As more states develop programs to rein in the cost of Medicaid through managed care, recipients are rapidly joining the rolls of HMOs.
Federal regulations allow HMOs and other managed-care organizations to care for Medicaid recipients through full-risk contracts.
As of June 1994, about 17% of the nation's poor-some 4.7 million people-were receiving healthcare through fully capitated plans, nearly double the 2.5 million in capitated plans in 1993, according to a study by healthcare consulting firm Lewin-VHI.
HMOs are finding it a challenge to introduce managed care-including setting up appointments with primary-care physicians and other niceties of middle-class medicine-to those who may never have had a private physician and whose primary language is not English.
But the consensus in the industry is that the poor and minorities are much better served by managed care than they ever were by traditional fee-for-service Medicaid.
Overall, Medicaid recipients' experience with the traditional healthcare system has been frustrating and unhealthy, not to mention unnecessarily expensive. When Medicaid recipients seek healthcare in the traditional system, they often have only the Yellow Pages to guide them.
When recipients can't locate a physician or clinic that will accept Medicaid, they wind up in the most expensive healthcare setting-a hospital emergency room.
Preventive care? Not likely. At the onset of the next illness, the cycle begins again.
"The story that has not been told in the debate about health reform is how badly the fee-for-service system has failed vulnerable populations," said Clyde W. Oden Jr., president and chief executive officer of Watts Health Foundation in Los Angeles. "HMOs have the potential for doing better, and many have done better.
"Organized delivery systems have an opportunity to succeed where fee-for-service has failed in serving populations at risk, including low-income and many minority groups," he said.
But plans that seek to serve minorities and the poor can't be "fly-by-night" players, Oden said. The long-term commitment of community organizations such as Watts is required.
What is now a $200 million not-for-profit urban healthcare delivery system started out in a storefront drugstore and a thrift shop in response to the needs of a community ravaged by the 1965 Watts riots. The foundation is an umbrella for about 30 health programs, including Watts Health Center and United Health Plan, a 95,000-enrollee HMO.
The Watts Health Foundation is part of a consortium of HMOs bidding for the Medi-Cal managed-care contract in the Los Angeles area. Medi-Cal is the state's Medicaid program.
Entering the Medicaid managed-care business can have deeper social consequences than developing another commercial product, said Joel Menges, senior manager at Lewin-VHI. Menges has worked with plans and state governments to establish Medicaid managed-care programs.
"In Medicaid, the health status of the population is often tragically poor. The managed-care industry has a very exciting opportunity to not just achieve cost savings but to elevate the health status of an entire population," he said.
Maura Bluestone, president and CEO of The Bronx Health Plan, said that under traditional Medicaid almost no continuity exists in the care a patient receives. Bronx Health has been serving Medicaid and low-income beneficiaries in New York City for eight years. It's a state-licensed prepaid health services plan, not an HMO, that serves only the poor.
In 1991, the New York Legislature set a goal of enrolling half the state's Medicaid population in managed-care plans over five years. Since then "there has been a tremendous proliferation of plans," including commercial HMOs, targeting the state's Medicaid recipients, Bluestone said. "It's almost as if you have to create an HMO within your HMO," she tells health plan executives when they ask for advice about entering the Medicaid business.
Commercial HMOs "have to gear up to administer benefits that are unique to Medicaid," Bluestone said. Although benefits vary somewhat by region, the Medicaid benefits package is broader than commercial coverage and can include supplemental services such as transportation, nutritional counseling and over-the-counter drugs when prescribed.