Medicaid depending on managed care

June 1, 2011

State governments are clamoring for assistance in funding fast-expanding Medicaid programs, increasingly looking to private insurers to help them save money and improve care.

WASHINGTON-State governments are clamoring for assistance in funding fast-expanding Medicaid programs, increasingly looking to private insurers to help them save money and improve care. Most states already are shifting more of the nation's 50 million Medicaid patients to managed care programs.

While states will need to cover 16 million more lower-income beneficiaries beginning in 2014, preparations will be hampered by the loss this month of an enhanced federal contribution provided by the 2009 stimulus legislation.

To cope with declining revenues and rising expenditures, many states moved to freeze Medicaid enrollment, cut provider rates and restrict benefits. But they have been unable to reduce eligibility standards because of federal "maintenance of effort" rules, lest they lose federal funds. A recently proposed rule would make it harder for states to cut Medicaid payments to providers.

In return for a smaller lump sum contribution, states would gain more control over how they spend the money, something that pleases many governors hoping for more flexibility and less Washington micromanagement of Medicaid. Republicans maintain that this approach will save money without cutting back on benefits because states will devise ways to better manage their programs.

The shift to block grants would affect states differently, depending on current coverage policies and how state officials respond. States could either reduce eligibility, cut benefits and/or lower rates to hospitals and providers, a possibility that already is generating concerns from providers about possibly significant losses in revenue.

Those states that now have tight Medicaid income eligibility rules and higher proportions of poor people-such as Florida and Wyoming-stand to gain the most under health reform, and thus would be big losers under the Ryan plan, according to an analysis from the Kaiser Family Foundation. States like Vermont and Minnesota, which have fairly generous Medicaid programs, would be less affected by health reform and also by the Ryan cuts.

Program expansions and funding curbs are prompting states to re-examine current health programs and explore options for change. More states are looking for plans to take on disabled and dual-eligible beneficiaries. California, for example, aims to enroll some 400,000 Medicare-Medicaid dual eligibles in private plans.

Last month, the Florida legislature approved a massive overhaul of the state's Medicaid system, with an eye to saving $1.1 billion by shifting nearly all of its beneficiaries into managed care plans. Louisiana expects to establish a managed care program next year, and Kentucky, Illinois and South Carolina are expanding existing managed care initiatives.

Similarly, Texas and Michigan are expanding mandatory programs. Such states seek to contract with multiple plans to ensure that beneficiaries have coverage choices.

AGAINST MANAGED CARE MEDICAID

Opposition to Medicaid managed care comes from hospitals and physicians, who fear lower rates and less control, while patient advocates are skeptical about plans improving access to care. Such concerns have stymied adoption of Medicaid plans in Maine, while Mississippi had to limit a new Medicaid managed care program to 15% of Medicaid recipients to appease providers. Public health officials in Georgia are reviewing the state's Medicaid and kids' care programs to evaluate whether the care delivered through three care management organizations meets quality and access standards.

Insurers counter by demonstrating that they can deliver quality care at lower costs. At a Capitol Hill briefing last month organized by America's Health Insurance Plans, AmeriHealth Mercy CEO Michael Rashid described how the Pennsylvania Health Choices Program saved nearly $5 billion over five years. Michael Dudley, president of Virginia-based Sentara Health Plans, cited a pregnancy management program that saved more than $300 per-member, per-month and achieved higher birth weights for infants.

Health information systems are key for states to bring more people into Medicaid programs, and insurers are investing to build the infrastructure needed to identify patients eligible for coverage and subsidies, along with opportunities to cut costs. Plans also emphasize that they are closely scrutinized by state regulators on how well they meet quality measures and satisfy members.

While insurers are looking to scale up Medicaid business, they have an eye on funding proposals. If reimbursement is not "where it should be," according to Dudley of Sentara, "that could be devastating."