The Santa Barbara Health Initiative was conceived in an environment where a major public health care program for low income and medically needy persons (called Medi-Cal in California) was facing uncontrolled rising costs, decreasing levels of participation by providers, and ineffective and largely unresponsive centralized administration by the state government. By 1982, inflationary trends had helped push Medicaid spending to $4.8 billion, and California was facing a massive budget deficit. Additionally, the state system exerted minimal control over the ways in which beneficiaries received services. This meant that duplicative and unnecessary medical services were frequently obtained and reimbursed, and “doctor-shopping” was a common phenomenon among recipients. Furthermore, low reimbursement rates for providers contributed to decreasing participation, which in turn led to problems with access to primary medical care. As a result, inappropriate use of hospital emergency departments became more common, which contributed to rising program costs. Finally, beneficiaries and providers alike were frustrated by the centralized nature of the program, which showed a decreasing ability to respond to the needs of these groups. Massive and complicated program regulations limited the state’s ability to make changes in the program needed to ensure access and at the same time contain rising costs.
The target population most directly affected by the Medicaid Demonstration Project is composed of all individuals in Santa Barbara County determined to be eligible for Medicaid services under criteria established by state and Federal law (average monthly eligible is over 20,800). In California, this includes recipients of public assistance (aged, blind, disabled, and families), medically needy qualifying under the same categories, and other needy persons, like medically indigent women in need of obstetrical care.
The Santa Barbara Health Initiative (SBHI) is unique in its goals and in its approach. It is different from standard Medicaid administration in three ways: First, primary care physicians are responsible for managing the health care of their Medicaid patients. Second, physicians are paid on a per capita basis. Lastly, this medical service delivery program is locally managed.
The program's principal documentable accomplishment is that health care providers—primary care physicians, specialists, hospitals, and pharmacists—are substantially more satisfied with the management of the Medi-Cal system than they were before. In terms of cost, the terms of the SBHI contract call for it to be paid at 95 percent of what it would otherwise have cost Medi-Cal to administer the program. Thus, in nominal terms, the SBHI purportedly saves 5 percent of Medi-Cal costs. In addition, quality of care probably has also improved, but there is no direct documentation to serve as evidence.