The Fullerton Fire Department is asking the City Council to expand a state Medicaid financing arrangement to go through a single health plan.

The request, on the council’s August 18 consent calendar agenda, would authorize continued participation in the California Department of Health Care Services’ Medi-Cal Voluntary Rate Range Intergovernmental Transfer program with CalOptima Health, Kaiser Permanente and any other eligible Medi-Cal managed care plans. It also asks the council to let the city manager execute the necessary agreements and to authorize transfer payments and purchase orders totaling no more than $1 million per fiscal year.

Staff projects the two arrangements together will require the city to send $742,927 to the state for the 2025 calendar year and return $1,568,979 through the health plans — a net gain of $826,052.

The program lets local public agencies recover part of what they spend treating Medi-Cal patients when they don’t receive full reimbursement. The city wires local dollars to the state, which uses them as the non-federal share of Medi-Cal managed care capitation rates and draws down federal matching funds. The combined money flows back to the city through participating health plans.

Two administrative fees come off the top. The state adds a 20% assessment to the city’s base contribution, which the agreement describes as non-refundable and payable at the same time as the transfer itself. Each health plan then keeps 2% before paying the city.

For CalOptima Health, staff estimates a base contribution of $425,013 plus an $85,002.60 state fee, against a projected disbursement of $1,160,342 — a net of $650,327. For Kaiser, the base contribution is $194,093 plus a $38,818 fee, against a projected $408,636, for a net of $175,724.

The figures are estimates. The state agreement, Contract IGT-25-0012, ties the city’s obligation to per-member-per-month contribution increments multiplied by member months, and requires the state to reconcile estimated enrollment against actual enrollment. Those figures are not final until two years after Dec. 31, 2025. If reconciliation raises the amount needed, the city must send more; if it lowers it, the state returns the difference.

The Fire Department provides emergency medical services, including ambulance transport, regardless of a patient’s ability to pay. According to the staff report, Medi-Cal beneficiaries account for roughly 25% of the department’s billable transports, and base Medi-Cal rates fall well below the cost of providing that care.

The council first approved participation, through CalOptima only, on Feb. 4, 2025. That cycle produced net revenue of $765,060 for calendar year 2024.

The money comes with strings. Under both plan agreements, the payments are classified as patient care revenue and must be applied to unreimbursed emergency medical service costs — not used to fund the next year’s contribution. The state agreement separately requires the city to certify that the transferred funds are not drawn from impermissible sources such as recycled Medicaid payments or federal money already excluded from use as state match.

The two plan agreements differ on what happens to money exceeding costs. The CalOptima draft treats any excess as an overpayment the city must return. The Kaiser agreement lets the city retain the excess, provided it is spent solely on health care services and can be tracked through the retained earnings account.

The CalOptima agreement attached to the report is marked as a draft and carries an effective date of Sept. 1, 2026. It runs through June 30, 2028, the same expiration as the state agreement, and either party can terminate it without cause on 60 days’ notice. Disputes would go to binding arbitration in Orange County rather than to court. The Kaiser agreement runs one year from signing and renews automatically, and either party can end it immediately if the state discontinues the program.

Staff wrote that the contribution and fees are expected to stay under the $1 million ceiling and are already included in the Fire Department’s proposed 2026-27 operating budget, with the projected revenue reflected on the revenue side. No additional appropriation would be needed.

Because the program’s availability and funding formulas remain at the state’s discretion, staff said it would review the financial performance each year and return to the council if the state materially changes the terms or if participation stops producing a net benefit.

The report was submitted by Fire Chief Adam Loeser and prepared by Administrative Analyst II Andrew Yang. Staff recommends approval.