The Monterey County Health Initiative. A post-mortem analysis of a California Medicaid demonstration project.

Twenty months after the California State Department of Health Services turned its Medicaid program in Monterey County over to a local health care authority, the Monterey County Health Initiative (MCHI), the state terminated the pilot project in favor of a return to fee-for-service reimbursement. The MCHI, plagued from its inception with shaky provider support and a flawed program design, failed to demonstrate its anticipated cost savings. The key features of this failure were overly generous fees for primary case managers, inadequate utilization control measures, a general hesitancy to assume the necessary gatekeeper function, and a management information system that was not fully operational until well into the implementation of the program. Policy implications and recommendations for future state-sponsored Medicaid demonstration projects are discussed.