In what may be a precursor of massive pullouts across the country, Medicaid managed-care plans in several states recently have exited markets or been sold by owners who see more promise in the commercial-only market.
Officials at the American Association of Health Plans contend that the Medicaid market is primed for an exodus similar to last year's wave of exits from the Medicare managed-care arena. In 1998, nearly 100 health plans exited selected Medicare-risk markets, forcing more than 400,000 enrollees to find other coverage.
"The situation is very serious, and it should force public policymakers to focus very clearly on how to solve this problem," said Karen Ignagni, the AAHP's president and chief executive officer. "It's going to be a top priority for us."
A shrinking pool of Medicaid managed-care plans could mean less competition among health plans-and lower reimbursement rates to hospitals from the remaining contenders.
A number of Medicaid managed-care plans, including both provider-owned enterprises and subsidiaries of national managed-care giants, have sold out, exited markets or announced plans to do so in recent weeks.
In June, for example, Harris County Hospital District in Houston said it planned to sell its money-losing HMO or partner with a competitor to run it more efficiently.
The 20,000-enrollee Community Health Choice lost $740,000 on $32.3 million in revenues last year, and a recent independent assessment by Milliman & Robertson concluded that the HMO will have negative capital and reserves by June 30.
That saga is likely to be repeated elsewhere, Ignagni predicted, because state governments have committed Medicaid managed-care plans to tough standards while failing to come through with necessary funding.
In fact, Ignagni said she knows of other health plans that are currently reviewing similar options. Her Washington-based association is conducting a survey of state governments and health plans across the country on this issue, and expects to have results later this summer.
In 1998, slightly more than half of all Medicaid recipients, or 16.7 million, were enrolled in some type of managed-care plan, according to the National Academy for State Health Policy in Portland, Maine.
A recent NASHP study showed the average number of comprehensive risk-based Medicaid plans per state fell to 8.3 per state in 1998 from 9.8 in 1994. Disenrollment is particularly high among commercial plans.
According to a report published this month by the Kaiser Family Foundation, for every commercial plan that entered the Medicaid managed-care market in 1998, six plans exited.
In the past month, Prudential HealthCare has announced a Medicaid pullout in Missouri, consummated a previously announced exit in Maryland by selling its Medicaid plan there to Amerigroup Corp., and worked toward completing a second sale to Amerigroup of its Medicaid operations in Washington.
Prudential's pending $1 billion sale to Hartford, Conn.-based Aetna appears to be entering the final stages of regulatory approval, and it may be selling off unprofitable product lines in preparation for the sale. But its actions in the Medicaid arena mirror those of other health plans that are not being acquired.
"This is purely a business decision to refocus our energies on the commercial marketplace," said Karen Michlewicz, a spokeswoman for Prudential HealthCare's Central Division.
Prudential notified state officials May 28 that it would not renew its Medicaid contract in Missouri for 12,000 managed-care enrollees in the state. According to Prudential, the program's high administrative costs make it unprofitable, although officials said they couldn't break out the Missouri plan's financial results.
Prudential's Medicaid contract in the state expires Sept. 1.
Two other large players-Humana and United Healthcare-have left the Medicaid market in St. Louis in recent years, but four Medicaid plans remain: Care Partners, HealthCare USA, Community Care Plus and Mercy Health Plans, Prudential officials said.
In Maryland, Prudential sold its 80,000-enrollee Medicaid business June 1 to Amerigroup, a Virginia Beach, Va.-based plan that specializes in Medicaid, and said it expects to conclude a similar deal in coming weeks to sell its Medicaid unit in Washington. That would move an additional 11,000 Prudential enrollees to Amerigroup.
Effective Jan. 1, meanwhile, Oxford Health Plans exited its last remaining Medicaid market, Brooklyn, N.Y., after earlier leaving the Medicaid program in Connecticut, New Jersey, Pennsylvania and several other boroughs of New York. Before the wave of exits started in mid-1998, Norwalk, Conn.-based Oxford had nearly 184,000 Medicaid enrollees.
About 34,000 Oxford enrollees in Brooklyn were affected by the most recent transaction.
Although commercial plans still serve more than half of Medicaid managed-care enrollees, a growing proportion are served by Medicaid-only specialty plans.
The effect of these changes is difficult to assess, said Suzanne Felt-Lisk, senior health researcher at Washington-based Mathematica Policy Research and author of the recent Kaiser Family Foundation study.
For providers, a shrinking pool of Medicaid HMOs could give the remaining players more marketplace clout and result in even lower Medicaid reimbursements, Felt-Lisk noted. She added that some Medicaid watchers believe commercial plans give enrollees better access to mainstream providers than Medicaid-only plans.
"State policymakers can certainly influence to what extent this (pullout trend) continues," she said, pointing to states' discretion in setting bidding processes and rates.
Blue Cross and Blue Shield of Colorado recently dropped out of Medicaid. Including its commercial contracts, the Blues' HMO Colorado lost $20.6 million on $197 million in revenues in 1998.
"The administrative costs (for the Medicaid portion) were not justified by the number of members we had," said spokesman Neil Westergaard. The 2,500 Medicaid enrollees of HMO Colorado were "seamlessly transitioned" to a fee-for-service plan that allowed them to keep their same doctors, he said.
While the public Harris County hospital system in Houston pins much of the blame for Community Health Choice's losses on its 12,000-enrollee commercial product for county employees and dependents, a change in control of the plan could spell trouble for the plan's 8,000 Medicaid enrollees.
Michael Meit, director of the community health office at the National Association of County and City Health Officials, said the biggest problem posed by such pullouts is the potential "loss of the healthcare home in the communities where plans are pulling out. There is a real issue in terms of continuity of care."