medicaid health plan in the state of California. We serve out of our 3.1 million member population. We serve about a million in the Medicaid program just here in Orange County. What that means is that there are a million people out of 3 million or a third of the county that are low income or live below the federal poverty level. Here in Orange county, we're also a what's called a county organized health system. Back when we were founded 30 years ago in 1994, the county decided not to build public hospitals. So we don't have a public hospital. We administer the Medi Cal program through about 10,000 contracts with providers. That includes our doctors, our clinics, our hospitals, our skilled nursing facilities, our ambulatory centers and our community clinics. So we are a county organized health system. We have a separate nine member fiduciary board. We are not part of the county of Orange. We have a $4.7 billion budget this year. 90% of our revenues come from state tax revenues and 10% from CMS, Medicare. So that's a little bit about Caloptima Health.

[A]

Fantastic. Well, appreciate that overview and context for our listeners. Michael, let's dive in and talk about HR1, the federal reconciliation bill that President Trump signed into law on July 4th. Massive bill. So many different things we could talk about today. But let's specifically focus on Medicaid where it's anticipated that Medicaid spending will decrease by nearly $1 trillion over the next decade. And under that same timeline, we're expecting the uninsured population nationwide to increase by an additional 10 million people. And that's, that's by 2034 according to the Congressional Budget Office and their latest estimates. So talk to us about the bill's impact on the operations and strategy at Caloptima over, over the next five to 10 years. How are you thinking about this internally? How are you preparing for this financially?

[B]

So Jacob, one of the things that is important for a lot of folks to understand right now is that although HR1 has been passed and we've got a state budget that our governor signed into law as well, nothing yet has actually changed in either the services or eligibility of any of our Medicaid members here, certainly in California and certainly here in Orange County. So the first messaging we're sending out is to our members, letting them know one, we haven't shared any of their confidential private information, two, their benefits and their eligibility at this moment in time remains the same. And three, please, please, please go get your healthcare services, take your kids in for baby well checks, get your immunizations, do your developmental screenings with your younger children, make sure you're getting your pharmaceuticals for blood pressure medicine and diabetes and whatever else and make sure you're going to the doctor. And if you can't or don't want to go to the doctor because you're concerned about things in the community, then try to use telehealth. We added on our website, caloptima.org getcare a list of our physicians that do telehealth. So in preparing for the changes, first and foremost we want people to continue to get their care until there is a change in the actual benefits eligibility and determinations. So the work eligibility, the soonest that that will start to occur for individuals that have to perform 80 hours a month for able bodied adults without dependents under 14 years of age, probably end of next year. So December of 2026, December 31st, but no later than December 31st of 2028. That's the mandate. And so one of the things we'll look at is making sure that our eligibility, which is determined by our social service agency is kept up to date. And we as the health plan are aware of who is and is not eligible to receive services. So our initial preparation is one, letting people know that right now nothing has changed. Next, as we get ready to start implementing eligibility changes, most likely that'll begin at the end of 2026. Then on the financing and you're asking how are we preparing for it financially? We currently have about 120 days of cash on hand. That doesn't sound Like a lot. But we spend between 350 and 400 million dollars a month in medical care and overhead. Our medical care, we spend about 94 cents of every dollar on care. Our administrative overhead last year, we're just closing the books for our last fiscal year, which ended June 30, is 4.2% to 5.2%. The year will close out at 5.2 for the full year. That is one of the lowest administrative overheads of any health plan I'm aware of in the state of California. So we're preparing by being very fiscally prudent and we are preparing to make sure that we have adequate reserves in case there's a interruption in revenues from either the state or the feds. So those are some of the initial things we're looking at. Jacob Absolutely.

[A]

And such an important call out that you made there in the beginning, Michael, that benefits have not been affected yet and these changes will really start to become more real towards the end of next year and that your members need to be proactive with with getting their services now before anything concretely changes. I'm glad you brought up the work requirements piece of all this because that's been you some of the main focus we've seen across the media, certainly one of the biggest changes for Medicaid. So can you talk about how you think the relationship between just in California, the medical with the states and then with your organization, a managed care organization, how will that influence the relationship between states and and these and private insurers across the country?

[B]

So we work very closely here in California with the Department of health care services, DHCs. We also, for those that have covered California or exchange products, we work closely with the Department of Managed Health Care, the dmhc and then from a regulatory standpoint, our commercial plans here in the state we have a board called the California association of Health Plans. I have the privilege of serving on that board board and it's representative of both the commercial as well as the public plans. And I think together we try to work very collaboratively with DHCS and DMHC to come up with policy and implementations that make sense, but also understanding the state has to maintain its budget and has its struggles, of course, but we want to be as collegial as possible. We want to work on solutions together. To the great credit of the Department of Healthcare Services, the director of DHCS here in California is very amenable to meeting. It is a very professional staff. We look at the problems together. We offer suggestions, recommendations. DHCS does reach out to us and ask for input, and we're allowed to be able to offer suggestions and recommendations on implementation. We know that implementing work requirements and implementing some of the financing changes is going to require a lot of collaboration, a lot of coordination and a lot of communication. And so as we move forward together, we are going to try to do that with as little disruption and impact to services to our members. A couple of examples on the financing side, we have to rely on actuaries. Those are the individuals that are skilled in looking at, okay, how sick is the population? And what we do is we look at all the claims that get filed for medical care and each one of those claims is attached to a condition and it gets a numerical number. And we can aggregate and pull together all that data and start to project how, how high of a risk is this population, how what is their propensity for being healthy or unhealthy. And then the state along with us negotiate to set rates to be able to reimburse to cover the costs that are allowable under the Medicaid program. And in turn, we pass those monies on to the doctors and hospitals and providers that provide the care. Right now we are relooking at, okay, if there's going to be changes in enrollment and eligibility changes and we have, let's say, a 20% decrease in the number of individuals that are eligible for Medi California, what does that do to the risk? And how healthy or unhealthy is the population and how much are we going to need in order to take care of them? This is complex work. I'm trying to simplify it here for understanding, but go forward, we will have to work very closely with our state and federal partners as we take care of our almost million folks. In the Medicare population alone. We have 127,000 seniors, of which about 285 are centenarians. That's a lot of folks over 100 years old and I know it because I sign birthday cards to all of them. But in that, we have to understand how that population is staying or not staying healthy. Our largest growing number of individuals is our senior population. So we are going to have to be very diligent as we look at the finance models go forward, because the seniors, as we age, we become more expensive. So those are some of the collaborations that we will undertake with our state and federal colleagues on rate setting. Go forward?

[A]

Absolutely. No, it's very. You're making it very clear this is going to be a significant lift for the Medicaid system for companies like yours. And it's good, it's good to hear that the state is being proactive in managing through some of those challenges that you foresee. Michael and I wonder if you would offer any advice to others listening in who are also operating in the Medicaid states all over the country in terms of how to begin navigating some of these challenges that you're foreseen that will pop up as this moves forward.

[B]

So, Jacob, I think one of the key things, especially in our roles, I have this great privilege to be the current CEO at CalOptima Health here in Orange County. I'm standing on the shoulders of the other CEOs and the staff and the community that have gone many, many years before my time here. And then I will have my time and move on and be part of the heritage and legacy. But one of the things that we have proactively worked very hard to do is to create communications with our county partners in a lot of circumstances. The Medicaid program that's operated by the county health plan is separate from the county. And we have a social service agency that actually does the eligibility, helps the individuals to fill out the applications. The social service agency for the county is the one that actually submits the application to the state. The state says yes or no, then sends back a file to the social service agency saying, here are all the eligible members that have been approved. Approved. The social service agency then sends us a file and says, please go ahead and proceed to put these folks on the Medi Cal roll in Orange County. We issue an insurance card, assign them to a medical group and a medical home and a primary care doctor. What we have done the last few years is we have had routine standing meetings with the executive leadership at the social service agency, and we work hand in hand with the director and his team. We go to community events together. They're there with their computers and their multilingual staff, signing people up and helping them navigate the application process to remain eligible or to achieve eligibility for Medi Cal. We go to those same community events and we have our informational booth and we actually coordinate our communications with the county social service agency so that the members in the community in all nine threshold languages that we have, English, Spanish, Vietnamese, Chinese, Korean, Farsi, Russian, etc. That we're both saying the exact same thing, that we're sending the exact same messages. Even the most recent letter we sent out. And we text our members. We do about 250,000 texts a week. And we told them, hey, your privacy is protected. Your benefits and eligibility have remained the same. And please go get your health care. We are both saying the same thing. I would encourage those around the country that listen in, and I have great regard, Jacob, for Beckers and their reach in healthcare and their updates that you send out on all sorts of disciplines. I would encourage them to have strong working relationships. The way it started for us, I picked up the phone and I called the director of the Social Service Agency and I said, this is who I am. I'd really like to start to work better with you. Let's get together and have a conversation. And it started with a dinner. And from there we have built a standing relationship. We work collaboratively at community events together. And we're now planning and coordinating with all these changes because they field about 80,000 phone calls a month. We field about 80,000amonth. Now we're saying the same thing from the same talking points to ensure that members are getting consistent information. That to me would be a huge win for the community and our Medi Cal Medicaid members that they're counting on us to get this stuff right. And I don't know that we can do that if we're in separate silos. So I would really strongly encourage. Try to punch a hole in the silo and string a phone line across and talk to your colleague at the county where they do the eligibility and you, as the health plan, provide the care, communicate with each other. That would be one of my key messages, Jacob?

[A]

Absolutely. Working more closely with your state partners and engaging more deeply with your community and with your members and patients is clearly going to be so key here over the next few years. Michael, throughout this entire process over these last several months, in terms of what we've been hearing from the insurance community and from providers and large hospital groups all over the country, there's a real fear here around what is coming over over the next decade. And certainly what we've heard on the ground from, from members and from patients all over the country worried about losing their benefits. So on the flip side of, of that, is there anything you would mention in terms of specific provisions of the bill that you think could potentially reduce administrative burdens or. Or even just create new opportunities for innovation in managed care?

[B]

So one of the things that I'm hopeful of is that together in our individual communities, if you've seen one county in the United States, you've seen one county. Each community is unique in itself. And I do have great concerns about what HR1 and the changes will do, especially to our hospital partners. The bill Is to trim out 1.2 trillion over the next 10 years into 20. 34 of that 665 billion will come out of our hospitals across the country just here in California. That'll be about $119 billion reduced here in the community. So we are all going to have to get very innovative about managing our overhead and managing the delivery of care. Those innovations will also include the implementation of AI technologies. Hopefully that will make processes and functions more efficient, Given our administrative overhead right now at 5.2%, which is, like I said, the lowest that I'm aware of in the state. State with either a public or private plan. One of the things that we have done is starting to really medically manage and oversee our key services. So in transplants alone, we're responsible for about 170 transplants a year. And we brought a specialty doctor in who is a transplant surgeon, and now he's overseeing our transplant program. And he has been able to streamline the transplant process, streamline and eliminate a lot of duplicate or unnecessary testing and make much quicker decisions to approve a transplant, go forward, or indicate that the patient really doesn't have the clinical capability of accepting a transplant and making really upfront good clinical decisions. We did it because I really felt it was imperative that we coordinate our care and that patients get timely care and not be waiting so long for transplants or to get on the list for a transplant. I then had a request, well, how are we doing with that program? And so I ran some financial numbers, keeping in mind we didn't go into this process for a financial reason, but we discovered because we were managing the program, eliminating a lot of duplication and unnecessary repeated tests, and it's very expensive in the transplant world. We ended up reducing our year over year cost for transplants by $20 million. That's an efficiency that if we multiply that by all the health plans across the state doing transplants, what impact could we have on really not slowing down care, but speeding it up, but being a lot more efficient? Those are the types of innovations we're going to have to work on together. And I think we have been very good about wanting to share our experiences. And I think if there are things that plans are doing today that are working well, it would be nice to create a toolkit of here's what's working well, and we're willing to share the white paper or the details. We are currently preparing a white paper on our transplant program to share with everybody how we were able to speed it up, become more efficient and the byproduct was we preserved very precious healthcare dollars. So that's a little bit about what we might be able to do together to innovate.

[A]

Sure, sure. It's a great example and I do hope some of our listeners take you up on that, that white paper offer. Michael, before we go, we've heard from GOP lawmakers throughout this process and certainly after the bill's passing that the focus here has been on improving Medicaid's sustainability in the long term. So what's your perspective on that? Given, given the position you sit in? What do you think are some of the most important strategies moving forward here in terms of preserving viability of the managed care system?

[B]

So we are a firm believer here in Orange County. We have had a long history of managed care, Medicaid, or what we call Medi Cal again. And we currently delegate about 700,000 of our members to nine large delegated medical groups. I believe we are the highly, the most highly delegated health plan on the Medicaid side in California. And we have worked very closely with our managed care medical group partners. We have seen that a member being in managed care gets far better care than if their fee for service. Why? They have a medical home, so they belong to a medical group and a clinic and a primary care doctor. Two that managed care model reaches out to them consistently for their medical care, reminders of their checkups, reminders of their medications, making sure they're following up on any of their disease issues or health issues and that they're being managed from a case management standpoint and given access to other services that we as the health plan provide or they as the medical group provide. So we believe that being in a managed care model, in a medical group with a medical home and a primary care doctor is better for your health than being fee for service and no one's really tracking or following up for you. I do think that it's imperative that the program continue to provide this coverage for those that are low income or live below the federal poverty level. We believe that that access to care is critical. What we don't want to have happen and which could really impact things severely is that the individuals lose eligibility. The plan changes. It doesn't change the fact that they need health care and it doesn't change the fact that they will have health crisis. And where are they all going to go in the end? What I fear is it'll land in the emergency room. I ran acute care hospitals for almost 30 years of my career. I've been the CEO of many hospitals and have had the great privilege of working with so many amazing doctors and communities. And I don't want the emergency room to become the primary care office for millions of people here in Orange County. From an eligibility standpoint, we could see up to 200,000 of our members lose coverage. Where are they going to go? Set aside any of the other issues that go with the access to care and just focus on the care part. If you need emergency care under emtala, under federal rules, emergency medical treatment rules, every hospital emergency room has to see you whether you have means to pay or not. But that is going to put a huge burden on our hospitals. So my hope is that we can preserve precious dollars, be very efficient in our delivery of care, and still have the ability through our state budget to fund the care for individuals that have no ability to find care for themselves. So that's my go forward hope. And on another note, I also believe firmly in the goodness of the human heart. And I know that there are a lot of good folks out in our community that will figure out how to create either free clinics, free access to care, free access to pharmaceuticals, free access to eye care, free access to dental care. We have amazingly good community organizations and philanthropists. So I also want to believe that many will step forward to care for our community.

[A]

Wonderful. I think that's a great last note to leave things on, Michael. So I want to thank you for taking the time to sit down with us and for sharing your perspective on what is such an important issue, especially in the years to come. So thank you for taking the time.

[B]

Jacob, thank you. And our thanks to Beckers as well for hosting this. And on my final, final note, I really encourage folks out there that are responsible for these populations. Make sure that you always have that element of love, that we are really here to care for each other. And this is really important work in our community is truly counting on us to get it right. So, Jacob, thank you.

[A]

Yeah, thank you, Michael, and to our listeners. If you'd like to listen to more podcasts from Becker's Healthcare, you can visit Beckershospitalreview.com.