More states expanding their move to Medicaid managed care

The transition is prompting concerns from physicians that patient care will be restricted.

By Doug Trapp — Posted May 30, 2011

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As states continue to move Medicaid programs away from unrestricted fee-for-service payment toward various types of capitated care, the concept of Medicaid managed care is drawing more scrutiny. At issue is whether such changes can produce program savings without unduly restricting beneficiary access to care.

Many states have hybrid Medicaid systems that mix capitated HMOs, primary care case management and prepaid plans that cover certain health services, such as hospital or mental health care. Some states offer HMOs and PCCM plans to all enrollees, while others restrict HMOs to urban residents. A few states, such as North Carolina, do not contract with HMOs. Instead, the state provides medical homes and coordinated care through physician-driven, regional enhanced primary care networks.

Medicaid programs have used some form of managed care for decades. About 70% of Medicaid enrollees in 2008 received at least some services through managed care plans, according to a February 2010 report by the Kaiser Family Foundation. But as state health care budgets explode and officials increasing look to provide better value for their health spending, pressure has been building for greater expansion of these programs, said Neva Kaye, managing director for health system performance at the National Academy for State Health Policy.

"I wouldn't say that fee for service is a thing of the past, but it doesn't produce the outcomes that states very much want," Kaye said.

The latest move toward managed care is being driven by "both the policy goal of trying to give people better coordinated care but also the allure of immediate budget savings," said Matt Salo, executive director of the National Assn. of Medicaid Directors. Fewer states are seeking long-term savings by investing in preventive health care, he said. Instead, they are turning to capitated plans to balance budget deficits.

The managed care trend has attracted the attention of a federal advisory board, the Medicaid and CHIP Payment and Access Commission. The board's next report to Congress in June will focus on managed care in Medicaid.

Kaye said the success of Medicaid managed care depends largely on how effectively states execute and monitor health plan contracts. States should ask if the plans can serve the needs of local populations, if the contracts adequately measure insurer performance and if the plans have adequate networks of health professionals, among other questions, she said.

Uncharted territory

Some states are expanding managed care beyond children and pregnant women to include less-healthy populations such as the elderly and disabled -- some of the most expensive and needy Medicaid enrollees. Some policymakers traditionally have considered such beneficiaries off limits when it came to transitioning patients into managed care.

Florida, Illinois and South Carolina -- among others -- have approved ending their Medicaid fee-for-service options for many or nearly all enrollees. Their managed care programs will mandate varying levels of care coordination.

South Carolina's shift toward managed care is perhaps the least dramatic of the three.

The state's Medicaid agency is requiring its remaining 80,000 Medicaid fee-for-service enrollees to choose an HMO or primary care medical home, said Jeff Stensland, a spokesman for the South Carolina Dept. of Health and Human Services. The state's Medicaid managed care population is 556,000.

Illinois is implementing a managed care expansion that was signed into law in January. It requires the state to expand a capitated care coordination program to more than 50% of its Medicaid enrollees by 2015.

The state estimates that the move will account for the bulk of more than $600 million in projected savings over five years.

The Illinois State Medical Society opposed the legislation in part because it will allow some of the state's limited Medicaid resources to be diverted to private plan profits and administrative costs, according to a Feb. 23 letter to the state's Medicaid agency. The legislation also will take effect before physicians and hospitals can form accountable care organizations that might compete with private HMOs in order to provide Medicaid care coordination.

Florida's Medicaid reform, adopted by the Legislature in early May, is perhaps the most controversial. It offers health plans -- either capitated HMOs or provider service networks of physicians and hospitals -- capitated rates that are 5% less than projected fee-for-service spending. The health plans can keep up to 7.5% worth of savings as profits if they meet quality standards.

Physician organizations in Florida have expressed concerns that the savings goal will lead managed care plans to restrict access to services for the state's 3 million Medicaid enrollees. The measures would extend managed care to elderly and disabled enrollees within the next two years and to nearly all other enrollees within five years.

"I'm certainly interested in seeing how they can accomplish this without denying care and doing other acts for which private health care plans are notorious," said Jeff Scott, general counsel and vice president for advocacy and public policy at the Florida Medical Assn.

The FMA opposed the statewide expansion to managed care, which was based on a five-county, five-year pilot that had mixed results. Florida Gov. Rick Scott had not said if he would sign the reform bills at this article's deadline but was expected to do so.

The Florida measures also institute a cap on noneconomic damages of $200,000 per physician or other health care professional and $300,000 per claim in Medicaid lawsuits. The caps do not apply if the plaintiff provides clear and convincing evidence that the doctor acted wrongfully.

The bills will require that health plans maintain adequate panels of physicians, addressing some of the FMA's concerns, said the association's Scott. "It wasn't as good as it could have been. It wasn't as bad as it could have been."

Florida must seek federal approval to implement the reforms, a process that could prove difficult. The state will need an entirely new Medicaid waiver -- not based on one obtained for the managed care pilot project -- for the changes to take effect, according to an April 28 letter from the Dept. of Health and Human Services.

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Florida's shift to managed care

Legislation adopted by the Florida Legislature in early May would require nearly all the state's 3 million Medicaid enrollees to sign up for a managed care plan by October 2014. The measures would:

  • Divide the state into 11 regions, each of which would have a minimum of two managed care plans, with some regions required to have as many as five plans.
  • Allow private insurance companies and networks of hospitals and physicians to form plans, which would be paid a monthly capitated rate with full risk. The state would pay plans capitated rates that are 5% less than projected fee-for-service Medicaid spending for the same patients.
  • Require plans to increase Medicaid pay rates to match Medicare after two years of continuous plan operation.
  • Allow participating plans to keep their first 5% of savings as profits and require the next 5% to be split with the state. Any additional profits would be returned to the state.
  • Require plans to accept prior authorization requests electronically and make available their prescription drug formularies and plan quality data on a website.
  • Allow Medicaid-eligible residents to use the equivalent value of their Medicaid coverage to buy private health insurance.
  • Require Medicaid enrollees to pay $10 monthly premiums and $100 for any nonemergency services provided at emergency departments.
  • Exempt from mandatory managed care the developmentally disabled, refugees, people with creditable health coverage other than Medicare, people enrolled in home- or community-based plans, and people in juvenile justice or mental health facilities.
  • Direct the state's Medicaid agency to draft the necessary federal Medicaid waiver requests by Aug. 1 and seek public comments on the proposals.

Source: Florida Senate

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