Medicare operates through two primary delivery systems: fee-for-service (FFS) and Medicare Advantage (MA). These systems differ in their payment methodologies, incentives, and the entities responsible for authorizing payment. MA is administered by private managed care plans rather than the federal government directly.

Dual eligibles—individuals enrolled in both Medicare and Medicaid—are likely to make up much of PHS's patient population. These beneficiaries may receive their Medicare benefits through either FFS or MA, although enrollment in MA has been increasing. In California, the Department of Health Care Services is also encouraging dual eligibles to enroll in specialized MA plans called Dual Eligible Special Needs Plans (D-SNPs), which are designed to coordinate Medicare and Medicaid benefits.

Dual eligible beneficiaries in California who enroll in Medicare Advantage are not required to enroll in a Dual Eligible Special Needs Plan (D-SNP); choosing a D-SNP is voluntary. All D-SNPs in California must have a State Medicaid Agency Contract (SMAC) with the California Department of Health Care Services (DHCS).

Beginning with contract year 2025 and continuing into 2026, DHCS is limiting new enrollment in D-SNPs to plans that are affiliated with a Medi-Cal managed care plan. As a result, the primary D-SNP options for dual eligible beneficiaries in California in 2026 will be those offered by health plans that also contract with DHCS to provide Medi-Cal managed care, including the Integrated Medi-Medi plans.

Existing members of non-affiliated D-SNPs may remain enrolled, but new enrollment is restricted to plans with affiliated Medi-Cal contracts. Plans that achieve more than 4 stars have the opportunity to receive significantly higher reimbursement.